IRS Advises Early Filers Who Reported Certain State Tax Refunds as Taxable to Consider Filing Amended Returns
The Internal Revenue Service (IRS) has recently released a statement advising taxpayers who filed their federal income taxes early this year and reported certain state 2022 tax refunds as taxable income to consider filing an amended return. The IRS clarified the federal tax status involving special payments made to taxpayers by 21 states in 2022 and concluded that taxpayers in many states did not need to report these payments on their 2022 tax returns.
If you're in one of the states where this applies - California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, or Alaska (only for the special supplemental Energy Relief Payment) - you don't need to report these state payments on your 2022 tax return.
For those in Georgia, Massachusetts, South Carolina, and Virginia, if you meet certain requirements, you won't need to include special state 2022 tax refunds as income for federal tax purposes. This applies if the payment is a refund of state taxes paid, and you either claimed the standard deduction for tax year 2022 or itemized your tax year 2022 deductions but did not receive a tax benefit.
If you filed before Feb. 10 in these areas and meet these requirements, you should check your tax return to make sure you paid tax on a state refund before filing an amended return. If you need to file an amended return, you can do so electronically or by paper mail, following the instructions for preparing the Form 1040-X. Direct deposit is only available for electronically submitted amended returns, and taxpayers can use the "Where's My Amended Return?" online tool to track its status.