USA NoL Carryback Impact


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Hello. I do books for a small C corporation which had a NoL for T/Y 2017. It was carried back and the company received a refund of both federal and state taxes from previous years.
I created the ledger entry for the federal refund by debiting "Cash" and crediting "Income Tax Expense".
For the state refund I debited "Cash" and credited "Other Income".
The first part of the question is - is the above correct?
Secondly, how is it handled on the tax return? Am I correct in treating the state refund as income since it was previously deducted as an expense and NOT treating the federal refund as income since it was not deducted previously as expense?
Thanks for any guidance.
 

kirby

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First question. No. Record credit to the account where you originally recorded the expense. Maybe it was State Income Tax Expense or something like that. But this is not Income.

The State tax refund will become taxable "income" for the Fed return. The Fed refund is not taxable income for the Fed return. So you are correct.
 
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Kirby, thanks for the feedback. I'll make the corrections on that first part.
 

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