Indian Reservation Income Question

[dsi]

My clients want to file MFS. He is Indain and she is not. They live together on the reservation, and he has income from his tribe.

Q: If they file MFS, does the community property income (CA is a community property state) he earns from the tribe, and gets reported 50/50 on their respective returns still get treated as exempt on her CA 540?

[tilt53]

As long as he lives on tribal land and his income is from the tribe, it is not taxable to CA. Go to Sch. CA on the state side and back it out with the explanation of: Qualified Native American Income.

[dsi]

Thanks Sandy.

[RLymanC]

Indian Income

One further thing should be done with respect to the Tribal income.

After backing it out of the CA return, print the return for mailing, have the taxpayer include a letter from the tribe, on tribal letterhead stating he is a member of that tribe, working on the reservation for the tribe, also a copy of his tribal ID.

I finally learned this after many clients got tax due letters from CA. CA has no record of tribal members, they want written prove that cannot be provided when e-filing.