IRS Announces State Relief Checks Not Taxable, taxpayers who received relief checks from 21 states last year – the IRS has announced that these payments are not subject to federal taxes. This announcement comes as a relief to many taxpayers who have been waiting for clarification on the taxability of these payments. The states where relief checks do not have to be reported by taxpayers are California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island. In addition, many taxpayers in Georgia, Massachusetts, South Carolina, and Virginia also do not have to pay federal taxes on state payments if they meet certain requirements.
The IRS statement reads, “The IRS appreciates the patience of taxpayers, tax professionals, software companies and state tax administrators as the IRS and Treasury worked to resolve this unique and complex situation.”
Many taxpayers in California, for instance, received a “middle class tax refund” last year. This was a payment of up to $1,050, based on their income, filing status, and whether they had children. The payment was approved by the state legislature to help offset high gas prices, which had reached a peak of $6.44 per gallon in June 2022. The key question was whether these payments would be considered income by the federal government and taxed accordingly. But the IRS has now confirmed that these refunds will not be taxed.
Similarly, in Maine, more than 100,000 tax returns had already been filed before the IRS issued guidance to delay filing. Governor Janet Mills had pressed for $850 pandemic relief checks for most Mainers, to help make ends meet during the budget surplus. The relief program was designed to conform with federal tax code, to avoid being subject to federal taxes or included in federal adjusted gross income calculations. Tax software makes for a much smoother and accurate process that helps minimize the risk of simple human error, click this link for more information.
IRS announcement state Relief checks not taxable, provides much-needed clarity on the taxability of state relief payments, allowing taxpayers to file their returns with peace of mind. The confusion caused by the IRS has been criticized as “harmful and irresponsible” by Maine Senate President Troy Jackson. However, it’s good to see that the IRS and Treasury have worked together to resolve the situation.