IRS clears confusion over state stimulus payments in more than 20 states

The agency had previously asked taxpayers to hold off filing their returns until officials determined whether the state payments were subject to federal taxes.

The Internal Revenue Service will not collect federal taxes against state-issued inflation relief payments or tax refunds, the agency said Friday, a reprieve for tens of millions of taxpayers who received the subsidies.

The IRS had previously asked taxpayers to hold off filing their returns as officials determined if the state payments were federally taxable, an unusual statement for an agency that has long called for submitting returns as quickly as possible. Tax filing season began Jan. 23.

Friday’s announcement means taxpayers in more than 20 states can now file their taxes. Residents of Alaska, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island will not have any taxes collected against state payments or tax refunds and do not need to report them on their returns, the agency said.

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