(FiveNation.com)- In an unprecedented move, earlier this month, the IRS released new guidance regarding special relief payments provided to residents of 19 states last year that could delay filing for many taxpayers.
In 2022, 19 states provided inflation relief payments or rebates for taxpayers, and the IRS has yet to determine if those payments are subject to federal income tax.
In its guidance released on February 10, the IRS said that it was working with tax officials in each state to determine the taxability of the payments, describing the rules on such payments as “complex.”
Tom O’Saben from the National Association of Tax Professionals told The Center Square that releasing new guidance so close to tax filing season is unprecedented for the IRS.
O’Saben said those who have already filed their 2022 federal tax returns should follow the IRS’s advice and not file an amendment to their returns. He told The Center Square that whatever decision the IRS makes will probably be a “nonevent” for 90 percent of taxpayers.
Illinois Department of Revenue spokeswoman Maura Kownacki told The Center Square the Illinois tax rebates are not subject to state income tax but whether the rebates can be taxed federally has not yet been determined by the IRS.
The day before the IRS released its new guidance, the watchdog group Taxpayer Advocate Service (TAS) blasted the IRS for telling taxpayers to delay filing, arguing that the agency should have been aware of the payments and tax rebates from these states.
TAS said if the IRS determines that the inflation relief payments and rebates are not taxable, those who have already filed their 2022 returns would have to file amended returns excluding the payments. This will mean taxpayers will have to invest even more money and time preparing their taxes and then wait for refunds. Additionally, the IRS will then have to expend more resources to process both the amended returns and any refunds.