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Changes to 2007 Form

Updates to 2007 540/540A – Personal Income Tax Booklet

The revised Internet version is available for download as of 08/25/2008

Revision Details:This revision is to note an exception to the amount of credit available for certain married/RDP filing jointly taxpayers.

  • 540/540A booklet and 540/540A Combined Instructions, page 58, Nonrefundable Renter's Credit Qualification Record, # 11, third bullet

Previously read:

Married/RDP filing jointly, head of household, or qualifying widow(er), enter $120 below. Enter this figure on Form 540/540A, line 28.

Revised to:

Married/RDP filing jointly, head of household, or qualifying widow(er), enter $120 below. (Exception: If married/RDP filing jointly and one spouse /RDP claimed the homeowner's property tax exemption, enter $60 below.) Enter this figure on Form 540/540A, line 28.

This revision may decrease taxpayers' tax credit, thus increase their tax liability.


Updates to 2007 540/540A – Personal Income Tax Booklet

The revised Internet version is available for download as of 07/24/2008

Revision Details:This revision is to correct the rounding language as it pertains to the AGI limitation for the calculation of the exemption credit.

  • Page 13, column 1, AGI Limitation Worksheet, line d of the booklet and Page 206 of the Package X.

Previously read:

d Divide line c by $2,500 ($1,250 if married/RDP filing separately). Round cents to the nearest whole dollar.

Revised to:

d Divide line c by $2,500 ($1,250 if married/RDP filing separately). If the result is not a whole number, round it to the next higher whole number.

This revision could decrease the taxpayer's exemption credit, thus increasing their tax liability.


Updates to 2007 Instructions for Schedule Ca (540), California Adjustments – Residents

The revised Internet version is available for download as of 06/25/2008

Revision Details: This revision is to reference the proper line number on form FTB 3809.

  • Page 54 of the booklet and page 4 of the flat, column 2, line 21e, last bullet, and page 235 of the Package X.

Previously read:

  • FTB 3809, Targeted Tax Area Deduction and Credit Summary, line 3b

Revised to:

  • FTB 3809, Targeted Tax Area Deduction and Credit Summary, line 4b

This revision would allow the taxpayer to use their NOL deduction from Form FTB 3809, thus reducing their tax liability.


Updates to 2007 Schedule D (540)/3885A – California Capital Gain or Loss Adjustment/Depreciation and Amortization Adjustments

The revised Internet version is available for download as of 05/19/2008

Revision Details: The IRS added a new depreciation Form 4562-FY for 2007 fiscal year filers based on the changes from the Economic Stimulus Act of 2008. This form is used for entities that are on a fiscal year and want to claim an additional first year depreciation allowance for qualifed property placed in service after 12/31/07.
The existing California form and instructions do not include reference to the new federal Form 4562-FY. W are revising the form and instructions to include the reference to the federal Form 4562-FY.

  • Page 39 and 49 of booklet, 3885A, line 7 and line 13
    Instructions for FTB 3885A, page 3, column 1, last paragraph, last sentence and page 239 and 242 of the Package X.

Previously read:

1. 7 Total federal depreciation from this activity. Enter depreciation from federal Form 4562, line 22.
2. 13 Total federal amortization from this activity. Enter amortization from federal Form 4562, line 44.
3. Refer to federal Form 4562 for information.

Revised to:

1.7 Total federal depreciation from this activity. Enter depreciation from federal Form 4562, or 4562-FY, line 22.
2.13 Total federal amortization from this activity. Enter amortization from federal Form 4562, or 4562-FY, line 44.
3. Refer to federal Form 4562 or 4562-FY for information.

If the taxpayer is required to complete federal Form 4562-FY to claim the additional depreciation allowable based on changes made by the Economic Stimulus Act of 2008, and CA 3885A does not make reference to the new federal Form 4562-FY, the taxpayer may enter zero on CA Form 3885A, line 7. This may overstate the California depreciation deduction and understate their taxable income and tax liability.

If the taxpayer is required, and is reporting amortization on Form 4562-FY and CA form 3885A does not make reference to the federal Form 4562-FY, the taxpayer may enter zero on CA Form 3885A, line 13. This may overstate the California amortization deduction and understate their taxable income and tax liability.


Updates to 2007 Schedule CA (540) - California Adjustments Residents and Instructions - 540 Booklet - Personal Income Tax Booklet

The revised Internet version is available for download as of 04/25/2008

Revision Details: Sch CA (540) California Adjustments Residents – To correct the reference for the amount needed from form FTB 3805V.
Sch CA (540) instructions – To correct the reference for the amount needed and the name for the type of income reported.

  • Page 37 of 540 booklet and side 1 of the Sch CA (540), California Adjustments Residents, line 21 b & d.
    Pages 4 & 54, line 21 b, & d instructions and page 230 and 235 of the Package X.

Previously read:

Sch CA (540), California Adjustments Residents

21 Other income,
b Disaster loss from FTB 3805V
d NOL from FTB 3805V

Pages 4 & 54, line 21 b, c, d, & e instructions.

b. Disaster Loss from form FTB 3805V. If you have a California disaster loss from form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Individuals, Estates, and Trusts, enter that amount as a positive number in column B.

d. NOL from form FTB 3805V. The allowable NOL under California law is different from the allowable NOL under federal law. Use form FTB 3805V to figure the allowable California NOL and enter it as a positive number in column B.

Revised to:

Sch CA (540), California Adjustments Residents

21 Other income,
b Disaster loss carryover from FTB 3805V
d NOL carryover from FTB 3805V

Pages 4 & 54, line 21 b, c, d, & e instructions.

b.Disaster Loss Carryover from form FTB 3805V, Part III, line 6. If you have a California disaster loss carryover from your 2006 form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Individuals, Estates, and Trusts, enter that amount as a positive number in column B.

d. NOL Carryover from form FTB 3805V, Part III, line 5. The allowable NOL carryover under California law is different from the allowable NOL carryover under federal law. Use form FTB 3805V to figure the allowable California NOL and enter it as a positive number in column B.

This change instructs the taxpayer to report their carryover amount and the figure used to calculate their allowable NOL for the current year. This change could increase or decrease the taxpayer’s tax liability.


Updates to 2007 Schedule CA (540) - California Adjustments Residents and Instructions - 540 Booklet - Personal Income Tax Booklet

The revised Internet version is available for download as of 04/01/2008

Revision Details: Sch CA (540) California Adjustments Residents; To correct the reference for the amount needed from form FTB 3805V.Sch CA (540) instructions. To correct the reference for the amount needed and the name for the type of income reported.

  • Sch CA (540), California Adjustments Residents, line 21b & d, side 1 of flat
    Page 54 of the booklet and page 4 of flat, line 21b, c, d, & e instructions and page 230 and 235 of the Package X

Previously read:

Sch CA (540), California Adjustments Residents

21 Other income, b Disaster loss carryover from FTB 3805V
d NOL carryover from FTB 3805V

Pages 4 & 54, line 21 b, c, d, & e instructions.

b. Disaster Loss Carryover from form FTB 3805V, Part III, line 6. If you have a California disaster loss carryover from your 2006 form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations Individuals, Estates, and Trusts, enter that amount as a positive number in column B.

c. Federal NOL deduction from Form 1040, line 21. If the amount on line 21 in column A includes a federal NOL, enter the amount of the federal NOL deduction as a positive number in column C. Get form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations Individuals, Estates, and Trusts, to figure the allowable California NOL deduction.

d. NOL Carryover from form FTB 3805V, Part III, line 5. The allowable NOL carryover under California law is different from the allowable NOL carryover under federal law. Use form FTB 3805V to figure the allowable California NOL deduction and enter it as a positive number in column B.

e. NOL deduction from form FTB 3805D, FTB 3805Z, FTB 3806, FTB 3807, or FTB 3809. Enter in column B the total NOL deduction figured on the following forms.

Revised to:

Sch CA (540), California Adjustments Residents
21 Other income, b Disaster loss from FTB 3805V
d NOL from FTB 3805V

Pages 4 & 54, line 21 b, c, d, & e instructions.

b. Disaster Loss from form FTB 3805V. If you have a California disaster loss from form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations & Individuals, Estates, and Trusts, enter that amount as a positive number in column B.

c. Federal NOL from Form 1040, line 21. If the amount on line 21 in column A includes a federal NOL, enter the amount of the federal NOL as a positive number in column C. Get form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations & Individuals, Estates, and Trusts, to figure the allowable California NOL.

d. NOL from form FTB 3805V. The allowable NOL under California law is different from the allowable NOL under federal law. Use form FTB 3805V to figure the allowable California NOL and enter it as a positive number in column B.

e. NOL from form FTB 3805D, FTB 3805Z, FTB 3806, FTB 3807, or FTB 3809. Enter in column B the total NOL figured on the following forms.

This change instructs the taxpayer to report the current year loss instead of the carryover amount. This change could increase or decrease the taxpayer’s tax liability.


Updates to 2007 Schedule CA (540) Instructions

The revised Internet version is available for download as of 03/18/2008

Revision Details: This change addresses the non-conformity issue for payments from the Hokie Spirit Memorial Fund.

  • Page 55 of booklet, page 5, second column, after Mortgage relief upon sale or other disposition of principal residence and page 236 of the Package X

Previously read:

There is no language regarding the Hokie Spirit Memorial Fund.

Revised to:

Hokie Spirit Memorial Fund exclusion. Enter in column C the amount excluded from federal income. For more information, get FTB Pub. 1001.

This adjustment could possibly increase the taxpayer's tax liability.


Updates to 2007 Schedule CA (540) Instructions

The revised Internet version is available for download as of 03/12/2008

Revision Details: Page 2 & 52, line 8 & 9, to correct instructions regarding child's interest income and add the exempt interest paragraph.

  • These updates are located on Page 5 of booklet & page 2 of flat, first column, line 8 & Taxable Interest Income at the end of the first set of bullets and the beginning of the second set of bullets.
  • Second column, line 9 – Ordinary dividends paragraph and the first bullet in each section (columns B and C)

Previously read:

Page 2 & 52, line 8

There is no paragraph or bullet.

  • Interest income from children under the age of 14, included on the parent’s or child’s federal return and reported on the California return by the opposite taxpayer.

Revised to:

Added the following paragraph

Certain mutual funds “pay exempt-interest dividends.” If the mutual fund has at least 50% of its assets invested in tax-exempt U.S. obligations and/or in California or its municipal obligations, that amount of dividend is exempt from California tax. The proportion of dividends tax-exempt will be shown on your annual statement or statement issued with Form 1099-INT.

Added the first bullet

  • The federally exempt interest dividends from other states, or their municipal obligations and/or from mutual funds that do not meet the 50% rule above.

Interest income from children under the age of 14, excluded on the parent’s or child’s federal return and reported on the California return.

Page 2 & 52, line 9

Previously read:

Generally, no difference exists between the amount of dividends reported in Column A and the amount reported using California law. However, California taxes dividends derived from other states and their municipal obligations. In addition, certain mutual funds pay "exempt-interest dividends." If the mutual fund has at least 50% of its assets invested in tax-exempt U.S. obligations and/or in California or its municipal obligations, that amount of dividend is exempt from California tax. The proportion of dividends tax-exempt will be shown on your annual statement or statement issued with Form 1099-DIV.

  • The portion of exempt interest dividends from mutual funds that meets the 50% rule above and were included in column A.

The federally exempt interest dividends from other states, or their municipal obligations and/or from mutual funds that do not meet the 50% rule above.

Dividend income from children under the age of 14, included on the parent’s or child’s federal return and reported on the California return by the opposite taxpayer.

Revised to:

Generally, no difference exists between the amount of dividends reported in Column A and the amount reported using California law. However, California taxes dividends derived from other states and their municipal obligations.

Dividend income from children under the age of 14, excluded on the parent’s or child’s federal return and reported on the California return.

Page 2 & 52, the taxpayer could over/under report their interest or dividend income resulting in a higher/lower tax liability.


Updates to 2007 540 Booklet - Personal Income Tax Booklet - Schedule CA (540) - Instructions

The revised Internet version is available for download as of 02/28/2008

Revision Details: Page 55, To correct the instructions to show the increased index amounts per IRC Sec. 219(g), as it read on January 1, 2005.Page 56, To correct (increase) the amounts use to figure the student loan interest deduction. (Rev. Proc. 2006-53, 2006-48 IRB, 11/09/2006, IRC Sec(s). 1 Section .23)

  • These updates are located on Page 5 & 55, Line 32 instructions, IRA Deduction Page 6 & 56, Student Loan Interest Deduction Worksheet, line 6, and page 268 & 337 of the Package X.

Previously read:

Page 5 & 55, California does not conform to the federal increase to the indexing of AGI requirements for IRAs. The phase-out for California remains at:

  • Married/RDP filing joint………$75,000 - $85,000

Federal amounts have increased to:

Married filing joint………$83,000 - $103,000

Page 6 & 56, Enter the amount shown below for your filing status.

  • Single, head of household, or qualifying widow (er) - $50,000
  • Married/RDP filing jointly - $105,000

Revised to:

Page 5 & 55, California does not conform to the federal increase to the indexing of AGI requirements for IRAs. The phase-out for California remains at:

  • Married/RDP filing joint or qualifying Window (er)………$80,000 - $100,000

Federal amounts have increased to:

Married filing joint/qualifying Widow (er)………$83,000 - $103,000

Page 6 & 56, Enter the amount shown below for your filing status.

  • Single, head of household, or qualifying widow (er) - $55,000
  • Married/RDP filing jointly - $110,000

Page 55, This error could cause the taxpayer to claim a lower IRA deduction, thus increasing their tax liability. Page 56, This revision could possibly increase the amount of the student loan deduction thus lowering their tax liability.


Updates to 2007 540 Booklet - Personal Income Tax Booklet

The revised Internet version is available for download as of 02/26/2008

Revision Details: To include pending state legislation regarding mortgage forgiveness debt relief act.

  • These updates are located on page 4 of booklet, 1st column, Conformity, and page 5 of the Package X.

Previously read:

Conformity - For updates regarding the following federal act, go to our Website at www.ftb.ca.gov and search for conformity.

  • Small Business and Work Opportunity Tax Act of 2007

Revised to:

Conformity - For updates regarding the following federal act, go to our Website at www.ftb.ca.gov and search for conformity.

  • Small Business and Work Opportunity Tax Act of 2007
  • Mortgage Forgiveness Debt Relief Act of 2007

Pending State Legislation – There is pending legislation that if enacted will provide full or partial conformity to Section 2 of the Mortgage Forgiveness Debt Relief Act of 2007. Assembly Bill 1918, as introduced, provides full conformity and Senate Bill 1055, as introduced, provides modified conformity.

No tax liability


Updates to 2007 540 Booklet - Personal Income Tax Booklet

The revised Internet version is available for download as of 02/15/2008

Revision Details: 1) To clarify the earned income tax credit amount, 2) To add the date that a taxpayer is considered age 65, 3) To correct the chapter reference, 4) To correct the line reference, 5) To correct the line reference, 6) To include all wages, 7) To correct the line reference

  • These updates are located on 1) Page 2, first column, Earned Income Tax Credit paragraph, 2) Page 3, second column of chart, 3) Page 6, second column, Mello–Ross paragraph, 4) Page 10, first column, line 12, 5) Page 11, second column, Form 540 – California Standard Deduction Worksheet for Dependents, 6) Page 12, first column, Form 540A – California Standard Deduction Worksheet for Dependents, 7) Page 12, first column, California itemized Deductions Worksheet, and page 8, 203-205 of the Package X

Previously read:

1)A child lived with you and you earned less that $37,783 ($39,783 if married filing jointly)
2) (If your 65th birthday is on January 1, 2008, you are considered to age 65 on
3) Get federal Publication 17, your Federal income Taxes-Individuals, Chapter24.
4) This amount appears on Form W-2, box 16, or CA Sch W-2, line C.
5) or from line B of the worksheet on the back of Form 1040EZ....
6) Or Form 1040, line 7
7) 5. Using California amounts, add the amounts on federal Schedule A, line 4, line 13, line 20, and any gambling losses included on line 28...

Revised to:

1) You earned less that $37,783 ($39,783 if married filing jointly) and have qualifying children
2) (If your 65th birthday is on January 1, 2008, you are considered to age 65on December 31, 2007
3) Get federal Publication 17, your Federal income Taxes-Individuals, Chapter 22.
4) This amount appears on Form W-2, box 16, or CA Sch W-2, line 3.
5) or from line A of the worksheet on the back of Form 1040EZ....
6) Or Form 1040, line 7, 12, and 18, minus the amount, if any, on line 27.
7) 5. Using California amounts, add the amounts on federal Schedule A, line 4, line 14, line 20, and any gambling losses included on line 28...

1) No impact on tax liability, 2) No impact on tax liability, 3) No impact on tax liability, 4) The taxpayer could underreport their wages, thus lowering their tax liability, 5) This could result in the taxpayer using the wrong standard deduction. This could increase or decrease their tax liability, 6) This could result in the taxpayer using the wrong standard deduction. This could increase or decrease their tax liability, and 7) This could result in the taxpayer using the wrong itemized deduction. This could increase or decrease their tax liability.


Updates to 2007 Form 540 - California Resident Income Tax Return

The revised Internet version is available for download as of 02/15/2008

Revision Details: To correct the line reference

  • These updates are located on Page 33 of 540 booklet, page 1, line 12 of flat, and page 200 of the Package X

Previously read:

12 State wages from your Form (s) W-2, box 16 or CA Sch W-2, line C

Revised to:

12 State wages from your Form (s) W-2, box 16 or CA Sch W-2, line 3

The taxpayer could under report their wages, thus lowering their tax liability.


Updates to 2007 Form 540A - California Resident Income Tax Return

The revised Internet version is available for download as of 02/15/2008

Revision Details: To correct the line reference

  • These updates are located on Page 29 of 540 booklet, page 1, line 12 of flat, and page 198 of the Package X

Previously read:

12 State wages from your Form (s) W-2, box 16 or CA Sch W-2, line C

Revised to:

12 State wages from your Form (s) W-2, box 16 or CA Sch W-2, line 3

The taxpayer could under report their wages, thus lowering their tax liability.


Updates to 2007 California Schedule W-2, Wage and Withholding Summary

The revised Internet version is available for download as of 02/15/2008

Revision Details: To correct the line reference

  • These updates are located on Page 27 of 540 booklet, page 35 of 540NR Booklet, page 1, bottom section, line 3, and page 197 of the Package X

Previously read:

(Add line 1 and line 2, enter here and on Form 540 2EZ, line 9; Form 540a, line 12a; Form 540 or Form 540NR (Long or Short), line 12.

Revised to:

(Add line 1 and line 2, enter here and on Form 540 2EZ, line 9; Form 540, 540A, or Form 540NR (Long or Short), line 12.

No Tax Impact.


Updates to 2007 Form 540/540A Instructions & California Resident Income Tax Return

Revision Date: 01/22/2008

Revision Details: (1) To distinguish that these instructions are for Form 540 only, since the 540 and 540A instructions are combined.

(2) Current instructions force the taxpayer to fill out a schedule that is not needed.

  • These updates are located on Page 11, (1) 2nd column, 3rd heading — Itemized deductions and (2) 2nd column, 3rd heading – Itemized deductions, below 2nd paragraph.

It currently read:

(1) Itemized deductions. (2) Blank

It should read:

(1) Form 540 — Itemized deductions. (2) Form 540A – Itemized deductions. Figure your California itemized deductions by completing the California Itemized Deductions Worksheet on page 12. Enter the result on Form 540A, line 18. If you did not itemize deductions on your federal income tax return but will itemize deductions for your California Form 540A, first complete a federal Schedule A, Itemized Deductions. Then complete the California Itemized Deductions Worksheet on page 12. Do not attach federal Schedule A to your Form 540A.

The revised form is available for download.


Updates to 2007 Schedule CA - California Adjustments - Residents

Revision Date: 01/07/2008

Revision Details: The printed version of the 2007 Schedule CA (540), California Adjustments - Residents, included in the Resident Booklet mailed to taxpayers and available through public distribution contains an error. All other versions of Schedule CA (540) are correct

  • Side 2, line 38. There is an incorrect reference to federal Schedule A.

It should read:

38 Federal itemized deductions. Add the amounts on federal Schedule A (Form1040), lines 4, 9, 15, 19, 20, 27, and 28.....

The revised Internet version is available for download.


Updates to 2007 Schedule CA - California Adjustments - Residents

Revision Date: 01/03/2008

Revision Details: Mortgage Forgiveness Debt Relief Act signed by the president on December 20, 2007.

  • Page 55 of booklet, page 5 flat, first column, last paragraph, and page 236 of the Package X

It currently reads

This section does not contain information on the Mortgage Forgiveness Debt Relief Act of 2007.

It should read:

Mortgage relief upon sale or other disposition of principal residence.
For taxable years 2007 through 2009, federal law allows an exclusion of income from discharge of indebtedness from the disposition of your principal residence. If you were personally liable for a mortgage and you were relieved of liability for the mortgage indebtedness by disposition of the property then you may have realized a gain. To the extent the amount discharged exceeded the fair market value at the time of disposition, the difference is income from discharge of indebtedness. See federal Publication 544, Sales and Other Disposition of Assets, for more information. If you excluded income from the discharge of indebtedness on your federal return enter the amount in column C.

California does not conform to the above act. This creates a need for an adjustment (addition of income) on the California return.

The revised Internet version is available for download.


Updates to 2007 Schedule CA - California Adjustments - Residents

Revision Date: 12/21/2007

Revision Details: To clarify the instructions for making an adjustment due to the federal IRA phase out amounts, which California does not conform.

  • Page 55 of the booklet, page 5, second column, line 32 of the flat and internet version, and page 236 of the Package X

It currently reads:

Enter as an adjustment in Column C the difference between the amount determined for the federal IRA deduction and the California IRA deduction.

It should read:

Enter as an adjustment in column B the difference between the amount determined for the federal IRA deduction and the California IRA deduction.

This revision helps the taxpayer make an adjustment in the correct column due the difference between the federal and California IRA deduction.

The revised Internet version is available for download

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