“As a result, I was issued a 1099-G for $6000, since I received a state tax refund, credit, etc. in 2012. Do I now owe federal income tax for 2012 of the entire amount of $6000, or just the refund part of $300?”==========Not entire amount of $6K;however, as you itemized deductions on Sch A of 1040 on your 2011 return, you need to include in your gross income, the LESSER of the refunded amount of $300 OR your excess itemized deductions; I mean assume that for 2011 you deducted itemized deduction of $10,000 , then your excess itemized deduction equaled $4200.$ $10,000-$5,800, std deduction for 2011, then you need to report $300 on line 10 form 1040.
“ It doesn't seem right that I would owe income taxes on the state tax credit portion of $5700. “======No
“Also, did I fill in Schedule A Line 5a correctly for tax year 2011?”=======To deduct your state tax on your return, you need to report the state tax liability on Sch A of 1040 line 5a.