Some taxpayers who filed before Feb. 10 can file amended return for state payments

[April 12, 2023]  By Joe Mueller | The Center Square

(The Center Square) – Taxpayers in Colorado and 20 other states who filed 2022 federal income tax returns before Feb. 10 and reported specific state tax refunds as taxable should consider filing an amended return, the Internal Revenue Service announced Tuesday.  

In February, the IRS clarified the federal tax status involving special payments made to taxpayers 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 payments” on 2022 returns. The IRS will not challenge the taxability of state payments related to general welfare and disaster relief.

Taxpayers in the following states don’t need to report these payments on their 2022 return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.

Taxpayers who filed returns in these states should check their returns to ensure they paid tax on the state refund before filing an amended return.

Colorado’s 2022 Taxpayer's Bill of Rights (TABOR) refunds, consisting of excess state revenue collected and returned to taxpayers, are included as a special state payment in the ruling. For taxpayers in Alaska, the determination applies if they received the special supplemental energy relief payment and only that payment.

The IRS published a list of individual states and how the federal government will treat the special refunds or rebates.

Taxpayers in Georgia, Massachusetts, South Carolina and Virginia also will not be required to include special state tax refunds from 2022 as income if they meet certain requirements. For those taxpayers, state payments will not require federal taxing if the payment is a refund of state taxes paid and the recipient either claimed the standard deduction for 2022 or itemized their 2022 deductions but didn’t receive a tax benefit.

Taxpayers who submitted their original 2022 return electronically may also file an amended return electronically and select direct deposit for any refund. Direct deposit isn’t available on amended returns submitted on paper.

Joe Mueller covers Missouri for The Center Square. After seven years of reporting for daily newspapers in Illinois and Missouri, he spent the next 30 years in public relations serving non-profit organizations and as a strategic communications consultant.