MCTR-MIDDLE CLASS TAX REFUND TAXABLE ON FEDERAL AND TAX FREE ON STATE

Forum|Forum|3 years ago
January 19, 2023
11 replies
184 views

Hi, so according to the ftb website anyone who received more than $600 of middle class tax refund will receive a 1099-misc. so is anyone being proactive and adding the mctr as other income and then excluding it per notice 2003-18 "GENERAL WELFARE EXCLUSION" I learned we can do this while attending a awesome tax brass class. page 39 of the tax brass book. let me know your thoughts or if you forgot to add and exclude or if anyone has recd the actual 1099 forms. brass tax class explained that these mctr shouldn't be taxed by federal since its a governmental fund, are for promotion of general welfare example generally based on individual or family needs) and not compensation for service.

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Best answer by jerry

"Yes, but I just tried it in Lacerte."

That doesn't matter. Neither does trying it with TurboTax. You seem to be thinking your software is ready to go.

Until the IRS declares how it is to be treated, it doesn't matter which program you enter it into or how you enter it there or how anything is handled.

IRS just announced in IR-2023-23 that the MCTR is not federally taxable:

"The IRS has determined that in the interest of sound tax administration and other factors, taxpayers in many states will not need to report these payments on their 2022 tax returns.
During a review, the IRS determined it will not challenge the taxability of payments related to general welfare and disaster relief. This means that people in the following states do not need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is in this group as well, but please see below for more nuanced information."

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BobKamman

Level 15

Last week, The [Sacramento] Bee reached out several times to the IRS for information, with no response. After sending a follow-up to an IRS representative Thursday, The Bee received the following message: “We are looking into this and hope to have something for you in the next few business days,” Robyn Walker, IRS media relations, wrote in an email reply. “We will reach out when we do.”

P

PamC

Level 6

Thanks for sharing this update Bob.

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