topic Schedule D (540) Generated for CA Non-Resident Return in State tax filing

Schedule D (540) Generated for CA Non-Resident Return

john1922 — Wed, 06 Mar 2024 08:26:16 GMT

I am not sure why I got a schedule D(540) for CA non-resident return. I am a full year non-resident, only income I have is rental in California. But I got a schedule D full of stock transaction. Thus line 1 to 5 of the CA schedule D should be 0, but i has numbers on there.

How do I override the schedule D in this case? using online premier version

Re: Schedule D (540) Generated for CA Non-Resident Return

Vanessa A — Wed, 06 Mar 2024 14:34:05 GMT

You can try 2 different things to get rid of the form. You can go to Delete a Form and deleting the Schedule D for CA.

On the menu bar on the left that shows.

Select Tax Tools
On the drop-down select Tools
On the Pop-Up menu select Delete a Form
This will give you all of the forms in your return
Scroll down to the form you want to delete
Select the Form
Click on Delete.

Always use extreme caution when deleting information from your tax return.  There could be unintended consequences.

Or, you can go back through the interview to see remove the numbers. When you go through the CA interview screen, you will come to adjustments in income screens. If you scroll down to investments you will be able to click on the type of investment which you are seeing cause you to have a D(540) On these screens you will remove all income that is not subject to CA taxation. If you are not sure which one it is you can click start next to them all to remove the income.

If that does not work, then

Re: Schedule D (540) Generated for CA Non-Resident Return

john1922 — Tue, 12 Mar 2024 07:58:03 GMT

I keep trying to delete the schedule D but it still pops up in my CA tax return. There is no way I can adjust the sales. they are all already 0 for now. Had the same problem last year thought they fixed it.

Re: Schedule D (540) Generated for CA Non-Resident Return

AmyC — Fri, 15 Mar 2024 21:17:59 GMT

If your return is correct, other than having an extra sheet of zeroes, it will not affect your filing or your tax situation.

Re: Schedule D (540) Generated for CA Non-Resident Return

Sedes Gobhani — Sun, 19 Jan 2025 23:34:35 GMT

I have the same issue and believe it is a TT bug. I live in Oregon and have a rental house in California. TT generates a Schedule D and puts my stock trades in it with price, basis & gains/losses. Why should TT force me to report my stock trades to a state in which I'm a non-resident? Or is that some California law (we want to see your stuff, even stuff we can't tax)?

Re: Schedule D (540) Generated for CA Non-Resident Return

MonikaK1 — Mon, 20 Jan 2025 22:47:36 GMT

California includes your total income, rather than just your California income, on a nonresident return because of the way California calculates tax.

The state starts with federal adjusted gross income and then subtracts your federal itemized deductions to come up with California taxable income (after some state-specific adjustments).

This is the base tax, or the amount of tax if all your income was earned in CA. You are then taxed on the CA percentage of this income. So if 10% of your total income is from CA, you pay 10% of the base tax.

You can see the calculation on lines 31-42 of Form 540NR for 2023. California doesn't have the 2024 Form 540 NR posted yet on their website.

More information about filing nonresident state returns is found in this TurboTax help article.

@Sedes Gobhani

Re: Schedule D (540) Generated for CA Non-Resident Return

Sedes Gobhani — Mon, 20 Jan 2025 23:44:43 GMT

"This is the base tax, or the amount of tax if all your income was earned in CA." Not sure what you mean, sorry I don't grasp the way it's worded here... "if all your income was earned in CA". Do you mean, "AS IF" all my income was earned in CA? Because these stock trades were not earned in CA and have nothing to do with CA. (If that's what you meant, then Wow, how one 2-letter word makes all the difference in clearing it up). Then I suspect they (California) are just trying to guage how poor or wealthy I am in order to know which of their tax brackets to put my rental income in context of. Otherwise, I have no clue.

Re: Schedule D (540) Generated for CA Non-Resident Return

MonikaK1 — Tue, 21 Jan 2025 22:42:32 GMT

The various states have different methods of allocating resident and nonresident income for the purpose of calculating taxes for nonresidents. Depending on an individual's situation, one state's method may appear more inequitable than another.

California's method starts with figuring California tax on all your income, figuring the percentage of your income that was California-sourced, and applying that percentage to the tax calculated on all of your income. So, you aren't being taxed on all of your income, just the percentage of your income that coincides with the percentage of your income that was California-based.

Here's an excerpt from California FTB Publication 1100:

For taxable years beginning on or after January 1, 2002, if you are a nonresident or a part-year resident, you determine your California tax by multiplying your California taxable income by an effective tax rate. The effective tax rate is the California tax on all income as if you were a California resident for the current taxable year and for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions, divided by that income. Use the following formula:

Prorated tax = CA taxable income × Tax on total taxable income ÷ Total taxable income

The publication does state "as if" you were a California resident. I hope this is helpful in clarifying the basis for the calculation.

@Sedes Gobhani

Re: Schedule D (540) Generated for CA Non-Resident Return

Sedes Gobhani — Tue, 21 Jan 2025 23:19:32 GMT

Ok that's what I thought. "The effective tax rate is the California tax on all income as if you were a California resident." They need to find that tax rate (or bracket) using your total income, "as if" your income was earned [while you were] in California. Makes sense now, thanks!