California Middle class Tax Refund

Forum|Forum|3 years ago
January 27, 2023
1 reply
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I received my California Middle Class Income Tax Refund in late January, 2023. However, my 1099-MISC is for 2022. Should I report the income for 2022 or wait for 2023?

Best answer by VolvoGirl

It is on a 1099Misc not a 1099G

There was a new Turbo Tax program update yesterday on Jan 26, 2023. The CA MCTR is now not taxable for federal and state. When you enter the 1099Misc box 3 it should ask ....Do any of the uncommon situations apply? And in my Desktop program the 3rd item listed is California Middle Class Tax Refund.

When you click on that then at the bottom it will say....The California Middle Class Tax Refund (MCTR) will not be taxable on your California or federal returns.

VolvoGirl

Level 15

Put it on 2022. It won't affect your return, it is now not taxable for federal or state.

Opus 17

Level 15

Sorry, if this is an additional refund of state income tax, it is treated like all other refunds of state tax. It is not deductible if you used the standard deduction for your 2021 income taxes, but it may be taxable if you used itemized deductions and deducted your state income tax. (It's taxable because it is a rebate or refund of something you previously deducted.)

Turbotax can figure this out for you if you modify your program input. Go to the "refund of state income tax" section on the income page. Add the rebate amount to whatever your previous refund was. In other words, Turbotax will normally say something like "last year, you got a California refund of $500, is that correct?" Say no, and add the amount of the rebate to your regular refund. Turbotax will ask some other questions to determine if the refund/rebate is all or partly taxable. (If you did not use Turbotax last year, the program will ask "did you get a state tax refund" and will then ask questions about last years tax return. Add the rebate to the amount of your regular refund.)

As to timing, if you did not physically receive the check or bank deposit until 2023, you are not required to report it until 2023. But, the FTB or the IRS may send you a letter and a tax assessment if they believe this was 2022 income, and you would have to reply with an explanation and proof. It may be simpler to report it for 2022 even though that is not technically correct.

t3523wdAuthor

Level 2

I agree with your advice about including in 2022 income so it will match against the 1099 that was erroneously issued by California.

The California's Franchise Tax Board has issued a 1099-MISC rather than a 1099-G that is traditionally issued for tax refunds. This makes what they have called a "Middle Class Tax Refund" look more like a handout rather than a return of my money. Unfortunately, much like the Inflation Reduction Act the Dems like to camouflage their give aways to make them more acceptable to We The People as the redistribute our wealth.