Most taxpayers in the 21 states that sent out stimulus checks or tax rebates in 2022 don’t need to pay taxes on those payments on this year’s federal tax return, the Internal Revenue Service announced Friday evening.
The guidance clarifies how taxpayers should treat these payments and allows those waiting to file to move forward. It also means, for the most part, those living in the affected states who already filed their taxes don’t have to amend their returns.
The agency said it won’t “challenge the taxability of payments related to general welfare and disaster relief,” so taxpayers who received payments from the following states don’t need to report them on their 2022 federal tax return:
California
Colorado
Connecticut
Delaware
Florida
Hawaii
Idaho
Illinois
Indiana
Maine
New Jersey
New Mexico
New York
Oregon
Pennsylvania
Rhode Island
Alaska also is included in this group, except for those who received the annual payment of Alaska’s Permanent Fund Dividend. That is considered taxable income on…
2023-02-10 19:17:31 IRS finally provides late guidance on state stimulus checks
Source from finance.yahoo.com
On January 6th, 2021, the Internal Revenue Service (IRS) issued its long-awaited guidance on state stimulus checks, providing much needed clarity for states that had been debating the viability of their own stimulus payments.
In response to the COVID-19 pandemic, Congress passed the federal CARES Act last year, which provided direct payments to millions of taxpayers across the country. However, as state governments began to enact similar stimulus programs, they experienced mixed success due to the lack of guidance from the IRS.
Now, the IRS has laid out concrete rules to help state governments make those payments more efficiently and without potential penalty. The new guidance states that if states pass their own version of the federal payment, they can use the same method and should make the payment directly to their residents’ bank accounts or directly to the IRS. It also explains that the payments do not need to be applied directly to federal tax liabilities and that most of these payments are excludable from gross income for federal tax purposes.
This guidance should be of particular interest to state governors who have been seeking to provide their own forms of stimulus, either as part of a broader stimulus package or in an effort to help their citizens directly. The guidance provided by the IRS further shows that states do have the ability to be creative when it comes to helping their residents during the current economic downturn.
While the new guidance from the IRS may be late to the game, the new rules should help states to make much-needed stimulus payments over the coming months. With more help potentially on the way from the federal government, the more efficient delivery of state stimulus payments could be a key factor in helping citizens get back on their feet.