How do one input the 1099-misc on state of california MCTR , will not expect in turbo tax

[katvaz1]

I found it on the Schedule CA Worksheet under State Forms:  under z-Other Income with the amount and then deducted to zero it out.  So this happened automatically and I didn't have to do anything.

[BobbyM6]

@AlwaysSunny 

Thanks, not sure if the quotes made a difference but these steps helped me.

[DK41]

pause Fed return, go to CA and put in the MCTR 1099Misc. finish state return, then go back and complete with the Fed. All should be good.

[Alexder]

The problem is that the MCTR may be subject to Federal Income Tax.  The IRS is asking that taxpayer's that received the MCTR should wait for a ruling from them as to the taxability of the payments.  I brought this to the attention of the TurboTax tax experts on 1/27/23. I was concerned that TurboTax was indicating that the MCTR was not subject federal tax and that might not be true.  I received an email that said that it was a known error and would be fixed the next day.  So far (2/9/23), TurboTax is still telling its users that the MCTR is not subject to federal tax, without authority or explanation.  

[DaveF1006]

I would suggest waiting until the IRS rule on this rebate. According to this IRS source, the IRS suggest that taxpayers wait until additional guidance is available or consult with a reputable tax professional. 

Now being a reputable tax professional myself, I would wait until additional guidance is available. Some professionals may suggest reporting this either as taxable income or not reporting this at all and then amending the return to reflect the change.

It does say in the IRS link I provided that the IRS suggests not to amend a previously filed 2022 return. I would imagine this is because of the volume of amended returns they will receive because of this issue.

@Alexder 

[VolvoGirl · Accepted solution]

 UPDATE

Feb 10, 2023 IRS has ruled the California Middle Class Tax Refund is NOT taxable
https://www.irs.gov/newsroom/irs-issues-guidance-on-state-tax-payments-to-help-taxpayers

[fyoungsoar]

thanks for the follow up, very helpful

[wdeatrick]

Should we remove the 1099-MISC if it has already been entered into TurboTax?

[ErnieS0]

Yes. Remove any Form 1099 that you entered for the California Middle Tax Refund. Otherwise, TurboTax will include it in your federal income.

The IRS has not said it will fix returns that claim the MCTR.

General welfare and disaster relief payments from the following states are not taxable and should not be included on your tax return.
 

• Alaska [1]
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Hawaii
• Idaho
• Illinois [2]
• Indiana
• Maine
• New Jersey
• New Mexico
• New York2
• Oregon
• Pennsylvania
• Rhode Island

For a list of the specific payments to which this applies, please see this chart.
 

[1] Only for the supplemental Energy Relief Payment received in addition to the annual Permanent Fund Dividend.

[2] Illinois and New York issued multiple payments and in each case one of the payments was a refund of taxes, which should be treated as noted above, and one of the payments is in the category of disaster relief payment.

@wdeatrick 

[wdeatrick]

Thank you, Ernie. In my case, I had already entered my 1099-MISC and tagged it as California MCTR so TurboTax correctly backed out the income from my Federal return. I had read somewhere that if one receives a state 1099-MISC, it must be entered then backed out, but the instructions from the IRS seem to indicate otherwise. 

[nlj1129]

What is TurboTax doing about the change in taxable income as a result of the change in IRS treatment of California's Middle Class Refund, for folks who have already filed their taxes and have arranged to have the taxes deducted from their savings accounts?

[PatriciaV]

If you included Form 1099-MISC for the California Middle Class Tax Refund on your filed tax return, we recommend that you amend your return and remove the MCTR income. This should result in an additional refund of tax on that income. The form for amending your 2022 individual return (Form 1040X) will be available February 16, 2023.

After TurboTax shows that the IRS has accepted your return, wait 24 hours then go to Where's My Refund? to check the status of your return. Once your return has been processed and you receive your refund (if any), proceed to amend your return.

See also: How do I amend my federal tax return for a prior year?

Although you can’t change your payment date in TurboTax after your return has been accepted, you can cancel it and make other payment arrangements with the IRS.

Federal tax direct debit payments can be canceled up to two business days prior to the debit date. To cancel, call the U.S. Treasury Financial Agent at 888-353-4537. Then, to schedule a new payment, go to the IRS Direct Pay site.

@nlj1129 

[edit 2/13/2023 | 12:44 pm PST]

[cja4]

I have input the MCTR as instructed as a 1099, Classifying it as 
CA MCTR. it still is flowing through to the 1040 as income, and changing the refund amount, even though it is supposed to be non-taxable.  Is there a fix for this?

[JohnW152]

The MCTR procedure has been updated since the last post in this thread was entered.

If the procedure below isn't what you followed before, please use this process, and delete the Form 1099-MISC information previously entered:

1. If you don’t see 2022 TAXES in the left pane, select the dropdown to the right of Income & Expenses on the Hi, let’s keep working on your taxes! page and then select Let’s get started, Pick up where you left off, or Review/Edit.  Otherwise, from the left pane, select Wages & Income
2. Scroll down and select the Show more dropdown to the right of Other Common Income
3. Select  Start or Revisit to the right of Form 1099-MISC
4. Answer  Yes to the question, Did you get a 1099-MISC?
5. Enter your information as reflected on the form
6. Enter California Middle Class Tax Refund in the box on the Describe the reason for this 1099-MISC page, then select Continue
7. On the  Does one of these uncommon situations apply? page, select the This was a California Middle Class Tax Refund (MCTR) button.  You'll note the following text at the bottom of the page:  The California Middle Class Tax Refund (MCTR) will not be taxable on your California or Federal returns.  Select Continue
8. If you have no more Forms 1099-MISC to enter, answer No on the Do either of you have another 1099-MISC? page

See the TurboTax Help article How do I edit or delete a 1099-MISC? for guidance in deleting the 1099-MISC information previously input.

@cja4 

[jsaylor]

This does NOT work. If you enter as you recommend, and check the "uncommon situations" box that it is the CA MCTR, when you finish your federal taxes and have it review, Turbo Tax will throw up an error code. It will say that you CANNOT check the west bo of the CA MCTR because they do not have an EIN number. If you go into forms and uncheck the YES box to follow the directions given by TurboTax, and then run your check again, it will throw up a new error code. It will tell you that you much select something from the list (remember - you are not allowed to choose CA MCTR even though that is exactly what it is). Anything else you choose will cause TurboTax to tax you on the "income". I have spoken with TT and there is no fix to this as of yet.