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California: Top 10 Personal Income Tax Mistakes

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Updated April 12, 2010

The California Franchise Tax Board (FTB) has ranked the ten most common errors on personal income tax returns.  These common mistakes can delay processing of your return, and may cause your refund to be adjusted or arrive later than expected.

1.) Estimated tax payment amount claimed is different from total amount received

How to avoid it: Check your records for all tax payments made to the FTB.  You should also check last year's return for any amount that you requested to be applied to this year's estimated tax (Line 46 on Form 540 or 540A and Line 53 on Form 540NR).  Include this amount with your payments on this year's return.  You can also check your estimated tax payments at ftb.ca.gov under the My FTB Account link.  Compare this to your records to be sure that the state’s amount matches yours.  If you believe the state's amount is incorrect you can call the FTB at 1-800-852-5711.  Be sure that you have proof of all payments made.  Another option would be to include a letter and proof of all payments with your return.

 

2.) Incorrect standard or itemized deduction amount used based on filing status

How to avoid it: If you are using the standard deduction, be sure that you are using the correct amount for your filing status as stated on Line 18 of Form 540, 540A, or 540NR.  If you are itemizing deductions, be sure to use the worksheet and check the instructions to be sure all of your deductions are allowed, and double check your math.

 

3.) Incorrect total tax amount computed, which can affect other schedules

How to avoid it: Check the total tax amount on Line 21 of Form 540 2EZ, Line 64 of Form 540A or 540, or Line 74 of Form 540NR to make sure the amount is calculated correctly, then check any affected schedule to see that the correct tax amount is transferred over.

 

4.) Incorrect total tax amount computed because of an error in calculating total tax or credits

How to avoid it: Check your total tax amount on Line 21 of Form 540 2EZ, Line 64 of Form 540A or 540, or Line 74 of Form 540NR to make sure the amount is calculated correctly.  Also check your total credits on Line 20 of Form 540 2EZ, Line 47 of Form 540A or 540, or Line 62 of Form 540NR (long form) and make sure the amount is calculated correctly.

 

5.) Incorrect adjusted gross income amount

How to avoid it: Check to make sure that your starting point is the correct federal adjusted gross income amount, that your state wages are entered correctly from your W-2, and that your California additions and subtractions are all correct.  Finally check your math to be sure that your California adjusted gross income on Line 16 of Form 540 2EZ, Line 17 of Form 540A, 540, or 540NR is calculated correctly.

 

6.) Incorrect total tax amount used based on incorrect total exemption credit amount

How to avoid it:  The exemption credit is based on filing status and total number of dependents and directly reduces your total tax amount.  Check that you are using the correct amount of exemptions (2 for you and your spouse if filing jointly plus any dependents) and that the exemption credit amount is calculated correctly on line 11 and is correctly transferred to line 32 (on Forms 540 and 540A).  If you are a part year resident, be sure that you are prorating your exemption credit on Line 38 (Form 540NR).  If your federal AGI is over $160,739 your exemption credit may be limited and you should use the worksheet in the instructions to calculate it.

 

7.) Incorrect total tax amount computed based on filing status, dependents, or AGI

How to avoid it: Confirm that you are using the correct filing status and that your adjusted gross income (AGI) is calculated correctly.  Also, be sure that all of your dependent’s names and relationships are listed and that your exemption amount on line 11 of Form 540, 540A, or 540NR is computed correctly.

 

8.) Incorrect California taxable income amount on a non-resident or part-year return

How to avoid it:  Be sure that your California taxable income on Line 35 of Form 540NR (long form) is the correct amount and that is it accurately transferred from Line 49, Par IV of Schedule CA (540NR).  If you are using the short form 540NR, check Line 35 to be sure that the deduction percentage on Line 33 and the prorated deduction amount on Line 34 are calculated correctly.

 

9.) Withholding amount claimed is different from amount listed on W-2

How to avoid it: Make sure to enter all California withholding from all of your W-2 or 1099-R statements that you received.  Confirm that you are claiming only California income tax withheld and that your math is correct.  Attach copies of all statements to your return as support for the withholding amount you are claiming.  You can also verify your withholding amount using My FTB Account.   

 

10.) Excess State Disability Insurance or Voluntary Plan Disability Insurance amount claimed is not supported

How to avoid it: You can only take a credit for excess State Disability Insurance (SDI) or Voluntary Plan Disability Insurance (VPDI) if you meet all of the following conditions: you had two or more California employers, you received more than $90,699 in wages, and the amounts of SDI and/or VPDI appear on your W-2.  Use the worksheet in the instructions for Line 74 on Form 540 or 540A, or Line 84 on Form 540NR (long form) to calculate the amount of the credit.  Be sure to attach the appropriate documents to support any amount claimed.


If you only had one employer for the year and had more than 1.1% of your gross income withheld for SDI (or VPDI) you will have to get a refund from your employer.

 


Source: California Franchise Tax Board

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