IRS: Which states will have to pay federal taxes on refunds

He Internal rents service (IRS) of the United States indicated that four states will have to pay federal taxes on the 2022 refunds, due to how they designed their returns. Know the list.

The move comes after the IRS asked 20 states to postpone filing their taxes while it was determined whether refunds issued last year were considered taxable income or not.

WHICH STATES WILL BE NEEDED TO PAY TAXES ON REFUNDS TO THE IRS?

The recent ruling from the Internal Revenue Service indicated that taxpayers in Georgia, Massachusetts, South Carolina, and Virginia who received state tax refunds and also claimed the state and local tax deduction (SALT) without exceeding the cap, will have to pay federal taxes on those payments, and he stressed that the remaining 16 states (of the 20 that he had asked to postpone the tax filing) will not have to pay any federal income tax.

WHY SHOULD YOU PAY FEDERAL TAXES?

The Internal Revenue Service’s decision is due to how they designed their tax returns in those states.

“The IRS has selected these four states because they structured their refunds like tax refunds”, explained Jared Walczak, vice president of state projects of the Tax Foundation, indicates the newspaper La Opinión. In other words, the IRS considers this return form as a reduction in your state tax liability.

For Vivian Paige, a Norfolk-based certified public accountant, “The tax benefit rule says that to the extent that you deducted something in the past and then got a refund, the refund amount is subject to taxs”he stressed.

WHAT HAPPENS IF THE DEDUCTION EXCEEDED US$10,000?

The Internal Revenue Service indicated that taxpayers in these four states (Georgia, Massachusetts, South Carolina, and Virginia) who took the standard deduction or who took the SALT deduction but exceeded the $10,000 limit will not be affected.