WASHINGTON — The Internal Revenue Service said that taxpayers who filed their federal income taxes early in this year’s filing season and reported certain state 2022 tax refunds as taxable income should consider filing an amended return.
On Feb. 10, 2023, the IRS provided details clarifying the federal tax status involving special payments made to taxpayers by 21 states in 2022. During a review, the IRS determined that in the interest of sound tax administration and other factors, taxpayers in many states did not need to report these payments on their 2022 tax returns. Consequently, the IRS will not challenge the taxability of state payments related to general welfare and disaster relief.
This means people in the following states don’t need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is in this group as well, but the determination applies only to the special supplemental Energy Relief Payment received.
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. Filing electronically cuts out the mail time and including direct deposit information on an electronically submitted form provides a convenient and secure way to receive refunds faster.
No matter how a taxpayer files the amended return, they can still use the “Where’s My Amended Return?” online tool to check its status.