Issue with Form 5805

[user17743391838]

The form has Part II, Field 5 that should show 2024 Tax Return (or 110% of it). Instead it is showing the value from line 2 (90% of 2025). Line 6 should contain the smaller of line 2 and line 5. But they're equal due to this and the resulting value is incorrect (higher).

[user17743391838]

Your token number is: 11_15_73_05_65-77732231

[MonikaK1]

Thank you for providing the diagnostic file. I reviewed the Form 5805 and related worksheets, the My Tax Data file, and the CA penalty interview entries using my Mac. 

I agree that CA Form 5805 Part II Line 5 shows the same figure as Line 2, My Tax Data shows that Part II didn't contain any user entries; the user entries were in Part I. 

I also saw that the amount appearing on the California Carryover Worksheet for the 2024 liability was a smaller figure than what appeared on Form 5805, Part II Line 5. As a result, I agree that the penalty calculated is higher than it would have been had the 2024 liability on the Carryover Worksheet been used for the comparison.

We will forward this issue for further investigation.

In the meantime, as it is getting close to the filing deadline, you could opt to leave the 5805 off the return and prepare a paper one separately to send to the FTB if you get a bill for the penalty that doesn't use the annualized method.

See here for contact information for the California FTB.

[MonikaK1]

I have now reviewed the file and the California instructions for the form and underlying statute further with one of our Leads.

The online instructions for Form 5805, Part II, Step 5 are confusing in that they state:

If the California AGI shown on your 2024 California tax return is more than $150,000, or more than $75,000 if married/RDP filing a separate tax return, then enter 110% (1.10) of the tax liability from your 2024 tax return on line 5 (which would be a smaller amount than shown on your form).

But, they also state:

If the California AGI on your 2025 tax return is equal to or greater than $1,000,000/$500,000 if married/RDP filing separately, enter 90% (.90) of the tax liability from your 2025 tax return on line 5 (which would be the same as the amount in Step 2, which is what is shown on your form).

(The taxpayer can't enter both amounts in the same step.)

However, in step 6, the form specifically states: Required annual payment. Enter the smaller of line 2 or line 5. If your California AGI is equal to or greater than (the threshold amount), use line 2.

California Revenue and Taxation Code Section 19136.3 specifically states that the standard "prior year tax" safe harbor shall not apply if the individual's AGI for the taxable year is over the threshold amount.

So, even though the California instructions for step 5 in Part II are confusing, in your case TurboTax correctly used Line 2 for Step 6 so the calculation of the penalty is correct.