IRS: Hold off filing taxes while we decide whether you owe more

By Doug Bailey

Even if you think you have a big refund coming, the Internal Revenue Service wants you to delay filing your taxes until it can figure out whether you owe more from any rebates received last year.

Taxpayers in many states, including California, Massachusetts, Illinois, South Carolina, Colorado, and others, received tax refunds as part of relief or statutorily obligated packages stemming from huge budget surpluses. The rebates averaged about $350 per person in some states and now the IRS says it needs time to decide whether those checks should be counted as income to be - you guessed it - taxed.

"We are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers,” the IRS said in a statement. “There are a variety of state programs that distributed these payments in 2022 and the rules surrounding them are complex. We expect to provide additional clarity for as many states and taxpayers as possible next week.”

The statement recommended taxpayers wait to file until “additional guidance is available.”

As expected, the news didn’t sit too well with many taxpayers, especially early-filers counting on significant refunds to pay off debts, buy needed goods or services, or just get ahead of inflation-fueled bills. Last year, taxpayers got an average $3,200 refund, an increase of 14% from the previous year and an amount the IRS said was bigger than most workers’ paychecks.

The IRS was prompted to release its statement after Republican California Congressman Kevin Kiley said his office had been contacted by numerous constituents with questions on the matter.

"Many of the 16 million residents of California who received the refund are unable to file a 2022 tax return because they do not have clear guidance as to whether to include this payment" as taxable income, he wrote in a letter to the agency.

The IRS said it did not recommend people amending a previously filed return if they’ve already submitted one. Amended returns have been caught in a huge backlog and have led to more delays.

Taxpayers swamped social media with outrage over the matter, noting that the refund was for income already taxed, or overtaxed.

“How many times can they tax that money,” asked “scottieL,” on a California Newsbreak site. “It’s been taxed and taxed again! How can this in any way be considered income?”

Others agreed.

“A tax rebate is a return of excess tax collected and should NOT be considered income,” said Dennis Roberts on the same site.

In Colorado, as in other states, a voter-approved law called TABOR, required the state to follow a formula to determine if taxpayers overpaid income taxes.

“As it turned out to be the case in 2022, the state was required by law to issue state refunds to the taxpayers,” said a social media poster on Yahoo. “The IRS will probably waste a month or so trying to figure out how to get a piece of that money…”