IRS Has Warning For People In 21 States

According to a report, the Internal Revenue Service has suggested that early filers in 21 states submit an updated tax return.

The Internal Revenue Service initially urged taxpayers to hold off filing if they received stimulus payouts in 2022. Whether or not these payouts would be considered taxable by the IRS was still up in the air. 

The Internal Revenue Service ruled on February 10 that citizens in such states wouldn’t be required to report such contributions on their tax returns, many weeks into the tax season.

The report shows that if you filed your federal return before February 10 and fulfilled these conditions, you may need to submit an updated return to account for the tax you paid on your state refund. In addition, people in this predicament who have consulted a tax expert might do so again to decide whether or not an updated return is required.

Payments for disaster assistance and general welfare were made by seventeen states: Rhode Island, Pennsylvania, New Jersey, Alaska, Indiana, California, Connecticut, Delaware, Hawaii, Illinois, Maine, New Mexico, Colorado,  Florida, New York, Oregon, and Idaho.

Suppose a state payment is a refund of previously paid state taxes, and the receiver either used the standard deduction or itemized deductions but still owes taxes to the state, as is the case in Massachusetts,  Virginia, Georgia, and South Carolina. In that case, the state payment need not be reported.

Electronic filing of modified tax returns is available to taxpayers. 

According to its website, the IRS says it would also accept paper revisions but warns it may take longer to obtain refunds since they are not issued by direct deposit. 

Sending Form 1040-X to the IRS required taxpayers to wait for a check in the mail for any refund, which prolonged the process of filing an updated return. Direct deposit, which allows refunds to be sent more quickly, is now an option for taxpayers who electronically submit Form 1040-X.  

Filing an updated tax return to cover the 2022 tax year is possible until the April 18 deadline, 2026.