argument with CPA son

[jimenright]

According to Pub 17, pg 143, upper right; and Schedule A instructions, Pg A2; taxes such as Washington State's supplemental disability tax (SDI), and Alaska's SUI, are considered State Income Tax and are to be entered on line 5 of the schedule A. If this is the case, they are eliminated as deductions if the Sales Tax deduction is taken.

According to my son, the CPA and very experienced tax expert, they are not income taxes, but are entered as other taxes on the Schedule A and the deduction for them is not affected by the sales tax deduction.

I think they are included as State Income tax and they cannot be deducted if the Sales Tax Deduction is taken.

What do you think? Is my son correct, and Pub 17 and the Schedule A instructions incorrect; or am I correct?

[dsi]

You are correct.....your CPA son is wrong.

[taxea]

argument with CPA son

On CA returns I enter it on the W-2 under local taxes. This adds it to the withholding amount. CA is one of the states that allows SDI to be deducted, but not TDI. taxea

[Jiggers]

Disagree with CPA

The tax is a disability/unemployment tax assessed by the state. It is not an income tax. I lived in California when it was determined that the SUI of California was a tax and was deductible.

[veritas]

These taxes are

imposed on income. Seems to me that makes them income taxes.

[S T]

Line 5 Instructions

Schedule A, Line 5 instructions you include

State and local income taxes withheld from your salary during 2007. Form(s) W-2 will show these amounts.

State and local income taxes paid in 2007 for a prior year, such as taxes paid with your 2006 state or local income tx return. Do not include penalties or interest.

State and local estimated tax payments made during 2007, including any part of a prior year refund that you chose to have credited to your 2007 state or local income taxes.

Mandatory contributions you made to the California, New Jersey or New York Nonoccupational Disability Benefit Fund, Rhode Island Temporary Disability Benefit Fund, or Washington State Supplemental Workmen's Compensation Fund.

Mandatory contributions to the Alaska, New Jersey or Pennsylvania state Unemployment fund.

So if my interpretation is correct the last two paragraphs line 5 on Schedule A would include State Disability in Calif (would not include Calif VPDI) New Jersey, New York and Rhode Island and Supplemental Work Comp in State of Washington, and SUI in Alaska, New Jersey or Pennsylvania.

SUI in California is paid at the Employer level not the employee level. SDI or State Disability is paid at the Employee level and is reflected on the W-2 as a local tax. I have seen the SUI on the W-2 for Pennsylvania, and it is a local tax imposed on the employee. I have not seen the other states.

Sandy

[DonPriebe]

SUI in California is paid at the Employer level not the employee level. SDI or State Disability is paid at the Employee level and is reflected on the W-2 as a local tax. I have seen the SUI on the W-2 for Pennsylvania, and it is a local tax imposed on the employee. I have not seen the other states.

In New York many of the larger employers pay the SDI tax directly and never show it on the W2. Those employers who do deduct it from the employee's paycheck show it in box 14. It amounts to about $32 maximum.

I follow the instructions and include it on the income tax line of Schedule A, and do not deduct it when we use the optional sales tax instead.

[S T]

Correction

Don, glad you interjected your thoughts as well,

My reference to SDI, I omitted the reference to it say was Calif in particular that I was referring to. Calif SDI deduction for line 5 is the employee level only if it is a State Plan
(not including VPDI) I am not as familiar with other State disability plans.

S

[Lion]

Other Taxes?

Oh my gosh, I took my Block training and never looked back. We had a drop-down box with literals to choose for other taxes, including SDI. So, when I had a NY commuter (here in CT) with SDI in box 14, I put it under other taxes. Now, that I haven't been with Block for awhile, I still follow their method. Have I really been doing it wrong all those years? Of course, my NY commuters have such large state tax that we never use sales tax on those returns. So, the bottom line would not change. And, if it did -- $31 in an extra deduction! Slap my wrist.

[taxea]

argument with CPA son

My point was that how SDI is reported depends on State law. CA allows for it to become a part of withholding and that is why it is put on the W-2 under the local tax section. CA does not allow this for voluntarily paid DI which used to be called TDI. Hawaii does not allow a deduction for SDI at all, not even on any part of Sch A. taxea