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Error on state tax form for IRA income phase out amount

Specifically, FTB corrected instructions to Schedule CA (form 540) line 32 regarding the income phase-outs for traditional IRA deductions for joint and qualifying widow(er) tax filers. To find the corrected instructions, visit the FTB website at ftb.ca.gov and search for “540 CA Instructions.”

Taxpayers who make IRA contributions can take a state tax deduction if they meet certain requirements. For individuals who are covered by an employer retirement plan, the IRA deduction is reduced (phased-out) when incomeexceeds certain limits. For the joint and qualifying widow(er) filing status, the correct adjusted gross income phase-out amount range is $80,000-$100,000. Before February 28, 2008, Schedule CA incorrectly listed the phase-out income range at $75,000-$85,000.

When we discovered the error, we immediately updated forms and instructions on the website, noted the error on the forms update page, and alerted all computerized tax processors who work with tax preparation professionals.

Taxpayers who take this deduction need to make sure they use the corrected form instructions, which shows a revision date of February 2008 or later, or check with their tax professional or preparation software. Anyone who filed and missed taking this deduction due to the error should file an amended state tax return.

It’s always a good idea to check for updates or corrections to any form that pertains to your clients. As updates and corrections are made to California tax forms, we post the changes on our website. To find our Tax Forms Updates webpage, go to our website at ftb.ca.gov and search for “forms updates.”