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Hi to all. This is new for me that when Fed AGI is more than earned income of California the calculation of California's EITC is based on FED AGI. I did it as follow for MCTR inflation relief for California adjustment but the client refund decreased since FED AGI become more for $1050 MCTR. Before entering 1099-Misc, California's EITC was more than now. It is unfair.
- Open the California return.
- Press Ctrl + F on your keyboard to open the forms window.
- Type oth, then press OK to open the California Other Income Statement.
- Scroll down to line 28.
- Enter the amount in Middle Class Tax Refund.
Any help very welcome.
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If you mark the Other Income box then it auto checks NO, its not MCTR. Uncheck the Other income box and them check Yes and see what happens
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Is the MCTR part of federal AGI?
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Whoever said the way taxes work is fair?
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If you feel that part of California tax law is not fair, you are perfectly welcome to contact your state Congressional representative. They are the ones that make the law.
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Yes, for FED; MCTR is part of AGI but when California wants to calculate 3514 if FED AGI is more than earned income of CA the amount of EITC for CA is FED AGI since it is bigger than earned income of CA. Take a look 3514 instruction.
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Has it been determined now that MCTR is going to be taxable Fed income? Last I read, it was going to be considered a gift. Did IRS give guidance on this?
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Unless you see formal guidance otherwise, yes, its taxable.
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@Tiffany4 wrote:
Has it been determined now that MCTR is going to be taxable Fed income? Last I read, it was going to be considered a gift. Did IRS give guidance on this?
It is not a "gift"; however, many tax professionals think it is non-taxable. The IRS has not made any direct statements about it.
https://www.taxprotalk.com/forums/viewtopic.php?f=8&t=27184
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People are getting 1099-MISC in their mailbox. It meant taxable.
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No it doesn't.
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What do you mean, NO it does not?
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Hi Sjrcpa. I think your a CPA so I would like to know if you said NO it does not what was the insight. I am new and I need your help. Please.
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Thanks , I would like to know if I was wrong about being taxable of MCTR.
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Merely receiving a 1099 (or some other tax form) does not dictate whether it is taxable (or how it should be taxed). Although 1099s and other tax forms give us a pretty good idea for how something is PROBABLY taxed, whether (and how) something is taxed depends on the specific circumstances.
As of now, there is no agreement and no response from the IRS about whether this is taxable for Federal purposes or not. The links I gave you above discuss it a bit, and many feel it may be non-taxable. But nothing is certain at this point.
You may consider presenting the facts and options to the client and let them decide. But if you treat it as non-taxable and later the IRS states it is taxable, you probably need to amend. But if you treat it as taxable and later the IRS says it is not taxable, it might not be worth the time and expense to amend.
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My short answer meant just because you receive a 1099 does not mean the income is taxable.
Bill explained it better.
Check out the links and read the discussions.
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Dave Fogel is one of THE smartest tax preparers around, and know CA inside/out:
His article gives a lot of substantiation to exclude the MCTR from taxable income for Federal purposes.
YMMV & consider disclosures.
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Yes that MCTR is messing the EITC at the state level. California indicated that it would not be taxable. What the heck does that mean? Can I exclude it from income completely or do I have to make an adjustment on Schedule CA. Taking the second option REDUCES the EITC.
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CA doesnt tax it, open the 540, hit F6 and type oth and you'll get the other income worksheet, theres a special line to exclude the MCTR
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I know is not taxable. The EITC, however is reduced if the MCTR is reported as other income on the federal return.
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yea CA uses the federal AGI for their EITC, I think
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I could not find any box to choose YES or NO. There is a box that already has NO as a default you can not override it. If it is possible place an image of that here. Thanks
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If you mark the Other Income box then it auto checks NO, its not MCTR. Uncheck the Other income box and them check Yes and see what happens
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I do not know how to thank you. Wonderful!
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they just fixed it today I think
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