|
|
| Tax School Homepage |
| Schedule CA. Management of an S corporation is so much easier now that California recognizes this type of business entity for California tax purposes. |
| Regulated Investment Company (RIC) |
| Investing in a regulated investment company can be a very beneficial investment and tax saving move for many taxpayers. Capital gain distributions are always reported as long-term capital gains on your federal tax return. You must also report any undistributed capital gain that a Regulated Investment Company has designated to you. The Internal Revenue will tax your undistributed capital gain form an Regulated Investment Company the year when you have earned the income. However, California will tax the distribution from a RIC in the year distributed not the year it was earned. If the year in which it was distributed turns out to also be the year it was earned, then there will not be any need for any adjustment on Schedule CA of Form 540. If on the other hand, the capital gain from a Regulated Investment Company is earned in one year and distributed in a later year, enter the amount which was included in your federal tax return for year earned to adjust it from California on Schedule CA, line 9, Column B. Enter the amount not yet reported on your federal tax return for the year it was distributed on Schedule CA of Form 540 or Form 540NR, line 9, column C. This will reconcile the income to meet the California requirement of reporting the RIC in the year distributed rather than in the year it was earned. Remember, you will only do this if the year distributed and the year earned are different years. If they are not different, there is no need for an adjustment on California Schedule CA. |
|
State income tax refund |
|
Federal tax withholding is not deductible on your federal tax return because it is money placed in advance of the anticipated money due on your taxes. California tax withholding is state withholding and the federal tax system considers it a tax expense and allows a deduction on Schedule A of Form 1040. The Internal Revenue Service taxes any California tax refund from which you have gained a tax benefit. If there was no tax benefit from the state refund, then it is usually nontaxable on your federal tax return. If you filed form 1040A in the previous year or you did not itemize your deductions in the previous year, you usually do not need to worry about including your state refund in your federal tax return. If the client itemized last year and you are trying to include the state refund in the taxable wages for federal, complete the worksheet and double check before you do include it. You can fill out the worksheet to make sure on the amount if any which would be taxable. You only need to worry about including your California refund on your federal tax return when you itemize in the previous year. The only manner in which you can benefit from a deduction on any state or local taxes paid is by itemizing your deductible expenses and the state and local taxes paid is one of the deductions you can take. If you paid any state or local taxes in the previous year, you usually calculate the state and local taxes paid and get a tax deduction for these on Schedule A of Form 1040. You only need to worry about the determination of whether your California state refund is taxable or not taxable for your federal income tax return. If you did include any California state income tax refund in your federal tax return because it was taxable to federal, then you need to exclude it from your California state tax return. Regardless, if this calculation was correct on your federal tax return or not correct, if you calculated an amount of the California state refund received as taxable for federal, you need to reverse that amount for California tax purposes. California state refund is not taxable income on you California tax return. Enter this amount on Schedule CA of Form 540 or Form 540NR, line 10, column B to reverse it from the federal adjusted gross income amount. If California taxed your state refund, it would be considered double taxation and double taxation is usually not allowed. When double taxation happens, there is usually a credit to compensate for the extra expense (or the double expense). |
| Alimony received by a nonresident alien |
| Copyright © 2014 [Hera's Income Tax School]. All Annual Federal Tax Refresher Course rights reserved. |
| Revised: 07/09/15 |
| 11 |
| Back to Tax School Homepage |
