Both individuals and tax professionals have been confused recently regarding federal tax status on special payments in 16 states. On Friday, the Internal Revenue Service provided details regarding this confusion. Here’s everything you need to know.
What Does the New Guidance Entail?
The IRS determined that they will not challenge the taxability of general welfare and disaster relief payments. Therefore, people in the following 16 states will not need to report these payments on their 2022 tax return: Alaska, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is included in this guidance but has a different set of regulations than the other 15 states. California’s Middle Class Tax Refund also falls into this category.
According to the IRS, you won’t need to report the payments on your 2022 return. Those who qualify can ignore the federal 1099-MISC form sent out last month by the state Franchise Tax Board. If you have questions regarding this new guideline, contact a tax professional today!
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