NewsTeam 10 Investigates


Audit of California's middle-class tax refund program requested by local assemblymember

Numerous San Diegans said they were scammed out of their money.
Middle class tax refund debit card
Posted at 8:14 PM, Jan 30, 2023
and last updated 2023-02-08 20:29:01-05

SAN DIEGO (KGTV) —More San Diegans have contacted Team 10 about missing funds from their middle-class tax refund debit cards.

The money was supposed to help people during the tough economy, but some found their debit cards sent to them were already depleted when they tried to use them.

That includes Budd and Callie, who wanted to use only their first names for privacy concerns. They received their debit card late last year. They activated it but didn’t use it right away.

By the time they tried to use it, the card was declined.

They discovered someone made six purchases with their debit card at a Ross store and Game Stop in Long Beach. “They cleaned it out,” Callie said.

Whomever used it left $1 on their card.

“How did this happen?” Budd questioned. “How did they get a list of the names apparently? How were they able to spend the money at the stores?”

RELATED: Scammers target Californians' middle-class tax refund

The problems got the attention of local Assemblymember David Alvarez, who is the chair of the Joint Legislative Audit Committee.

“It’s been a multitude of questions for people who’ve been relying on this rebate,” said Alvarez, who represents the 80th Assembly District.

He sent a letter requesting an audit of the program. He told Team 10 the hearing for it will likely be in March.

“Clearly, it’s been a problem for a lot of people. You’re hearing from them. We’re hearing from them,” Alvarez said. “This is what government should do. We should be responsive to the needs of our citizens and that’s our intention is with this audit. “

In the meantime—and to add insult to injury for some people-- tax forms for this money are now being mailed to those who never got a chance to even use the funds.

A spokesperson for the Franchise Tax Board said — the payment is “not taxable for California purposes.”

When it comes to federal taxes, an FTB spokesperson said to “consult with a tax professional.”

Tax attorney Adam Brewer knows it’s a tricky situation for some people.

We don’t want taxpayers paying tax on money they didn’t receive, but at the same time, the IRS has that 1099-MISC form, so they’re expecting it to be reported,” Brewer said. “That’s where we’d say, just put a note on your tax return to alert the IRS you’re not ignoring it completely, but that you didn’t receive the funds.”

The FTB said under the terms of their “contract with Money Network, the vendor handling the MCTR debit cards, the debit card program is expected to run with less than a 1% fraud rate.”

With more than 9.4 million debit cards sent out, that’s still tens of thousands of people.

“It’s another example or a program that was not really well thought out,” Callie said.

“It didn’t work out so well,” Budd added.