Massive Filing Delay Called for by IRS for Millions of Taxpayers

Massive Filing Delay Called for by IRS for Millions of Taxpayers

( – Normally, the Internal Revenue Service is constantly chasing US citizens to get their tax returns in as quickly as possible. This year it’s playing a different game. Instead, it’s asking millions of Americans to delay filing their 2022 taxes.

On February 3, the IRS released a statement asking all taxpayers who received special tax refunds or payments from their states last year to delay filing their 2022 returns. According to the agency, they’re “aware of questions” about how these payments should be reported, and they’re now talking to state officials to work out exactly how to proceed.

Nineteen states ran relief programs last year, aiming to put extra cash in the pockets of working- and middle-class families suffering from high inflation. This was run as a special tax rebate scheme in some, like California and Illinois. However, the rules differed from state to state, leaving many taxpayers confused. It seems the IRS doesn’t know exactly what’s going on either, and now, in an unusual move, the agency is asking anyone who received these rebates to hold on to their paperwork until they’ve spoken to the states and come up with a plan.

What’s the Problem?

One key point the IRS needs to decide is what the purpose of the payments was. Some states called them financial aid for people affected by inflation, while others billed them as a continuation of earlier pandemic-related tax rebates. Whether the IRS decides they’re taxable or not might depend on what their official purpose was, even though every state’s scheme had the same goal — to return more money to struggling Americans.

Another source of confusion is the wide range of different rules used by the states. For example, California’s Middle Class Tax Refund handed out $9 billion, and state officials say they don’t plan to tax those payments. But will the IRS decide they’re liable for federal tax? That’s just one of the issues that needs to be resolved.

It’s obvious that, right now, the IRS doesn’t have the answers. Their statement asks taxpayers not to call them or try to amend a 2022 tax return they’ve already completed until new guidance has been issued. When will that be? It’s not clear yet. According to the statement, the goal was to “provide additional clarity for as many states and taxpayers as possible next week,” — but that was over a week ago.

So far, no additional clarity has appeared. Now, millions of Americans who received tax rebates or relief payments are in the unusual position of waiting for the IRS to say it’s okay to file a tax return.

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