CA Middle Class Tax Rebate

[dvinegrad]

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?

[sjrcpa]

Here's one of several discussions

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

[jerry]

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?

[TaxGuyBill]

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

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

[rbynaker]

Some thoughts.

1) I'm in no hurry but feel free to run with scissors.  I'll wait and see if we get guidance from the IRS.  Word on the "street" is that the IRS is working on this and they plan to release the information for all of the similar state programs at the same time.

2) How do you know that Lacerte won't include the S1 #8z data with an efiled return?  (Does anyone at this point have a clue exactly what gets filed with an efiled return?  When I started with Drake you could look at the data file before it got sent.  Then the "Security Summits" started and that went away.)  Does Lacerte have a method of viewing the electronic data before it gets sent?  I suspect not (despite every one of us declaring under penalty of perjury that the return is complete, we really have absolutely no idea what we're submitting!)

3) The guidance keeps changing but at one point they wanted "bad" 1099-K data reported in on S1 #8z and out on #24z.  Maybe this approach would work for CA MCTR.  I don't like it because something that should be excluded (if in fact this should be excluded) should not be part of gross income and then subtracted out to arrive at adjusted gross income.  So given my 'druthers, I'd rather do it in-and-out on S1 #8z (if anywhere).  I fully expect some sort of software glitch either on the tax prep software side or on the IRS side that somehow breaks the "modified AGI" calculation for things like taxable social security or IRA deduction limits based on computers having no idea exactly how to deal with a generic line #24z entry; especially one that really has no business being there (despite the IRS instructions).

What a fine start to another fantastic tax season.

[Drphibes]

Problem is you can't e-file a return with a negative number on Sch 1 line 24z.  I think the $1 extra on Misc income is going to be the best idea until the IRS comes out with something.