By Alex P. Vidal
“The people are hungry: It is because those in authority eat up too much in taxes.”— Lao Tzu
TAX season has started but the Internal Revenue Service (IRS) surprisingly is telling us taxpayers to delay filing our 2022 taxes especially if we received special state tax refunds or payments.
Should I delay or not? My answer is yes and maybe.
I have been filing my taxes through the TurboTax, a software package for preparation of American income tax returns, produced by Intuit in the past five years.
TurboTax is a market leader in its product segment, competing with H&R Block Tax Software and TaxAct.
If I delay, there’s no difference especially if we all have the same deadline. The sooner I file my income tax, the better since, anyway, I don’t utilize anymore the services of private accounts like I used to do in California.
“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,” the IRS said in a statement.
The tax agency added it is “aware of questions” surrounding the relief efforts that were crafted by states in different ways and under different rules.
When can we expect our tax refund? Residents who met the income, filing status and dependent requirements received checks ranging from $200 to $1,050 as part of the Middle-Class Tax Refund (MCTR) in California.
As far as California state taxes are concerned, NewsNation reported that the MCTR is not taxable income, but noted that it “may be considered federal income,” leaving taxpayers in limbo and without official guidance from the IRS, according to the Franchise Tax Board (FTB).
According to the FTB, the refunds have benefitted more than 31 million California taxpayers and their dependents.
-o0o-
The IRS now says they are still evaluating whether the tax refunds like California’s Middle Class Tax Refunds are taxable for Federal income tax purposes, according to Nexstar’s Jeremy Tanner and Alix Martichoux in a report dated February 7.
“While this is unusual, this kind of determination in the middle of tax season isn’t unprecedented,” Tax Attorney Adam Brewer of AB Tax Law told Nexstar.
“In 2021, the IRS exempted the first $10,200 of unemployment benefits received in 2020 after many taxpayers had already filed their income taxes and reported the income as taxable. This mid-tax season rule change may be following that precedent.”
These pandemic tax benefits have dried up for parents
In Illinois, qualifying residents received one-time payments of up to$700 under the Illinois Family Relief Plan. Making matters more complicated, the checks consisted of two different rebates: one for individual income tax and another for property tax.
“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,” the IRS advised.
The two states are among 19 total that issued some type of special rebate or payment in 2022, according to the Associated Press.
The full list consists of Alaska, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, South Carolina, and Virginia.
“While this is unusual, this kind of determination in the middle of tax season isn’t unprecedented,” Adam Brewer, a tax attorney with AB Tax Law in San Diego, told Nexstar.
“In 2021, the IRS exempted the first $10,200 of unemployment benefits received in 2020 after many Taxpayers had already filed their income taxes and reported the income as taxable. This mid-tax season rule change may be following that precedent.”
“We expect to provide additional clarity for as many states and taxpayers as possible next week,” the IRS said in the statement, adding that the agency doesn’t recommend trying to call the IRS or amending a previously filed 2022 return before guidance is issued.
(The author, who is now based in New York City, used to be the editor of two local dailies in Iloilo.—Ed)
