NJ Special-Refund Recipients Should Hold Off On 2022 Taxes: IRS

NEW JERSEY — Some New Jerseyans should hold off on filing their 2022 tax returns if they received a special inflation-relief tax refund or payment from the state last year while the Internal Revenue Service sorts out whether it’s taxable, the agency has said.

As a result, many lower- or middle-class state residents may need to pay the federal government a bit more.

New Jersey is one of 19 with diverse programs last year offering inflation relief payments or refunds for taxes. Taxpayers in the affected states should hold off until they get more information from the IRS, the agency said.

"We are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers," the IRS said Friday in a statement.

The IRS is reviewing several New Jersey benefits, including the Middle Class Tax Rebate, a one-time payment to low-income earners, and several property tax-relief programs, state treasury officials told Patch on Thursday.

"We expect more information from the IRS soon, and recommend New Jersey residents who will be filing soon to consult with their tax professional," Melinda Caliendo, a spokesperson for the New Jersey Department of the Treasury, told Patch via email.

The benefits under review will not become subject to state taxes during the filing period.

The Middle Class Tax Rebate — a one-year program — provided up to $500 for many residents with at least one dependent child and gross income of $150,000 or less ($75,000 or less for people with a filing status of Married Filing Separate or Single).

The state also introduced a one-time, $500 payment for low-income owners through the Individual Taxpayer Identification Number (ITIN) Direct Assistance Program.

The IRS is also reviewing the federal taxability of New Jersey's Individual Taxpayer Identification Number (ITIN) Direct Assistance Program. The one-time, $500 payment went to individuals making low income who have an ITIN but not a Social Security number.

In some of the states with benefits under review, officials determined the payments aren't subject to state income taxes. Now officials must determine whether they're taxable at the federal level, Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals, told The Associated Press.

In other states, people would get taxed if they received a tax refund in 2022 only if they itemize their deductions, Keith Hall, president and CEO of the National Association for the Self-Employed, told The AP. An example of a state that is taking this route is Virginia, which has stated that taxpayers that filed a standard deduction will not be taxed for their tax rebate.

But not all states have issued guidance on tax rebates.

Other states that offered inflation relief in 2022 were Alaska, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Massachusetts, Minnesota, New Mexico, Oregon, Rhode Island, South Carolina, and Virginia.

Following the IRS recommendations is key if taxpayers want to avoid having to amend a previously filed tax return, according to Hall.

"I think the IRS is trying to help people save another filing, if they had to do an amended return," he told the AP.

The 2022 federal income tax filing deadline is Tuesday, April 18 — same as New Jersey's. Related: What To Know About Filing Your 2022 Tax Return

If you are not sure if you need to wait to file your taxes, Hall recommends you consult with a tax professional about your specific situation.

The Associated Press contributed reporting.