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IRS Issues Guidance for Taxpayers in 21 States to Amend Returns Following Tax Law Changes

Internal Revenue Service (IRS)
Internal Revenue Service (IRS) released new guidance. (Photo: CNET)

The Internal Revenue Service (IRS) has announced that taxpayers who reported specific state tax refunds as taxable before February 10 on their 2022 federal income tax returns in Colorado and 20 other states should consider filing an amended return.

Internal Revenue Service (IRS)

Internal Revenue Service (IRS) released new guidance. (Photo: CNET)

IRS Issues New Guidance

The clarification follows an earlier IRS determination in February that taxpayers in many states would not need to report these payments on their returns, including state payments related to general welfare and disaster relief, according to a published article in Princeton Daily Clarion.

Taxpayers in several states, including California, Connecticut, Florida, and Pennsylvania, do not need to report these payments on their 2022 returns. Colorado’s Taxpayer’s Bill of Rights (TABOR) refunds, which are excess state revenue collected and returned to taxpayers, are included as a special state payment in the ruling.

The IRS published a list of individual states and how the federal government will treat the special refunds or rebates. Taxpayers in Georgia, Massachusetts, South Carolina, and Virginia also will not be required to include special state tax refunds from 2022 as income if they meet certain requirements.

READ ALSO: State Relief Checks: What Should You Do If You Already Filed Your Tax Before IRS Guidance?

When the Taxpayers Will File an Amended Return?

In a published article in News On the Neck, taxpayers who submitted their original 2022 return electronically may also file an amended return electronically and select direct deposit for any refund. However, direct deposit is not available on amended returns submitted on paper.

Taxpayers in these states should check their returns to ensure they paid tax on the state refund before filing an amended return. For taxpayers in Alaska, the determination applies if they received the special supplemental energy relief payment and only that payment.

Taxpayers who fail to file an amended return where required may face an IRS audit and possible tax bills, interest, and penalties. The IRS has urged taxpayers to consult with a tax professional to determine if an amended return is needed.

READ ALSO: IRS Issued Revised Guidance For Tax Filers Clarifying About Special Payments In 2022

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