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Georgia General Assembly doesn't give a taxpayer an even break p2

Taxpayers are nearing the deadline for filing their returns with the IRS and the Georgia Department of Revenue, and they may have realized by now that the state and the federal government calculate adjusted gross income differently. The reason is that the Georgia General Assembly does not adopt wholesale every change to the federal tax code. So, when Congress finally passed the tax extenders for the 2014 tax year, Georgia lawmakers spent a few weeks deciding which parts of the law would apply here.

Let's say that pet food is deductible at the federal level but was not adopted by the state. Bob earned $50,000 in 2014 and had just one deduction: $500 spent on pet food. As far as the IRS is concerned, his adjusted gross income in 2014 was $49,500. In most states, that would be the number he used for his state return.

But in Georgia, pet food is not deductible. Bob must go back, recalculate his federal adjusted gross income without the deduction and then base his state tax return on that number. Yes, it does mean that taxpayers will be filling out two federal tax returns (but only filing one).

And, yes, it does mean that Bob's state tax obligation could be higher than expected. The state thinks Bob made $50,000.

According to the Georgia Department of Revenue's March 8 notice, "Federal tax changes and how they affect 2014 returns," depreciation is one area where the state and the IRS tend to differ. Among the other differences is that Georgia does not allow the same unemployment exclusion -- $2,400 -- that the IRS does. Nor does Georgia allow taxpayers to report sales tax from the purchase of a new vehicle as an itemized deduction.

We suggest that taxpayers review state filing instructions and the March 8 notice carefully before starting their state tax return. Remember, too, that a small error now can turn into a major headache in the future. If you have questions about 2014 or any other tax year, you may want to talk to an experienced tax attorney.

Sources:

Georgia Department of Revenue, "Federal tax changes and how they affect 2014 returns," updated March 8, 2015

Accounting Today, "Block Warns Taxpayers in 12 States Could Get Smaller Tax Refunds," Michael Cohn, Feb. 19, 2015

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