Schedule CA (540 NR) does not handle nonqualified deferred compensation plans correctly

[dmtt]

For a nonqualified deferred compensation plan payout earned for previous service in California, the Schedule CA 540 NR form (for nonresidents) incorrectly omits the compensation as California income.  This occurs in Section B, Line 8t of Schedula CA 540 NR.  TurboTax has no UI option to specify whether or not the compensation was for services in California or not.  There is also no way to specify the "Other adjustments" (Section B, Line 8z).

[hbl3973]

dmtt,

I agree that there should be such an option.  According to 

https://www.ftb.ca.gov/tax-pros/law/legal-rulings/2011-02.pdf

                                    and

https://www.ftb.ca.gov/forms/2021/2021-1005-publication.pdf

the CA taxability of NQDC is determined by whether or not it is taken out over 10 years or more. 

I do not have a workaround for TurboTax online that I can suggest.  The desktop versions allow direct access to the forms and generally allow you to override entries.  While there is a way to transfer from online to desktop, I haven't yet activated my desktop CA state option to check of that workaround works.  I'll let you know.  

In the meantime I I will raise this issue with the powers that be.  Hopefully they can either fix TurboTax or find a workaround for you.

[hbl3973]

dmtt,

As promised, I raised the issue with the powers that be.  I just checked that the desktop version does allow direct entry of that line 8t figure.  TurboTax does provide a way to transfer to the desktop:

https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-forms/find-forms-mode/L507Cr4T5_US_e...

so that may be your best option for now. 

The reason that the desktop version allows direct forms access is because you pay the filing fees in advance to active the desktop version rather than at the time you finally efile.

[dmtt]

Thank you very much for confirming the problem.  Unfortunately, I already paid for the online version (including California state filing).  So I'm hoping for a workaround or a fix to the online version.

[hbl3973]

dmtt,

It wouldn't hurt to try calling customer service to explain the issue and ask them to provide a free license key for the equivalent download product as you have already paid all filing fees.  It may take a few days to get an answer as it would undoubtedly need to be elevated to management.  And do point them to this discussion so that they fully understand the problem.

I will, of course, monitor the bug report thread for replies.

[dmtt]

Good news.  It looks like TurboTax online version has now fixed the problem.  The W2 payment for my deferred compensation plan is now counted towards my "as if CA resident" column, and I am now given the option to enter the "as if CA nonresident" amount.

Thank you for your help and for filing the bug to bring it to their attention.

[hbl3973]

That's wonderful.  Thanks for letting us know the bug has been fixed.