Hi,
I received a refund form 1099-G from CA state for Tax Year 2006. The form states that:
"The refund amount may need to be reported on your Federal Income Tax Return if you claimed state income tax payments as an itemized deduction as Schedule A of your Federal Income Tax Return and received a refund from your California State Income Tax Return."

I did not claim the state income tax as itemized deduction on Federal Income Tax Return in 2006. Do I still have to add this refund amount in my Federal Adjusted Gross Income when filing tax return for 2007?

Any help is greatly appretiated.

If you did not claim itemized deduction for the state income tax in 2006, then state tax refund for 2006 is not a taxable income.

Thank You :-)

Would she have to amend her 2006 federal return to include amount on 1099-G?

Negative. The refund from the 2006 state return was received in 2007, and would be added to her 2007 tax return if, in fact, it was taxable income.