Friday, March 9, 2012

California Non-Resident Return Filing

Q.  Recently I received a notice from the FTB (California) FTB 4600B requesting a tax return for 2010. I was able to download the filing requirements for a non-resident return (I now live in Kentucky), and page 3 for the instructions for 540NR Tax Booklet specifically lists California Gross Income limits, which for my filing status and age indicate no filing requirement. What do I do now?

A.  I had a client, now living in Idaho, who received the same notice. When I called the Franchise Tax Board on his behalf, I was told that it is the Gross Income together with California source income that triggers a filing requirement. To be clear, they are talking about the Gross Income on your federal return. If it is above the threshold limits listed on the instructions, California wants a return.

The best I can offer is that the instructions on the 540NR booket are very misleading. California is one of the states that taxes you on your world wide income. I suggest you go ahead and file a return. Most of the time, you will owe no tax; you just need to go through the hassle of filing a non-resident return. Trust me on this: California will make your life miserable if you don't file the return once a demand letter goes out, which is the case with the notice you received.

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