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Common questions about California Middle Class Tax Refunds in ProSeries

by Intuit Updated 5 months ago

This article answers frequently asked questions about California Middle Class Tax Refund (MCTR) payments in ProSeries. Clients who qualify for an MCTR payment can expect to receive it between October 2022 and January 2023. For more information about payments, see the FTB's website.

Regarding special payments made by many states in 2022, the IRS has determined that in the interest of sound tax administration and other factors, taxpayers in many states won't need to report these payments on their 2022 tax returns.

For more information, see here

Are MCTR payments taxable?

MCTR payments are not taxable income for California state tax purposes.

For federal purposes, MCTR payments may be taxable as income. The IRS hasn't issued specific guidance for the treatment of these payments.

If you determine the MCTR should be included on the federal return, follow the steps below for your program to enter the income as federal only.

How do I enter the MCTR on a federal return in ProSeries?

Follow the steps for your program to report the MCTR as income on the federal return and create a subtraction for California purposes so the income isn't taxable by the state.

If your client received a 1099-MISC from the state:

  1. Open a 1099-MISC worksheet.
  2. Enter the Payer's EIN and Payer's Name.
  3. Enter the amount in Box 3, Other income.
  4. Under For Other Income, check Yes on the California Middle Class Tax Refund line
  5. Open the California return.
  6. Press F6 to bring up Open Forms.
  7. Type oth, then press OK to open the California Other Income Statement.
  8. Scroll down to line 28.
  9. Enter the amount in Middle Class Tax Refund.

If your client didn't receive a 1099-MISC:

  1. Press Ctrl + F on your keyboard to open the forms window.
  2. Type oth, then press OK to open the Schedule 1 Line 8 Other Income Statement.
  3. Scroll down to Line 12, Other taxable income.
  4. Enter a description and the amount of MCTR.
  5. Open the California return.
  6. Press F6 to bring up Open Forms.
  7. Type oth, then press OK to open the California Other Income Statement.
  8. Scroll down to line 28.
  9. Enter the amount in Middle Class Tax Refund.
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