SAN FRANCISCO (KCBS RADIO) – It's the time of year that people are gathering information as they prepare to file their taxes. But, the IRS is telling Californians to wait before sending them in.
Those middle class tax refund payments many California taxpayers receive, either in their bank accounts or by debit card, are causing confusion as people file their federal taxes. It’s still not clear how those payments should be categorized and whether or not they need to be taxes.
"If it is taxable it would solely be taxable on the federal and not for California," said San Francisco accountant Phil Black.
Black told KCBS Radio the one time payment could incur taxes on the federal return, depending on the IRS interpretation. If it's a tax refund or a prepayment of tax refund then it would be taxed.
However, San Jose State Professor Annette Nellen, director of the school’s graduate tax program, said the IRS could look at it differently and exclude it from taxation. "Could this possibly be viewed as purely COVID relief, which then falls under excluded because of the vast relief," she explained.
The IRS has yet to make these decisions, but they are expected soon. In the meantime, tax preparers and the IRS are advising Californians to wait before filing their return.
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