DENVER — Only six months ago, Coloradans breathed a sigh of relief when the Internal Revenue Service announced it would not take out federal taxes on refunds from Colorado's Taxpayer's Bill of Rights.
But now Colorado officials worry that taxability of the refunds is once again being called into question under new guidance released by the IRS on Wednesday, which could potentially reverse its decision.
The above video on TABOR refunds aired on June 20
The new guidance says people who claim the standard deduction on their federal income tax returns — around 90% of taxpayers — do not have to include state tax refunds in their taxable income. Those who itemize their deductions must include the refunds, but only if they deducted all of the state taxes they paid.
Colorado tax officials are unsure whether the state would fall into these new guidelines, or be carved out so that all Coloradans will have to pay federal taxes on their TABOR refunds.
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