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In a complicated situation for 2017 taxes (settled in 2018) (Estimated State payment too big --> money back; + 2018 Tax Reform), it seems like I'd be better off had I made a State Tax estimated payment in 2017, instead of making it in Apr 2018.

Is it possible to amend my 2017 tax return to "move back" that payment, even though I guess it would mean I'd owe interest on that amount from 31 Dec 2017 to Apr 2018?

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    wait, you want to take the 2017 tax deduction for the $20,000? Legit but why?? You will only have to pay tax on it in 2018. Will you be in a lower bracket in 2018? – Harper - Reinstate Monica Apr 15 at 0:52
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    @Harper Per the linked question, there can be a benefit if the payment were made in 2017, due to the reduced deductibility of SALT payments starting in 2018. – nanoman Apr 15 at 1:14
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    No, there's no proportioning, he's making it way more complicated than it is. If I loan you $20,000 and you pay it back, the principal is neither income nor expense and it's not reportable at all (the interest is). This situation is like like you loaned the $20,000 to the state and the state gave it back to you. Neither one is reportable. The state will report the $20,000 as part of the amount on your 2017 1099-G for your tax refund... you just have to know to deduct it and not report it as income. – Harper - Reinstate Monica Apr 15 at 1:27
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    @ILoveCoding ... But this is not in dispute or the heart of your issue. The only person I have heard of contradicting this is that misguided auditor. (The IRS worksheets lead you directly through this so I can't imagine what the auditor was thinking.) It's entirely separate from whether you are allowed to allocate a refund entirely to 2018 payments when you made payments in both 2017 and 2018, or allowed to deduct in 2017 a payment made in 2018. All the evidence I have seen is no. – nanoman Apr 15 at 2:10
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    @Harper For "recovery and expense in the same year", the key is that you can't just declare the corresponding expense to be only the 2018 payment. The "expense" corresponding to the recovery is the entire amount of 2017 state tax paid, and the recovery must be prorated to the payments. The explicit example in Pub 525 of 2017 state tax payments made in both 2017 and 2018, with a refund received in 2018, makes this clear. – nanoman Apr 15 at 2:18
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No, amending a return allows you to correct misstated facts, or choose an alternate permitted tax treatment consistent with the facts, but not to calculate as if something happened in a way other than it did. There does not appear to be any provision allowing you to retroactively treat such a payment as being made in a different year.

  • except the $20,000 payment was for his 2017 taxes. if he actually owe the tax, there,d be no question that he could do as he plans. he owed tax as ofDec 31 2017. What followed was just pperwork. – Harper - Reinstate Monica Apr 15 at 0:55
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    @Harper The relevant fact for a federal deduction is when the payment was made, not when it could have been made. – nanoman Apr 15 at 1:08
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Definitely don't. Nanoman told you one reason. Here's another.

As far as IRS is concerned, OP would be creating "churn" unnecessarily.

By January 2018, it was well known that 2018 taxes would be changed. It was known most tax brackets would see their tax drop by 3%. So if someone could take a tax deduction in 2017, and then pay income tax on that same amount in 2018, they would be 3% richer -- or in OP's case, $600 richer on $20,000. There aren't many opportunities to do that in the tax code, but by golly, State tax prepayment, deduction, refund, declaration is one of them. I'm not saying OP planned this in 2018...

... but it looks like intentional churning for that purpose. Especially now that the 2017 taxes are settled.

I stick by my earlier advice: Don't take the $20,000 as a deduction in 2017, and don't declare it as income in 2018 (i.e. exclude that amount from the "state tax refund paid" section on your 2018 1040). You did not benefit from the deduction, so there is no question you do not need to pay tax on the $20,000 of the refund.

How exactly you claim that appears to be complicated because your overall state payments were made in 2 years (man, I'll score a mental note never to do that.) If you already have a tax accountant, let him figure it out. IRS does not penalize you for mistakes made by your preparer.

  • Since the edits make the chronology harder to track, if as I gather you no longer stick by your earlier advice, perhaps edit your answer to make it readable for future users... – ILoveCoding Apr 15 at 2:38
  • @ILoveCoding I already did that. It definitely seems like tax life is easier if all your state payments occur in the same calendar year. That's what I'd shoot for. – Harper - Reinstate Monica Apr 15 at 2:55

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