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Were you told you owe taxes on California inflation relief payments?

The Middle Class Tax Refund payment is not taxable for California state income tax purposes. However, the MCTR payments may be considered federal income.


SACRAMENTO, Calif. —

Have you received a letter in the mail stating you owe taxes on your Middle Class Tax

Refund even though you have yet to actually receive the California inflation relief payment? You're not the only one.


Dólares


A Sacramento County husband and wife reached out to KCRA 3 Investigates after they received a 1099-MISC in the mail from the California Franchise Tax Board. The problem? They haven't received their Middle Class Tax Refund and want to know how they can be taxed on money that isn't in their possession.


"I said to myself, you know, this is crazy. I'm not going to claim that I got $700 when I didn't and have to pay taxes on it. So, you know, that didn't make sense to me," said the wife, who asked KCRA 3 not to use her name for this report.

The couple said they have repeatedly reached out to the FTB along with Money Bank — the bank issuing the Middle Class Tax Refund — for help, but can't get through to anyone on the phone.

"I think it's terrible. I think that they need to get their act together," the wife said.

The couple is hoping they receive their refund payment before they file their taxes.

"I'm really thinking positive here, that we might receive the $700 before we file our taxes,"


the Sacramento County woman said. "We don't file our taxes until March. So, if we get the $700, everything's fine, we'll go ahead. But if we don't get the $700, I'm going to have to call someone because I'm not going to put it on my taxes. And if I don't put my taxes, I can be in trouble. I think time will tell how this is going to play out."

Californians will not be taxed by the state for their MCTR, but the federal government recognizes the money as federal income, which is why people may receive a 1099-MISC for refund payments of $600 or more.

KCRA 3 Investigates reached out to the Franchise Tax Board to get more clarity as to why some of the relief payments are taxable, and what Californians should do if they receive a 1099-MISC but haven't received their refund payment.

What should people do if they receive a 1099-MISC in the mail from the FTB for taxes on their MCTR, that they haven't received?

FTB: The FTB is required to provide the 1099-MISC for the year that the payment was issued. For some payments that were issued in 2022, the individual's MCTR payment may still be in the mail.

Will people who received a 1099-MISC in the mail from FTB for taxes on their MCTR, that they haven't received, in fact, be taxed?

FTB: The MCTR payment is not taxable for California state income tax purposes. You do not need to claim the payment as income on your California income tax return. However, as we note on our MCTR Help webpage, the MCTR payments may be considered federal income.

For that reason, FTB is issuing a 1099-MISC for MCTR payments of $600 or more. Individuals can refer to IRS Publication 525, Taxable and Nontaxable Income, or consult with a tax professional regarding the federal tax treatment of MCTR payments.

What should people do if they receive a 1099-MISC in the mail from the FTB for taxes on their MCTR, but they were victims of fraud and never saw any of the money, or a portion of the money was wiped out due to fraud? Will these people still be taxed? How is/will FTB handle these claims?

FTB: Money Network is the state's vendor handling the MCTR debit cards and is responsible for processing MCTR debit card fraud claims. Anyone reporting potential MCTR debit card fraud should call Money Network immediately at 800-240-0223, Monday through Friday, 8 a.m. to 5 p.m.

Call 800-240-0223, enter your language preference and then the card number and the pin they set up.

From the menu, select Option 1 "To Activate, Customer Service, and Main Menu." The balance will be stated to the caller, and they can either press 1 to repeat or 2 to "continue."

Press 2 to continue.

On the next menu, Select Option 6 for "new or existing dispute." Caller will be transferred to an agent to intake the claim.

Timeframe: Review and verification of the activity being either a fraudulent activity or a malfunction with the funding of the card can take 45 to 90 days.


https://www.kcra.com/article/california-middle-class-tax-refund-ftb-owing-taxes/42562278



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