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What to do if you already paid taxes for your relief or stimulus checks in California

Those in California who have received a check through the Middle-Class Tax Relief program will not be required to pay federal income tax. What you need to know.

Boosted standard deduction for the over 65s

Earlier this month, the Internal Revanue Service (IRS) warned taxpayers who had received a stimulus check from their state to postpone filing their tax return until the agency determined if these payments counted as taxable income.

The guidance is now available, and for taxpayers in California, the news is good. Because the Middle-Class Tax Refund is classified as a “payment [...] made for the promotion of the general welfare or as a disaster relief payment,” the checks will not be taxed at the federal level.

The tax authority cited the pandemic emergency declaration that the White House as a justification for these payments to be treated as a relief program. Since the White House plans to end the pandemic emergency declaration in May, in the future, these types of payments may be subject to federal taxes. State governments should be aware that when the pandemic state of emergency is lifted, any payments made to their residents are likely to be taxed, and recipients should be informed of that fact to ensure they are not caught by surprise when filing the federal return.

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What about payments made by other states?

The majority of state-level payments made last year will not be taxed, and the IRS justified the position by saying that the decision is “in the best interest of sound tax administration.”

In addition to residents of the Golden State, those who received a check in Alaska, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island, will not be required to report the payment as income to the IRS.

Additionally, aside from “welfare and disaster relief payments,” the IRS has stated that this year, no taxes will be levied against payments issued as a “refund of state taxes paid,” where “the recipient claimed the standard deduction or itemized their deductions but did not receive a tax benefit.” Residents in this situation in Georgia, Massachusetts, South Carolina, and Virginia who have already submitted their returns do not need to report any amendments to the federal tax authority either.