So and So Posted August 8, 2007 Report Share Posted August 8, 2007 I know you from the "board that shall not be mentioned". Would you please help me with a problem I am having on a Calif return? I am in Texas and do not do very many Calif returns. I have a client who has an AGI of approx 12000.00. But he has Sch A deductions of about 26000.00. So, no Fed taxable income. The Calif return has generated an NOL. It has taken the Sch A deductions and used it against the AGI to create the NOL. I have searched the FTB site and have had no luck finding any info on their rules for NOL's. Does this sound correct to you? There is no NOL on the Fed level. But one is generated on the Calif level? Thanks for your help. Quote Link to comment Share on other sites More sharing options...
Pacun Posted August 8, 2007 Report Share Posted August 8, 2007 This is my landlord who does not report what I pay him for rent. Quote Link to comment Share on other sites More sharing options...
jainen Posted August 8, 2007 Report Share Posted August 8, 2007 >>I have a client ... << Pacun, is the original post from you as well? Because I don't understand how you could have a client if you know he is filing fraudulent returns. Even without personal knowledge, so and so would certainly have to inquire how so much can come from so little. It is common for software to be less complete for state returns as for federal. You may have to make manual adjustments for the Schedule A items that should not generate an NOL. Quote Link to comment Share on other sites More sharing options...
Pacun Posted August 8, 2007 Report Share Posted August 8, 2007 No. The original question is legit... I think what's not legit is his income reporting practices. Quote Link to comment Share on other sites More sharing options...
Pacun Posted August 8, 2007 Report Share Posted August 8, 2007 So and So, I have checked your posting and it seems your reasoning is good. I hope you checked with this client why he had so little income. I have rejected clients on this situation because I have felt that they are renting part of their house and they do not want to report rental income. I hope you questioned this client properly. I am not expert in CA taxes, but I cannot imagine that any state will allow you a NOL. You should call ATX and ask them to fix CA forms. 4 years ago, I called ATX to fix DC forms. My problem was that when I split[ed](on DC forms) the income for both spouses and the first spouses got deductions or more than $1 of his income, the program didn't calculated any taxes and refunded everything witheld to clients. So, when first spouse had 5K income and the other had $200K, all state withheld was refunded to clients. Quote Link to comment Share on other sites More sharing options...
So and So Posted August 8, 2007 Author Report Share Posted August 8, 2007 I do not have any problems with the income reported against the deductions taken. As long as you have been doing taxes, I'm sure you have had situations where things like this crop up. There could be income from investments. Maybe they took a bath on some stock sales to get some money out. Maybe they are borrowing the money from dear old Dad. Just because the numbers look upside down, does not mean it is a fradulent return. What I needed to know is if Calif will create an NOL if it is not created at the Fed level. I have found, since I posted here, that Calif does follow the Fed guide lines for what will and won't create an NOL. So, I know something is off with the retun. Thanks anyway. Quote Link to comment Share on other sites More sharing options...
jainen Posted August 8, 2007 Report Share Posted August 8, 2007 >>Calif does follow the Fed guide lines for what will and won't create an NOL<< California generally conforms to IRS Section 172 in calculating an NOL, but there are exceptions. Most important for you, filing in Texas, is that a California non-resident segregates income for this purpose, and so could have a California NOL based on California losses that are offset by non-California income on the federal return. There are also lots of differences in the way the carryforward is determined. Without knowing anything about your specific case, I would guess it more likely that your software requires certain entries, hopefully as simple as a checkbox. The federal probably determines it automatically while the state has only basic calculations and weak diagnostics. That's pretty common. Name your software and maybe someone can give you a hint, or study your help files and call tech support. Quote Link to comment Share on other sites More sharing options...
So and So Posted August 9, 2007 Author Report Share Posted August 9, 2007 Janien Actually, this is a full year resident for Calif. I'm doing the '06 and he didn't move to Texas until March '07. The program completes form 3805V. It takes the AGI and deducts the Sch A to create what it says is the NOL. But when I follow the form along closely, it appears that on page 3 of that form, it does not actually give the NOL. The Sch A deductions are only RE taxes and Mort. interest. So, I don't think this should be creating the NOL. And I certainly didn't request this form!!!! T/P does not have a taxable income for Calif. So, no tax is due. And if I understand the form correctly, the NOL would only carryforward. But, I am really stumped. I'll call my tech help. Maybe I can brighten their day. :lol: Quote Link to comment Share on other sites More sharing options...
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