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NYS INFLATION REFUND CHECKS

Brightonlad73

My understanding is that Free Tax USA and Turbo Tax packages are having difficulties in accepting the $200 or $400 checks from the state in 2024. A glitch in the programs is preventing the input. The checks are not state taxable but may be federal. Since FT USA asks if you received the check then rejects the amount with the error stating, "Trying to subtract the amount from NYS return refund can not be greather than other income", or words to that effect. Anyone have a work around? FYI, I did go to the NYS tax site and down loaded a 1099G, however there is no place to put it to correc the error. Absent the 1099, it would be best to simply say "no" if you received a check but that form probably went to the irs even though it was not mailed to tax payers.

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Brightonlad73

Thank you. You have confirmed what I believe to be correct. I'm not happy with answering a question with a "no" when the answer is "yes", but in this instance I have no choice. In any case, FreeTax and your timely responses have settled the issue for me. I'll finish up and be back next year. Again thanks.

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pdx123

https://community.freetaxusa.com/discussion/2884/nys-inflation-refund-checks

We first put the 200 under misc/other income under federal and named it new york inflation refund or something like that, which then allowed us to write that we included the 200 as part of agi under the state section when ftusa asked. Some say you don't need to claim it if you took the standard deduction in 2023 tax year, but the various articles I read from NY Times all day it's taxable so better safe than sorry

Brightonlad73

Pretty much where you are. It is $400 for us and the work sheet for "other" either will allow that input for one of us, or $200 for each. It ends up $400 either way so that part probably doesn't matter.

Brightonlad73

At the risk of being a community pest, I'm going to add one more comment and put it to rest. I watched a video on Channel 9 News in Syracuse. "Your Stories Q&A". The news financial rep asked a cpa for one of the tax firms in the area. His response is that it is not state taxable for anyone. If you took the standard deduction for federal in 2024, then it is not taxable and you can ignore it. More on that in a minute. If you itemized in 2024 then you must enter the amount on your 2025 taxes. According to the cpa, 90% of NYS tax payers took the standard deduction in 2024. So, as far as FreeTaxUSA goes, the only way to ignore it, from what I can see, is to get by its "glitch". That means to tell the program that I did not receive the inflation check when it asks me if I did. If I'm correct, someone needs to fix this but I doubt that going to happen. Still, I really like the package and I read somewhere that taxpayers have the same concerns with Turbo Tax.

Taylor

Hello Brightonlad73,

Thank you for contributing to our Community! This is isn't a glitch, the software is working as designed based on how these payments need to be handled. The error you're seeing occurs because the New York return is trying to subtract the inflation refund check from your federal adjusted gross income, but it can only do that if the amount was entered in your federal return first.

To report it on your federal return:

1. Click on the "Income" tab
2. Select "Other Income" (in the "Uncommon Income" section)
3. Scroll down to "Miscellaneous Income"
4. Enter the amount of your NY inflation refund check ($200 or $400) and the description, "NY Inflation Refund Check."
5. Click "Save and Continue"

Then, when you get to the New York state section and it asks if you received the inflation refund check, answer "Yes" and enter the amount. The software will subtract it from your New York income. You can then view this subtraction on the NY State Summary screen.

If you did not itemize deductions on your prior year's federal return:
The check is not federally taxable. Simply answer "No" when the New York return asks if you received the inflation refund check. You're correct that this is the appropriate approach in this situation.

The 1099-G you downloaded from the NYS site doesn't need to be entered separately, it's just documentation. The IRS hasn't released official guidance on these payments yet, but the general rule is that state refunds are only federally taxable if you itemized and received a tax benefit from state tax deductions in the prior year. If the IRS later issues guidance that changes the proper treatment, you might need to amend your return.

Brightonlad73

MAW

The amount is federally taxable if you itemized your deductions on the 2023 federal return, not the 2024.

hrmbassociate

It’s most likely a software glitch. If you took the standard deduction last year, the NY $200/$400 check is generally not federally taxable, so answering “No” usually won’t affect your return. If you itemized deductions, part of it may be federally taxable and should be entered as a 1099-G on the federal return only.

Best option: wait for a software update or contact FreeTaxUSA support, since NY likely reported it to the IRS electronically.

TaxMorgan

We have updated our recommendations. Our recommendation now is not to report the amount on the federal return.

If you would like to report it, it should be reported as a taxable state refund, which we’ll automatically subtract out on your NY return.

Brightonlad73

Thank you for closing the loop. I did not report it, filed my taxes, and had my return back in a week or so. This won't be an issue next year as it was a one time benefit in NYS.

Tite

I didn’t receive the check for $400

Tite

what should I do

MatthewD

Hello Tite,

If you haven't received your 2025 NYS inflation refund check (mailed starting late September 2025), you may not have qualified. Checks are sent based on when 2023 tax returns were filed and if you qualified.

You must have had an AGI of $150,000 or less (married) or $75,000 or less (single) on your 2023 return, not be a dependent, and have a valid address on file.

Sikkasill

Step by Step, where/how would I input your suggested "taxable state refund" for the inflation check exactly?

MatthewD

Hi Sikkasill,

These checks are generally not taxable. The IRS has not released official guidance on the taxability of the NY Inflation Refund, but in the past, similar state payments have been treated as mostly non-taxable. They are likely taxable at the federal level if you itemized deductions on your 2024 federal return. Most taxpayers who took the standard deduction will not owe federal tax on it. If the IRS later issues guidance that changes the proper treatment, you might need to amend your return.

Sikkasill

https://community.freetaxusa.com/discussion/comment/7876#Comment_7876

Okay, so step by step HOW do you recover the $200 from this New York State Inflation Refund then? If its in this program or not in this program, what are the steps to take exactly?

Taylor

Hello Sikkasill,

As prior messages have shared, we have updated our recommendations to not report the NY Inflation amount on the federal return. If you would like to report it, it should be reported as a taxable state refund. The software will then automatically subtract this out on your NY state return.
To enter it:

Select Income > Taxable State Income
Follow the prompts given by the software.