Tax Refund categorization

Question

I read a closed discussion suggesting a sub category for tax payment and refund both for fed and state. But, what's the problem with just having a Fed category and a state category and putting both the payment and refund in the right category? What is the downside to not having a sub payment and refund category?

smess · Answer

For Federal payments or refunds using the subcategory Tax:Fed (for the previous year), Quicken will prompt you with a pop-up "Is this transaction a payment of taxes for Tax Year (insert previous calendar year)"?

It would be preferable if Quicken didn't refer to this as a "payment" when a deposit is entered.  To properly account for Federal Tax in the previous year, using the same sub-category (Tax:Fed) is the way to do it, but when it is a refund being entered, it is counterintuitive to answer "Yes" to this question, since it is not a "payment".

Perhaps for a deposit transaction for sub-category "Tax:Fed", Quicken could present "Is this transaction a refund of taxes paid for Tax Year (insert previous calendar year)?

Sherlock · Answer

We use the same subcategory of Tax:Fed for federal payment and refund.  We use a subcategory of Tax:State for state payment and the Tax Refund category for state refund.

The location of the categories doesn't really matter.  What is important are the tax-line assignments:

The federal payment and refund categories are tax-related but are not assigned a tax-line item.
The state payment category is assigned the Schedule A: State income taxes tax-line item.
The state refund category is assigned the 1099-G: State and local tax refunds tax-line item.

UKR · Answer

AFAIK, 
Tax Refund State is reportable as Form 1099-G on your federal tax income and therefore should be a separate Income category.Tax Refund Federal ... even though it's not reportable, I keep it as an Income category separate from an expense category for "W-2: Fed income tax withheld", so as not to mess up the numbers.