State Payments Won’t Impact Your Federal Returns After All

State Payments Won’t Impact Your Federal Returns After All

March 06, 2023

In January, you may have read news reports that the IRS was recommending that taxpayers hold off filing their 2022 tax returns for awhile.

Why? Because at the time, the IRS was still deliberating whether taxpayers would need to report special payments made by 20 states in 2022.

In mid-February, the IRS finally determined that “in the interest of sound tax administration and other factors,” most taxpayers won’t have to report these special payments on their 2022 tax returns.

These waivers apply to two categories of state payments.

Refunds of state taxes

In 2022, Georgia, Massachusetts, South Carolina and Virginia issued refunds of a percentage of state taxes paid by residents in past years.

Taxpayers who received these refunds won’t have to report them:

  • If they’re claiming the standard deduction (i.e., they're not itemizing); or
  • If they won’t receive a tax benefit for itemized deductions (i.e., because the total itemized amount doesn’t exceed the standard deduction amount).

General welfare and disaster relief payments

These payments were made to residents living in: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.

No one who has received these payments needs to report them on their 2022 tax returns.

All of these waivers only apply to special payments made in 2022. The IRS may change its mind if states make future payments or issues tax refunds. 

If you have any tax-related questions, speak with a tax professional.


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