Warning: Undefined array key "_wpupa_attachment_id" in /home/u185508669/domains/yopost.com/public_html/wp-content/plugins/wp-user-profile-avatar/templates/wp-author-box-social-info.php on line 90

Warning: Trying to access array offset on value of type null in /home/u185508669/domains/yopost.com/public_html/wp-content/plugins/wp-user-profile-avatar/templates/wp-author-box-social-info.php on line 90

Hold Off on Filing Your Return, IRS Tells Millions of Taxpayers

Warning: Undefined array key "_wpupa_attachment_id" in /home/u185508669/domains/yopost.com/public_html/wp-content/plugins/wp-user-profile-avatar/templates/wp-author-box-social-info.php on line 90

Warning: Trying to access array offset on value of type null in /home/u185508669/domains/yopost.com/public_html/wp-content/plugins/wp-user-profile-avatar/templates/wp-author-box-social-info.php on line 90

The Internal Revenue Service told millions of taxpayers to hold off on filing their returns until it issues guidance on whether several state refund and rebate payments issued last year count as taxable income.

California sent out more than 16 million special Middle Class Tax Refund payments, worth $9 billion, to help counter inflation and high gas prices last year. It is still unclear if those payments should be treated as taxable federal income, as taxpayers are starting to file their 2022 tax returns.

The IRS said in a Friday statement it will provide guidance this week on the tax status of California’s and other states’ payments. Meanwhile, it is advising those who received these payments to await further instructions.

“For taxpayers and tax preparers with questions, the best course of action is to wait for additional clarification on state payments rather than calling the IRS,” the IRS said.

Despite the IRS statement, H&R Block Inc. and Intuit Inc.’s INTU 1.08%increase; green up pointing triangle TurboTax, two of the biggest tax-preparation companies, have continued to file returns for clients. The firms are taking the position that the California payments aren’t taxable.

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

The tax status of special state payments is just one reason many taxpayers might receive smaller tax refunds this year compared with last.

Flush with money, more than a dozen states issued rebates and refunds in 2022, akin to the federal stimulus payments issued during the Covid pandemic. Whether the state payments are taxable for federal purposes depends on the stated purpose and federal tax law. If the payments were for Covid relief, for example, they should be exempt from federal tax as disaster-relief payments, tax professionals say.

In some cases, it depends on whether a taxpayer itemizes deductions. The Virginia tax authorities said that the up-to-$500 one-time 2022 Virginia rebate will be treated like a state tax refund, so it will be taxable for taxpayers who itemize deductions, but not for taxpayers who take the standard deduction.

In California, state tax authorities have said that the payments aren’t taxable for state-income-tax purposes but may be for federal purposes. California issued more than 6.4 million 1099-MISC reporting forms to the taxpayers who got payments of $600 or more, according to the Franchise Tax Board, California’s tax authority.

“That’s left everybody in a state of confusion,” said Ms. Pickering.

H&R Block’s analysis concluded that the California payments aren’t taxable for federal purposes as certain payments to promote general welfare are excludable from federal income. So they are filing returns for customers who received the payments, but not including the payments as taxable income. TurboTax is also taking the position that the payments aren’t taxable for federal purposes, said Lisa Greene-Lewis, a certified public accountant and editor at TurboTax.

The California payments ranged from $200 to $1,050, based on family size and income. For a family who got the full $1,050 payment, the extra federal tax hit could be a couple hundred dollars.

For taxpayers who have already filed, the IRS says it doesn’t recommend filing an amended return at this time.

read full article at https://www.wsj.com/articles/hold-off-on-filing-your-return-irs-tells-millions-of-taxpayers-11675737726


Show More

Related Articles

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker