Do you need to report your California inflation relief check when filing taxes? (2024)
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California legislators approved the payments last summer to help combat rising prices of gas, food and just about everything else. The state’s Franchise Tax Board has been issuing the direct payments since October as direct deposits or debit cards, depending on the recipient. The paymentsrange in size from $200 to $1,050depending on your income, tax filing status and number of dependents.
The direct payments have been sent out automatically based on Californians’ 2020 tax information. Now, as they prepare to file their 2022 taxes, some inflation relief recipients will need to report the payments as income, according to the the Franchise Tax Board (FTB).
The first important thing to note, the FTB says, is that there’s a difference here between state taxes and federal taxes. As far as California state taxes are concerned, the Middle Class Tax Refund (MCTR) is not taxable income, a FTB spokesperson told Nexstar. That means you don’t need to claim your inflation relief payment — no matter the size — on your California income tax return.
However, the MCTR “may be considered federal income,” according to the FTB. For that reason, the state is sending out 1099-MISC forms to anyone who received a payment of $600 or more.
San Diego-based tax attorney Adam Brewer said the money is indeed taxable when it comes to the federal return, and warns that the $600 number is not a threshold for who has to report the income.
“Just because you received less than $600 and didn’t get a 1099-MISC, it doesn’t mean it’s tax-free,” Brewer told Nexstar. “It just means you’re not going to get a reminder about it, and the IRS isn’t going to get a copy, you know, so they’re not going to know to look for it, but that doesn’t mean it’s a tax-free payment.”
Brewer added that taxpayers should also pay attention to the rate at which the money will be taxed. The payments should be subject to ordinary income tax and not the 15.3% applicable to business income reported using a 1099-MISC.
If you have further questions about your tax return when it comes to the direct payments, the FTB suggests talking to a tax professional. The agency has also posted more tax information on its website.
If you’re waiting to receive a 1099-MISC from the state, the FTB asks you wait until Feb. 15 before asking for a replacement. If you still haven’t received a form after Feb. 15, and your MCTR payment was $600 or more, you can request one by calling 1-800-852-5711.
The tax filing deadline is on April 18, 2023. Californians impacted by recent storms have until May 15.
“According to the IRS, you won't need to report the payment as income on your 2022 return. So recipients can ignore the federal 1099-MISC form sent out last month by the state Franchise Tax Board,” the Los Angeles Times reported.
If you qualify, or think you may qualify, for the Golden State stimulus payment you need to file your 2020 tax return. If you qualify for CalEITC, make sure you claim it on your return.
Taxpayers who itemize their deductions on their federal income tax returns and receive a state tax refund must include the refund in income only if they deducted the state tax paid.
The IRS now says you don't owe federal taxes on your gas tax rebate. That guidance came out in the 3 p.m. hour on Friday. This development comes weeks after we began pushing for answers from the Franchise Tax Board which sent out 1099s for payments above $600.
Do I have to pay taxes on the grant proceeds? Yes. Prior to February 15, 2022, you will receive tax information related to the grant proceeds, which you will need to report on your tax returns. Please consult with a tax professional for additional information.
The MCTR was reported via a 1099-Misc, which is entered on line 8 of form 1040. If line 8 is blank, then the MCTR was not claimed as taxable income. If there is a value in line 8, then it's possible you claimed the MCTR as taxable income. Check Schedule 1, line 8z.
You can claim the stimulus payments as a tax credit and get the money as part of your tax refund. The stimulus checks are a federal tax credit, known as the Recovery Rebate Credit.
You received this form because both of the following happened: You claimed state income tax payments as an itemized deduction on Schedule A of your Federal Income Tax Return for the tax year listed in Box 3. You received a refund, credit, or offset of $10 or more.
If you chose general sales taxes, none of your refund is taxable. If you chose state and local income taxes, your state refund is taxable. However, it's only taxable to the extent that it's more than the refund you would have received by choosing the larger refund from these: Standard deduction.
You are required and responsible for reporting any taxable income you received - including state or local income tax refunds - even if you did not receive Form 1099-G. Keep payers advised of your current address so you'll receive your 1099-G timely.
Form 1099G is a record of the total taxable income the California Employment Development Department (EDD) issued you in a calendar year, and is reported to the IRS. You will receive a Form 1099G if you collected unemployment compensation from us and must report it on your federal tax return as income.
This means that people in the following states do not need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island.
IRS says California, most state tax rebates aren't considered taxable income. Taxpayers in more than 20 states who received tax rebates last year got some guidance from the IRS after the agency had asked them to hold off on filing their tax returns.
If you did not itemize your deductions in the previous year, do not include the refund in income. If you deducted the taxes in the previous year, include all or part of the refund in the year you receive the refund. This information is found in Publication 525, Taxable and Nontaxable Income.
The stimulus payments are not taxable on the federal return and are not reported as income. However, you can claim a tax credit if you did not receive the payment. If you did not receive the third stimulus payment, you need to report the information on your 2021 return to claim the Recovery Rebate Credit.
The Golden State Grant is a separate payment from your monthly CalWORKs payment. The Golden State Grant does not count as income and will not affect your eligibility for programs like CalWORKs, CalFresh and Medi-Cal. The Golden State Grant does not have to be repaid. The Golden State Grant is not taxable income.
"My clients and taxpayers in California will be very happy the IRS is not going to tax them on these payments." The IRS indicated the payments qualified as either disaster relief or for the good of general welfare. For families in a 25% tax bracket who received a $1,050 payment, it saves up to about $250 in taxes.
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