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Some state refund recipients should amend their federal tax returns

April 11, 2023

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Residents in 21 states got some good news from the Internal Revenue Service earlier this year.

In 2022, they received general welfare, disaster, or stimulus payments from their state officials. These generally were referred to as refunds.

Basic state tax refunds in some instances are taxable at the federal level. But the IRS announced on Feb. 10 that in most cases these special 2022 state payments were not.

The affected taxpayers live in Alaska, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, and Virginia. You can read about the IRS decision in my post State relief payments issued in 2022 are federally tax free.

Late decision could require amended filing: But there was one problem for a lot of these folks who don't owe Uncle Sam tax on their state payments. They filed their federal tax returns before the IRS issued its ruling on the money's taxability.

So now, the IRS is recommending that taxpayers who submitted their federal income taxes early in this year's filing season and reported their affected state 2022 tax refund amounts as taxable income consider filing an amended return.

"Taxpayers who filed before Feb. 10 in these areas and meet these requirements should check their tax return to make sure they paid tax on a state refund before filing an amended return," the IRS said in its announcement. You can double check your payment's federally tax-free status at the IRS' special State Payments page.

If you hired a tax pro to handle your 2022 taxes, check with that office about filing an amended return.

Electronic X filing: If you filed your tax return this year electronically, you can e-file the 1040-X to make the necessary corrections.

You also now can have any refund that the amended filing produces directly deposited to the financial account of your choosing.

The IRS recommends both electronic options, noting that it cuts out the slower snail mail time. Plus, says the tax agency, direct deposit is a more secure way to receive refunds.

If you do prefer filing a paper Form 1040-X, mail it to:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0052

Note that you cannot have your amended filing refund directly deposited if you file a paper 1040-X.

Regardless of how you submit your amended return, you can use the IRS online tracker Where's My Amended Return? to find out its status.

You also might find these items of interest:

 

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The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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