Pacun Posted March 21, 2011 Report Share Posted March 21, 2011 If client used the standard deduction for 2007, 2008. He itemized for 2009 because he bought a house and paid points (Total Schedule A was 40K in itemized deductions). He comes to you and said that the State didn't refund him for 2007 and 2008 in time. In 2010 he got the refunds for 2007, 2008, and 2009. Will you include all those amounts in as taxable income in 2010 return? Quote Link to comment Share on other sites More sharing options...
rfassett Posted March 21, 2011 Report Share Posted March 21, 2011 No - only the amounts for which he received a tax benefit via itemizing deductions. In your case, just the 2009. And again, only to the extent that he received a tax benefit for them in the prior year. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 21, 2011 Author Report Share Posted March 21, 2011 No - only the amounts for which he received a tax benefit via itemizing deductions. In your case, just the 2009. And again, only to the extent that he received a tax benefit for them in the prior year. Sounds good. "tax benefit" I tried to cover my basics by saying that Schedule A was 40K but now I understand that I forgot to mention that client made 60K and that's why you mentioned "tax benefit" twice in your response. Thank you for your reponse. I just wanted to verify it. How about if my client owed 3K to the state for 2007 and 2K for 2008 and he paid both amounts in 2009, could he add those 5K to schedule A in 2009? Quote Link to comment Share on other sites More sharing options...
rfassett Posted March 21, 2011 Report Share Posted March 21, 2011 Why not? Cash basis taxpayer takes deduction in year the check is written. Does the fact that the liablity accrued two or three years ago taint the answer? I don't think so. Quote Link to comment Share on other sites More sharing options...
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