Several states have continued to send out a payment despite indications that the state stimulus checks would be discontinued in 2023. Multiple states are either offering inflation relief payment stimulus checks or are offering rebates and other forms of support to states.
With the desperation centered around the soaring rate of inflation, some state governments have been forced to revise their state stimulus check payments or have offered state residents some form of relief that include tax refunds, debit cards, sales tax waivers, and gas and transit cards.
There has been a gradual climb-down in the inflation rate starting the last quarter of 2022 after the record-breaking inflation figures that persisted in the first three quarters of 2022. It reached a high of above 9% in June 2022, the highest since November 1981. Consumers continue to face sticker shock at supermarkets. This has prompted some states to consider sending out more stimulus checks to deserving residents.
States Continue Sending Out Stimulus Checks
Massachusetts is among those states that have continued supporting residents. The commonwealth declared that it would continue to provide eligible tax filers with a refund. The amount of the refund is 14.0312% of their income tax liability and is based on their income tax returns for 2021.
The law in Massachusetts states that taxpayers may expect a refund from the state administration if the total revenues exceed the annual cap in tax revenue. Officla revealed that the collection exceeded the mandate by $3B. it triggered the need to refund the rest of the money. The payments started in November last year with eligible filers receiving their refunds in their mailboxes. Those who are yet to file their 2021 income tax returns have time until September 23 of this year to qualify for the stimulus check.
Democratic legislators led by Governor Gretchen Whitmer have in recent weeks announced a proposed plan that would send a stimulus check worth $180 to residents of Michigan if they have filed their income tax returns for 2022, to be filed this year.
If the plan meets the approval of the state legislature, individual filers who each receive a stimulus check of $180 though a couple of filing jointly would be in line for an equal amount. Married filers filing separately would get $90 under the proposed stimulus check.
But Gov. Whitmer would need the backing of the Republican opposition if Michiganders are finally to get their $180 stimulus check. the state has reported a budget surplus of $9 billion from 2022 tax revenues.
New Jersey residents who have filed their application for relief from property tax under the ANCHOR relief program initiated by the state will get support. this program is for renters and homeowners in New Jersey and around 2M residents are believed to benefit from this scheme.
Homeowners with an Adjusted Gross Income of $150,000 maximum will get a refund in property tax worth $1,500. Homeowners with an AGI between $150,000 and $250,000 will receive a $1,000 stimulus check. tenants with a reported AGI of $150,000 with get a $450 check.
Residents of Colorado will benefit from the TABOR bill that mandates returning state income tax surplus to residents of the state. Under the Taxpayer’s Bill of Rights, the administration sent out $750 stimulus checks to individual tax filers and double the amount to married couples filing jointly.
The deadline for application for this stimulus check has been extended to April 2023. Residents with an income tax liability in the state or having a claim against their wage withholding have more time. They can file until October 16 this year to be considered eligible for the refunds under TABOR. This was put up on the website of the tax department of the state of Colorado.
IRS Steps In To Clear Confusion Over Tax On State Stimulus Checks
The state stimulus checks have created some confusion in the mind of filers with many questioning if the payments were taxable under federal laws. The IRS had responded and requested filers to hold off filing their returns till they get a clear message from the authorities.
The IRS has finally cleared the confusion about whether state stimulus checks are subject to any form of income tax. The IRS has finally cleared the air on this issue and informed state filers who are beneficiaries of inflation relief payments that they will be liable to pay taxes on inflation relief checks issued by the state.
This comes as a huge relief for millions who have collected some form of subsidies from the state, with more in line. The advice to hold off paying taxes till they get clarity on the issue was an unusual request from the federal tax agency.
The tax season began this year on January 23. And the announcement indicates that income tax filers in over 20 states can now freely file their returns without worrying that their stimulus check might be subject to federal taxes.
Now residents of states who have collected the payments will not have income tax collected against the state inflation relief stimulus checks or refunds and will not have to report them on their income tax returns.
The Internal Revenue Service has let on that the state payments were to be considered as relief payments in the face of a disaster or payments for promoting the general welfare of residents. They are thus not being taxed by the federal authorities.
But people in Massachusetts, Georgia, Virginia, and South Caroline will have to report their state stimulus checks as income unless the itemized deduction or standard deduction was claimed by the residents, though they did not receive any tax benefits. This was further clarified by the IRS.
The state stimulus checks came on the heels of record inflation that sent prices soaring across projects and services. The excess revenues reported by most states from wage gains in the past two years have encouraged the state administration to send out stimulus checks. The decision not to tax state payments with some exceptions comes on the day the tax authorities have reported boosting service numbers.
The Inflation Reduction Act was backed by the present president, Joe Biden, and prominent Congressmen from the Democratic Party. The IRS received additional funding of $80B covering over 10 years that will help it strengthen its services and boost tax enforcement for corporations and high earners.
