claim withheld tax back from CA

Forum|Forum|2 months ago
March 28, 2026
2 replies
3 views

I joined a company in Dec 2024 and received a signing bonus that same month (Dec 2024). I resigned from the company in April 2025 and returned the unvested bonus (9-months worth) back to the company (bonus was vested monthly for 12 months). My federal and CA tax were withheld for the entire 12-months worth of the bonus. I should be able to get the credit back for the 9-months worth of withheld federal and CA taxes (since I returned the 9-months worth of unvested bonus). I figured out how to claim the credit back from the IRS, but I have trouble finding the correct line to enter the credit (of IRC 1341 "Claim of Right") for either Form 540 or Form 540 CA . Can anyone help? Thanks.

GreenApple123Author

Level 4

I guess the question is specifically where on the correct CA Forms (540? or 540 CA?) to enter/write the IRC 1341 claim of right credits.

Any help will be appreciated

MaryK4

Level 15

Add the calculated credit amount to Line 78 (the "Total Payments" line). You must write "IRC 1341" and the specific credit amount directly to the left of the total on that same line.

On Schedule CA (540), Part I, Section B, Line 16 (Column B), enter the amount of the federal deduction you took for the repayment. This essentially "adds back" the federal deduction so you can properly take the dollar-for-dollar credit on Form 540 instead.

NOTE: You will not be able to do this with TurboTax online (you may print the return for mail filing and write in the IRC 1341 notation). If you are using the TurboTax Desktop you can make the entries in Forms mode, but you will have to print and mail the returns.

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GreenApple123Author

Level 4

Thanks so much for your reply.

Just want to make sure that I understood your answer correctly by using some numbers. Let's say, my federal credit was $5000 and my CA credit was $1000.

I took the federal credit of $5000 and entered on Federal Schedule 3 Part II Line 13b.

On CA 540, Part II, Line 16 (Column B), I enter $5000 (the federal credit I took); and on Form 540 Line 78 (Total Payments), I will write "IRC 1341 $1000" and manually (by overwriting??) deduct $1000 from my total payment amount?

Also, you mentioned enter the federal deduction on Schedule CA (540) Part I, Section B, Lline 16 (Column B), I assume you mean Part II Line 16 (Column B)?

I am still quite confused! Please help!! Thanks so much!

MaryK4

Level 15

No, you enter your federal credit amount ($5,000) for Schedule CA (540), Part II, Line 16, Column B. Because you took a federal credit, the IRS considers that a "deduction" you've already received for tax purposes. To prevent double-counting this benefit on your California return, you must "subtract" that federal benefit from your CA itemized deductions because TurboTax will transfer the amount from the federal return.

For the Form 540, Line 78 (Total Payments), you need to ADD your calculated $1,000 CA credit to the other payments (like your W-2 withholding) already on that line. In most cases, this would be added as an Estimated Tax Payment, but in this specific case, that would cause a circular problem: TurboTax would add the estimated tax payment (like the credit above) then you would have to re- subtract- this is the best way to get around the TurboTax calculation (and once again, this is an extremely rare case where this would happen).

Please let me know if you need more clarification! @GreenApple123

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