This can't be right. Lets look at his more closly.
- Per my 2007 w2 I paid state tax of $50M to NYS.
- On my 2007 tax return I got a deduction for this payment.
Scenario 1 (which I could have done):
- File the NYS state return which would have given me a $4M tax refund
- File in CT with no income and have no CT liability.
- Received a 1099g from NYS for $4M, which would be taxable in 2008.
Scenario 2 (whcih I did to arb the differences in tax rates in the 2 states):
- Allocated time between NYS and other states, which resulted in a $24M tax refund from NYS.
- Filed in CT, and needed to pay them $16MM in taxes.
- This resulted in a net $8M benefit to me, allthough I knew that I would need to claim the $8M in my 2008 return as income.
- However, my 1099G says $24M refund, and I had to pay federal tax on that amount in 2008.
Your response is telling me that this is right, but it can't be. If so, then I am paying an xtra $8.4M ($24M x est 35%) in Federal taxes in 2008, and getting no benefit for the fact that I also paid $16M to CT.
Another way to look at it and taking the timing out, is I accrued with my 2007 withholdings $50M for states,and also paid an extra $16M in 2008, for a total of $66M. I received $24M back for my net deduction over 2007/2008 should be $42M.
However, since I am not recognizing the $16M payment, I am only getting a $26M net deduction.