In new guidance, the IRS clarified the federal tax status involving special payments made by 21 states in 2022.
The IRS determined that in the interest of sound tax administration and other factors, taxpayers in many states will not need to report these special payments on their 2022 tax returns.
During a review, the IRS determined it will not challenge the taxability of payments related to general welfare and disaster relief.
This means that people in the following states do not need to report these special state payments on their 2022 tax return: Alaska, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.
Many people in Georgia, Massachusetts, South Carolina and Virginia will also not include state payments in income for federal tax purposes if they meet certain requirements.
To assist taxpayers who have received these payments file their returns, the IRS provided this additional information. For a list of the specific payments to which this guidance applies, see this chart.