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IRS Clarifies Tax Status of State-Administered Payments for 2022

tax refunds
tax refunds ( Photo: CNBC )

As the deadline for filing individual income tax returns for U.S. citizens and residents looms closer.

tax refunds

tax refunds ( Photo: The US Sun )

The IRS has issued a clarification regarding the tax status of special state-administered payments to millions of residents in 21 states

Taxpayers who reported certain state stimulus or relief payments as income on their 2022 federal income tax return paid too much tax, as the IRS does not consider certain such payments to be taxable income. Therefore, if you claimed them on a return that you have already filed, the IRS recommends filing an amended return to have your overpayment refunded.

In a press release issued on February 10, the IRS stated that taxpayers in 17 states will not have to report 2022 “general welfare and disaster relief” payments on their tax returns. These states include Alaska, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island.

Additionally, residents of Georgia, Massachusetts, South Carolina, and Virginia who received a state tax refund and either claimed a standard deduction or itemized deductions but didn’t receive a tax benefit will have the payments excluded from their taxable income.

Filers considering submitting an amended tax return can do so electronically and opt for direct deposit for any refund if they filed their original 2022 return online

However, paper filing is still an option for submitting the amended return Form 1040-X, Amended U.S. Individual Income Tax Return. If you choose this return route, you will receive any refund due as a paper check in the mail.

It’s important to note that an amended return can take three weeks to show up in the IRS system and up to 16 weeks to process. The IRS recommends waiting until after receiving any expected refunds from the original return before filing an amended return.

This clarification from the IRS will be a relief to many taxpayers who may have overpaid on their taxes due to the inclusion of non-taxable state-administered payments on their tax returns. By filing an amended return, they will be able to claim their overpayment refund and bring the tax year 2022 to a close.

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