IRS won’t tax most relief payments states made last year

By David Sharp – Associated Press

The IRS announced on Friday that most relief checks issued by states last year are not subject to federal tax, offering guidance 11 hours after tax returns start pouring in.

A week after telling taxpayers to delay filing their returns, the IRS said it would not challenge the taxability of general welfare or disaster-related payments. Overall, the IRS said in 2022 he will have special payouts in 21 states.

“The IRS thanks taxpayers, tax professionals, software companies and state tax administrators for their patience as the IRS and Treasury Department worked to resolve this unique and complex situation,” the IRS said Friday night. said in a statement.

States where taxpayers are not required to report relief checks are California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island. This also applies to supplemental energy relief payments in Alaska, in addition to the annual Endowment dividend, the IRS said.

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Additionally, many taxpayers in Georgia, Massachusetts, South Carolina, and Virginia also avoid federal taxes on state payments if they meet certain requirements, the IRS said.

Last year, most California residents received a “middle-class tax rebate” of up to $1,050, depending on their income, tax returns, and whether they have children. Democratic-controlled state legislatures approved payments to offset record-high gas prices that hit a high of $6.44 a gallon in June, according to the AAA.

A key question was whether the federal government would count these payments as income and require Californians to pay taxes on it. I was late filing my return for the year. On Friday, the IRS said it would not tax refunds.

Maine was another example of a state where the IRS’s stance caused confusion. More than 100,000 tax returns had already been filed as of Thursday, many of them before the IRS urged residents to delay filing their returns.

Democratic Gov. Janet Mills last year requested an $850 pandemic relief check to help most Maine legislators make ends meet amid a ballooning budget surplus.

Her administration designed the relief program to comply with federal tax law to avoid being subject to federal taxes or included in the calculation of federal adjusted gross income, according to the Department of Public Administration and Financial Services. spokeswoman Sharon Huntley said.

Senate Speaker Troy Jackson called the disruption caused by the IRS “harmful and irresponsible.”

“Democrats and Republicans have worked together to create a program that will comply with federal tax law and reach more than 800,000 Maine residents,” the Allagash Democrat said in a statement Friday.

Sharp reported from Portland, Maine. His AP writer Adam Beam of Sacramento, California contributed to this report.

Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. IRS won’t tax most relief payments states made last year

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