2022 Relief Payments

The IRS announced Friday that most relief checks issued by states last year aren’t subject to federal taxes, provid­ing nth hour guidance as tax returns start to pour in.

A week after telling payment recipi­ents to delay filing returns, the IRS said it won’t challenge the ta'<ability of pay­ments related to general welfare and di­saster, meaning taxpayers who re­ceived those checks won’t have to pay federal taxes on those payments. All told, the IRS said special payments were made by 21 states in 2022. 

“The IRS appreciates the patience of taxpayers, tax professionals, software companies and state tax administra­tors as the IRS and Treasury worked to resolve this unique and complex situa­tion,” the IRS said Friday evening in a statement.

The states where the relief checks do not have to be reported by taxpayers are California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illi­nois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylva­nia and Rhode Island. That also applies to energy relief payments in Alaska that were in addition to the annual Per­manent Fund Dividend, the IRS said.

In addition, many taxpayers in Geor­gia, Massachusetts, South Carolina and Virginia also avoid federal taxes on state payments if they meet certain re­quirements, the IRS said.

In California, most residents got a “middle-class tax refund” last year, a payment of up to $1,050 depending on their income, filing status and whether they had children. The Democratic ­controlled state Legislature approved the payments to help offset record high gas prices, which peaked at a high of $6.44 per gallon in June according to AAA. 

A key question was whether the fed­eral government would count those payments as income and require Cali­fornians to pay taxes on it. Many Cali­fornia taxpayers had delayed filing their 2022 returns while waiting for answer. Friday, the IRS said it would not tax the refund. 

Maine was another example of states where the IRS stance had creat­ed confusion. More than 100,000 tax returns already had been filed as of Thursday, many of them submitted be­fore the IRS urged residents to delay fil­ing their returns.                                                                                                                                                                                                                                                                                     

Democratic Gov. Janet Mills pressed for the $850 pandemic relief checks last year for most Mainers to help make ends meet as a budget surplus bal­looned.

Her administration designed the re­lief program to conform with federal tax code to avoid being subject to federal taxes or included in federal adjusted gross income calculations, said Sharon Huntley, spokesperson for the Depart­ment of Administrative and Financial Services.

Senate President Troy Jackson called the confusion caused by the IRS “harmful and irresponsible.”                    

“Democrats and Republicans worked together to create a program that would comply with federal tax laws and deliver for more than 800,000 Mainers,” the Democrat from Allagash said in a statement Friday.

Source: Associated Press