Heads Up, Early Filers! Time for a Tax Do-Over on Certain State Refunds

Heads Up, Early Filers! Time for a Tax Do-Over on Certain State Refunds

Picture this: you’re an early bird, and you’ve filed your taxes way ahead of schedule. You’re feeling accomplished and ready to tackle the rest of the year… until the IRS comes knocking with some news. Turns out, if you reported certain state tax refunds as taxable income, you might want to hit the rewind button and file an amended return. Don’t worry, we’ve got your back with all the info you need to sort this out.

The Scoop on the State Refund Shenanigans

It all started on February 10, 2023, when the IRS revealed that 21 states had made special payments to taxpayers in 2022. These payments, related to general welfare and disaster relief, were initially considered taxable. But after some review, the IRS decided to cut us some slack and not challenge the taxability of these state refunds. High fives all around!

Who’s Affected by This Tax Tango?

If you’re in California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, or Rhode Island, you’re in luck! You don’t need to report these state payments on your 2022 tax return. Alaska, you’re part of this group too, but only if you received a special supplemental Energy Relief Payment. Curious about the specifics? Check out this online chart for the federal tax treatment of your state’s refunds or rebates.

But wait, there’s more! If you live in Georgia, Massachusetts, South Carolina, or Virginia, you might also be off the hook for including special state tax refunds as income on your federal return. The catch? You must have claimed the standard deduction for tax year 2022 or itemized your deductions without receiving a tax benefit. If you meet these requirements and filed before February 10, take a peek at your tax return to see if you need to make any changes.

How to Fix Your Tax Return (Without Breaking a Sweat)

If you need to file an amended return, don’t fret! You can still file electronically and even opt for direct deposit if you’re owed a refund. It’s fast, secure, and as easy as pie.

If you’re more of a pen-and-paper kind of taxpayer, you can submit a paper Form 1040-X, Amended U.S. Individual Income Tax Return. Just follow the instructions and mail it to:

Department of the Treasury Internal Revenue Service Austin, TX 73301-0052

Keep in mind that direct deposit isn’t available for paper-filed amended returns.

No matter how you file, you can use the “Where’s My Amended Return?” online tool to track your amended return’s status.

Still Need More Info?

For additional details, check out Tax Topic 308 on Amended Returns. And remember, whether you’re an early bird or a last-minute filer, it’s always better to double-check and make sure your tax return is accurate. Happy tax season, everyone!

***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**

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