CALIFORNIA
community property state

 

Military Income:  Taxable to military members who are domiciles of California when they are stationed in California.  Military pay is not taxable when stationed outside of California.  Only PCS orders qualify as being stationed outside of California; those on unit deployment whose duty station is California will have their military pay taxed.

NOTE ON MILITARY RETIREMENT:  Remember – California taxes its residents on income from ALL sources. An individual becomes a resident the instant he steps across the state line and remains in California for more than 30 days.  If a military member retires in California and remains in California, retirement pay will be taxed regardless of what the member's home of record is or was.

Military Filing Requirement:  No, if no tax withheld a return does not have to be filed to maintain residency.

Military Spouse Residency Relief Act:  Service member in state in compliance with military orders. Spouse in state solely to be with service member. Spouse must be a resident of same state as service member.

Forms Used:            

Filing Status:  The key here is domicile and community property. 

Attach Copy of Federal Return:  Yes, to California Long Form 540NR

Not Taxed: 

Other State Tax Credit:  Available.  Code is 187 on second page of state return under Other Credit.  Attach California Schedule S and other state return. 

Where to Mail:
Refund or No Amount Due: Tax Due:
Franchise Tax Board
PO Box 942840
Sacramento, CA  94240-0000
Franchise Tax Board
PO Box 942867
Sacramento, CA  94267-0001
Refund Status: 1-800-852-5711 E-File Help Desk (916) 845-0353  e-file@ftb.ca.gov
Forms Request:  1-800-338-0505  Other Info:  1-800-852-5711
Franchise Tax Board
Tax Forms Request Unit
PO Box 307
Rancho Cordova, CA 95741-0307
Franchise Tax Board
PO Box 942840
Sacramento, CA 94240-0040
Website:  www.ftb.ca.gov
E-filing Info:  Retain FTB8453 for 4 years.
Tax Form Instructions:
Resident Instructions Non-Resident Instructions

Military Specific Publication

 

Filing Status Scenarios

1.  Taxpayer and Spouse Residents (Use also for Single Taxpayer)
2.  Taxpayer and Spouse Different States of Residence
3.  Taxpayer and Spouse Non-Residents
4.  Taxpayer Non-Resident - Spouse Part-Year Resident
5.  Taxpayer Single - Resident but Income from Other State
6.  Amended Return

 

1.  Taxpayer and Spouse Residents (Use also for Single Taxpayer) - Taxpayer and spouse are both California residents, lived at their present location (outside of California) all year, and one or both had income.

Main Info Screen.  California considers military members stationed outside the state as nonresidents and does not tax their military income.  Therefore a non-resident California income tax return will be prepared.  Check the box for not preparing a state return to make the red fields go away.

 

Resident/Nonresident Worksheet.  Review form to ensure income is split correctly for the appropriate states.  

California 540NR Form.  A joint non-resident California income tax return is prepared.  Complete the Military Information on page 1 as it applies to the taxpayer(s).

 

California Schedule CA NR page 1.  The Nonresident or Part-Year Resident Adjustments form must be completed in order to explain to the state of California why the taxpayer is excluding his or her military income. Complete all lines in Part 1 that pertain. You can remove red fields left after answering all pertinent questions by clicking on the field and pressing CTRL + Space Bar.

California Schedule CA NR page 1 - Part II, Income Adjustment Schedule.  As California does not tax military income when stationed outside the state, the military members income is not taxable.  The only way to properly do this for California is to Link on line 7, Wages, salaries, etc., in the CA amounts column and add a Scratch Pad.

Scratch Pad - Detail Sheet.  In the Type field enter type of adjustment.  In the Amount column enter the military income as a negative number.

California 540NR Form Page 3. Check the box for e-filing the CA return. Check yes to electronically sign the CA return.

Complete all other fields and forms with red or required information.

2.  Taxpayer and Spouse - Different States of Residence - Taxpayer or spouse is a resident of California, while the other member is a resident of a different state.  A California income tax return must be prepared only if the military member is a California resident who is stationed outside of California and had tax withheld.

Main Info Screen.  Select California nonresident filing for this scenario. If there is a red field behind Full year resident, you can check the box for not preparing a state return to make the red field go away.

 

Resident/Nonresident Worksheet.  Review form to ensure income is split correctly for the appropriate states.

California 540NR Form.  A joint non-resident California income tax return is prepared.  Complete the Military Information on Page 1 as it applies.

California Schedule CA.  The Adjustments-Nonresident/Part-Year Resident form must be completed in order to explain to the state of California why the taxpayer is excluding his or her military income. You can remove red fields left after answering all pertinent questions by clicking on the field and pressing CTRL + Space Bar.

California Schedule CA - Part II, Income Adjustment Schedule.  As California does not tax military income when stationed outside the state, the military members income is not taxable.  The proper way for California is to Link on line 7, Wages, salaries, etc., in the CA amounts column and add a Scratch Pad.

Scratch Pad - Detail Sheet.  In the Type field enter a line for the Military Pay Adjustment.  In the Amount column enter the military income as a negative number.

California 540NR Form Page 2. Check the box for e-filing the CA return. Check Yes to electronically signing the CA.

 return.

Complete all other fields and forms with red or required information.

3.  Taxpayer and Spouse Non-Residents - Taxpayer and spouse are residents of a different state.  The spouse and taxpayer must file a California tax return due to one or both having California earned income.

Main Info Screen.  If both members are residents of another state, the parties should file as nonresidents.  For this example, the taxpayer and spouse are both military members and residents of Wisconsin but must file a California income tax return because the spouse worked in California at a second job.

Resident/Nonresident Worksheet.  Review form to ensure income is split correctly for the appropriate states.

California 540NR Form.  A joint non-resident California income tax return is prepared.

 

California Schedule CA.  The Adjustments-Nonresident/Part-Year Resident form must be completed in order to explain to the state of California why some income is not taxable by California. Complete all lines that pertain. You can remove any red fields left by clicking on the field and pressing CTRL + Space Bar.

California Schedule CA - Part II, Income Adjustment Schedule.  To comply with the provisions in the Service Member's Civil Relief Act, the military member's non-resident military income must be taken off of the California 54NR Form.  You do this by entering the amount of nonresident military wages from the military member's W-2 form on line 7 in the Subtractions column.  Check the military pay adjustment block. The nonresident military spouses income is exempt from California taxation and must be removed from the CA amounts column. Link to the CA amounts column of Line 7 and attach a Scratch Pad.

Complete the scratch pad as in the example. Ensure you enter the nonresident military spouse's wages as a negative number.

California 540NR Form Page 2. Check the box for e-filing the CA return. Check Yes to electronically signing the CA return.

Complete all other fields and forms with red or required information.

`

Main Info Screen.  For this example, the taxpayer is in the military and a resident of Indiana.  The taxpayer and spouse moved from California to North Dakota during the year.  The spouse was a resident of California but is now changing their residency to North Dakota for tax purposes.  The spouse therefore was a part-year resident of both California and North Dakota and must file a California income tax return because the spouse worked in California.

Part Year Resident States Worksheet.  Review form to ensure income is split correctly for the appropriate states.

California 540NR Form.   This form will be generated for an California part- year resident who must report California earned income.  Complete the Military Information on Page 1 as it applies as well as any other pertinent questions.

California Schedule CA.  The Adjustments-Nonresident/Part-Year Resident form must be completed in order to explain to the state of California why some income is not taxable by California. Complete all lines that pertain. You can remove red fields left after answering all pertinent questions by clicking on the field and pressing CTRL + Space Bar.

California Schedule CA - Part II, Income Adjustment Schedule.  To comply with the provisions in the Service Member's Civil Relief Act, the military member's non-resident military income must be taken off of the California 54NR Form.  You do this by entering the amount of nonresident military wages from the military member's W-2 form on line 7 in the Subtractions column.  Check the military pay adjustment block.

California 540NR Form Page 2. Check the box for e-filing the CA return. Check Yes to electronically signing the CA return.

Complete all other fields and forms with red or required information.

5.  Married or Single Military Resident of California with Income from Another State  - Taxpayer is single.  A California income tax return must be prepared only if the military member is a California resident who is stationed outside of California and had tax withheld. California will not tax the other states income because it consider military members with a domicile of California to be nonresidents when they are stationed outside California.

Main Info Screen.  Select California nonresident filing for this scenario. If there is a red field behind Full year resident, you can check the box for not preparing a state return to make the red field go away.

Resident/Nonresident Worksheet.  Review form to ensure income is split correctly for the appropriate states.  

California 540NR Form.  A single non-resident California income tax return is prepared. Complete the Military Information on Page 1 as it applies as well as any other pertinent questions.

California Schedule CA.  The Adjustments-Nonresident/Part-Year Resident form must be completed in order to explain to the state of California why the taxpayer is excluding his or her military income. Complete all lines that pertain. You can remove red fields left after answering all pertinent questions by clicking on the field and pressing CTRL + Space Bar.

California Schedule CA - Part II, Income Adjustment Schedule.  As California does not tax military income when stationed outside the state, the military members income is not taxable.  The proper way for California is to Link on line 7, Wages, salaries, etc., in the Subtractions column and add a Scratch Pad.

Scratch Pad - Detail Sheet.  In the Type field enter "Military Pay Adjustment".  In the Amount column enter the military income as a negative number.

California 540NR Form Page 2. Check the box for e-filing the CA return. Check Yes to electronically signing the CA return.

Complete all other fields and forms with red or required information.

6.  Amended Return  - An amended California return must be filed because the taxpayer received new tax information after their California return was filed.
Federal 1040X Form.  Before making any changes to the tax return add the US 1040X form to the tax return.  You must check the box under Income and Deductions to lock in the entries in Column A - Original amount or as previously adjusted.

California 540X - Amended Individual Income Tax Return.  Add the California 540X Form to the return.  Answer the questions as in the example.   You must check the box to lock in the entries in Column A - As originally reported or as adjusted, before making any changes to the return.

Make whatever changes are required to the federal tax return.  For this example, a new W-2 was received.

California 540X - Amended Individual Income Tax Return, Page 2.  Return to the California 540X form to determine if the taxpayer is receiving an additional refund or owes money. 

California 540X - Amended Individual Income Tax Return, Page 2.  On Page 2 you must answer all applicable questions and enter an explanation for why the Amended Return is being prepared.  Enter the current date in the Date field.

Amended returns can not be e-filed.  The taxpayer must mail the federal 1040X and any state amended returns if required to be filed.