Tax filers in California who got a Middle Class Tax Refund and a corresponding 1099 form should wait to file their federal tax returns, the IRS said Friday.
The Internal Revenue Service, now two weeks into tax season, issued a statement Feb. 3 saying it is working on guidance for tax preparers and at-home filers.
For tax filers who got the 1099-MISC form, the question remains: Will the IRS tax the inflation refund?
“The IRS is aware of questions involving special tax refunds or payments made by states in 2022; we are working with state tax officials as quickly as possible to provide additional information and clarity for taxpayers,” the statement reads.
READ MORE: Is California’s Middle Class Tax Refund taxable by Uncle Sam?
The agency previously said it was working on guidance for 19 states that provided refunds of some form in 2022.
The IRS said it expects to provide “additional clarity for as many states and taxpayers as possible next week.”
California has sent out 6.4 million 1099-MISC forms to MCTR recipients who got at least $600, according to the Franchise Tax Board. The payments cap at $1,050 for joint filers who earn less than $250,000 and have a qualifying dependent. Between October and January, the tax board sent out 16.6 million payments worth a combined $9 billion.
In the first week of tax season, some MCTR tax filers found they could not submit their tax returns when using TurboTax. The system spat out a “rejected” message when Bill, a reader who reached out to express his frustration, tried to submit his federal tax return.
It reads like this: “CA_MCTR_Payment – There is a potential issue with the Form 1099-Miscellaneous if you received this form for payment of the California Middle Class Tax Refund.”
The system updated days later and Bill said he was able to submit his tax return — at which point he was taxed $160 on his $700 MCTR payment. He noted that his son, also using TurboTax, was not taxed.
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