Taxpayers in 21 states, in including Georgia, may want to consider filing amended returns if certain disaster relief and general welfare payments were reported as taxable income on the 2022 federal tax return. On February 10, 2023, the IRS announced that “in the interest of sound tax administration and other factors,” those who received these payments are not required to report it as taxable income. This announcement is welcome news for Atlanta taxpayers that were unsure whether certain state tax refunds needed to be included as income. This means taxpayers who included these payments as income may want to consider filing an amended return. To help clients, prospects, and others, has provided a summary of the key details below.
The reason payments from these states are being excluded from income for federal tax purposes is because they apply under either the General Welfare Doctrine or as a Qualified Disaster Relief Payment. Some of the state payments that fall under this guidance include Colorado Cash Back, Connecticut’s Child Tax Rebate, Oregon’s One-Time Assistance Payments, and Maine’s Pandemic Relief Payments. The primary states affected by the decision are California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island.
Some state tax refunds issued to taxpayers in Georgia, Massachusetts, South Carolina, and Virginia will also not need to be reported on federal taxes if certain requirements are met. If the taxpayer claimed a standard deduction for tax year 2022, itemized deductions, didn’t receive a tax benefit, and if the payment is a refund of paid state taxes, they do not have to include state payments for federal tax purposes.
Taxpayers who filed the 2022 tax returns electronically can also file amended returns electronically and opt for direct deposit for refunds. This will speed up the processing time. For filers who want to mail payments, they can submit a paper version of the amended return, Form 1040-X, and will receive a check in the mail. While direct deposit isn’t applicable to amended returns submitted on paper, all taxpayers can check the status of their amended return on the “Where’s My Amended Return?” tool.
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The recent IRS ruling is certainly welcome news for Atlanta individuals and businesses that paid taxes on state tax refunds. While filing an amended return is certainly an option, it is important to consult with a qualified tax advisor who can assess your situation and determine the best way to proceed. If you have questions about the information outlined above or need assistance with a tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.
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