Arizona families that received a tax rebate from the Arizona government in 2023 will have to pay federal taxes on the money if the Biden Administration has its way.
In response to what he calls “the reckless decision by the Biden Administration’s IRS,” Arizona State Senate President Warren Petersen is working to find a resolution that will protect more than 700,000 Arizona recipients from having to give the federal government a portion of those dollars this tax season.
The Arizona Families Tax Rebate was championed by Republican lawmakers to provide relief to families struggling under the weight of crippling inflation.
The bill passed out of the Legislature on May 10, 2023 and was signed into law the next day. More than a dozen other states have passed similar legislation, in which cases the IRS concluded those funds were not considered taxable income.
Petersen says with tax season commencing on January 29th, families are now scrambling to figure out exactly what is going on and what obligations they must fulfill as a result of this arbitrary action by the federal government.
Petersen has reached out to the Arizona Department of Revenue, the Arizona Attorney General’s Office, and most recently, the Office of U.S. Senator Kyrsten Sinema to discuss next steps to protect Arizona families.
“It makes zero sense that the IRS is choosing to hurt Arizona families by taxing a tax rebate,” said Petersen in a press release. “I’m thankful for the help from Senator Sinema’s office in working to get this matter front and center with the IRS and U.S. Treasury. With tax season less than two weeks away, time is of the essence. While litigation likely isn’t the best approach, I appreciate the Attorney General’s office reaching out to us on this matter. I am, however, incredibly disappointed our Governor is again nowhere to be found on an issue that could ultimately cost our citizens tens of millions of dollars. I’m calling on her to not turn a blind eye on this issue, as she did with gas prices last spring, and to work with us on solving this problem for Arizona families.”
The Arizona Department of Revenue advised taxpayers that the rebate is not subject to Arizona income tax and should be subtracted from the federal adjusted gross income on the 2023 Arizona individual income tax return.
“Affected taxpayers will be sent a statement by mail that they are to check the online portal to access their 1099-MISC which documents the rebate amount they received,” according to the Arizona Department of Revenue (ADOR). “ADOR is required by federal law to issue this form to taxpayers as an informational statement since the income must be reported on the income tax return.”