Let it be known that probably only my dad and perhaps a few other anal code-readers may care about this post, but I wanted to point out what seemed to be an issue in the Indiana state tax online filing forms. After spending a couple hours reading about this online and writing the post, I think I determined I was misunderstanding a few terms and I-file is working ok.
I’ve been filing my taxes online for several years. Every year I find something glitchy or goofy, but in general the last two years have provided good interactive online experiences that resulted in easily direct-deposited refunds and simple logins that usually remember some of my data from the previous year.
I’m a bit stuck right now, though. I did my federal as usual at esmarttax.com, a site I’ve used for several years. Someone dumb there doesn’t know the difference between principle and principal, but otherwise the experience has been flawless for me. Once I file the federal online, to avoid paying that site to e-file my Indiana taxes, I use the free Indiana e-file site–or as they call it, I-file. BTW, sometimes when you click links on their site, the page dead-ends or crashes. And sometimes it works with a redirect to the right page. Go figure.
This year I was reminded of some idiosyncrasies in the I-file system, including when I could not remember their password rules: Not all lower case and not all upper case characters. Who does that? I’ve seen requirements for length and numeric characters, but this I couldn’t remember. It’s only after updating my email address (which can be done despite not being able to log in), then having them send me my username by email (I actually had that right but couldn’t tell), THEN using that to update my password using the security questions that I was able to enter my filing account. The site helpfully remembered my address and employer (though not their address on the W-2). And then… the property tax rebate stuff happened.
I previously posted a tip from in.gov to help you address your property tax rebate on your federal return, which I did and was promptly penalized my fifty bucks in federal taxes on the amount. This rebate situation (property taxes paid to state from mortgage escrow but refunded from state by check directly to me) complicates last year’s itemization, but I figured it’s an easy audit trigger and technically I did get that money back, so I spent a great deal of time determining how to un-itemize the rebated amount. Meanwhile I still paid into escrow for the whole year but the state’s asinine treatment of property taxes in 2008 means my escrow did not have to pay out for half of the year, so I’m still out the cash but I only get a deduction for that half portion. And then that’s reduced by the rebate. Sigh.
Legislators: no more property tax rebates. Just credit the next bill. How much money and time did we waste sending checks to Hoosier homeowners? Your PR stunt was not in our best interests.
Anyway, here’s what we find in the I-file:
Technically, I think the actual amount paid for Tax Year 2008 (blue underline) would be zero because property taxes are paid in arrears, so until I pay my bill in 2009 which is FOR 2008, well, you see.
Then, green underline, same problem. Of course what I paid in 2008 was for 2007, as described above. But I am pretty sure they are asking if I paid late. This one isn’t worded as badly. Do I just know a little too much to do this right?
Next, I was happy/surprised to see a question about whether I told the feds I received a rebate. Way to keep Hoosiers honest (or something):
*This is where I misunderstood! This state tax refund amount is NOT the rebate. At least I don’t think it is after pondering for way too long.
My logic went like this:
First of all, the line marked “taxable refunds blah blah blah” (see red underline) is not where you report the rebate. You read the 1040 instructions for this line (10) which refer you to another publication and that tells you to enter the amount on a different line (21). It’s still the income section and it still adds it to your AGI, so in the end the federal part is right and I-file is just telling you to put it in not-quite the right place.
I figured the spirit of the question was still answerable as Yes, so you’ll see where I entered my rebate in the next box with the purple circle. Lalala, I continued through the I-file pages until suddenly my $900 in paid property taxes (the amount escrow paid out for me in 2008 per the form they sent me), which I had entered on that first screen, became $1101 on the Indiana tax form line 8 called Indiana deductions! Magically, I get to ADD the rebate to my taxes paid, not SUBTRACT it from the total!
Well, surely I screwed up something, right? Even though one never puts a negative number on a tax form (instructions just add or subtract one line from another), I went back and entered -201 in that box with the purple circle. ERROR! Red letters tell me I must enter a positive number.
Well, now what? I think the answer is one of these:
1. I am doing something wrong. I should eventually get a deduction for the 900 less the 201 for a total deduction of 699, right?
2. The I-file calcs are wrong.
3. We are both right, but I didn’t realize Indiana felt badly for socking me with back taxes on my federal so it’s being nice and giving me this bonus cash.
After typing all this I think it is actually #1 and #3, sort of. “Indiana will not tax this rebate” is stated at that tip I linked, however it also says “You also will need to subtract the rebate off of your 2008 Indiana tax return.” I took “subtract the rebate off your return” to mean subtracting it from the amount escrow paid the state (my $900 deduction), but it might mean subtract it from the federal AGI (which made it ‘income’), such that I am not taxed on that enhanced AGI by Indiana–hence a ‘deduction’ of that amount is added to the ‘deduction’ of the tax bill paid. This is all very stupid and I’m still not sure I’m not being taxed by Indiana anyway (they use federal AGI to determine taxable income, so since that includes the rebate, aren’t I being taxed by the state anyway?).
Other than a brief glimmer of hope for an explanation when I found an in.gov tax blog (it turned out to be more of a silly press release written in first person format with lots of cliches), I couldn’t figure out what I should do on this form. I either get a refund of $23 (with the $1101 deduction) or $9 (not sure how I got that one) or $3 (this should be ‘right’ but was only achieved by entering the $699 net taxes paid as the ‘actual amount of property tax paid’ and telling I-file I didn’t put the
rebate recovery state tax refund on the federal form). *This last choice seems to be correct now that I realize the line 10 stuff was not about the rebate. I think.
All this is to say I saved my session and didn’t file my state return tonight. I’m a pretty sharp girl. Am I overthinking it, or are my fellow Hoosiers doomed to confusion as well? It should not be this difficult.
*Posted anyway so you can see how my analytical mind travels the wrong track eagerly at times and so Dad can see that this is resolved…except for the state taxing the rebate they said they wouldn’t tax. Reading page 18 of the IT-40 Booklet (IN tax instructions) mostly explained it and even had an example. I wonder if I’d read those first if I could have avoided the confusion! Now where’s my three bucks!?