Federal Guidance on State Tax Payments

           Until recently the Internal Revenue Service (IRS) had been encouraging many taxpayers to hold off on filing their tax returns. This is not because of a technical flaw, but there was a question that needed to be answered. Would state tax payments over the past year be taxable at the federal level? California is one of 21 states to provide such payments.

          After discussion, it was determined that these payments would not need to be reported as income, and therefore not taxable. They will be viewed as payments for general welfare and disaster relief. This was a complex situation that had many questions for the IRS. One determining factor is that since the federal pandemic disaster declaration is ending in May 2023, there is no need to make an issue of these payments made in 2022. With that issue settled, please be sure to gather your important documents and prepare to file your tax returns promptly. It is very important that the Form 1099 Misc be given to your tax preparer to show that income as nontaxable on the tax return. Keep in mind that due to disaster declarations related to the devastating rainstorms, tax returns filed in California have the deadline of May 15.

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