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Early filers can amend 2022 returns to recoup taxes, IRS says

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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.

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.



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.

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.

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