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It is not just Illinois but also other states which gave out rebates in 2022. Obviously, I mostly deal with Illinois taxpayers who want their taxes filed. My question is this: if your taxpayer is from one of these states, are you not filing the returns? If yes, how are you explaining it your clients?
I see nothing about when IRS will have an answer to this and I see nothing about adding additional days to the filing deadline past April 18th. Yet time marches on toward that date with no resolution.to the issue.
I have noticed that IL Dept of Revenue has added the rebate amounts (both the individual rebate plus the property tax rebate) to Form 1099G. So the amount the program is bringing forward will not match the 1099G so you may want to go to the IL website and download the correct amount and change it within the program. Of course, that does nothing for those who do not have a 1099G or address the underlying issue of taxability.
My initial thought was that the rebates were not taxable if the taxpayer did not itemize, and if they did itemize, taxable only if they received a tax benefit after taking into account the $10000 limitation, and that is what I have reported on the returns I have completed so far. However, once I saw this IRS statement, I started to think about the taxpayers who don't itemize and who paid no Illinois tax. In my office, that would mostly be seniors with only retirement income, a good percentage of my business. So even though they paid no Illinois tax, they still received the rebates. Now I am thinking IRS will want to tax those payments. Of course, I have already filed a number of returns like that, as well as several more where the taxpayer did have IL tax but did not itemize so I omitted the rebates.
Any guidance on how others are handling this, and also if you are delaying filing, would be appreciated.
I apologize in advance if this has already been asked. As we all know, the search function here stinks. I went back through the last several days and did not see a discussion on the IRS announcement.
