IRS Delays Tax Filing Season to Torture Taxpayers
The IRS seems to always manage to find a way to make life more entertaining for the average American. This time is by causing confusion regarding the tax status of state refund and rebate payment. They are causing a pleasant delay in the filing of 2022 tax returns. The IRS has kindly issued a statement advising taxpayers to sit back, relax, and enjoy the wait for guidance on whether these payments should be considered taxable deferral income. California, however, always seems to find a way to bring joy into its citizen life. The state sent out more than 16 million Middle-Class Tax Refund payments worth $9 billion to bring a smile to everyone’s face during inflation and high gas prices.
The IRS, being the generous entity that it is, has graciously advised the lucky recipients of state payments to hold their horses and wait for further instructions on whether they’ll get the option to walk away with their hard earn money or not. Meanwhile, TurboTax and H&R Block have made it their purpose to file returns for their clients anyway. The IRS has also politely requested that taxpayers and tax preparers refrain from annoying them by stalking their phones for clarification. Instead, they promise to provide guidance at some point this week when they feel like it.
H&R Block and TurboTax Defy IRS to Save Taxpayers’ Refunds
Chief Tax Officer at H&R Block, Kathy Pickering, knows that taxpayers are chewing at the nails to get their hands on their refunds, but let’s get serious, waiting just one more week won’t kill them. I mean, what’s a little more concern and impatience when it comes to tax refunds right? After all, the IRS is still uncertain about the tax status of those state payments. So, it’s in everyone’s (IRS) best interest to hold off and make sure those refunds are as small as possible. Look at the bright side, bigger refunds will just mean more money to give back to the government.
Now it’s time to sort through all the confusing tax laws and regulations and tries to find out if your state-issued rebates and refunds are taxable. Sounds great right? Over a dozen states were kind enough to give taxpayers some extra cash in 2022. But of course, we all know the government has to make sure they get their cut too. Depending on the reason for the payment and the difficulties of federal tax law, these rebates may or may not be taxable. A good example will be if the payment was for Covid relief, it should be tax-free, but that’s assuming that uncle same changed his mind. Another example is the Virginia tax authorities have stated that the one-time $500 rebate in 2022 will be treated as a state tax refund and will be taxable for taxpayers who itemize deductions, but not for those who take the standard deduction.
What does this mean for the state of California?
The state of California is surprising us again. The tax authorities have thrown a curveball to taxpayers by stating that the payments they received are not taxable, for state purposes. But there’s more! They may still be taxable for federal purposes. To make things even more confusing, the Franchise Tax Board has decided to bless over 6.4 million taxpayers with 1099-MISC forms. In case you want to know what this means, this is a reminder that taxpayers received a payment of $600 or more. What was the side effect of all this? More confusion and chaos.
According to H&R Block, California payments aren’t taxable for federal purposes because they’re for promoting the general welfare. So H&R Block is filing returns for customers who received these payments but not including them as taxable income. Lisa Greene-Lewis, a certified public accountant and editor at TurboTax, says the payments aren’t taxable for federal purposes.
To sum everything up, the IRS’s statement regarding the tax status of state refund and rebate payments has caused much confusion among taxpayers, leading to a delay in the filing of 2022 tax returns. Now that you know when you’re not getting your tax money why don’t you use any leftover money you have to get a Beyonce Renaissance Tour ticket.
