The IRS recently issued a preliminary statement to address questions being asked about the TY2022 taxability of various state payments that we encourage our partners to read – refer to IRS Statement below. The IRS is working with state tax officials and expects to issue further guidance very soon. We will share that with you immediately upon availability.
This is a complex situation with many different scenarios across 19 states. Your Partner Support Team, along with the tax software industry, is following this closely but does not yet know what the resolution looks like. There is a possibility that the IRS will be able to handle any refund or balance due adjustments, if applicable, on the backend and eliminate the need to amend (similar to how the IRS handled the $10K Unemployment Exclusion that was enacted via late Covid relief legislation after many taxpayers had already filed their TY2020 returns in 2021). Until the IRS issues final guidance, please follow these important instructions:
Do not amend returns at this time – wait for the IRS guidance. Amending returns can impact the current refund/return processing of your client’s already e-filed TY2022 return by weeks or months. Remember, refunds containing any portion of EIC and related Child Tax credits are not funded until the end of February/early March due to PATH Funding laws.
Do not contact the IRS or Partner Support Team for questions, as we cannot provide tax advice and do not have additional information other than what the IRS and the applicable states have provided to date
Tax Pros will need to consult with their client and decide if they want to hold off filing a specific return (not yet filed) until the IRS issues final guidance.
The IRS is aware of questions involving special tax refunds or payments made by states in 2022; we are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers. There are a variety of state programs that distributed these payments in 2022 and the rules surrounding them are complex. We expect to provide additional clarity for as many states and taxpayers as possible next week.
For taxpayers uncertain about the taxability of their state payments, the IRS recommends they wait until additional guidance is available or consult with a reputable tax professional. For taxpayers and tax preparers with questions, the best course of action is to wait for additional clarification on state payments rather than calling the IRS. We also do not recommend amending a previously filed 2022 return.
Additional Resources and Reminders:
Nineteen states are sending and/or have already sent various forms of stimulus and rebate payments to taxpayers. Click here for a list of the (19) states and more information on those payments.
Consult the applicable State Tax Agency via their website for updates and additional information. You can access a directory of the state sites HERE.