California: Top Personal Income Tax Mistakes

Excess VPDI Payments and California Tax Returns

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The California Franchise Tax Board has ranked the 10 most common errors found on the personal income tax returns of state residents. These mistakes range from trying to deduct Voluntary Plan for Disability Insurance (VPDI) payments on federal returns to incorrectly calculating adjusted gross income or AGI. They can delay the processing of your return and may affect the amount of your refund. 

1) The amount of estimated tax payments claimed is different from the total amount received:

Check your records for all tax payments made to the FTB.

You should also check last year's return if you requested that any amount is applied to this year's estimated tax. Look on line 46 on Form 540 or 540A, or 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 make sure the state’s amount matches yours. Call the FTB at 1-800-852-5711 if you believe the state's amount is incorrect. Be sure you have proof of all payments made. You can also include a letter and proof of all payments when you submit your return.

2) The standard or itemized deduction amount used based on filing status is incorrect:

If you're claiming the standard deduction, make sure you're using the correct amount for your filing status as stated on line 18 of Form 540, 540A or 540NR. Use the worksheet provided and check the instructions to make sure all your deductions are allowed if you itemize, and double check your math.

3) The total tax amount computed is incorrect, which can affect other schedules:

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 schedules to see that the correct tax amount is transferred over.

4) The total tax amount computed is incorrect because of an error in calculating total tax or credits:

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. 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 the long form 540NR. Make sure the amount is calculated correctly.

5) Your adjusted gross income amount is incorrect: 

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

6) Your total tax amount is incorrect because it's based on an incorrect total exemption credit amount:

The exemption credit is based on filing status and your total number of dependents, and it directly reduces your total tax due. Make sure you're using the correct number of exemptions, two for you and your spouse if you're filing jointly, plus one for each of your dependents.

The exemption credit amount is calculated on line 11 and is transferred to line 32 on Forms 540 and 540A. Make sure you prorate your exemption credit on line 38 of Form 540NR if you're a part-year resident. 

7) Your total tax amount computed based on filing status, dependents or AGI is incorrect: 

Confirm that you're using the correct filing status and that your adjusted gross income or AGI is calculated correctly. Make sure that all your dependents names and their relationships to you are listed and that your exemption amount on line 11 of Form 540, 540A or 540NR is computed correctly.

8) The California taxable income amount on a non-resident or part-year return is incorrect:

Double check to make sure your California taxable income on line 35 of long form 540NR is the correct amount and that it is accurately transferred from line 49, Part IV of Schedule CA.

Check line 35 to make sure the deduction percentage on line 33 and the prorated deduction amount on line 34 are calculated correctly if you've signed the short-form 540NR.

9) The withholding amount claimed is different from amount listed on your W-2:

Make sure you enter all California withholding from all your W-2 or 1099 statements. 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're claiming. You can also verify your withholding amount using "My FTB Account" at ftb.ca.gov.

10) Excess state disability insurance or Voluntary Plan Disability Insurance claimed is not supported: 

You can only take a credit for excess state disability insurance (SDI) or Voluntary Plan Disability Insurance (VPDI) if you meet all the following conditions:

You had two or more California employers

You received more than $90,699 in wage

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 the 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 percent of your gross income withheld for SDI or VPDI, you'll have to get a refund from your employer.

NOTE: Please check the California Franchise Tax Board website for the most up-to-date advice. The information contained in this article is not intended as tax advice and it is not a substitute for legal advice.

Source: California Franchise Tax Board