Income Taxes: IRS Issues Directive Telling Taxpayers in Some States To Delay Filing — What You Need To Know

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If you live in a state that offered special tax refunds or payments in 2022, the IRS has advised against filing a tax return until it becomes clear whether that money is taxable.

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In a statement issued on Feb. 3, the agency said that it is “aware of questions involving special tax refunds or payments made by states in 2022,” and is working with state tax officials to provide additional information and clarity for taxpayers. “There are a variety of state programs that distributed these payments in 2022 and the rules surrounding them are complex,” the IRS stated, adding that it expects to provide additional clarity in the week ahead.

The agency recommended taxpayers in these states either wait until additional guidance is available or consult with a tax professional. The IRS also advised against amending a previously filed 2022 return.

Although the IRS statement did not name specific states, Accounting Today reported that the warning “seems to apply mainly” to taxpayers in California, which offered a Middle-Class Tax Refund in 2022 to millions of residents.

The California refunds are not supposed to be taxed by the state, Accounting Today noted. However, it’s not clear whether the refunds are taxable at the federal level. California last year issued more than 7 million direct-deposit and 9.4 million debit-card refunds totaling over $9 billion, according to the California Franchise Tax Board. The state also sent millions of Form 1099-MISC information returns to both California taxpayers and IRS.

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Like the IRS, California state tax authorities are likely to send guidance to taxpayers in the coming days. The state also advised taxpayers and tax preparers not to file amended returns until more guidance is issued.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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