Contact Form

    News Details

    Middle Class Tax Refund: Early filers can amend 2022 returns to recoup taxes, IRS says
    • April 12, 2023

    The IRS reversed course this week, advising early tax filers who included the Middle Class Tax Refund as taxable income to recoup the money by amending their 2022 federal tax returns.

    The Internal Revenue Service issued an advisory Tuesday, April 11 regarding various tax refunds issued by 21 states, California among them.

    “Taxpayers who filed before Feb. 10 … should check their tax return to make sure they paid tax on a state refund before filing an amended return,” the IRS said.

    READ MORE: Why does my accountant insist I file now instead of Oct. 16?

    The agency also suggested taxpayers who worked with a tax preparer or accounting consult with them first to determine if an amended return is necessary.

    Just two months ago, the agency advised tax filers not to amend their 2022 returns.

    The MCTR was intended to be a stimulus payment for California residents who were paying more for just about everything thanks to record-high inflation. The Legislature and Gov. Gavin Newsom set aside $9 billion from the budget’s surplus in order to send taxpayers a “refund” ranging from $200 to $1,050 to qualifying taxpayers. (Social Security and welfare recipients who do not file taxes were not eligible for the MCTR.)

    While it sounded simple enough, directing $9 billion to 16.8 million people wasn’t so simple. A third-party vendor, the Money Network, was hired to keep fraud in check. Instead, it struggled to get the payments to recipients, leading to jammed phone lines and millions of extremely frustrated Californians.

    The New Year came with much confusion for MCTR recipients who got a 1099 form from the IRS, courtesy of the Franchise Tax Board.

    Would the inflation rebate be taxed as a 1099 typically requires? For weeks, nobody knew.

    RELATED: Tax filing deadline, for most in California, shifts to October

    Accountants pondered the question in blog posts. Local readers sent dozens of emails our way asking for guidance. (Never mind the hundreds of emails asking, “Where’s my refund?” Some of those still persist today.)

    By Feb. 10, two weeks after the tax filing season began, the IRS issued official guidance, saying the MCTR would not be taxed.

    “In the interest of sound tax administration and other factors, taxpayers in many states will not need to report these payments on their 2022 tax returns,” the IRS said on Feb 10.

    The IRS said that after a review, it determined it “would not challenge the taxability of payments related to general welfare and disaster relief.”

    Also, if you’re filing an amended 2022 return, the IRS reminded us Tuesday that those can be filed electronically with any associated refund now available via direct deposit.

    On Feb. 9, the IRS announced that people electronically filing a Form 1040-X would “for the first time be able to select direct deposit for any resulting refund.”

    The IRS began accepting Form 1040-X electronically in 2020, but until 2023 did not offer direct deposit as an option for a refund.

    Prefer to send a paper amended return? Send it here:

    Department of the Treasury
    Internal Revenue Service
    Austin, TX 73301-0052

    If you still haven’t gotten a Middle Class Tax Refund and believe you qualify, here are some numbers to call:

    The debit card customer line is 800-542-9332.

    The Franchise Tax Board at 1-800-852-5711.

    ​ Orange County Register