The IRS announced Friday that most relief checks issued by states last year aren't subject to federal taxes, providing 11th hour guidance as tax returns start to pour in.
A week after telling payment recipients to delay filing returns, the IRS said it won't challenge the taxability of payments related to general welfare and disaster, meaning taxpayers who received those checks won't have to pay federal taxes on those payments. All told, the IRS said special payments were made by 21 states in 2022.
The states where the 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. That also applies to energy relief payments in Alaska that were in addition to the annual Permanent Fund Dividend, the IRS said.
In California, most residents got a"middle class tax refund" last year, a payment of up to $1,050 depending on their income, filing status and whether they had children. The Democratic-controlled state Legislature approved the payments to help offset record high gas prices, which peaked at a high of $6.44 per gallon in June according to AAA.
Maine was another example of states where the IRS stance had created confusion. More than 100,000 tax returns already had been filed as of Thursday, many of them submitted before the IRS urged residents to delay filing their returns.
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