“We live in New London, ohio. My husband works and pays taxes to Parma City, Ohio. Do we possibly recieve money back when we itemize?”--->You can itemize your local income taxes paid in 2011 for a prior year such as taxes paid with your 2010 local income tax return; local income taxes withheld from your salary during 2011.Your spouse’s W2 will show these amounts withheld; Do not reduce your deduction by local income tax refund or credit you expect to receive for 2011 or refund of, or credit(if you have) for prior year local income taxes you actually received in 2011. You can itemize local (I mean city taxes on Sch A of Form 1040 line 5. However, if you do NOT itemize your deductions on Sch A, then you can’t deduct your city taxes on your return. As you deduct your city taxes on Sch A, you can reduce toue taxable income and tax liability. When you, as a taxpayer, have claimed a federal itemized deduction for local income tax payments and subsequently receive a refund related to those payments, the Internal Revenue Code requires you to report the refund as income on Form 1040 for the year in which the refund was received. As a result, only taxpayers who have filed federal itemized deductions for the year for which the local government issued a tax refund must claim the refund as income. So,to avoid the need to report any subsequent local income tax refunds as income, when you itemize deductions on Sch A, you will choose to claim a deduction for local sales tax instead of deducting local income taxes.I guess You can elect to deduct local general sales taxes instead of local income taxes. You cannot deduct both. As long as you deduct local sales tax in lieu of local income taxes, you are not required to report any subsequent local income tax refund as income.
“ I have never entered this information on our tax returns. Should I be?”---->As said above, as long as you can itemize your deductions on Form 1040 Sch A, you can deduct your city taxes on your return.