The Internal Revenue Service (IRS) is urging taxpayers in at least 20 U.S. states to hold off on filing their taxes for the 2022 tax year.
The reason? The federal tax agency is unsure of how to deal with state tax refunds and credits that were issued due to record-breaking inflation rates last year.
The IRS issued an official statement regarding the matter. It reads in full:
The IRS is aware of questions involving special tax refunds or payments made by states in 2022; we are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers. There are a variety of state programs that distributed these payments in 2022 and the rules surrounding them are complex. We expect to provide additional clarity for as many states and taxpayers as possible next week.
For taxpayers uncertain about the taxability of their state payments, the IRS recommends they wait until additional guidance is available or consult with a reputable tax professional. For taxpayers and tax preparers with questions, the best course of action is to wait for additional clarification on state payments rather than calling the IRS. We also do not recommend amending a previously filed 2022 return.
The situation is rather ironic since the IRS recently issued another notice indicating that they were expecting a smooth, stress-free tax season for Americans.
Although the IRS itself did not issue a full list of states involved in the snafu, MarketWatch indicates there are at least 20 states that issued some type of monetary inflation relief to eligible residents.
Among these are Arkansas, California, Colorado, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, New York, Oregon, South Carolina and Virginia.
According to Lee T. Reams, EA, a former member of the Board of Directors for the California Tax Education Council, "we will have to wait and see if the IRS legal council concludes the General Welfare Exclusion applies in this case."
Reams continued, "However, as we wait for the IRS to respond, millions of tax returns are being backed up on tax preparers computers causing them problems and delaying badly needed tax refunds for American families."
What do you think about the IRS's advice to taxpayers?
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