Wait to file taxes, IRS tells people in some states who received benefits. Here’s why

People who received some state benefits should wait a little longer — or seek help from an expert — before filing their taxes this year, the IRS said.

That’s because the agency isn’t sure whether the state-issued refunds and payments are taxable on the federal level.

“For taxpayers uncertain about the taxability of their state payments, the IRS recommends they wait until additional guidance is available or consult with a reputable tax professional,” officials wrote Feb. 3 in a news release. “For taxpayers and tax preparers with questions, the best course of action is to wait for additional clarification on state payments.”

That clarification could come the week of Feb. 6, according to the IRS, which didn’t immediately respond to McClatchy News’ requests for additional information.

“Many taxpayers who file early in the season are very anxious for their refunds,” Kathy Pickering, a chief tax officer at H&R Block, told The Wall Street Journal. “Waiting another week to file would mean waiting another week for their refund.”

Which taxpayers are impacted?

As inflation soared in 2022, more than a dozen states issued payments or tax rebates.

The Associated Press reports that 19 states gave refunds: “Alaska, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, South Carolina, and Virginia.”

For example, millions of Californians received a Middle Class Tax Refund. But now there’s confusion over whether taxpayers should claim the payments on their federal taxes, The Sacramento Bee reported.

As the IRS says it’s working to understand the “complex” rules of the relief programs, experts think the outcome could vary state by state. While pandemic-related payments are likely to be tax-exempt, people may be taxed on economic relief, according to The Washington Post.

“It’s all up to what the [state] legislature decided,” Jared Ballew, director of government relations at Drake Software, told the news outlet. “Was it for the benefit of that money, or is it like a tax refund, which would be taxable on a federal level?”

As the IRS works to provide clarity, it urges people to avoid amending 2022 returns that already have been filed.

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