Monday February 13, 2023 – Last week The Internal Revenue Service (IRS) recommended taxpayers of 22 states that issued some form of state tax rebate should delay filing tax returns so the IRS could decide if those rebates were taxable.
After causing confusion, just 2 days later, the IRS clarified the federal tax implications of state-issued inflation or tax surplus rebates. The IRS decided, in most cases, recipients do not have to pay federal taxes on such payments. Although there are some exceptions depending on a given filer’s circumstances.
Taxpayers in California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island “do not need to report these state payments on their 2022 tax return,” the IRS said.
But, like most things’ taxes, there are exceptions, exclusions and complexities.
Attorney Steven A. Leahy clarifies the IRS clarifications on Today’s Tax Talk.