IRS finally provides late guidance on state stimulus checks

Posted on : February 11, 2023

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 federal tax returns, the statement said. Any other payments that states provided as compensation for workers are also taxable on the federal level.

According to the IRS, taxpayers in Georgia, Massachusetts, South Carolina, and Virginia who also received payments don't have to report these on their 2022 federal tax returns if they meet the following criteria:

  • The payment is a refund of state taxes paid, and

  • Either the taxpayer claimed the standard deduction or itemized their deductions but did not get a tax benefit.

The IRS did not provide instructions for taxpayers who don't meet those requirements, whose payments are still federally taxable, and who have already filed their federal tax returns.

The determination comes almost three weeks after the tax-filing season began and after millions of Americans already filed their federal returns. A week ago, the IRS recommended taxpayers in those states that sent out payments to hold off on filing, a situation the agency's watchdog called "not acceptable."

The agency appeared to acknowledge the stress the oversight caused.

"The IRS appreciates the patience of taxpayers, tax professionals, software companies and state tax administrators as the IRS and Treasury worked to resolve this unique and complex situation," the IRS release said.

Rebecca is a reporter for Yahoo Finance. Janna is the personal finance editor for Yahoo Finance. Follow her on Twitter @JannaHerron.

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