California 2011: Self-Employment Deduction
California taxpayers with a self-employment tax deduction may have differing state and federal deduction amounts. In 2011, the federal government increased the deduction to more than 50% of the self-employment tax. California did not conform to this change, and does not use the more than 50% deduction.
Certain customers, who had a deduction for self-employment tax paid, may have filed an incorrect California tax return.
TurboTax has fixed this issue.
How to tell if you may be impacted
You may be affected if ALL of the following are true:
- You filed a 2011 California Income Tax Return prior to March 1, 2012 AND
- You had an amount of Federal Form 1040, Line 27 AND
- You had no amount on your California Schedule CA (540) California Adjustments, Line 27, Column B
If you are affected, you may have underpaid your California state tax.
What you need to do if you are impacted
The Franchise Tax Board (FTB) has announced that taxpayers who filed already using the more than 50% deduction for self-employment tax are not required to amend those returns.
Instead, the FTB is sending letters to taxpayers whose returns are affected. The letters will include an explanation of the issue and proposed corrected amounts, and will allow the taxpayer to respond before issuing a tax bill.
You can find additional information by copying this address into your browser:
www.ftb.ca.gov/aboutFTB/newsroom/self_employment_tax_announcement.pdf?WT.mc_id=News_Announcement_20120302_01
