If you are one of the millions of taxpayers who received emergency financial aid from your state last year, the Internal Revenue Service (IRS) advises you to wait a bit before filing your federal income tax return.
Although the filing season began on January 23, the IRS is still determining whether the payments sent last year to taxpayers in nearly 20 states, aimed at alleviating rising inflation, should be treated as taxable income on federal returns.
The IRS stated that it is working with state tax authorities and expects to provide further guidance next week.
“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. “For taxpayers uncertain about the taxation of their state payments, the IRS recommends that they wait until additional guidance is available or consult a qualified professional.”
The Tax Policy Center, a nonprofit research group, estimates that at least 18 states sent out aid checks in 2022. These states are: Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, New Mexico, New York, Oregon, Rhode Island, South Carolina, and Virginia.
But another foundation, the Tax Foundation, claims that 22 states will be affected, as four other states provided aid to specific and smaller groups within the population.
Source: The New York Times