Difference in IRA basis between federal and California

[kimperson1]

Where do I input the basis of my IRA for my California return. 

The federal basis and the CA basis are different amounts.

I've entered the federal basis but cannot find any place in the California section to either adjust the federal basis or to input the actual CA basis amount.

[DaveF1006]

To clarify, what form and line number does your basis for your California return appear?

[kimperson1]

Hi Dave, I'm new at TT, have used Lacerte for the last 30+ years, so I hope this response gets to you. Federal Form 8606, Part I, Line 2 shows your basis in federal traditional IRA's. Now while this amount is only important when you take an IRA distribution, you do need to keep track of the basis because it can increase every year if you make non-deductible contributions to your traditional IRA. Way back when, CA had a max IRA deduction allowed of $1,500 while the fed had a max IRA deduction of $2,000. So many Californians have basis in their IRA's. So when you take distributions you will have part of the distribution be non-taxable; but the fed and CA non-taxable portions will be different. CA does not have a form that mimics the federal F8606, Lacerte just uses F8606 in the CA return and the label at the top of the form says "California Form 8606". So I need to find a place to input what the CA basis in the IRA is so that this amount carries forward every year until distributions begin, or find a place to adjust the federal IRA basis on the CA return.

[DaveF1006]

Yes, there is no form for Ca that the mimics the 8606 to record your non-deductible contributions to Ca. The reason for this is that those contributions are tracked in an 8606 on the federal side thus determines how much of a distribution is taxable. Once the distribution is deemed taxable on the federal side, the same amount is taxable to the state. The State of California fully conforms to federal filing thus has no need for a separate form in Ca to track non-deductible contributions.

If there was a non-conformity issue, then the state would have a form to track non-deductible contributions. 

[kimperson1]

Unfortunately Dave you are incorrect.  And the Lacerte program does track federal and CA traditional IRA basis differences.  And, as I stated in my 1st response to you Lacerte will use the 8606 form for CA and put "California Form 8606" on the top of the page.  Then it does the computation for CA for the taxable portion and non-taxable portion of the IRA distribution.  Why CA doesn't have its own F8606 is beyond me but CA does accept that there are differences in CA and federal IRA basis because of the early years of reduced allowable IRA contribution amounts on the CA tax return.  The fact that CA doesn't have its own version of F8606 does not mean that differences in fed and CA basis are ignored! So it appears that Turbo Tax is lacking in its ability to prepare CA tax returns correctly.  Very disappointing...and I guess a waste of my money.

The Guidebook to CA Taxes (the CA version of the Master Tax Guide)  states that the CA treatment of distributions from IRA's is the same as the federal, EXCEPT  (1) Contributions that were not allowed as a CA deduction and (2) Interest earned in 1975 and 1976 on contributions.  So there it is...in black and white.  And TT is not allowing for this difference.

[DaveF1006]

To clarify, did you have IRA non-deductible contributions in 1975-76 or 1982-86? These were the years that California law did not conform with the Federal law according to ftb.ca.gov.

[kimperson1]

Yup. Started contributing in 1982.  So a few years of non-conforming IRA deductions.  But if TT can't deal with differences in federal and CA IRA basis then this program will not work for me. Do you know of any way to back-door the adjustment somewhere within the program?

[DanaB27]

You can make an IRA adjustment on the "Any IRA Distribution Adjustment" to account for the difference in the taxable amount but don't see that you can track the CA IRA basis directly.

@kimperson1