What California Form 540NR (2018) Is For
California Form 540NR is used by nonresidents and part-year residents who earned California-sourced income during 2018. Nonresidents report only income connected to California, while part-year residents report income earned during the months they lived in the state plus any California-based income from other periods. The form comes in a short and long version, depending on whether you claim itemized deductions or certain credits. Residency and domicile details matter because they determine how much of your income California can tax.
When You’d Use California Form 540NR
You use Form 540NR when you must file a California tax return as a nonresident or part-year resident for the 2018 tax year. You must file if you earned California-sourced income, such as wage income, rental real estate income, or interest income tied to California, even if you lived in another state. Part-year residents use the form to report income earned while living in California.
The original deadline for 2018 returns was April 15, 2019, with an automatic extension to October 15. This extension applies only to filing, not payment. Late payments may result in penalties and interest charges if you do not pay the full amount by April 15.
Key Rules or Details for the 2018 Tax Year
For 2018, several vital rules shaped how nonresidents and part-year residents completed California Form 540NR:
- You had to file the form if your income exceeded California’s filing thresholds for your age and filing status.
- California follows the Internal Revenue Code only through January 1, 2015, which means many federal changes under the Tax Cuts and Jobs Act did not affect your California income tax return.
- Your tax calculation is based on California AGI, which includes adjustments for state-specific additions and subtractions that differ from federal rules.
- You must separate your total income from California-sourced income, as this determines your taxable income and the percentage used to prorate most credits.
- You must follow special rules for military compensation, and certain Native American income may be excluded when all eligibility requirements are met.
- You must attach Schedule X when filing an amended return to explain each change and update the amounts reported on your original filing.
Step-by-Step (High Level)
Complete Your Federal Return
Begin by completing your federal return, as many figures are transferred directly to Form 540NR. Your federal adjusted gross income serves as the starting point for California’s calculation, and you may need forms such as Form 1099 to verify your income and withholding amounts.
Gather Records and Determine Residency
Collect documents that show your income, estimated tax payments, and the dates you lived in or outside California. This information helps you distinguish between total revenue and California-sourced income, which affects your tax calculation for the year.
Report Income and Adjustments
Use Schedule CA (540NR) to make California-specific additions or subtractions. These adjustments account for differences between federal law and the Internal Revenue Code conformity date used by California. Your entries help determine your California AGI, which leads to the ratio used to calculate your taxable share.
Choose Your Deduction Method
Decide whether to claim the standard deduction or itemize. If you itemize deductions or claim specific credits, you may need to use the Long Form 540NR.
Calculate Tax, Credits, and Payments
Next, apply the correct tax table or rate schedule to compute your tax. You may also qualify for credits, such as the California Earned Income Tax Credit, which is claimed on Form FTB 3514, or the Child and Dependent Care Expenses Credit, claimed on Form FTB 3532. Include any estimated tax payments or payments you made with Form FTB 3519. If you owe an underpayment penalty, you may need Form FTB 5805.
Final Steps
Once your calculations are complete, review all entries and confirm that your supporting forms are attached. You can e-file your return or mail a paper copy. If you expect a refund, you can request direct deposit. If you owe tax, you can submit payment through Web Pay, check, or money order.
Common Mistakes and How to Avoid Them
When filing Form 540NR, taxpayers often make similar errors, but with careful review and documentation, they can avoid most of them.
- Many filers enter an incorrect taxpayer identification number. Comparing the numbers on your return with those on your federal forms helps prevent delays and errors.
- Some taxpayers misread the backup withholding on their income statements, and checking each withholding amount against the W-2 or 1099 forms they received reduces this risk.
- Errors often occur when applying federal deduction rules. Reviewing the California instructions before completing adjustments on Schedule CA (540NR) or Schedule P (540NR) helps avoid mismatches.
- Filers sometimes use an old or incomplete California address, and updating your address before filing ensures that all residency information matches your income entries.
- Individuals with active duty military pay occasionally report income that California does not tax, and reading the state’s military guidelines helps you enter the correct amount.
What Happens After You File
After you file Form 540NR, the Franchise Tax Board reviews your return for accuracy and compares your entries with the information reported to the state. Paper returns take longer to process than electronic filings, so expect additional time if you mailed your forms. You can check your refund status online using the amount shown on your return.
If the FTB needs more details, they will contact you by mail. You have certain protections under the California Taxpayers' Bill of Rights, including the right to prompt and clear communication. Keep copies of all forms and supporting documents in case the state requests verification or you need to amend your return later.
FAQs
Do I need Form 540NR if I moved to California during the year?
You will generally file Form 540NR as a part-year resident when you earned income while living in California and any California-sourced income from the months you lived elsewhere.
I worked for a California employer remotely; do I owe California tax?
Income is usually not taxable by California if all services were performed outside the state, unless you had other California-sourced income.
How do I know which part of my income California can tax?
California determines taxable income for nonresidents and part-year residents using rules outlined in the California Revenue and Taxation Code, which specify how to allocate revenue earned within and outside the state.
Can I claim the California Earned Income Tax Credit as a nonresident?
You may claim the credit if you meet the income limits and residency requirements listed in the instructions for the tax year.
How long does it take to receive a refund?
Refunds for paper returns typically take longer than those for electronic filings, and you can track your status online.
