IRS Tax Alert - Taxability of State Payments

The following IRS Statement was issued by the IRS.

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IRS issues statement about the taxability of state payments
February 3, 2023

The IRS is aware of questions involving special tax refunds or payments made by states in 2022; we are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers. 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.

For taxpayers uncertain about the taxability of their state payments, the IRS recommends they wait until additional guidance is available or consult with a reputable tax professional. For taxpayers and tax preparers with questions, the best course of action is to wait for additional clarification on state payments rather than calling the IRS. We also do not recommend amending a previously filed 2022 return.

2022 Connecticut Child Tax Rebate

Connecticut has recently passed legislation that provides a child tax rebate.  This is not an automatic process.  Taxpayers must apply for the rebate by submitting an application here: 2022 CT Child Tax Rebate. The deadline to apply is July 31, 2022.

Child Tax Rebate

Connecticut is providing a tax rebate to residents for up to 3 children they claimed as dependents on their 2021 federal tax return. The rebate is $250 for each child. The rebate decreases by 10% for every $1,000, or fraction of $1,000, of a taxpayer's federal adjusted gross income exceeding:

• $100,000 for single taxpayers or married taxpayers filing separately;
• $160,000 for taxpayers filing as a head of household; and
• $200,000 for married taxpayers filing jointly and taxpayers filing as a surviving spouse.

To claim the rebate, taxpayers must apply electronically to the Connecticut Department of Revenue Services by July 31, 2022.

The rebate is not subject to Connecticut income tax. But the rebate is subject income tax withholding if the taxpayer:

• owes state or municipal taxes or other obligations;
• is in default of a student loan made by the Connecticut Student Loan Foundation or the Connecticut Higher Education Supplemental Loan Authority.

Louisiana - Business Return Dates

 Louisiana has updated the go live dates for the business returns below.

• Corporate Income and Franchise CIFT-620 - 2/21/2022
• Fiduciary(IT-541) - 3/28/2022
• Partnership(IT-565) - 3/21/2022

NCDOR Opening of Tax Season Target

  The North Carolina Department of Revenue has provided the following information.

The DOR is working toward the week of Feb. 28 for the opening of state tax season. Taxpayers can expect to begin to receive refunds in early April.

 Accurately processing 2021 tax year returns and issuing refunds in timely manner is a priority for DOR. However, tax law changes included in last year’s budget have delayed the DOR’s finalization of tax forms, updates for tax systems, and approval of tax preparation software. 

Ohio 2021 Paper Returns Extended Processing Times

The Ohio Department of Taxation has made the following announcement:

It may take several months for your paper return to process. For faster processing, the Ohio Department of Taxation recommends you submit your return electronically.

The official notice can be found here:  Attention Ohio Income Tax Filers

NC Business Recovery Grant Program

  NC is pleased to announce that the application and webpage is now available on NCDOR's website. The deadline to apply is January 31, 2022.

 

The program will issue a one-time payment to eligible North Carolina businesses that experienced significant economic loss due to COVID-19. Two types of grants will be available to eligible businesses that suffered an economic loss of at least 20 percent during the pandemic:

• A hospitality grant will be available to an eligible arts, entertainment, and recreation business, as well as an eligible accommodation or food service business such as a hotel, restaurant, and bar.
• A reimbursement grant will be available to an eligible business not classified in NAICS Code 71 and 72 and that did not receive funding from other relief programs including Paycheck Protection Program, COVID-19 Job Retention Grant, and EIDL Advance.

 We are looking for partners to assist us with outreach so that all eligible NC business owners have the opportunity to apply.

• Use the attached Outreach Toolkit and Flyers to raise awareness of the program throughout your networks. It contains highly useful details about the program and application process, FAQs, and example language to use on social media.
• If you'd like to host an event with NCDOR for your members or have someone from NCDOR speak at your events, please contact me as soon as possible. NCDOR will do everything it can to accommodate any requests.

California Extended System Maintenance: 10/29-10/31

California Extended System Maintenance: Friday, October 29, 2021 between 5:30 PM PT to Sunday, October 31, 2021 9:30 PM PT.

On October 27, 2021 at 12:30 PM CT, the State of California Franchise Tax Board (FTB) announced it will be performing system maintenance beginning Friday, October 29, 2021 5:30 PM PT to Sunday, October 31, 2021 9:30 PM PT. All FTB IT services, including SWIFT, will be unavailable during this timeframe.

The State of California FTB recommends retrieving any outstanding acknowledgement and receipt files prior to the start of the maintenance window and holding all transmissions until after the maintenance timeframe is completed.

Should you experience any issues with transmission processing or receipt/acknowledge retrieval after the maintenance window timeframe or have any questions, please contact the California e-file coordinator at e-file.coordinator@ftb.ca.gov.

Important information for 2021 TN 250 and TN 251 forms

Now that you have filed your 2020 TN 250, please remember that the Hall Income Tax is repealed as of January 1,2021.  As a result the TN 250 and TN 251 will not be available in the 2021 tax software.

For more information see:  Hall Income Tax

Minnesota MeF Scheduled Maintenance

 The Minnesota Department of Revenue has sent the following announcement.

e-Services and other online services unavailable Friday, October 8

Due to scheduled maintenance, our e-Services system and other online services will be unavailable Friday, October 8 from 4:30 p.m. to midnight. This includes Where’s My Refund? and the Property Tax Refund Online Filing System. Regular deadlines for filing and paying taxes still apply. Please plan accordingly. We apologize for the inconvenience.

*Resolved* New York Reject Code R0170

***Resolved***

On 10/8/21 at 3:37 PM, we received communication from the State of New York (NYS) reporting a temporary fix which resolved the R0170 reject. According the NYS, you can now resume transmitting returns, and NYS will resume pulling from the IRS previously transmitted returns. For returns in Rejected status for R0170, recreate the e-file and retransmit the return. Returns already in Transmitted status will be acknowledged when NYS pulls the files and processes them.

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***Update***

On 10/6/21 at 3:15 PM EST we received communications from the State of New York (NYS) with an updated status about eFile returns. Currently, NYS is not pulling e-file returns due to an issue with the SSNValidation Status between the NYS and the IRS. This issue results in rejected returns with a Reject code of R0170. We will update you as we receive new information from the State of New York or the IRS. Please hold these returns and do not re-submit them until we receive additional guidance.

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We are aware of an issue impacting 1040 New York State returns. We have contacted The State of New York who is examining the issue. Please hold these returns and do not re-submit them until we receive additional guidance from the State of New York. 

Error Message:  R0170 - The primary SSN/ITIN was either invalid, or could not be verified

California Golden State Stimulus (GSS) September Payments

 On Friday, September 17^th, the Franchise Tax Board (FTB) and the State Controller’s office will release the next batch of GSS I & II payments.

Alabama MeF Scheduled Maintenance

Alabama will be turning off MeF (all tax types) around 4:00pm on Thursday, September 23^rd.  They will be updating their system over that weekend and will not be retrieving submissions or sending ACKs from 4:00pm on Thursday, September 23^rd until after the cutover to their new system and go live.

 

Note: Anything transmitted after 3:00pm, Thursday, September 23^rd may not be acknowledged until after they open back up on Monday, September 27^th or Tuesday, September 28^th.

Arizona's MeF system maintenance

 Arizona's MeF system will be unavailable from 6 PM - 8 PM MST today, Sept. 16th.

Upcoming Connecticut MeF Outage

The Connecticut Department of Revenue Services announced a planned outage starting around 11:30 AM on Thursday, September 2,2021 as they transition to a new system. The transition is expected to be completed and the MeF system back online by Monday, September 13, 2021.

No acknowledgments will be sent during this outage. This outage will only affect the business tax types (FID, CORP and PART). Individual Income Tax will not be affected.

Connecticut will be honoring the IRS postmark date, as well as the requested payment date of any payments sent during this outage.

Since CT will honor postmark and payment dates, our Electronic Filing Center (EFC) will continue to send submissions during the window.  Please transmit your returns as normal through your tax software.

Indiana Experiencing Ack Processing Delays due to scheduled maintenance

The Indiana Department of Revenue (DOR) will launch the third phase (Rollout 3) of its multi-year tax system modernization initiative, Project NextDOR, on Tuesday, Sept. 7, 2021. As DOR continues its transition to the new Indiana Tax System (ITS), there will be some outages for maintenance.

As a result, return submission acknowledgements will not be generated from 11:59 p.m. EST on Aug. 12, 2021, until 8 a.m. EST on Sept. 7, 2021. Tax return submissions received during this period will be processed when DOR’s system is back online.

*Resolved* New York Experiencing Ack Processing Delays

New York State has announced that the issue affecting their ability to retrieve MeF submissions and send acknowledgements has been resolved.  

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 New York State is currently unable to retrieve MeF submissions and send acknowledgements.  They are working on a resolution.

Once New York notifies us that the issue has been resolved and normal operations have resumed, we will update this blog post.