1. California Supplement to 2016 NTTC Training Slides
California Volunteers Make The Difference
2015 California

2. NOTE TO INSTRUCTORS – Cont’d
Choose from these slides those appropriate to the audience
You may choose to integrate into each lesson topic or present as a standalone California lesson
Duck Book page references may not be up to date.
Any comments or corrections should be addressed to Jay Wiedwald, CA-2 TRS at:
2013 California

3. What FTB Publications Will Help?
540 Booklet
Publication 1001 – California Adjustments
Publication 1005 – Pension and Annuity Guidelines
Publication 1540 – California Head of Household or Instructions for Form FTB 3532
Form FTB CA 3514 – California Earned Income Tax Credit – Instructions included with form
2015 California

4. General
Taxpayer name change: CA > Basic Information > Additional Personal Information
Alimony paid: CA > Basic Information > Additional Personal Information: Enter last name of Recipient
Reporting Use Tax: CA > Tax
Voluntary contributions: CA > Voluntary Contributions
California ID theft (FTB):
If it applies to Fed also, complete Fed. Affidavit and submit copy with State Return
If it applies to CA only, complete FTB Form 3552 and submit with State Return
CA2 TaxSlayer Clinic

5. CA Adjustments in the Duck Book
Duck Book p. 64
In the Index of the printed Duck Book, see the list of “CA Adjustments” - Page 111
Covers many California differences and special treatment
Section on CA income differences starts on page 80, deduction differences on page 82
TaxSlayer articles: “California Additions to Income, “California Subtractions from Income”
2015California

6. CA Filing Basics – Deceased TP or Spouse
Duck Book p. 14
Deceased Taxpayer or Spouse
The executor / guardian information must be entered: CA > Basic Info > Deceased TP or Spouse
Failure to complete the executor/guardian information will cause an e-file reject
2015California

7. CA Filing Basics – Deceased TP or Spouse
Complete
Required
Information
Note separate
entries for First
Name, Initial
and Last Name
2015 California

8. CA Filing Basics
If using federal F 1310 Statement of Person Claiming Refund Due a Deceased Taxpayer, CA 8879 declaration changes:
2015 California

9. California scope limitations
CA Filing Status
Duck Book p. 3
California scope limitations
Full year resident returns only
Taxpayers employed in multiple states are out-of-scope if they want CA credit for income taxes paid in another state
Other state returns are out-of-scope
2015 California

10. CA Filing Status Income Splitting is out of scope
MFS (see exception next slide)
RDP
Injured Spouse (due to there being no CA equivalent provision)
Refer to paid preparer
Note:
Innocent spouse claims are out of scope
2015 California

11. CA Filing Status MFS is in scope only if:
Duck Book p. 14
MFS is in scope only if:
Couple lived apart for entire tax year
Had no intention to reconcile throughout the tax year, or
No comingling of funds
Approval by LC
File using only taxpayer’s income
Will need to complete Form all income should be attributed to the taxpayer
Additionally:
The taxpayer should not have comingled accounts producing income
The taxpayer needs to have the other’s ssn
The other spouse is believed to have taken the standard deduction
2015 California

12. CA Head of Household
Duck Book p. 14
Complete CA Form 3532: CA > Basic Info > F3532
Must enter information about person who qualifies TP for HOH
California definition of HOH is identical to federal so should be no problems
NOTE: PL fails to ask the income of the qualifying person.
2015 California

13. CA Head of Household – cont’d
Duck Book p. 14
Complete CA Form 3532: CA/Basic Info/F3532
2015 California

14. CA Head of Household – cont’d
Duck Book p. 14
Complete CA Form 3532: CA/Basic Info/F3532
For an in-scope
return all of these
must be left blank
2015 California

15. CA Exemptions
California exemptions are a credit applied to reduce the tax amount
Personal/spouse: $111
Blind / 65 or older: $111
Dependents: $344
2015 California

16. CA Income Wages
Duck Book p. 24 and 25
Enter state wages and other information as shown on W-2
CA EIN: If there is no State withholding and CA wages are the same as Federal wages, does the EIN have to be entered?
2015 California

17. CA Income Wages - cont’d
W-2 box 1 and 16 can be different:
Ride-sharing benefits are not taxable for CA
Income can be different:
W-2, box 12 code W, employer made HSA contribution
Tribal income of a tribal member residing and working on tribal land is non-taxable for CA (can be on 1099-MISC as well)
2015 California 17

18. CA Income Wages – cont’d
TaxSlayer does not make the CA adjustment when W-2 box 16 is different –
Calculate the amount of adjustment needed
Enter as a subtraction or addition to Income on the State return
2015 California

19. CA Income Wages – cont’d
Go to CA/Additions to or Subtractions from Income
Select “Other Additions” or “Other Subtractions”
2015 California

20. CA Income Wages – cont’d
Link to TaxSlayer guidance for CA additions
Link to TaxSlayer guidance for CA subtractions
2015 California

21. CA Income Wages – cont’d
CASDI or VPDI – regardless of where they appear on the W2, enter this info in Box Select description from drop down menu.
2015 California

22. CA Disability
CASDI or SDI – deductible as a state income tax on federal Sch A
VPDI or VDI is not deductible as a tax
If CASDI, SDI, VPDI or VDI exceed the annual maximum, the excess is treated as an additional payment on CA 540 L 74
NOTE: Currently TS does everything correctly, except if VPDI is over- withheld by multiple employers it doesn’t calculate the excess. Handles SDI correctly in all regards.
2015 California

23. CA Income Wages - cont’d
Special situation – state / county paid in-home care reported on W-2 (IHSS payments)
All use same employer ID#, but…
Payer name changes – care recipient’s name
TaxSlayer employer database (Site Specific) brings up last used
Preparer must change name and other employer information for each instance
Reminder:
Take calcs off SS M/Care if necessary
2015California

24. Medicaid Waiver Payments
California conforms with federal treatment of Medicaid Waiver (IHSS) payments
MUST be excluded from income only if care provider and care recipient live under same roof
If handled correctly on Federal return, TaxSlayer takes care of it on State Return
IMPORTANT NOTE:
As of 12/21/15 when Medicaid Waiver income is backed out by entering it as a negative number on line 16 of TW 1040 Wkt7 TaxWise makes the necessary adjustments to EITC and ACTC but not the CDC. Until the problem is corrected if CDC is being claimed on form 2441 the preparer should link a scratchpad to F2441 line 4 or line 5, depending on which spouse had the Medicaid Waiver income and make the same entry as is on TW 1040 Wkt7, line 16, keeping it as a negative number. Doing so carries properly to CA Form 3506.
2015 California

25. Health Savings Accounts
California does not conform to federal Health Savings Account rules.
CA Schedule CA adjustments are necessary.
TaxSlayer adjusts some automatically, but mostly not.
Make sure to review the adjustments. Income and interest, as well as federal taxability of unqualified distributions are the adjustments to mention.

26. HSA - CONTRIBUTIONS Employer Contributions: Employee Contributions:
Adjustment is not allowed by CA.
TaxSlayer takes care of this.
Employer Contributions:
This amount is taxable for CA
TaxSlayer takes care of this

27. HSA - DISTRIBUTIONS Used for Qualified Expenses:
Not taxable by IRS or CA
No adjustments required – NOTE: Can be an additional medical deduction for CA, but only above CA’s 7.5% AGI threshold.
Used for Non-Qualified Expenses:*
Taxable by IRS
Not taxable by CA
Enter in State Section/Subtractions
*Note: This item needs entry on CA return
Make sure to review the adjustments. Income and interest, as well as federal taxability of unqualified distributions are the adjustments to mention.

28. HSA Accounts - INT & DIV *
Non-Taxable for IRS
Taxable for State
Enter in CA/Additions to Income
*Note: This item needs entry on CA return
Make sure to review the adjustments. Income and interest, as well as federal taxability of unqualified distributions are the adjustments to mention.

29. CA Income – Interest- Dividend
Duck Book p
General CA tax rules:
“US Bond” interest - 100% exempt
“CA Muni Bond” interest - 100% exempt
“Other State Muni Bonds” interest - 100% taxable for CA
If documents say something different, follow the documents
2015 California

30. CA Income – Interest- Dividend
Income from US obligations is not taxable for CA
Includes US bonds, T-Bills/notes, federal land or home loan banks
Does not include Fannie Mae or Freddie Mac
Make adjustment on TS Interest or Dividend Income entry form on line titled:
“Amount of Interest on US Savings Bonds and Treasury Obligations that you want subtracted from Your State Return”
Always determine federal tax treatment first
Determine CA tax treatment second
2015 California

31. CA Income – Interest- Dividends
Interest income from California bonds is not taxable for federal or CA
Dividend income from California muni mutual fund is not taxable for federal or CA
Use “Tax Exempt Interest” section in TS
2015California

32. CA Income – Interest- Dividend
Interest income from states other than CA are taxable for CA (not taxed by federal)
In “Tax Exempt interest” section make adjustment for State
2015 California

33. CA Income – Interest- Dividend
Exempt status of income from a mutual fund keeps its status if at least 50% of the assets are exempt
Then the actual portion of income that is from exempt assets is exempt from CA income tax
2015 California

34. CA Income – Interest- Dividend
Duck Book p. 68
Look out for CA withholding on 1099-INT or DIV forms
Select type of If more than one, select “Blank” and enter total amount
Must be entered twice:
In federal section under:
Payments & Estimates > Other State Withholdings
In State section under:
CA > Payments > Withholdings from Form 1099
2015 California

35. CA State Tax Refund State tax refunds are not taxed by California
Not even refunds from another state
Because they were never deducted for CA purposes
TaxSlayer makes the adjustment
NOTE: TS refund calculator is very poor for federal calculations - doesn’t account for possible prior year sales tax benefit.
2015 California

36. CA Business Income
There should be no differences between federal and state returns filing an in-scope Schedule C
2015 California

37. CA Capital Gains & Losses
Duck Book p. 37
CA Sch D
There should be no difference between federal and CA capital loss carryover for an in- scope return (usually)
No separate entry possible for CA
TS transfers Federal amount to State Return
If amounts are different make changes under additions or subtractions to income: A/B test
2015 California

38. CA Capital Gains & Losses
Duck Book p. 36
CA basis of property inherited during is always FMV at date of death (or alternate valuation date)
Adjustment needed if federal return uses Form 8939 carryover basis
Out-of-scope if Form 8939 is used for federal return – no way to adjust CA return
2015 California

39. CA Capital Gains & Losses
Spouse inherits main home after other spouse dies
If title held as Community Property, then basis of entire property is stepped up to fair market value
Not just the decedent’s half
If not titled as community property
Only the decedent’s half is stepped up
2015 California

40. CA Capital Gains & Losses
Duck Book p. 35, 85
Look for CA withholding on 1099-B or 1099-S forms (or CA 592-B or 593)
If more than one type of 1099, select “Blank” and enter total amount
Must be entered twice:
In federal section under:
Payments & Estimates/Other State Withholdings
In State section under:
CA/Payments/Withholdings from Form 1099
2015 California

41. CA Retirement Income Generally the same as federal Exceptions
Railroad Retirement Tier 2
IRA basis difference
Three-Year Rule (rare)
Only if retired during the last six months of 1986
Survivor benefits of public safety officer killed pre- 1997
Duck Book p. 44
Duck Book p. 81
Duck Book p. 42
Duck Book p. 43
2015 California

42. CA Retirement Income
Duck Book p. 44
Railroad Retirement, tier 2, non-taxable to California
TaxSlayer takes care of this
2015 California

43. CA Retirement Income IRA basis difference
Duck Book p. 81
IRA basis difference
If a taxpayer or spouse contributed to an IRA in 1975, or 1982 through 1986 (or contributed to an IRA in those years and became a CA resident after 2002)
CA basis > federal basis
The taxpayer must have records
Reference FTB Pub 1005
Out of scope NOTE: I thought it was in-scope if TP had full records.
2015 California

44. CA Retirement Income
Duck Book p. 42
Rare situation: three-year rule for CA, simplified rule for federal
Only if the annuity starting date was between 7/2/1986 and 12/31/1986
For federal, can continue to take annual simplified exclusion for forever (rare)
After three years, by 1990, 100% of distribution is taxable for California
Enter adjustment on CA/Additions or Subtractions to income
See FTB Pub 1005
2015 California

45. CA Retirement Income
Duck Book p. 43
Survivor benefits of public safety officer killed pre-1997
Exempt for federal
Fully taxable for CA
Enter adjustment on CA/Additions to income
2015 California

46. CA Retirement Income
CA does not have a failure to take minimum distribution (RMD) surtax
CA does have a premature distribution surtax
If federal exception applies (F5329 Pt I), TaxWise carries to CA 3805P
CA does not have excess contribution surtax, but that isn’t relevant – return is out-of-scope
2015 California

47. CA Unemployment Compensation
Duck Book p. 46
Unemployment shown on form 1099-G
Paid Family Leave (PFL) administered by the SDI program through EDD use form 1099-G
Non-taxable for California
TaxSlayer makes the adjustment
2015 California

48. CA Social Security US Social Security or Tier 1 Railroad Retirement
Duck Book p. 46
US Social Security or Tier 1 Railroad Retirement
Not taxable for CA
TaxSlayer makes the adjustment
2015 California

49. CA Social Security Certain foreign social security is in scope
Duck Book p. 42
Certain foreign social security is in scope
Canadian Pension Plan (CPP)
Quebec Pension Plan (QPP)
Old Age Security (OAS) or
German Social Security
Taxed like US social security for federal
Fully taxed by CA
Enter federally taxed portion as an adjustment on CA/Additions to income
Next Slide
2015 California

50. CA Social Security
Foreign social security treated as U.S. Social Security on 1040 – up to 85% taxable
TaxSlayer removes federally taxed portion from CA return (treating as U.S. Social Security
Enter entire pension amount as an adjustment on CA/Additions to income
2015 California

51. CA Social Security Foreign social security
Do not confuse Canadian RRSP, which is
Treated as an IRA for federal
Taxable investment account for CA
RRSP is Out of scope on Federal return
2015 California

52. CA Other Income
Duck Book p. 49
Tribal income of a tribal member residing on tribal land is non-taxable to California (Can be on a 1099-MISC, if for social benefits rather than for wages.)
TaxSlayer does not make the adjustment
Enter adjustment on CA/Subtractions from income
2015 California

53. CA Other Income Gambling income from CA state lottery
Duck Book p. 48
Gambling income from CA state lottery
Taxable for federal
Exempt for CA
Gambling losses on CA state lottery
Deductible for federal (limited)
Not deductible for CA
2015 California

54. CA Other Income CA state lottery – NOT taxable for CA
Will be on separate W-2G
TaxSlayer does not make the adjustment
Enter Winnings under CA/Subtractions from Income
Enter federally reported losses under CA/Itemized Deductions as a negative number
2015 California

55. CA Other Income Home mortgage Cancellation of Debt (COD) income
Primary home mortgage debt relief for CA expired 12/31/13
Can amend 2013 returns if prepared incorrectly
Counselor and Reviewer have to have been certified in COD for TY2013
NOTE: Home Mortgage COD Out-of-Scope starting with TY 2014 due to California non-conformance
2015 California

56. CA Adjustments CA does not conform to: TaxSlayer adjusts automatically
Educator expense deduction (Line 23)
HSA deduction (Line 25)
HSA distribution discussed separately
Tuition & Fees Deduction (Line 34)
TaxSlayer adjusts automatically
2015 California

57. CA Standard Deductions
Duck Book p. 58
2016 CA Standard Deduction:
S/MFS - $4,129
MFJ/HOH/QW - $8,258
Much less than federal!
TP may benefit by itemizing for CA even though not for federal
Often applies to those 65 and over
Enter itemized deductions just in case!
2015 California

58. CA Itemized Deductions Lesson 26
State income tax and SDI are not deductible for CA, nor is CA Sales Tax
Private Mortgage Insurance (PMI) expenses are not deductible for CA
TaxSlayer makes both adjustments
Need to see what TaxWise does with this item in the 2014 CA software
2015 California

59. CA Itemized Deductions
Duck Book p. 60
Foreign income taxes deducted for federal itemization [rare] are not allowed for CA
TS does not make the adjustment
Make adjustment under CA/Itemized Deductions as a negative number
2015 California

60. CA Credit for Child & Dependent Care
Duck Book p. 70
Credit is nonrefundable
CA form 3506 generated when federal is generated
TaxSlayer carries federal information to CA form
If business address is address where care is given, nothing needed in State Section
2015 California

61. CA Credit for Child & Dependent Care
All care must be provided in CA
Provider telephone number entered in federal Child/Dependent Care section
Address where care actually provided is required, but TS defaults to care provider’s mailing address.
NOTE: Only real concern is whether care was provided in CA. Preparer should make sure that a CA address is entered if the care was provided in California, and if care was provided out of state use another state address.
2015 California

62. CA Renter Credit Renter Credit
Duck Book p. 82
Renter Credit
If TP rents, answer “Yes” to Rent question
TS will determine eligibility based on CA AGI.
Single or MFS - $39,062
MFJ, HH or QW - $78,125
There is no Renter Credit Worksheet such as previous software required
The full qualifying conditions can be found via a link at the top of the CA > Credits > Other Credits page (info is for ALL credits)
2015 California

63. CA College Access Tax Credit
New CA Credit for Tax Years 2014 , ‘15, ‘16 and ‘17
Credit is up to 60% of Donation for TY2014; 55% for 2015; 50% for and 2017
Unused portion of Credit can be carried forward for up to 6 years
Donation must be made through and certified by California Education Facilities Authority (CEFA)
Enter Credit under: CA > Credits > Other Credits
Donation can be deducted as a Charitable Contribution on federal Sch. A only . Make adjustment under CA/Itemized Deductions as a negative number
Need to see what TaxWise does with this item in the 2014 CA software
2015 California

64. CA Dependent Parent Credit Code 173
Duck Book p. 88
Person filing MFS
Cannot claim Head of Household status because they have no dependent children that would qualify them as “considered unmarried”
Does have a dependent parent(s) for which the taxpayer paid more than half the household expenses
The taxpayer must have lived apart from their spouse/RDP for the last half of the tax year
The credit is 30% of the tax due (Line 35) limited to a credit of $440
Enter Credit under: CA > Credits > Other Credits
The credit cannot be claimed if the Joint Custody HoH Credit is claimed
2015 California

65. CA Joint Custody HOH Credit Code 170
Duck Book p. 87
Joint custody situation:
Child lives with the custodial parent more than one half the year
Noncustodial parent filing Single or MFS
Maintains his/her home as the main home for a qualifying child and lives with the child for at least 146 days but less than 219 days
Has a decree of dissolution/separation or a separation agreement
Noncustodial parent can claim a credit of 30% of the tax due (Line 35) limited to a credit of $440
Enter Credit under: CA/Credits/Other Credits
The credit cannot be claimed if the Dependent Parent Credit is claimed
2015 California

66. CA Senior HoH Credit Code 163
Duck Book p. 88
A person over 65 who qualified as Head of Household for 2014 or 2015, but does not qualify in 2016 because the qualifying individual died in or 2015
AGI must not exceed $71,370 for 2016
The credit is 2% of Taxable Income (Line 19), but not more than $1,345 for 2016
Enter Credit under: CA/Credits/Other Credits
2015 California

67. California Earned Income Tax Credit (EITC)
Duck Book p. 98
The CA EITC is refundable; no other CA credit is refundable.
Available to California households with adjusted gross income:
<$6,718 with no qualifying children.
<$10,088 with one qualifying child.
<$14,162 with two or more qualifying children

68. California Earned Income Tax Credit
Standards to qualify are same as for federal EITC, but some federal earned income doesn’t qualify
CA EITC requires earned income be reported on a W-2 form. Unlike the federal EITC, self-employment income doesn’t qualify
Only California income qualifies
Must have been a CA resident more than six months

69. California Earned Income Tax Credit

70. Federal plus CA EITC Example (if all income is W-2)

71. California Earned Income Tax Credit
FTB form CA 3514 must be completed
CA > Payments > Form 3514 – Some details in are Question!
The credit amount will appear on line 75 of the 540 return
TaxSlayer does the calculation automatically
Preparer must only address if federal EIC was disallowed in a prior year
NOTE: Currently TS doesn’t ask for child’s physical address. Defaults to mailing address. Could cause a problem if a PO Box.

72. CA Direct Deposit or Debit
Duck Book p
Direct Deposit is selected as part of Return Option in TaxSlayer
Provide Routing and Account Numbers
If federal refund is being sent to multiple accounts (if Form 8888 is enabled for the site), then the full California refund will be sent to the first-listed account
2015 California

73. CA Installment Agreement
Duck Book p. 98
For taxpayers that cannot pay in full within 90 days
CA Form 3567 (counterpart to fed 9465)
Authorizes direct debit of monthly payment
$34 set up fee
Not available in TS
More at ftb.ca.gov - Payment Options under the Popular Topics heading
Web pay is an option
2015 California

74. State Tax Tax withheld on documents other than W-2, W- 2G and 1099-R
If on other documents must be entered in federal section for itemized deduction and again in CA section as tax payments
Tax refund can be applied to next year
Estimated tax for next year:
Tax to pay with extension for current year
CA2 TaxSlayer Clinic

75. CA Estimated Taxes
Duck Book p. 73
If balance due is >$500, and it’s expected that 2016 will be the same, avoid underpayment penalty
Increase withholding
Form DE 4 (not in TaxSlayer)
search box enter “DE 4”
Make estimated tax payments
2015 California

76. CA Estimated Payment Estimated Payments for 2017 Go to:
CA > Miscellaneous Forms >Estimated Payment Vouchers Form 540ES
2015 California

77. CA Wrap-Up PINs – TaxSlayer automatically assigns PINs
Have taxpayer(s) sign CA 8879 and keep with their tax records
The site does not keep a copy
2015 California

78. CA Amended Returns
CA statute for amending to obtain a refund expires later of:
4 years from date return was due
This is one year longer than federal statute
Not available in TaxSlayer
1 year from date the tax was paid
2015 California

79. CA Quality Review
Carefully review CA Schedule CA for federal – CA differences
Is what’s there correct?
Is anything missing?
2015 California

80. Thank you for volunteering!
California
Questions?
Comments?
Thank you for volunteering!
2015 California