To report federal and state tax refunds:
- Go to Screen 18, Tax Refunds.
- Enter the State tax refund.
- Enter the Federal income tax refund.
- State tax refunds received from the prior year are to be included on line 8 of the Form 1041 and excluded from the state return.
- Federal Income Tax Refunds received during the tax year are considered in the determination of trust accounting income but ignored in the determination of taxable income.