Was finishing up client 1040 when he calls me and says 'Hey, forgot to tell you that I was on a game show in California in 2022 and won $3,000 but I didn't get a 1099". I can add easily add the income to the 1040 and the IN but now concerned about CA. Can anyone provide for me a short head-start on my research on how to report this in CA? Don't mind to dig in to the research but a bit difficult at this late date. If the CA solution is potentially quick, I might try to finish this one by the deadline. Otherwise, extend...
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I'm surprised no 1099-MISC was issued, maybe he just didn't receive it.
In brief, his CA filing would work as follows. You can probably do it without too much extra work.
1. Verify that this is his only CA source income (it almost surely is)
2. CA Form 540NR needs to be filed for full-year non-resident. Your software should fill it out using the federal info.
3. Schedule CA(540NR) begins with federal AGI items in column A, then tax law adjustments in Cols B & C where federal law differs from California. (This would not apply in your scenario, unless your taxpayer has unemployment compensation, which is not taxed by CA, or something similar, like tax-exempt muni bond income). Finally, it is only in Col. E that you indicate that the CA-taxable income is just the $3K game show prize, nothing else.
4. Finally, what CA does (via the form calculations) is figure out the tax rate that would apply if the taxpayer were a full year resident, and then that rate is applied to the actual taxable income ($3K).
5. Assuming IN has an Other State Tax Credit (OSTC), you should see that pop up on the IN return.
Your software should really do just about all the work, except for populating Col E as described above, which you have to do. As a non resident, your taxpayer shouldn't need to answer any questions about health insurance, or what county they live in, or any of the other stuff that residents have to deal with.
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard -
Agree on the comments by RR. I just finished a tax return for a client who sold some land in a nearby state, and the process was similar as described for his home state and for the non-resident state. (Most of the "foreign" tax turned into a home state tax credit.) An interesting surprise was that I had already entered numbers on Fthe federal Schedule A, but the standard deduction was larger on both fed and home state returns. BUT the non-resident state read the same numbers, crunched them a bit, and for the non-resident state he was able to benefit by using their allowable itemized deductions versus their standard deduction.
Learn something new every day!
I am rather intrigued why (apparently) no Form 1099-MISC was received for $3k of income. ESPECIALLY if CA likely wants a piece of the pie. Perhaps it became 2023 income??Comment
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