Yes, that is correct. You will get an error with an income form that has zero income. Further, you will get an error when withholding exceeds income on an income form. Here are two possible solutions.
1. If you do not have any other income and therefore do not have a requirement to file a tax return, then you simply don't file a tax return and write to the CA Franchise Tax Board making a request for refund. Make an explanation and Include a copy of the 1099-R with zero income and CA withholding. Here is a link with more information on what to include in your refund claim.
2. If you have other income and thus a requirement to file, then do not include the form 1099R with zero income and CA withholding. Instead enter the amount as withholding not on a form 1099 in the Federal interview using the steps below. That will show the credit for those amounts paid on your CA return without entering a zero income form 1099R.
- In the federal "Deductions & Credits" section
- Scroll to "Estimates and Other Taxes Paid"
- Start/Revisit "Income Taxes Paid"
- Other Income Taxes Paid
- Start/Revisit "Withholding not already entered on a W2 or 1099"
- Yes
- Use the State Boxes to enter CA and the amount of withholding shown on the 1099R form that you are not reporting
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