tax on credit

[curious george]

for the last tax year, we have received X amount of credit due to obviously paying too much, this year we need to pay tax on the 'X' amount....this is basically reducing the original X amount and paying double for at least a portion of that.
absurd

 

[aquabliss]

Only the state refund is taxed again, not federal. 

This explains it (somewhat):http://brrinc.org/articles/personal_tax_questions/why_is_my_refund_taxable_x.html

 

[curious george]

ok so let's call it overpayment .
means i paid too much and you give it back to me, how can this be taxable.

regardless of how much i withheld, at the end i need to pay Y, but paid more, then i get the delta back.
why to make it so complicated ??

 

[qwerty]

You are not paying taxes twice on it. You deducted your state taxes on your federal return so you didn't actually pay taxes on it.  Since you actually got a refund on your state taxes, you essentially deducted to much in state taxes and therefore when the state gives its back to you, Uncle Sam takes his fair share.

 

[curious george]

thank you, it is still misleading when you try to calculate how much did you pay taxes per year at the time they are submitted .