The California Franchise Tax Board (FTB) offers tips on the most common audit issues found on the personal income tax returns of state residents. These mistakes include incorrectly calculating adjusted gross income (AGI) or mistakenly claiming credits or exemptions. Such errors can delay the processing of your return and affect the amount of your refund.
Learn which common mistakes to check for on your California income tax return.
- Double-check any estimated tax payments against California's record of your payments, which you can access online.
- Be sure that you have correctly claimed any deductions or credits that are allowed in California. These are different than the ones allowed on your federal return.
- You can take a credit for excess state disability insurance or Voluntary Plan Disability Insurance if you had at least two California employers who paid you more than $128,298.
Double Check Your Estimated Tax Payments
Make sure that the amount you think you've paid toward this year's taxes is the same as what California thinks you paid.
First, check your records for all tax payments you've made to the FTB for the tax year in question. Then take a look at last year's return to check whether you requested that any amount of that year's refund be applied to this year's estimated tax. The information should appear on line 95 on Form 540, the California Resident Income Tax Return, or line 102 on Form 540NR, the California Nonresident or Part-Year Resident return form. Add this amount to the payments you made.
Now compare the total to California's record of your payments at ftb.ca.gov (under the "My FTB Account" tab) to make sure that they match. You can call the FTB at 1-800-852-5711 if you believe the state's amount on your W-2 is incorrect.
Be sure you have proof of all the payments you made. You can also include a letter and proof of all payments when you submit your return.
There is no longer a Form 540NR Short. If you used the short version of the form in the past, you will now use Form 540NR.
Take the Standard or Itemized Deduction
Deductions lower your taxable income. Make sure you're using the correct amount for your filing status on line 18 of Form 540 or 540NR if you're claiming the standard deduction.
California has a lower standard deduction than you can claim on your federal income tax return. For filers who are single, or for married or registered domestic partners filing separately, it's $4,803. For joint filers, it's $9,606.
Itemizations on your California tax return do not conform to federal deductions. Check the instructions to make sure all your deductions are allowed if you itemize.
If you did not itemize on your federal return but will be itemizing on your California return, complete federal Schedule A. Check the box at the top of Schedule CA on your state return and complete lines 1 through 30. You'll attach a copy of your federal Schedule A to your California return.
Know Your Total Tax Amount
Check the total tax amount on line 31 of Form 540 or Form 540NR to make sure the amount is calculated correctly. Then check any affected schedules to make sure that the correct tax amount has been transferred over.
Also, check your total credits on line 47 of Form 540, or line 62 of Form 540NR, to make sure the amount is calculated correctly.
Get the Math Right
Your starting point for calculating your California taxes should be the correct federal adjusted gross income (AGI) amount. If you are a wage employee, the state wages that you enter must match those on your W-2.
Once you have these entered correctly, confirm that your California additions and subtractions are all correct. Finally, review your math to make sure that your California adjusted gross income on line 17 of Form 540 or 540NR is calculated correctly.
Your Total Exemption Credit Amount
The California exemption credit is based on filing status and your total number of dependents. It directly reduces your total tax due. Make sure you're using the correct number of exemptions. You can claim one for yourself, one for your spouse if you're married and filing jointly, and one for each of your dependents.
The exemption amount for individuals is $129; for dependents, it's $400 each.
The exemption credit amount is calculated on line 11 and is transferred to line 32 on Form 540. Make sure you prorate your exemption credit on line 39 of Form 540NR if you're a part-year resident.
You need to have all your dependents' names and their relationships with you listed. And your exemption amount on line 11 of Form 540 or 540NR must be computed correctly.
Are You a Nonresident or Part-Year Resident?
If you work in California but are a resident in another state, or only a part-time resident in California, you will need to double-check to make sure your California taxable income on line 35 of Form 540NR is the correct amount. It needs to be accurately transferred from line 5, Part IV of Schedule CA.
Claim the Correct Withholding Amount
Make sure you enter all California withholding from your W-2s or 1099 statements. Confirm that you're claiming only California income tax withheld and that your math is correct. Attach copies of all statements to your return as support for the withholding amount you're claiming.
Check Whether You Qualify for Excess State Disability Insurance or VDPI
You can only take a credit for excess state disability insurance (SDI) or Voluntary Plan Disability Insurance (VPDI) if you meet all the following conditions:
- You had two or more California employers
- You were paid more than $128,298 in wages in 2021
- The amounts of SDI and/or VPDI appear on your W-2
You'll have to get a refund from your employer if you only had one employer for the year and had more than 1.0% of your gross income withheld for SDI or VPDI.
Use the worksheet in the instructions for line 74 on Form 540, or line 84 on the 540NR form, to calculate the correct amount of the credit. Be sure to attach the appropriate documents to support any amount claimed.
Other Common Tax Mistakes in California
Watch out for these other issues as well:
- If you're filing an amended return, make sure all the information from your original return matches—except for the information you're amending.
- Double-check that no one else is claiming any of your dependents.
- Make sure you qualify for the Earned Income Tax Credit if you're claiming it. The rules can be tricky.
- Do the math, then check it twice, especially if you're itemizing numerous deductions.
Frequently Asked Questions (FAQs)
Where do I mail my California tax return?
If you are mailing your California tax return with a payment, it should be sent to Franchise Tax Board, PO Box 942867, Sacramento, CA 94267-0001. If you are mailing it without a payment, it should be sent to Franchise Tax Board, PO Box 942840, Sacramento, CA 94240-0001.
How can I amend my California tax return?
To amend your tax return in California, you will need to fill out and file the California Explanation of Amended Return Changes (Schedule X) as well as a corrected Form 540 or 540NR. You will also need to send any documents that support the amended information on your return.