If You Live in These 4 States You May Have To Report Your Inflation Relief Check According to New IRS Guidance

Young family with baby worried about family budget and high taxes and bills.
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Following much confusion and conflicting advice, the Internal Revenue Service (IRS) has finally issued guidance regarding the federal tax status involving special payments made by 21 states in 2022.

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While the agency said on Feb. 10 that taxpayers in many states will not need to report these payments on their 2022 tax returns, there are four states in which they will be required to — unless they meet specific requirements.

The IRS guidance stated that taxpayers in Georgia, Massachusetts, Virginia and South Carolina don’t have to report the state payments for federal tax purposes, “if the payment is a refund of state taxes paid and either the recipient claimed the standard deduction or itemized their deductions but did not receive a tax benefit.”

The IRS rule is clearer for the other states who issued special payments, as the agency said that most of these fall under the general welfare or disaster relief payments rule and in turn, “may be excludable from income for federal tax purposes under the General Welfare Doctrine or as a Qualified Disaster Relief Payment.”

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“Determining whether payments qualify for these exceptions is a complex fact intensive inquiry that depends on a number of considerations,” the IRS concluded.

These states are: Alaska, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.

Alaska in particular is a bit complicated — the IRS indicated the exemption was, “only for the supplemental Energy Relief Payment received in addition to the annual Permanent Fund Dividend.”

The full list of state payments can be found here.

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“The IRS appreciates the patience of taxpayers, tax professionals, software companies and state tax administrators as the IRS and Treasury worked to resolve this unique and complex situation,” the announcement detailed.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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