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Level 3
January 26, 2023
Question

CA Middle Class Tax Rebate

  • January 26, 2023
  • 1 reply
  • 5 views

Do you all plan on reporting the CA middle class tax rebate 1099-Misc as income on the federal return?

If not, what description are you all planning to write as a non-taxable offset on Schedule 2?

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1 reply

sjrcpa
Level 15
January 27, 2023
The more I know the more I don’t know.
Level 6
January 30, 2023

I've made a decision that (with my clients agreement) I will exclude MCTR as federally taxable income for my clients, using the general welfare exclusion - unless the IRS comes down with something specific to the contrary.

But to avoid AUR notices for those that received 1099-MISC, I was going to enter the payment on Schedule 1, line 8z, then an offsetting negative payment.

I tried it for a $700 MCTR.

The original $700 on the 1099-MISC and the offsetting $700 add up to zero (obviously), so  Lacerte doesn't show a Schedule 1 in the completed return.  I don't know if it will be electronically transmitted or not, but if not, the AUR computers will have nothing to match to, and notices will go out.

I'd hate to claim a negative adjustment of $1 less just to get a Statement for Schedule 1 to generate.

Interestingly, TurboTax, another Intuit product, automatically puts both the original amount and the offset (using terminology "general welfare exclusion") on statement for Schedule 1, line 8z.

Anyone have any ideas?

Level 15
January 30, 2023

That is rather odd that is isn't showing up in Lacerte.

I suspect that your $1 idea is your best option.