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CA and SE tax deduction

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    CA and SE tax deduction

    Those of you are CA preparers are probably aware that the FTB is trying include an adjustment on CA returns to limit the above-the-line deduction of SE tax to 50% of the total tax, claiming that CA does not conform to the recent changes. Am I alone in thinking that they are overreaching here? The deduction consists of the "employer" portion of the SE tax, which has been 7.65% of SE-taxable income for some time now. Since the "employee" portion has been reduced by two percentage points, the "employer' portion represents a larger percentage of the total than the previous 50%, but this is simply a computational construct. The total amount of the deduction has not changed from 7.65% of SE-taxable income. So there is really nothing new for CA to conform to, yet the FTB is trying to make a minor profit center out of it. It strikes me as eminently contestable, and I wonder if the FTB isn't counting on the amounts being so small that no one will bother.

    It does seem that the FTB goes out of its way to make a nuisance of itself in the middle of a busy tax season.
    Evan Appelman, EA
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