What California Form 540 (2019) Is For
California Form 540 (2019) is the main individual income tax return for people who were California residents for the entire year. If California was your home for all of 2019, or it remained your domicile while you were temporarily away, this is the form you use to file a tax return with the Franchise Tax Board (FTB).
On this form, you report your worldwide income and calculate your California tax liability on wages, self-employment income, investments, retirement distributions, and other income. Form 540 then applies California’s tax rates, deductions, and credits to determine whether you owe more income tax or are due a refund.
California generally follows federal income tax rules but not all recent federal changes. For 2019, the state conforms to the Internal Revenue Code as of January 1, 2015, with selective updates, and it keeps its own tax rates, standard deductions, and exemption credits separate from federal law.
When You’d Use California Form 540 (2019)
You use California Form 540 (2019) if you were a full-year resident and your income meets the filing requirements for that year. This includes employees, self-employed individuals, retirees, and investors whose income exceeds the thresholds for their filing status and age. Even if your employer withheld California income tax, you must still file a tax return if you meet those thresholds.
For the 2019 tax year, the original due date to file a tax return was April 15, 2020. California granted an automatic extension to October 15, 2020, for filing only. If you owed tax, it still had to be paid by April 15, 2020, to avoid penalties and interest on a past due return.
You also use Form 540 to amend a 2019 return. If you discover that you forgot income, missed a deduction, or claimed a credit incorrectly, you file an amended return using the same form marked “AMENDED” and attach Schedule X to explain the changes. Most amended returns must be filed within four years of the original due date or within one year of an IRS adjustment, whichever is later.
Key Rules or Details for 2019
Filing Requirements and Income Thresholds
You must file if your California gross income or adjusted gross income is above the threshold for your filing status and age. Examples for 2019 include:
- Single, under 65: $18,371
- Married/RDP filing jointly, both under 65: $36,742
- Head of household, under 65: $29,466
These thresholds are higher if you or your spouse are 65 or older or blind.
Tax Rates, Deductions, and Credits
California has progressive income tax rates from 1% up to 12.3%, plus a 1% Mental Health Services Tax on taxable income over $1 million. The standard deduction for 2019 is:
- $4,537 for single or married/RDP filing separately
- $9,074 for married/RDP filing jointly, head of household, or qualifying widow(er)
You also get personal and dependent exemption credits that reduce your tax liability, although these phase out at higher income levels.
California-Specific 2019 Rules
Important 2019 rules and changes include:
- Health insurance mandate: California’s individual mandate begins in 2020, but the 2019 return is used to set the baseline for filing; penalties for lacking coverage start with 2020 returns.
- Young Child Tax Credit (YCTC): New refundable credit up to $1,000 for families with earned income under $25,000 and at least one child under age 6.
- Net operating losses: NOLs may only be carried forward, not back.
- TCJA differences: California does not follow several federal Tax Cuts and Jobs Act rules, such as the new alimony treatment and certain federal limits on itemized deductions.
Estimated tax rules also apply. If you had significant income with no withholding, you were expected to make quarterly estimated payments in 2020, using safe harbor rules like paying at least 90% of current year tax or 100–110% of prior year tax.
Step-by-Step (High Level)
Step 1: Gather Income and Deduction Documents
Collect W-2s, 1099s, K-1s, brokerage statements, mortgage interest forms, property tax bills, and records of charitable contributions. Include proof of health insurance and any documents related to credits you plan to claim.
Step 2: Choose Filing Status and Report Federal AGI
Select your filing status (single, married/RDP filing jointly, married/RDP filing separately, head of household, or qualifying widow(er)) and enter your federal adjusted gross income from Form 1040. Your federal AGI is the starting point for your California return.
Step 3: Make California Adjustments on Schedule CA
Use Schedule CA (540) to adjust for items where California law differs from federal rules. This includes state tax refunds, alimony, certain business and investment items, and other additions or subtractions. The result is your California adjusted gross income.
Step 4: Calculate Deductions and Exemption Credits
Decide whether to claim the standard deduction or itemize. Itemize only if your California itemized deductions are more than the standard deduction for your filing status. Then claim your personal, dependent, senior, and blind exemption credits, subject to any income-based phaseouts.
Step 5: Compute Tax and Apply Credits
Use the tax tables or rate schedules to compute your California income tax on taxable income. Then apply nonrefundable and refundable credits, including the California Earned Income Tax Credit and Young Child Tax Credit if you qualify. These credits reduce your final tax liability and may create or increase a refund.
Step 6: Reconcile Payments and File the Return
Enter withholding from W-2s and 1099s, estimated tax payments, and prior year overpayments applied to 2019. The difference between tax and payments determines whether you owe or will receive a refund. Sign the return (both spouses on a joint return) and file electronically or mail it to the address in the instructions, using the correct payment voucher if you owe.
Common Mistakes and How to Avoid Them
- Wrong or missing SSN/ITIN
- Check every identification number for you, your spouse, and dependents
- Using federal instead of California deduction amounts
- Confirm that you use California standard deduction figures and compute itemized deductions using California rules
- Dependent claimed on more than one return
- Coordinate with the other parent or relative so only one taxpayer claims the dependent
- Misreporting estimated tax payments
- Verify actual payments from bank records or your FTB online account before you file a tax return
- Withholding and SDI entered in the wrong boxes
- Use California income tax withheld from box 17 of your W-2 and list SDI separately so you can claim any excess SDI refund
- Unsigned or incomplete amended returns
- When filing an amended return, mark it clearly as “AMENDED,” attach Schedule X, and sign just as you would an original return
What Happens After You File
Once your Form 540 (2019) is filed, the FTB compares it to information from employers, financial institutions, and the IRS. E-filed returns generally process faster, while paper returns take longer because they must be manually entered and reviewed.
If you are due a refund, you can track it using the FTB’s online tools. Direct deposit usually arrives faster than a paper check. If you owe tax, interest and penalties continue to accrue on any unpaid balance until it is paid in full.
You may receive a notice asking for more information, explaining an adjustment, or proposing additional tax. Respond promptly and send copies, not original documents. The FTB can also select your 2019 individual income tax return for audit, so keep records for at least four years. If the IRS later changes your federal return, you must notify the FTB and amend your California return within one year.
FAQs
How is California income tax different from federal income tax?
California uses its own tax brackets, standard deductions, and exemption credits, and it has a top marginal rate of 12.3% plus a 1% Mental Health Services Tax on very high income. The state also does not follow several federal TCJA changes, so you must use Schedule CA to adjust from federal AGI to California income.
Do I have to file Form 540 if my only income is Social Security?
California does not tax Social Security benefits, but other retirement income may be taxable. If your other gross income is below the filing requirements for your age and filing status, you generally do not need to file Form 540 for 2019.
What is the Young Child Tax Credit and who qualifies?
The Young Child Tax Credit is a refundable credit of up to $1,000 for 2019. You may qualify if you have earned income under $25,000 and at least one child under age 6 at the end of 2019, and you meet the California EITC requirements.
Can I claim the California Earned Income Tax Credit and the federal EITC?
Yes. The California EITC is a separate refundable credit based on California earned income and federal AGI limits. If you qualify for the federal EITC, you often qualify for the state version, but you must compute it using the California tables and enter it on Form 540.
What if I can’t pay my full 2019 tax liability?
Pay as much as you can by the original deadline to reduce penalties and interest, then request an installment agreement with the FTB. An approved payment plan helps you avoid more aggressive collection actions while you pay down a past due return over time.
How long should I keep my 2019 tax records?
Keep your filed 2019 return and supporting documents, such as W-2s, 1099s, and receipts, for at least four years from the original or extended due date. This covers the usual period in which the FTB can audit or assess additional tax.
