I believe turbotax allocates capital gains incorrectly for the state NR return (CA-540NR). Who should I contact about this? Do I need to purchase live help option? Thanks

[zolotavin]

I am filling CA-540NR form as a CA resident, because my wife is resident of TX and does not have CA sourced income. Last year everything went fine, but this year the step where I allocate capital gain from stock sales is different. It requires me to select between two options neither of which is true for me: NR for full year or part year resident. I believe this is done to help me allocate portions of the capital gain income between states correctly, but no matter the choices I make it seems none of the capital gains  are added to the CA adjusted income. I am fine buying live help option if they can resolve this, but it seems like a SW bug of some kind rather than my inability to fill in the forms. Thank you in advance for suggestions.

[AmyC · Accepted solution]

Ca has a section called Other Adjustments to Income. It allows you to input the description and how much you want to add or subtract from the CA income. Follow these steps:

1. The CA overview pages says your taxes are ready for us to check.
2. Scroll down past General Info
3. Stop at Income and Adjustments
4. Click EDIT
5. Scroll all the way to the bottom, Other Adjustments to Income
6. Click Start
7. Enter the description and amount.

If there is still something wrong, you may want to contact a specialist that can work through that section of the return with you.

[Edited 03/06/20 | 6:24pm PST]

[zolotavin]

Thanks!

[AmyC]

You are welcome!

[Anonymous]

This is wrong, the subtractions and additions are for differences in CA & Federal Law.

There is a bug in TurboTax right now and it does not let you fill out columns D and E in 540NR Part II Section B Other Income 8z for 1099-MISC and other miscellaneous income without 1099-MISC. This is a big problem for me.

[RobertB4444]

You are mistaking what the purpose of column B is.  

• Column B (Part II, Section A, Line 1 through Line 7, and Section B, Line 1 through Line 7 and Line 9a) – Subtract income that is not taxable to a California resident such as California lottery winnings and social security benefits. Do not use column B to deduct income that was earned while a nonresident of California or from sources outside of California. There must be a difference in state and federal tax law. Generally, if a full-year California resident cannot subtract income in column B, a nonresident or part-year resident may not subtract income in column B.

Here is the California laws dealing with non-residents.

[L3B]

How does this work for Pennsylvania - when the issue is Capital Gains?  Is that part of dividends?  How do I tell PA that it was not part of PA unearned income and should not be taxes.

[HopeS]

It depends on whether or not you are a PA resident or non-resident. Please send another post to confirm if you are a resident or non-resident of PA.

Allocating unearned income is pretty straightforward: just allocate it to the state you were a resident of when you received it. Here are some examples:

• You received three quarterly dividend payments while living in Arkansas, and the remaining dividend while living in Oklahoma. Allocate the first three payments to Arkansas and the last payment to Oklahoma
• You sold some stocks right after you moved to Iowa. Allocate the gain to Iowa.
• You closed an interest-bearing account while still living in California, so you'd allocate 100% of the interest to California
  • On the other hand, if the account remains open, you'd allocate the interest you earned as California resident to California, and the remainder to your new state. An easy allocation method is to divide the year's interest by 12, and then multiply the figure by the number of months you lived in each state

Generally, Pennsylvania does not give a specially favorable tax treatment on qualified dividends or long-term capital gain as does the Federal return.  Unless you receive a written notification that any qualified distributions may be excluded from PA income, they are included for PA tax.  Click on the following two PA website links for additional information:  

PA Source Income Rules

PA Source Income for Nonresident 

@L3B 

[L3B]

First thank you for the response.  My daughter lived in PA until Jan 17, 2022. (Part-time resident) She then moved to New Jersey.  The W2s are very clear as to what income was earned in each state.  She did received Dividends and Capital Gains.  These earnings occurred while she lived in NJ.  

In the software for PA, unlike the Interest Income Schedule, on the Dividend Income Summary and subsequent screens, I am unable to update the dividend amounts to 0 or change those amounts.  No matter what I input on the next screens it does not change.  (For future versions it would be nice to provide an explanation of the reasons for adjustment - When to use Other vs nominee adjustment.

Thank you

Lori

[RobertB4444]

Pennsylvania's part year tax calculation works a little differently.  It doesn't just look at what was earned from Pennsylvania sources.  It also looks at the total income that you earned for the year and the percentage of time that you were in Pennsylvania and takes their cut of that.  You will have to include all of the income you have on the federal return in the Pennsylvania return, unfortunately.

The good news is that New Jersey does provide a credit for taxes paid to Pennsylvania so make sure to do the Pennsylvania part-year return before doing the New Jersey full year resident return.

@L3B 

[L3B]

Robert,

Thank you.  This is helpful.  EXCEPT - Turbo Tax does not have anyplace to put the dates residency in the various states.  It just decides part year vs full year residents.  I thought about it.  What was included as income was long term gains, which could be argued were earned in previous years as a resident of PA.  

Again, thank you for responding.

[MarilynG1]

In the Pennsylvania interview, when you indicate 'Part Year Resident' the next screen asks for dates (screenshot).

The dates are transferred to the PA Info Worksheet (screenshot).

From PA Dept. of Revenue:

"Part-year residents are not subject to PA tax on ordinary interest, dividends, gains, intangible property or gambling and lottery winnings from PA sources while a nonresident."  

In the PA interview, you should get a screen asking about 'PA Adjustments to Capital Gains' and on the next screen, can indicate that a sale is 'not taxable in PA' (screenshots).

@L3B