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How to enter Claim of Right in 2023 California State tax filing

Hi,

In 2020, I received  a relocation allowance from my employer, which I had reported as income and paid both Fed and California income tax on that allowance back in 2020.  In 2023, I have to pay back this allowance to my employer.   As I am taking standard deduction for my 1040, I entered a tax credit for the tax that I paid back in 2020 in my 2023 Schedule 3 Line 13b.

 

To reclaim the tax that I had back in 2020 in my 2023 California tax return, do I just enter the relocation allowance ($10K in this case) to Schedule CA Part I Line Z Column B  and label it as "IRC1341 Relocation Repayment"?   It looks this number will then show up in Form 540 Line 14 as an Income Adjustment amount....  I am hoping to get a confirmation from this Community if my thinking process is correct?

 

I do know the exact State tax that I had paid in 2020 for that relocation allowance, but from looking at Schedule CA, it seems that I enter full amount received (to adjust income) and not just enter the tax amount paid.

 

Thank you

-Steve

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1 Reply
LenaH
Employee Tax Expert

How to enter Claim of Right in 2023 California State tax filing

You are allowed to take the claim of right deduction or the credit on your California return. You can choose what method provides you with the best tax benefits. 

 

Per the 540 CA Instructions, if you are claiming a credit on your federal tax return and are deducting the repayment for California, enter the allowable deduction on line 16, column C

  • To enter information on Line 16, column C, of Form 540, please enter the amount on the appropriate line using Forms mode in TurboTax Desktop.

If you choose to take the credit instead of the deduction for California, add the credit amount on line 78, the total payment line, of Form 540. To the left of the total, write “IRC 1341” and the amount of the credit.

  • To enter the credit amount on Line 78 of Form 540, you will have to click on the box next in Line 78 using Forms mode in TurboTax Desktop. This will bring you to a supporting schedule, where you would enter IRC 1341 and the amount.

 


 

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