Turbotax pulling in other states date for Non resident CA filing

[atulkshirsagar]

I have this question for the veteran Turbotax community and turbotax support team. I have been filing taxes using turbotax for more than a decade now and every time I file state taxes I realize that Turbotax for federal is very good but it sucks equally when it comes to states.  Since the live assist has started I have been getting help from an expert to file CA taxes. I have seen even the experts struggle when it comes to CA filing. This year it was worse so thought I will write this and clarify. 

We live outside of the country right now; We own a rental in CA so every year and we file as a Non resident CA taxes(540 NR). 

This year, we did a 1031 exchange where we sold a rental property from one state and bought in another state.  Both are different states than CA.  Now, I completed the like kind exchange in Turbotax federal. I also completed the rental portions for both the old and new rentals in Turbotax for federal. 

Now, when I started CA state taxes, turbotax seem to have pulled all the 1031 exchange data from federal, it has also pulled the rental details for all the non-CA houses and it started showing me questions around all this which confused the heck out of me. 

So I got an expert help who has been working with Turbotax for 7-8 years and was quite knowledgeable but he couldn't figure out what was going on. He did his own research for almost an hour and then said none of this data matters for CA so lets just respond to what we can, at the end it will only use the CA Only data. I could see he was not confident and although we managed to get rid of all the errors at the end, I am not confident with my CA filing either. I look at previous years and looks like the same case(turbotax pulls non-relevant states data even for Non-reisdent CA filing)

I hope someone can shed some light on this and explain why Turbotax does this. 

[atulkshirsagar]

Can someone please help

[KrisD15]

I do know that most states tax non-residents on only the income from that state's sources and at that state's tax rate.

California is a little different. 

California also only taxes non-residents on the income sourced form California, but not at a set rate. 

California looks at ALL of your yearly income, not just the California income.

It calculates a tax rate from all your income and than calculates the California tax rate based on that rate (for all your income). The California tax rate is a percentage of your total rate based on the ratio of California income to all your income. 

So one non-resident that earned 30,000 in California is not taxed the same as another (otherwise identical) non-resident that also earned 30,000 if one earned more in their home state than the other earned in their home state. 

This is why the California State return imports ALL your income first. 

According to the State of California:

"Nonresidents of California who received California sourced income in 2024, or moved into or out of California in 2024, file Form 540NR. California taxes all income received while you resided in California and the income you received from California sources while a nonresident.

If you file Form 540NR, use Schedule CA (540NR), column A through column D to compute your total adjusted gross income as if you were a resident of California for the entire year. Use column E to compute all items of total adjusted gross income you received while a resident of California and those you received from California sources while a nonresident. You determine your California tax by multiplying your California taxable income by an effective tax rate. The effective tax rate is the tax on total taxable income, taken from the tax table, divided by total taxable income. You may also qualify for California tax credits, which reduces the amount of California tax you owe.

If you were a resident of California for all of 2024, get a California Resident Personal Income Tax Booklet and file Form 540 or Form 540 2EZ.

For more information on the taxation of nonresidents and part-year residents, get FTB Pub. 1100, Taxation of Nonresidents and Individuals Who Change Residency."
 

[atulkshirsagar]

Thank you. This helps take away some mystery out. I wish Turbotax adds a ton of such explanation at every stage in state tax just like it does for federal. Will make life much easier for us tax payers. Just this year I spent at least 10 hours on phone with tax expert figuring out this thing. So much time wasted for me and the expert.