My 1099-G Shows a Different Amount for State Tax Refund Than What I Actually Received. Help!

So I'm a bit confused and hoping someone can help me out. This is the first year I've ever received a 1099-G since last year was my first time itemizing deductions. Here's my situation (using rounded numbers): Last year I physically received about $800 in my state tax refund. When I started doing my taxes this year using FreeTaxUSA, it automatically pulled that $800 figure from last year's return and plugged it into the state tax refund section (Box 2). But I just got my 1099-G in the mail today (didn't even know this was something I'd be receiving), and in Box 2 it shows only $740, which is less than what I actually got in my refund. Why would the 1099-G show a smaller amount than what was actually deposited in my account? And more importantly - which number am I supposed to use on my tax return? Should I go with the actual refund amount I received ($800) or should I use what's reported on the 1099-G ($740)? Really appreciate any help on this! I don't want to make a mistake that might cause problems later.

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21 comments

Ashley Adams

•8M

The 1099-G should reflect the taxable portion of your state refund, which isn't always the same as the total refund you received. The difference is likely because part of your refund wasn't actually taxable at the federal level. When you itemize deductions, you can deduct state income taxes paid. If you get a refund the following year, you generally need to report that refund as income - but only to the extent that you actually benefited from the deduction. If part of your state tax payments didn't give you a federal tax benefit (maybe because you were close to the standard deduction amount), then part of your refund isn't taxable. Your tax software should have a worksheet that calculates the taxable portion of your state refund. You should use the amount shown on your 1099-G ($740 in your example), not the full refund amount, when reporting this on your return.

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Ashley Adams

•8M

The state doesn't actually determine how much of your refund is federally taxable - they're just reporting the total refund they issued to you. There's likely a different explanation for the discrepancy. One possibility is that the $800 you received included some additional credits or interest that aren't considered part of your state tax refund for federal purposes. Another possibility is that the refund amount was adjusted after it was initially calculated. Check your state refund documentation carefully - there might be some additional components besides just the tax refund.

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Aaron Lee

•8M

I ran into this exact issue last year! After hours of frustration, I discovered taxr.ai (https://taxr.ai) which helped me figure out the difference. In my case, part of my state refund included interest and a special energy credit that wasn't subject to federal tax. You can upload your 1099-G and last year's return to taxr.ai and it will analyze the documents to identify the discrepancy. Their system also explained how much of my state refund was actually taxable for federal purposes, which saved me from overpaying on my taxes. I ended up getting a bigger federal refund than I expected because I was only taxed on the correct portion!

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Aaron Lee

•8M

Yes, taxr.ai handles all kinds of tax document discrepancies! I originally used it for my state refund issue, but they can analyze 1099-NEC forms too. It compares what's reported against your records and helps you determine the correct amount to report. They use bank-level encryption and don't store your documents after analysis. I was skeptical at first too, but they're actually partnered with licensed tax professionals. They just use AI to spot discrepancies faster than a human would. Their privacy policy is really clear about how they protect your information.

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Chloe Mitchell

•8M

Just wanted to follow up about taxr.ai - I tried it for my 1099-NEC issue and it was incredibly helpful! It analyzed both documents and showed me that my 1099-NEC was missing a payment from December that should have been included. I was able to contact the company that issued it with the specific details about the missing payment, and they sent a corrected form. The whole process took about 10 minutes on the website, and the analysis was really detailed - it even showed me which sections of tax law applied to my situation. Definitely recommend it if you're dealing with any kind of document discrepancy!

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Natalie Wang

•8M

If you're still having trouble figuring this out, you might want to call the IRS directly. That's what I did with a similar issue last year. But fair warning - I spent literally HOURS on hold. Finally discovered Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent explained to me that the 1099-G amount is what matters for tax purposes, not what was deposited in my account. In my case, the difference was because part of my refund was for a state tax credit that isn't taxable federally. The IRS agent walked me through exactly how to report it correctly. Saved me from potentially getting a notice later!

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Natalie Wang

•8M

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Michael Adams

•8M

I need to apologize about my skeptical comment earlier. After my third attempt to call the IRS myself (another 1.5 hours on hold before being disconnected), I finally broke down and tried Claimyr. I'm honestly shocked - it actually worked exactly as described. I got a call back in about 25 minutes with an IRS agent already on the line. The agent confirmed that I should be using the amount on my 1099-G, not what was deposited in my account. In my case, the difference was due to some local tax credits that aren't considered part of the state income tax refund. For anyone dealing with 1099-G questions or similar issues - save yourself the headache and just get connected directly. Can't believe I wasted so many hours trying to do this myself.

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Zoe Gonzalez

•8M

I actually did have something unusual happen with my refund timing! I filed an extension last year, so my "2023" refund didn't actually get processed until early 2024. And now that you mention it, I also received a small adjustment from a prior year that came separately. That could absolutely explain the discrepancy - the software is probably only accounting for the main refund but the 1099-G is showing the combined amount. I'll double check my bank statements to confirm. Thanks for pointing this out!

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Samantha Hall

•8M

No problem! This happens more often than people realize. Your 1099-G will include ALL refunds paid to you in the calendar year, regardless of which tax year they're from. The key is to look at the payment dates rather than the tax year the refund relates to. If you have your bank statements, look for all deposits from your state tax agency during the year. If you add them all up, they should match what's on your 1099-G (assuming there weren't any other adjustments).

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Hannah Flores

•2M

I had a very similar situation last year! The difference between what I received and what was on my 1099-G turned out to be because my state refund included both my actual tax overpayment AND interest that the state paid me for processing the refund late. The interest portion isn't considered part of your "state tax refund" for federal tax purposes - it's actually reported as taxable interest income instead (though many states don't issue a separate 1099-INT for small amounts). So the 1099-G only shows the actual tax refund portion ($740 in your case), not the total deposit you received. You should definitely use the amount on your 1099-G ($740) when reporting your state tax refund recovery. If there was interest included in your deposit, you might need to report that separately as interest income on your federal return. Check your state's refund documentation - it should break down exactly what components made up your total refund payment.

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