TAXPAYERS IN MANY STATES WON’T NEED TO WORRY ABOUT INCLUDING STATE REBATES AND PAYMENTS FROM 2022 ON THEIR FEDERAL RETURNS.
On February 10, 2023, the IRS issued guidance confirming this news. In a statement, the IRS noted that given sound tax administration and other factors, many state payments do not have to be reported on individual income tax returns at next year’s filing time. This adjustment is welcomed news for taxpayers looking forward to smoothing out their tax burdens soon.
The IRS recognizes that recent changes to the tax code have been a complicated process for all parties involved. They continue to move swiftly in ensuring the proper implementation of new regulations to provide relief funds to individuals and businesses.
General welfare and disaster relief payments
Payments made to promote the general welfare or relief in times of disaster can be exempt from taxation under certain conditions. It is essential to understand the requirements of these exceptions as part of the process when assessing such payments for the tax liability.
Given the fact that the pandemic emergency declaration is ending in May 2023, making this an issue only for the 2022 tax year, if a taxpayer does not include the amount of one of these payments in its 2022 income for federal income tax purposes, the IRS will not challenge the treatment of the 2022 payment as excludable for income on an original or amended return.