There is still no ruling from the IRS. The press is reporting that the IRS is aware of the situation. Turbo Tax currently is handling the payments as exempt for both state and federal taxes. I spoke to a Turbo Tax "tax expert" by phone regarding this issue on Jan 27, 2023. I got an email about one-hour later that said this is a known error and they were working on it. As of Feb 3, 2023, the "error" still exists. A report from KCRA Sacramento said a Congressman from California complained to the IRS about the situation. He asked for an expedited opinion. The KCRA report says that TurboTax was contacted, and they said they believed the payments are exempt from federal tax. So, if a California resident uses TurboTax today, they will not pay any federal tax on the MCTR payment. I think that at the least, the TurboTax note that says “The California Middle Class Tax Refund (MCTR) will not be taxable on your California or Federal returns” should be modified to reflect the current situation with the IRS. If TurboTax has concluded that the MCTR is not subject to federal tax, even though the IRS has not issued a ruling, the note should reflect that.
