I'm using the download version of TurboTax 2023 Deluxe (so it handles 1099-MISCs as part of the purchase price).
We file as MFJ and got the 1099-MISC from the Franchise Tax Board and took a standard deduction in both 2021 and 2022.
I ran the Federal and State reviews which came back with no issues and e-filed the Federal return today - 1/26.
It was rejected due to the CA MCTR but the Customer Service message that accompanies the rejection says 'None'. The email message I received states "CA_MCTR_Payment - There is a potential issue with Form 1099-Miscellaneous if you received this form for payment of the California Middle Class Tax Refund."
If I click on the 'Learn More' button in the email, I just end up on a generic 'How do I fix a Rejected Return' page.
If I search TurboTax.com for CA_MCTR_Payment, I get a 'No results Found' message other than what is in the Community support pages.
When you enter the 1099-MISC info for the CA MCTR and then scroll through the Continue buttons, you get to the screen that is titled 'Does one of these uncommon situations apply?'
You then check the 'This was a California Middle Class Tax Refund (MCTR)'
TurboTax then prompts a message at the bottom, above the 'Continue' button that reads 'The California Middle Class Tax Refund (MCTR) will not be taxable on your California or Federal returns.'
The problem is that even when you have followed these prompts, the MCTR amount (in our case $700) still appears in Line 8 on Page 2 of the Federal Form 1040 (which comes from Schedule 1 line 8z) and is then included in the Total Income on Line 9 and flows down into the AGI.
On the Deductions on the Federal Form 1040, Line 14, there is no -$700 entry that would remove the MCTR payment from income (ours just has the standard MFJ $27,300 deduction).
So right now, as of January 26th, while the UI for TurboTax states that the MCTR is not taxable, it does appear that it is included in the Total Income on the Federal 1040 Return and Schedules which then becomes the number on which Federal taxes are calculated.
This is possibly why the Federal Return is being rejected.
I haven't tried filing the CA return as I want to make sure that the Federal Return is accepted before I send anything to the State due to the potential impact on the Federal Adjusted Gross Income of the current CA MCTR issue. That being said, the CA Form 540 created by TurboTax on 1/26 has automatically removed the $700 CA MCTR payment from the Adjusted Gross Income number that it has carried over from the Federal Form 1040.
