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STEP 6 FEDERAL TAX ADDITION AND DEDUCTION

27. FEDERAL INCOME TAX REFUND RECEIVED IN 2004.

If you received a refund of Federal income tax during 2004, you must report the amount on this line. It must be reported even if you used the standard deduction on the prior year’s Iowa return. The Federal refund must be included on this line because you benefit from being able to deduct Federal taxes paid on the prior year's Iowa return which reduces your Iowa taxable income.

Include the following:

  • The refund you received from your 2003 Federal tax return
  • To find the amount you received, check your records or call the IRS at 1-800-829-1040. This information is not available from the Iowa Department of Revenue.

  • Any refunds received in 2004 for other years that were amended or filed late
  • Any Advance Child Credit you may have received in 2004. Please note: Most taxpayers received theirs in 2003.

If you chose to have any part of an overpayment of Federal income tax credited to estimated tax payments for 2004, the amount should be claimed as 2004 estimated tax paid on line 32. The total Federal overpayment must also be reported on line 27.

A refund of Federal tax received in 2004 is not reported if the tax was not deducted from Iowa income in a prior year.

Do not include the Federal refund in the following situations:

  • Do not include any part of the refund received from earned income credit or additional child tax credit.
  • You are filing an Iowa return for 2004 for the first time because you moved into Iowa during the year. A refund of Federal tax received in 2004 is not reported if the tax was not deducted from Iowa income in a prior year.
  • The refund you received was from a year in which you did not take a deduction for the payment of Federal tax because your income was less than the minimum amount for paying Iowa tax or your tax for that year was calculated using the alternate tax computation.
  • You were a nonresident for the tax year of the refund and were not required to file an Iowa return for that year.

Married Separate Filers: If the refund received in 2004 was from a jointly filed Federal return, it must be divided between the spouses in the ratio of the spouses’ net incomes in the year for which the refund was issued. Example: A 2003 Federal refund received in 2004 would be prorated using the spouses’ net incomes from the 2003 Iowa return.

(Examples of how to prorate)

Example of how to prorate:

Wife’s income is $10,500
Husband’s income is $15,500
Total: $26,000
Federal refund: $1,200

Divide wife’s income by total income: $10,500 divided by $26,000 = 40%
The husband’s income is, therefore, 60% of their combined income.

In this example, line 27 is $720 (60%) of the Federal refund for the husband, and $480 (40%) of the Federal refund for the wife.

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