IRS says it won’t tax $662 energy relief payment Alaskans received last year along with PFD

Alaskans will not be taxed on the $662 energy relief payment they received last year on top of their Permanent Fund dividend, according to the Internal Revenue Service.

The agency on Friday said it would not tax the energy relief payments in Alaska, as well as similar special payments made by several other states in 2022 that were related to “general welfare and disaster relief.”

“It’s a good thing, so thank you, IRS,” said Allegra Hamer, the Alaska coordinator of American Association of Retired Persons Foundation Tax-Aide, a volunteer program that provides free tax preparation services in communities statewide and nationally.

The tax break could save Alaska families hundreds of dollars each, though some low-income people who pay no taxes will see no benefit, she said. Overall, it will be worth tens of millions of dollars to the Alaska economy, she said.

Hamer said that because the energy relief money came as part of the $3,284 checks that also included the Permanent Fund dividend, tax filers will need to subtract the amount of the energy relief payment when they file.

As a result, Alaskans need to enter $2,622 as their Permanent Fund dividend amount when filing, not $3,284, she said.

“That’s a message that has to get out because most people have not done their taxes yet,” Hamer said.

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If people have already filed their taxes, they need to file an amendment with the proper $2,622 amount, and a small explanation, she said.

“You have to explain only if you are amending,” she said.

Amended filings should say something simple, such as “Energy relief payment is not taxable,” she said.

“The IRS can understand that,” she said.

Hamer recommends that people who have already filed should return to their original tax preparer for the amended filing. She said she hopes companies that charge filers won’t charge a fee to amend a filing, which she said is a simple process.

Depending on the tax bracket, it’s likely many individual Alaskans will save $65 to $150, or double that for a married couple filing jointly, thanks to the decision by the IRS, she said. A couple with children who received the special payment will save even more.

Last year’s energy relief payment was a special check to help Alaskans with 40-year-high inflation and high gas prices, and came atop the annual dividend check Alaskans receive each year as a share of the state’s oil wealth fund.

Hamer said the Alaska Department of Revenue does not appear to have announced the news from the IRS.

“I’m disappointed it’s Wednesday and they haven’t yet, because IRS notices tend to not get widespread reading for the general public,” Hamer said.

Aimee Bushnell, a public information officer with the revenue department, said Wednesday the state is working on the matter.

“The Alaska Department of Revenue’s Permanent Fund Dividend Division is currently working with the Alaska Department of Law and the IRS on how to proceed with this new guidance,” she said.