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IRS Suggests That Early Filers Who Reported Special Relief Payments as Income Amend Their Returns

Ruth Singleton
Published Date:
Apr 12, 2023


The IRS issued a statement on Tuesday saying that taxpayers who filed their federal income taxes early in this year's filing season and reported certain state 2022 relief payments or refunds as taxable income should consider filing an amended return. That is because the agency determined on Feb. 10 that these payments are not taxable.

Specifically, the Feb. 10 guidance clarified that taxpayers in California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island and Alaska do not need to report state payments related to general welfare and disaster relief on their 2022 federal tax return. Alaska is in this group as well, but that state's payment of the Permanent Fund Dividend is still subject to federal taxation.

The IRS noted that taxpayers "can see a listing of individual states and the federal tax treatment of their special state refunds or rebates listed on this State Payments chart."

The IRS also mentioned that "many people in Georgia, Massachusetts, South Carolina, and Virginia will not include special state 2022 tax refunds as income for federal tax purposes if they meet certain requirements. For these individuals, state payments will not be included for federal tax purposes if the payment is a refund of state taxes paid and the recipient either claimed the standard deduction for tax year 2022 or itemized their tax year 2022 deductions but did not receive a tax benefit."

According to the IRS, "Taxpayers who filed before Feb. 10 in these areas and meet these requirements should check their tax return to make sure they paid tax on a state refund before filing an amended return. In addition, taxpayers in this situation who used a tax professional can consult with them to determine whether an amended return is necessary."

If an amended return is needed, taxpayers who submitted their original 2022 tax return electronically can also file their amended return electronically and may select direct deposit for any resulting refund.

Taxpayers also have the option to submit a paper version of the Form 1040-X, Amended U.S Individual Income Tax Return, and receive a paper check. They should follow the instructions for preparing the paper form, but they should mail it to:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0052

Direct deposit is not available on amended returns submitted on paper.

There was initial confusion in early February about the taxability of these special payments, and, at the time, the IRS  recommended that taxpayers wait for additional guidance on the federal tax status of these payments or refunds related to general welfare and disaster relief that were issued by certain states. National Taxpayer Advocate Erin Collins wrote on Feb. 9 that the “IRS has known for months that there is uncertainty about the tax treatment of these special state tax refunds or payments, and it has also known the answers may affect tens of millions of taxpayers. Yet to date, it has issued no specific guidance whatsoever.”

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