Residents in 21 states got some good news from the Internal Revenue Service earlier this year.
In 2022, they received general welfare, disaster, or stimulus payments from their state officials. These generally were referred to as refunds.
Basic state tax refunds, in some instances, are taxable at the federal level. But the IRS announced on Feb. 10 that these special 2022 state payments were not in most cases.
The affected taxpayers live in Alaska, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, and Virginia. You can read about the IRS decision in my post. State relief payments issued in 2022 are federally tax-free.
Late decisions could require amended filing: But there was one problem for a lot of these folks who don’t owe Uncle Sam tax on their state payments. They filed their federal tax returns before the IRS issued its ruling on the money’s taxability.
So now, the IRS is recommending that taxpayers who submitted their federal income taxes early in this year’s filing season and reported their affected state 2022 tax refund amounts as taxable income consider filing an amended return.
“Taxpayers who filed before Feb. 10 in these areas and meet these requirements should check their tax return to make sure they paid tax on a state refund before filing an amended return,” the IRS said in its announcement. You can double check your payment’s federally tax-free status at the IRS’ special State Payments page.
If you hired a tax pro to handle your 2022 taxes, check with that office about filing an amended return.
Electronic X filing: If you filed your tax return this year electronically, you can e-file the 1040-X to make the necessary corrections.
You also now can have any refund that the amended filing produces directly deposited to the financial account of your choosing.
The IRS recommends both electronic options, noting that it cuts out the slower snail mail time. Plus says the tax agency, direct deposit is a more secure way to receive refunds.
If you do prefer filing a paper Form 1040-X, mail it to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0052
Note that you cannot have your amended filing refund directly deposited if you file a paper 1040-X.
Regardless of how you submit your amended return, you can use the IRS online tracker Where’s My Amended Return? to find out its status.