It’s tax season but the Internal Revenue Service warned last week that it’s not quite ready for some filings. The agency is asking millions of Americans to hold off on filing tax returns.
The hiccup is over direct payments and rebates many states handed out, hoping to help its residents counter raging inflation. Annual consumer price inflation peaked at 9.1% in June 2022.
Now the IRS needs to decide if that relief money should be taxed at the federal level. By the Tax Policy Center’s count, 18 states dished out tax rebates in 2022. While the states told residents the funds wouldn’t face state taxes, the federal fate is up in the air.
According to the Tax Policy Center, 18 states issued tax rebates in 2022.
“There are a variety of state programs that distributed these payments in 2022 and the rules surrounding them are complex,” the IRS said in a statement. “We are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers.”
For instance, California’s Middle Class Tax Refund made more than $9 billion worth of payments benefitting more than 31 million people, according to the state. A married couple with one dependent could get up to $1,050. Again, the money won’t be taxed in California, but the state’s not sure the same can be said for Washington, D.C. Just in case, the state is issuing 1099 forms to those who received refunds greater than $600.
Other states at play include New Mexico, which dished out multiple rebates that totaled up to $1,500 for married couples; and South Carolina, which earmarked $1 billion for payments sent out toward the end of the year, capped at $800 apiece.
“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,” the IRS said.
The agency said it hopes to have guidance for as many states and taxpayers as possible this week.
SIMONE DEL ROSARIO: IT’S TAX SEASON BUT THE IRS IS NOT READY FOR MANY OF YOU.
THE AGENCY’S ASKING MILLIONS OF AMERICANS TO HOLD OFF ON FILING THEIR RETURNS.
THE HICCUP IS OVER DIRECT PAYMENTS AND REBATES MANY STATES HANDED OUT, HOPING TO COUNTER RAGING INFLATION.
NOW THE IRS NEEDS TO DECIDE IF THAT RELIEF MONEY – SHOULD BE TAXED AT THE FEDERAL LEVEL.
BY THE TAX POLICY CENTER’S COUNT – 18 STATES DISHED OUT TAX REBATES IN 2022.
THE IRS SAID THE VARIETY OF PROGRAMS COME WITH COMPLEX RULES, AND THEY’RE WORKING WITH STATE TAX OFFICIALS TO GIVE CLARITY TO THOSE WHO RECEIVED THE MONEY, AS SOON AS POSSIBLE.
FOR INSTANCE, CALIFORNIA’S MIDDLE CLASS TAX REFUND MADE NINE BILLION DOLLARS WORTH OF PAYMENTS BENEFITTING MORE THAN 31 MILLION PEOPLE. A MARRIED COUPLE WITH A CHILD COULD GET UP TO ONE THOUSAND FIFTY DOLLARS.
THE MONEY WON’T BE TAXED IN CALIFORNIA, BUT THE STATE’S NOT SURE THE SAME CAN BE SAID FOR D-C.
AND NEW MEXICO DISHED OUT MULTIPLE REBATES THAT WENT UP TO 15-HUNDRED DOLLARS FOR MARRIED COUPLES.
WHILE SOUTH CAROLINA SENT OUT CHECKS THAT WENT AS HIGH AS 800 BUCKS.
THE IRS IS TELLING TAXPAYERS AND PREPARERS IN THESE STATES TO WAIT UNTIL MORE GUIDANCE IS GIVEN – AND DON’T CALL THE IRS IN THE MEANTIME.
I’M SIMONE DEL ROSARIO IN NEW YORK IT’S JUST BUSINESS.
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