Richcpaman Posted October 24, 2018 Report Share Posted October 24, 2018 Anyone out there a CA Part Year Resident wizard? I have a client who took a position in CA in July 2014. Wife stayed in VA until 2018. So, he was part year with wages in VA, and Part year in CA with wages. Wife is all VA with rents and Sch C. AGI of $425k. CA W-2 was for $132K. After doing the CA 540 NR and CA Sch CA 540NR form, I had the tax about $2.3k. The State just sent a demand for an additional $12k in tax. Stated that we underreported the Fed taxable income, reducing the %. Ok, Fine. However, the process they propose ends up with them taxing $429k, and not dropping it down to only $132k. Even one of their specialist told the client that you don't pay tax on all the income, only the $132k. Am I missing another form? Any thoughts? Rich Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted October 24, 2018 Report Share Posted October 24, 2018 This looks like a question for Bulldog Bob. He is one of our resident CA experts. 2 Quote Link to comment Share on other sites More sharing options...
Max W Posted October 24, 2018 Report Share Posted October 24, 2018 Did you prepare Sch S, Other State Tax Credit? https://www.ftb.ca.gov/forms/2017/17_540s.pdf 1 Quote Link to comment Share on other sites More sharing options...
Lion EA Posted October 24, 2018 Report Share Posted October 24, 2018 Remember that the tax rate will be determined by the federal income. Then your software applies a ratio to include the CA income/federal income X tax rate. Check the Sch S and go through the CA return line by line to see how it flows. 1 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted October 25, 2018 Report Share Posted October 25, 2018 5 hours ago, Richcpaman said: I have a client who took a position in CA in July 2014. Wife stayed in VA until 2018. So, he was part year with wages in VA, and Part year in CA with wages. Wife is all VA with rents and Sch C. AGI of $425k. CA W-2 was for $132K. After doing the CA 540 NR and CA Sch CA 540NR form, I had the tax about $2.3k. The State just sent a demand for an additional $12k in tax. Stated that we underreported the Fed taxable income, reducing the %. I am not a wizard at this, I only get this kind of return occasionally. It is a pain. At first glance, I have some problems with the numbers you are using. With an AGI of 425K, they went into the 9.3% tax bracket at about 125K taxable in 2014. Assuming they had Itemized deductions and exemptions totaling 100K, they would still have 325K taxable and a tax bill of about 25K. So I don't think the state is taxing all the income. And the 2.3K you came up with on your original filing looks light to me on 132K of CA source income. Is the 12K the state is demanding all tax, or is it loaded up with penalties and interest? Have you gone back and recalculated the CA 540NR and the CA Sch CA 540NR based on the full federal income and then applied the percentages? If so, what did you come up with? ATX is not great at the CA Sch CA 540NR. It is not intuitive. You almost have to run that schedule by hand if it is complicated. I am guessing here, but I think you probably have about a 6K shortfall in the CA taxes that year, and the penalties and interest are driving the bill up to 12K. If you have more specific questions, post away and I will do my best to help out where I can. Just curious, how did you file 2015-2017 for them? Tom Modesto, CA 1 Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted October 25, 2018 Report Share Posted October 25, 2018 I have a question, if you are apart time resident of CA, doesn’t CA treat you as a full time residence anyway? Quote Link to comment Share on other sites More sharing options...
Max W Posted October 25, 2018 Report Share Posted October 25, 2018 Part-year residents of California - Taxed on all income received while a resident and only on income from California sources while a nonresident. https://www.ftb.ca.gov/individuals/fileRtn/Nonresidents-Part-Year-Residents.shtml#how_taxed 1 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted October 25, 2018 Report Share Posted October 25, 2018 11 hours ago, ILLMAS said: I have a question, if you are apart time resident of CA, doesn’t CA treat you as a full time residence anyway? No. Well, let me state that differently, they are not supposed to under the tax law, but they are like a prostitute, they will do anything for a few extra bucks. Seriously, that is why proving domicile is so important. In the OP, if the taxpayer domiciled in CA, and the rental income was in his name, then it is taxable income for CA purposes from the time he established residency (domicile) in CA. But if the taxpayer was a non-resident who did not domicile in CA, then the rental income is not taxable in CA. Tom Modesto, CA 1 1 Quote Link to comment Share on other sites More sharing options...
Richcpaman Posted October 27, 2018 Author Report Share Posted October 27, 2018 On 10/25/2018 at 9:15 AM, BulldogTom said: No. Well, let me state that differently, they are not supposed to under the tax law, but they are like a prostitute, they will do anything for a few extra bucks. Seriously, that is why proving domicile is so important. In the OP, if the taxpayer domiciled in CA, and the rental income was in his name, then it is taxable income for CA purposes from the time he established residency (domicile) in CA. But if the taxpayer was a non-resident who did not domicile in CA, then the rental income is not taxable in CA. Tom Modesto, CA Bulldog: The worst part is CA is a prostitute with a gun.... I think I have it figured out. I adjusted the Federal amount in Sch CA540NR Column B, instead of Col E. He owes $8,700 now... Have to argue down the number with the state now. Rich 2 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted October 29, 2018 Report Share Posted October 29, 2018 On 10/27/2018 at 8:11 AM, Richcpaman said: Have to argue down the number with the state now. Good Luck with that one. CA does not abate penalties. They will tell you they do for reasonable cause, but in practice it rarely happens. As far as getting the tax amount correct, they will listen and adjust to the right number if you prove it to them. Let us know how it goes. Tom Modesto, CA 2 Quote Link to comment Share on other sites More sharing options...
Catherine Posted October 29, 2018 Report Share Posted October 29, 2018 12 hours ago, BulldogTom said: CA does not abate penalties. Are penalties in CA not assessed based on the tax due? (They are here in MA.) If based on tax, then if the tax figure changes, should the penalty amount not also change? If what you say is true, then anyone who files in CA needs to be super-careful as the state could then impose a truly vicious penalty for any minor inaccuracy - with almost no taxpayer recourse. Or did you just mean that pleading ignorance and asking for a one-time-promise-I'll-be-good penalty waiver is a waste of paper and toner? Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted October 30, 2018 Report Share Posted October 30, 2018 9 hours ago, Catherine said: Are penalties in CA not assessed based on the tax due? (They are here in MA.) If based on tax, then if the tax figure changes, should the penalty amount not also change? If what you say is true, then anyone who files in CA needs to be super-careful as the state could then impose a truly vicious penalty for any minor inaccuracy - with almost no taxpayer recourse. Or did you just mean that pleading ignorance and asking for a one-time-promise-I'll-be-good penalty waiver is a waste of paper and toner? Penalties are based on tax due. So once you get to the correct tax, you get the correct penalty. Your last sentence is what I meant. Tom Modesto, CA 1 Quote Link to comment Share on other sites More sharing options...
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