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Incorrect Tax Refund Reporting by the States of Kansas and Arizona

By MarksNelson on February 6, 2017 in Articles, Linda Freeman CPA, News, Tax

Many taxpayers are gathering their W-2’s, 1099’s, and other information as they get ready to meet with their tax advisors and start the preparation of their 2016 income tax filings.  This year, there is a slight snag to watch out for.

The Kansas Department of Revenue recently discovered that some of the Forms 1099-G sent out for the 2016 tax year were incorrect.   The Form 1099-G is issued to report payments made during that reporting year – which include tax refunds (or tax credits for overpayments applied to the taxpayer’s account) and unemployment benefits.  In this case, some of the forms issued to report state tax refunds did not properly match the amounts actually received during 2016.  The error did not extend to forms issued for unemployment payments paid during that year.

The Department has stated that while they believe only a small percentage of the forms were issued incorrectly, they are reissuing all of the 1099-Gs that reported state tax refunds in order to ensure accuracy.  The State’s estimate is that approximately 380,000 of these reporting forms will be resubmitted to the taxpayers.

All forms will be reissued, so taxpayers will receive a new form in the mail.  The new forms will be marked CORRECTED on both the 1099-G form and the envelope and were expected to be mailed out as of Tuesday, January 31st.

While some of the initial forms mailed to taxpayers were incorrect, the Department of Revenue has stated the information sent to the Internal Revenue Service was accurate.  As a result, there should not be any processing issues with the taxpayers’ Federal returns.

Taxpayers who received a 1099-G already should check to see if the amount reported matches their records.  If the amount is incorrect, they should wait for the corrected form before completing their 2016 income tax returns.

In a similar situation, the Arizona Department of Revenue also announced that they sent out erroneous forms to approximately 640,000 of their state residents.  They have not yet completed steps to correct this issue, but plan to identify impacted taxpayers and send corrected Forms 1099-G as soon as possible.

Please feel free to contact your MarksNelson advisor if you have any questions regarding how this might impact you.


Linda Freeman