CALIFORNIA MIDDLE CLASS TAX REUND $350.

[oldmankingsfan]

Sorry. It seems Intiuit censors the use of the word that is a synonym for Marxist. How about left leaning income redistributors?

[AleyKat]

Thanks for the insight @NaturallyAspirated ! Can you post an update once you either hear back or see that it was fixed?  I'm in the same boat as your son. I want to be honest and report the $350, but did not receive a 1099-MISC, and am getting an error for the EIN.  Would it be wrong to just enter the CA FTB EIN as you provided earlier?

[VolvoGirl]

Enter the CA Middle Class Tax Rebate as a 1099Misc and put the amount in box 3. It will show up as Other Income on Schedule 1 line 8z and also as a separate negative amount to zero it out.

Go to Federal > Wages & Income, you might need to continue though the general screens.
When you come to the Wages - Your Income screen click on Add Income or
scroll down to Other Common Income, then 1099Misc.
Put the amount in box 3 and follow the prompts.

The next screen says…..
Do any of the uncommon situations apply? 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. It will show up as Other Income on Schedule 1 line 8z and also as a separate negative amount to zero it out.

On my 1040 schedule 1 line 8z it is now labeled CA payment 700 and the next line it says CA payment - general welfare exclusion -700.  So a net 0.

You don't have to do anything on the California return.  It will be excluded automatically.

[NaturallyAspirated]

VolvoGirl:  Your 1099-MISC data entry works in TurboTax because your MCTR is $700.   However, the TurboTax 1099-MISC form does not currently (as of the date of this post) handle cases where the MCTR is less than $600. 

[NaturallyAspirated]

The MCTR Debit Card mailout timeframes can be found here:
www.ftb.ca.gov/about-ftb/newsroom/middle-class-tax-refund/index.html  about half-way down the web page and broken out by the first letter of recipient's Last Name

[NaturallyAspirated]

I do not believe it would be "wrong" to use EIN 68-0204061 (California's State Revenue Department), but with the current (as of the date of this post -- 2023-02-05) version of TurboTax, that EIN and an amount of less than $600 in Box3 (other income) on the 1099-MISC form, causes Smart Check to throw an error message to say that the EIN and/or Box3 amount is invalid.  

CA FTB did not issue 1099-MISCs for MCTRs less than $600, yet honest citizens want to report MCTR income when filing their taxes, but without it being incorrectly taxed. 

I suspect TurboTax is currently checking that Box3 is greater than or equal to $600 and I think that needs to be changed to greater than zero.  Regardless, I'm looking to Intuit to provide an easy to use MCTR solution that makes their customers, the IRS and the CA FTB very happy.

[AleyKat]

Thank you so much @NaturallyAspirated ! Hope it gets figured out soon. 

[NaturallyAspirated]

I installed an update to TurboTax that became available this (2023-02-10) morning a little before 8 a.m. Pacific Time.  I'm now running TT version 022~000~0407 and the TT executable version 2022.47.17.39 , under Windows-11.

It appears to have fixed the issue with MCTRs of less than $600 (for example $350) being reported via a 1099-MISC form in TurboTax.  However, I would encourage other users to test and confirm/debunk accordingly.

[VolvoGirl]

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

[joejmath]

What does that mean for people who already filed and paid taxes on it?

[NaturallyAspirated]

I wish I knew, but alas I do not.   I'm not a CPA, nor a tax-professional, but just a regular taxpayer who has used TurboTax (Microsoft Windows version) for decades to make filing taxes less arduous.

We filed our taxes earlier today (Feb 10).  Later on, I went to check my e-mail and was confronted by "breaking news" stories that the IRS is asking taxpayers NOT to file taxes for at least another week or so because they have  yet to decide if California's MCTR is taxable income or not, and likewise for similar programs in about 20 other States.

However, the link provided by VolvoGirl to the IRS' website contradicts the "breaking" news stories, so I'm inclined to believe the IRS's website.  That IRS website page indicates they are not treating it as taxable income, in the majority of cases.

Depending on the specifics for each State, for those who have already filed, I guess it is best to double check your tax forms and if the MCTR was treated as taxable income, then maybe filing an amended tax return is worth the effort, depending on the size of the tax hit.

For the current version (see previous post)  of TurboTax I ran today and using a1099-MISC form, the CA MCTR amount was not treated as taxable income for either Federal or State.

[fd402]

This was just reported today by CBS news regarding the Calif refund.

"

SAN FRANCISCO -- California taxpayers got some great news Friday from the Internal Revenue Service. The federal government will not tax those Middle Class Tax Refunds after all.

Californians have been waiting for weeks to find out if the IRS will tax their inflation relief payments. The IRS said no - it qualifies as "relief."

The state issued more than 16 million payments to Californians ranging from $200 for singles up to $1,050 for families.

Millions received 1099 tax forms saying they must report the payments as income, however, the IRS ruled Friday you won't have to pay taxes on that income.

"The IRS just issued just a few minutes ago a notice that taxpayers in California will not need to report the payments on their 2022 tax returns," said Norman Golden, IRS enrolled agent. "My clients and taxpayers in California will be very happy the IRS is not going to tax them on these payments."

The IRS indicated the payments qualified as either disaster relief or for the good of general welfare. For families in a 25% tax bracket who received a $1,050 payment, it saves up to about $250 in taxes.

Note: Enrolled agent Golden says he will still advise clients to report the 1099 on their tax forms, but back out the income using the "general welfare" exclusion. This is to prevent the IRS from coming back to say you didn't report a 1099, since those forms are reported to the IRS."

[joeortega]

So does anyone know when Intuit is going to fix this bug?  How about a response from Intuit?

[VolvoGirl]

What bug?  The IRS has said it's not taxable so you don't even need to enter it.  

[NaturallyAspirated]

A little before 8 a.m. Pacific Time on Friday February 10th 2023, Intuit released a software fix for TurboTax that allowed CA MCTRs of less than $600 to be entered as a 1099-MISC, then flagged as a CA MCTR, and subsequently pass SmartCheck without an error being raised.
By late afternoon that day, the IRS' website finally stated that in most, but not all States, such refunds would not be taxable.  The CA-FTB only issued 1099-MISCs to taxpayers who received an MCTR of $600 or more, which combined with IRS procrastination, had previously left those who received an MCTR of less than $600 (and therefore no 1099-MISC from CA-FTB) confused as to how to, or even whether to, report their refund.