CA Claim of Right Payment

[insanit]

Hello,

I need help with claim right of payment for CA.

According to the FTB instructions, I put the tax credit I previously determined on Schedule CA, Part II, Line 16, Column C. My rebate amount did not change.

According to the FTB instructions, I think I also need to apply the tax credit to form 540, Line 78. But, I cannot edit this line. Double-clicking does nothing. Where should I add the credit to affect Line 78?

Thanks!

[HopeS · Accepted solution]

If you choose to use the credit instead of the income reduction, then you would have to calculate that manually. Once this is completed in your federal return, the credit would go on line 78 of the CA return as part of the 'Total Payments'.  Both the federal and CA return would have to be completed in the TurboTax Desktop version if the credit is used.  For assistance with this, see: How to switch from online TurboTax to the TurboTax software? and TurboTax Prior Year Products.

If you choose to use the income reduction method you can use the TurboTax Online version.

• Income Reduction Method 1.  

1. Figure your tax for 2022 claiming a deduction for the repaid amount. If this method is used follow the steps under Taking the Deduction above.

• Credit Method 2.   Figure your tax for 2022 claiming a credit for the repaid amount. Follow these steps.

1. Figure your tax for 2022 without deducting the repaid amount.
2. Refigure your tax from the earlier year (the year you originally reported the income) without including in your income the amount you repaid in 2022.
3. Subtract the tax in (2) from the tax shown on your return for the earlier year. This is the credit.
4. Subtract the answer in (3) from the tax for 2022 figured without the deduction (step 1).

• If method 1 results in less tax, deduct the amount repaid.

If method 2 results in less tax, claim the credit figured in (3) above on Form 1040 with the instructions 

Once this is completed in your federal return, the credit would go on line 78 of the CA return as part of the 'Total Payments'.  Both the federal and CA return would have to be completed in the TurboTax Desktop version if the credit is used.  For assistance with this, see: How to switch from online TurboTax to the TurboTax software? and TurboTax Prior Year Products.

Per CA FTB 540 Instructions for CA-specific instructions.

Claim of Right

• If you had to repay an amount that you included in your income in an earlier year, because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Or, if the amount you repaid is more than $3,000, you may take a credit against your tax for the year in which you repaid it, whichever results in the least tax. 
• If the amount repaid was not taxed by California, no deduction or credit is allowed.
  • Social security benefits are not taxable by California and the repayment would not qualify for a claim of right deduction or credit. If you deducted the repayment of Social Security benefits on your federal tax return, enter the amount of the federal deduction on line 16, column B. 
• If you claimed a credit for the repayment on your federal tax return and are deducting the repayment for California, enter the allowable deduction on line 16, column C.
• If you deducted the repayment on your federal tax return and are taking credit for California, enter the amount of the federal deduction on line 16, column B.

To help you determine whether to take a credit or deduction, see the Repayment section of federal Publication 525, Taxable and Nontaxable Income. Remember to use the California tax rate in your computations. If you choose to take the credit instead of the deduction for California, add the credit amount on line 77, the total payment line, of Form 540. To the left of the total, write “IRC 1341” and the amount of the credit.

Please review the link below as well:

Claim of Right

@insanit 

[insanit]

Hi @HopeS thanks for your help!

My problem is that I cannot manually change Line 78. Double-clicking that line doesn't allow me to change the value. If I double-click Line A on the Worksheet, it directs me to the Tax Payments Worksheet form where only Line 9 has a value. Do you know where I can make the change to affect Line 78? Thank you!

[insanit]

For what it's worth, this is the answer to the question on how to edit line 78:

https://ttlc.intuit.com/community/state-taxes/discussion/urgently-need-help-with-california-ca-540-f...

Its been an issue for years. Maybe time to fix it.