California Proposed Assessment - 2015. Wages excluded in error?

[SL37]

Hello,

I received a Noticed of Proposed Assessment from California for the 2015 tax year stating the following:  "We disallowed the deduction for those wages you subtracted on your Schedule CA (540) California Adjustments-Residents.  As a California resident, all your wages are taxable, including those wages earned outside of California."

Apparently, when my federal income information was fed into the state tax returns, all of the California wages for my wife (who was on paid family leave for a portion of 2015) were keyed in as a deduction.  I've reviewed the tax information I submitted, and downloaded the software to view and amend a prior filing, and everything hows I did not claim any deductions for wages.  I'm at a loss as to why the entirety of her CA wages were deducted.  This appears to be a filing issue that I may need to address with TurboTax and their 100% accuracy guarantees.  

Has anyone experienced this?  Any insight would be appreciated.  We have a large tax bill plus interest charges being assessed from 2015-2019.

[Anonymous]

file a claim . but all TT pays if it was at fault is penalties and interest. I would say this is the first time I've seen a post about your issue.

[rbernal22a]

I had received the exact same letter, same year and details. Paid family leave, filed thru TT and all amounts have been disclosed in the return. Any word or advise on what steps to take next?

[SL37]

I submitted a claim for under the 100% Accurate Calculation Guarantee.  I'm waiting for TurboTax to research and determine if there was in fact a calculation error (which I highly suspect, especially if you and others may have been impacted by the same thing).  

If there was a calculation error, they will reimburse for the penalties/interest.  The tax is still due, which is fine and makes sense.  If we under reported in error, we're on the hook for that.  But we should not be assessed the interest, as it never would have been charged had the initial calculation been correct.

You can find info here about how to submit a claim:  https://ttlc.intuit.com/community/charges-and-fees/help/how-do-i-submit-a-claim-under-the-turbotax-1...

[rbernal22a]

Thanks for the info! After review of my 540 Form, a substantial amount was entered in Line 14 - California Adjustments -Subtractions, lowering our taxable income which in turn meant lesser tax. No protest here, will pay the taxes but will go the same route as far as resolving the interest/penalties with TT. Again, thanks for your help!

[BradWalker212]

I received the exact same notice for apparently the exact same reason. After review, I am seeing the same error of wages being reported as subtraction. Very frustrating.

[jalaraz]

I have the same letter and issue! Your post has been very helpful. Will submit a claim as well...

[jalaraz]

Can you let us know when Turbo Tax gets back to you? Just submitted my claim and wondering how long it will take them to respond.

[SL37]

4 weeks in and still waiting for feedback...  I did follow-up yesterday and mentioned that others in this thread are having the same problem.  With more reports coming in, I'm hoping it will get some extra attention and be resolved soon.  

[rbernal22a]

@SL37 I had received a response and my claim was denied as the “TT software performed the calculation correctly.”  The analyst provided screenshots and so I’ll share the highlighted text from the screens. 

Some particulars of my case, Married filing Joint, received PFL benefits for a few weeks for bonding with child, no employer paid PFL or from insurance company, just EDD and my earned income.   

When entering my W-2 info, we were asked, “Do any of these uncommon situation apply to this W-2?  I had checked the box, “Paid Family Leave – I earned all or part of this income as paid family leave.”

Then, at the CA interview page  – Paid Family Leave(PFL) Income in California it states, “We’ve noticed that you’ve reported receiving PFL income on a W-2. California doesn’t tax PFL income that was paid by your employer’s insurance company. Review your PFL income below and adjust the amount(if needed) to reflect the total paid by your employer’s insurance company. “

ALL of my W-2 wages were then pre-populated under the “PFL Income Received From Insurance Company:  $$$$$$” because I had checked the PFL box

The print beneath the entry says, “Don’t include PFL Income that was paid directly by your employer. This type of income is normal taxable wages.”  I made no adjustments to the entry and kept on going.  That’s where I screwed up. 

Moving forward, the next screen addressed, “PFL paid by CA EDD on Form 1099-G – Your Unemployment Doesn’t Get Taxed in CA”  Highlighted text, “There’s nothing you need to do.”

So on to the CA Schedule 540.  Line 7 - Wages, Salaries, tips, etc., my unadjusted PFL income (all  W2 wages) was entered under SUBTRACTIONS as well as on the CA Wage Adjustments Worksheet under Line 8 Paid Family Leave insurance(PFL) benefits.

Line 19 – Unemployment compensation had Subtracted the actual amount that I had received from EDD as reported on the 1099-G.

And so, because I did not adjust the “PFL Income Received From Insurance Company” amount, it was subtracted from taxable wages, leading us to where we are right now.   I had assumed that TT was intuitive enough to catch/detect my ignorance, but I guess I get it.  I hope you all have a better outcome.

The analyst did offer another resource thru the FTB as far as attempting to have the penalty refunded and I will be giving it a try:

You may be able to appeal CA's penalty under the "first-time penalty abatement" law passed by CA in 2014. While this regulation (Section 19132.5) isn't easily spotted on the Franchise Tax Board's website, it requires the FTB upon request of a taxpayer to abate a failure-to-pay timeliness penalty when the taxpayer has paid all tax currently due and has not had a similar penalty in the prior 4 years. File a Form FTB 2917, Reasonable Cause - Individual and Fiduciary Claim for Refund, available at https://www.ftb.ca.gov/forms/misc/2917.pdf

[Lisa995]

@rbernal22a 

"no employer paid PFL or from insurance company, just EDD and my earned income.   "

"When entering my W-2 info, we were asked, “Do any of these uncommon situation apply to this W-2?  I had checked the box, “Paid Family Leave – I earned all or part of this income as paid family leave.”"

Since you DID NOT have any PFL on your W2, you should have marked NO to the "Do any of these uncommon situations apply to this W2"

PFL from EDD through the state of CA is automatically excluded from your CA taxable income....you should not have said that the income on your W2 (from your employer) was PFL as well...this resulted in your W2 income being excluded when it should not have been.

[SL37]

Has anyone else received feedback from Turbotax?  They sent me an automated e-mail on 8/6 saying it will take additional time to research, and I've followed up twice since then, with zero responses back.  I don't mind if this takes time to research, but a lack of response entirely is extra frustrating.  

[BradWalker212]

My claim was denied. Basically said it was my error when I put the info in from my W2. 

[jalaraz]

My claim was denied as well. Apparently I had the same situation as @rbernal22a  did and checked the wrong box when I shouldn’t have.