Problem
Sherry had $5,600 withheld from her wages for state income taxes during 2015. In May of 2015, she received a $450 refund for her prior year state tax return. The amount of Sherry's tax on her 2015 tax return is $6,100 and she pays the additional tax of $500 ($6,100 - $5,600) when she files her state income tax return in April of 2016.
a. Assuming she elects to deduct the state income tax, how much state income taxes should Sherry deduct on Schedule A of Form 1040 of her 2015 federal income tax return?
b. How should Sherry report the $450 refund?