CA Form 3800

[CI7]

My daughter is a student in CA and earned money during the school year working at the school.  She is filing a CA tax return as a nonresident and is required to complete CA Form 3800 (she is also filing a federal return and a MO state return as a resident).  Her parents are not residents of CA and do not file any state return in CA.   Two Questions-

1.  CA Form 3800 asks for information from the parents return- since the parents are not residents of CA and do not file CA state tax returns, how should this information be completed in turbo tax?  Should the parent information be filled in as "0" or left blank or completed based on the information on their federal return?

2.  My daughter has wages from her school job in CA (approx. $900); wages from a summer job in MO (approx. $5300) and passive income (approx. $2700)-

a. Since she is nonresident in CA, does this passive income get included/taxed in  the CA return (I thought I read that CA only taxed amounts earned in CA for nonresidents)?

b.  Based on the level of earnings in CA, does a CA tax return need to be filed?

[Vanessa A]

No, she does not need to file a CA non resident tax return since her income was less than $12,950.

Dependent filing requirement

If you can be claimed as a dependent on another person's tax return, you have a different standard deduction. It cannot be more than the normal standard deduction. Your standard deduction is the larger of:

• Your earned income plus $350, or
• $1,100 for the taxable year

However, if she had CA taxes withheld, she may want to file to claim a refund of the taxes withheld.

 She does not need to file form FTB 3800 since the passive income is not from CA. Therefore, you do not need to include your income on the form. Instead, as you walk through the CA return, this income should be removed from her CA income.  You can then go to Tax Tools>>Tools>>Delete a Form>>Delete FTB 3800 to remove that form from the return. 

[CI7]

Thank you.  A couple points of clarification/additional information- First, my daughter can be claimed on another tax return; but is not claimed on another return.  Second, her standard deduction on both the federal return and MO state return is $6625 (earned income plus $400).  Third, in turbo tax, the CA Form 3800 auto calculated the the line 1 amount (child's unearned income- interest, dividends, capital gains) as the difference between her AGI and her earned income.  This amount (approx. $2700) was greater than the line 2 amount of $2300. Fourth, there are no CA taxes withheld from her CA earnings.

1.  Does the above additional information impact the conclusion that there is no need to file a CA tax return (her total income was greater than her standard deduction; but not greater than $12,950)?

2.  How would I correct the CA Form 3800 line 1 amount (that turbo tax is populating) that is showing the approx. $2,700 of unearned income?  Shouldn't line 1 on CA Form 3800 be $0 (if all passive income was earned in state of residence-MO)?  I think you are suggesting in your reply to delete the entire form?  Or do I override the Line 1 amount and input a $0?

[Vanessa A]

1.  Does the above additional information impact the conclusion that there is no need to file a CA tax return (her total income was greater than her standard deduction; but not greater than $12,950)?  No, the additional information does not change anything since the $2,700 was not income received as a resident of CA or relevant to CA.  This income should not be reported on the CA return, only on her MO return. 

2.  How would I correct the CA Form 3800 line 1 amount (that turbo tax is populating) that is showing the approx. $2,700 of unearned income?  Shouldn't line 1 on CA Form 3800 be $0 (if all passive income was earned in state of residence-MO)?  I think you are suggesting in your reply to delete the entire form?  Or do I override the Line 1 amount and input a $0?  Yes, I am suggesting you delete the entire form.  This form is for those kids who have passive income that is taxable to CA.  Her passive income is not taxable to CA so there is no need to include the form on her return. 

If you are given the option to override, I am assuming you are using the desktop version of TurboTax.  When you are in the CA step by step section, you should see adjustments to income.  

To verify, you are filling out a 540NR correct?  If you are filling out a regular 540, it will not give you this option.  If you are filling out the NR, you should come to a section that asks about making adjustments to the CA income that is not taxable to CA.  Here you will remove her passive income and delete the Form 3800.

Basically, your daughter must file a CA 540NR return that ONLY reports her CA source income.  

"Do I need to file?

As a nonresident, you pay tax on your taxable income from California sources.

Sourced income includes, but is not limited to:

• Services performed in California
• Rent from real property located in California
• The sale or transfer of real California property
• Income from a California business, trade or profession"

[CI7]

Thank you again.  In answer to the questions below:

1.  I went back through the adjustments section of turbo tax CA return and believe I have indicated correctly that none of the passive income (dividends and capital gains) are CA related.  I believe I have done this correctly, as when I look at Schedule CA (540NR), the only amounts showing in column E (California Amounts) is my daughter's W-2 wages earned in CA (dividends and capital gains show $0 in column E) and

2. yes, my daughter is filing a 540NR return.

After the above, Form CA 3800 still appears in the file and shows all her passive income on line 1.  On schedule 540NR (line 31), turbo tax still indicates it will calculate the tax based on "FTB 3800".  Since I have no way of changing CA 3800 or the method to calculate the tax on 5540NR line 31 (and I believe I have entered the information correctly in turbo tax), I deleted CA Form 3800 from the turbo tax file and now turbo tax is calculating tax owed based on "tax table" (and indicates that on line 31 of 540NR).  Based on this calculation, she owes $4 on her CA income only.  

However, when turbo tax performs its state tax return check, it finds a number of errors (all related to parents info for CA Form 3800).  When I enter $0 (as parent does not file in CA in response to the error check), CA Form 3800 appears back in my daughters return and the FTB 3800 box gets checked on 540NR line 31; however, the tax due remains $4.   I am guessing CA Form 3800 is required to be completed and filed based on the turbo tax check process.

My remaining questions-

1. Is CA Form 3800 required or not?  (I am guessing CA Form 3800 is required to be completed and filed based on the turbo tax check process putting the form back in the return)?

2. If the standard deduction is earned income plus $350 and you only need to report CA income on the CA540NR return (and her CA income is $900), shouldn't the tax liability be $0 as the standard deduction would be greater than income?  If so, would you need to file a return?

[MaryK4 · Accepted solution]

1. Complete form FTB 3800 if all of the following apply:

1. The child is under 18 or a full time student under the age of 24 at the end of 2021.
2. The child had unearned income taxable by California of more than $2,200.
3. At least one of the child's parents was alive at the end of 2021.
4. The child was age 18 at the end of 2021 and did not have earned income that was more than half of the child's support.

Since the passive income is not taxable by California, the 3800 is not needed.

@CI7 

[CI7]

I am trying to reconcile the answers I received in the replies to what I am seeing in the turbo tax CA forms now that I have entered the information.  Specifically, the determination of the standard deduction for CA and determination of the CA tax.

1. Determination of the standard deduction for CA (forms 540NR/SCH CA (540NR)/Dep Std Ded)- as a reminder, my daughter has approx. $900 of CA W-2 income (her only CA income) and MO W-2 income and MO passive income.  From an earlier reply, it sounded as if I should expect the CA standard deduction to be greater of CA W-2 wages plus $350 or $1,150.  However, in turbo tax I am seeing on the forms referenced above a standard deduction of $5,202 that is then prorated on SCH CA (540NR) based on the percentage of CA income to Total Income, ending in a CA standard deduction of approx. $500.   I follow the math; just want to make sure that the methodology (proration of the $5,202 standard deduction) to calculate the CA standard deduction of approx. $500 is the correct methodology?  If the methodology is correct, it impacts the next question as the CA standard deduction would be less than the CA W-2 income.

2.  Determination of the CA Tax- Because the CA standard deduction of approx. $500 is less than the CA W-2 Income of approx. $900, there is taxable income in CA based on the way the forms referenced above are working in turbo tax.  Turbo tax then calculates the tax on the CA taxable income of approx. $400.  The tax amount is $4.  

a.  If the standard deduction of $500 is correct, is a tax return required in CA, since there is $400 of taxable income?

b.  The earlier reply indicated that the CA Form 3800 is not required.  When I delete the form, the CA state tax check in turbo tax requires me to answer question on this form and puts it back into the mix- even though my daughter does not meet 2 of the 4 requirements listed below.  CA Form 3800 shows up in the return and calculates the tax on line 17.  In addition, 540NR calculates a tax liability on line 37.  Both CA Form 3800, line 17 and 540NR line 37 calculate a $4 tax liability (same amount but arrive at it in a slightly different way).  If a CA return is required, should I file the return with CA Form 3800 included since turbo tax includes it in the schedules?

[MaryK4 · Accepted solution]

I am enclosing screen shots of the worksheets you referenced (I rounded the numbers to match your examples) and there is a tax due of $4.  For the 3800, try deleting it.  Sometimes when a form is added, you have to delete it rather than change entries to remove it from the return.  See How do I view and delete forms in TurboTax Online?  @CI7 

[ZLW1]

I have a situation that touches on the original post.

My daughter is in the process of establishing California residency while attending school there.  She fulfills all the criteria for needing to submit a form 3800.   In filling out the CA tax form, form 3800 line 10 asks for the parents' tax from line 540.  We (the parents) are Colorado residents, and do not file a form 540.  What should we input in its stead?

[AmyC]

If your daughter is a dependent on your tax return, her resident state is yours. A child away from home for school does not change the residency. If she is not a dependent, your income is not needed.

See If i am a college student, am i a resident of the state that my school is in?