I.R.S. Tells Millions Who Received State Rebates: Don’t File Just Yet

These special payments have caused confusion because the I.R.S. must sort through each state’s program to determine their taxability. For example, disaster relief payments are not taxable, which is why stimulus payments sent out during the coronavirus pandemic were not treated as income, said Jared Walczak, vice president of state projects at the Tax Foundation.

Social benefit programs that help low-income households are also generally not considered taxable income. But the states generally characterized last year’s payments to taxpayers as inflation relief, and in other cases they sent the money because they had state surpluses, tax experts said.

“Ultimately, it is the I.R.S.’s job to determine what the true function is,” Mr. Walczak said. “It may be all taxable or not taxable in some states, while in other states taxability may differ based on whether a taxpayer itemized or took the standard deduction.”

TurboTax, the giant online tax preparation service, has made a determination of its own. Based on “currently available information” and its “own expertise,” it said it believed that the payments were not taxable at the federal or state level — and it has not dissuaded its customers from filing.

“We are providing guidance to our customers and are hopeful for additional clarification in the near future,” said Lisa Greene-Lewis, an accountant and tax expert with TurboTax.

But many other tax preparers across the country are frustrated that the guidance wasn’t sorted out before tax season opened.

Dan Herron, an accountant and financial planner in San Luis Obispo, Calif., said he had held back on filing for taxpayers who received the middle-class tax credit in their state given all of the confusion.

“It is so frustrating considering these kinds of payments have been sent out during 2022, yet the I.R.S. didn’t worry about it until … NOW,” he said in an email. “Clients express their frustration to us, which makes us frustrated with the I.R.S. It’s not a fun situation to be in.”

Sumber: www.nytimes.com