The Internal Revenue Service (IRS) has provided guidance on the federal tax status of refunds of state or local taxes, and certain other payments made by state or local governments to individuals.
Previously, the IRS provided guidance on state payments made in 2022, “IRS issues guidance on state tax payments to help taxpayers.”
The guidance is being issued as part of the IRS’s efforts to provide additional certainty to states and their residents regarding the federal income tax consequences of state payments made to taxpayers.
In 2022, a number of states implemented programs to provide payments to certain individuals residing in their states.
Many of these programs were related, directly or indirectly, to the various consequences of the pandemic, and the programs varied in terms of the types of payments, payment amounts and eligibility criteria. IRS issues guidance on state tax payments to help taxpayers address the federal tax treatment of these 2022 payments.