If you are eligible for special checks or rebates related to tax surpluses or inflation in 2022, you may want to delay filing your tax return, says the Internal Revenue Service (IRS).
The agency is clarifying whether these special state tax rebates should be taxed at the federal level, an IRS spokesperson told CNBC Make It.
The “rules around them are complex” and will require more time to determine the tax implications, according to an IRS statement. “We plan to provide additional clarification to as many states and taxpayers as possible next week.”
The IRS recommends that qualified filers for relief checks wait until “additional advice becomes available or consult a reputable tax practitioner.”
The IRS has also recommended those who have already filed a 2022 tax return not to file an amendment.
It’s not yet clear which specific states require more guidance, but at least 18 one-time refunds have passed in 2022, according to the Urban-Brookings Tax Policy Center: Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, New Mexico, New York, Oregon, Rhode Island, South Carolina and Virginia.
Most of those 18 states are still waiting to confirm whether the refunds will result in federal taxes, says Richard Auxier, senior policy associate at the Tax Policy Center.
Federal taxation will depend on federal law and the stated purpose of each remittance, according to the Wall Street Journal. Stimulus payments related to Covid-19 relief were not taxablebut it is possible that rebates related to inflation relief or tax surpluses may be eligible for federal tax. Each state relief program is also run differently, adding to the confusion.
In California, for example, a special program Middle class tax refund intended to cover the costs of rising inflation will not be taxed by the state, according to the state’s Franchise Tax Board. But it is also admits the funds could be taxed federally.
Similarly, in New Mexico, state taxes on a 2022 refundable income tax refund to cover rising costs will not be charged, according to the State Department of Taxation and Revenue website. However, the site also states that “the department cannot comment on the federal tax implications of the refunds and relief payments.”
In the meantime, filers who qualified for relief checks or tax refunds might want to wait until there is more guidance from the IRS before filing, if they don’t. have not already done.
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