How to File Your California Tax Return for 2023

In recent years, California has seen a growing number of taxpayers leaving the state, with the trend accelerating since the start of the pandemic. According to IRS data, net outmigration nearly doubled, from about 170,000 individuals in 2019 to almost 300,000 in 2021 and 2022. This sharp increase has raised concerns, as more people are choosing to relocate to other states, while the influx of new residents has remained flat. Despite these challenges, California residents—long-time and new—must stay informed about how to file their California tax return correctly.

It is essential to file your California tax return to meet your legal requirements and ensure you get any tax credits and refunds you are entitled to. No matter how long you've lived in California or how recently you moved there, knowing how to file your taxes, what deductions you may take, and what tax perks are available will help you get the most out of your financial position. This tutorial will show you all you need to know about submitting your California tax return, including step-by-step directions and helpful advice.

Why do you need to file? Although people are leaving the state, California is still an important center for many businesses and families. There are real benefits to doing your taxes correctly, such as the Child Tax Credit, a special tax credit for the state. The Franchise Tax Board (FTB) gives you everything you need to make this procedure go as smoothly as possible. This article will help you file your taxes for 2023 quickly and without making expensive mistakes.

Who Needs to File a California Tax Return in 2023

Understanding who needs to file a California tax return is the first step in the process. Whether you're a new resident or have lived in California for years, the key factor is your income. California has specific income thresholds based on your filing status, age, and number of dependents. You must file a return if your gross income exceeds your situation's threshold.

For 2023, the filing requirements are as follows:

• Single filers under 65: Must file if their gross income exceeds $21,561.
• Married filing jointly (under 65): They must file if their combined income exceeds $43,127.
• Head of Household (under 65): Must file if income exceeds $30,682.

Example: Sarah, a 30-year-old single filer who earned $25,000 in 2023, must file her California tax return because her income exceeds the $21,561 threshold for single filers under 65.

If you are 65 or older, the income thresholds are slightly higher, giving you a higher filing limit before you file. For instance, a single filer 65 or older must file if their gross income exceeds $28,761.

Other Considerations

• Dependents: If you claim dependents, the income threshold for filing increases. For example, a single filer with one dependent has a threshold of $36,428.
• Special Filing Situations: Certain individuals, like non-residents or those who earned income from California-based businesses, may need to file Form 540NR, even if they lived in California for only part of the year.

It's also important to note that filing a tax return might be beneficial even if you fall below the income threshold. If you're eligible for a refund or certain tax credits, filing could result in a refund even if you're not required to file.

Key Deadlines for 2023 California Tax Filing

Filing your California tax return on time is essential to avoid penalties and ensure you receive any refunds you're entitled to. Understanding the key deadlines for 2023 tax filing will help you stay on track and avoid unnecessary stress.

Primary Deadline: April 15, 2024

The standard deadline to file your California tax return is April 15, 2024. This is the date by which you must submit your return and pay any taxes owed to avoid late fees and interest. If you fail to meet this deadline, you may face penalties on your outstanding balance, and interest will begin to accrue from April 15.

Extension Deadline: October 15, 2024

If you're unable to meet the April deadline, California offers an automatic 6-month extension, meaning you can file your California tax return by October 15, 2024, without facing late-filing penalties. However, it’s important to note that an extension only applies to filing the return, not paying any taxes owed. If you owe taxes, those must still be paid by April 15, 2024, to avoid penalties and interest.

Penalty and Interest on Late Payments

Even if you file an extension, any unpaid taxes after April 15 will accrue interest and may be subject to late payment penalties. For example, if you owe $500 in taxes and file an extension but don’t pay by April 15, interest will begin to accrue on the unpaid balance, increasing your amount owed.

Additional Important Dates:

• Estimated Tax Payments: If you're self-employed or have income not subject to withholding, you may need to make estimated tax payments throughout the year. These payments are generally due in April, June, September, and January of the following year.
• Refund Processing Times: E-filed returns generally process faster, with refunds typically arriving in 3 weeks. Paper returns can take up to 8+ weeks to process.

Staying on top of these deadlines ensures you avoid unnecessary penalties, access any available refunds, and file your California tax return without complications.

Key Forms and Documents You Will Need

Filing your California tax return requires the proper forms and documentation in place. Gathering these documents before you start the filing process will make completing your return accurately and efficiently easier. Here’s a breakdown of the key forms and documents you will need. Primary 

Forms for Filing Your California Tax Return

• Form 540 - California Resident Income Tax Return
  This is the primary form used for filing California tax returns for residents. Most individuals and small business owners will need to complete this form. It covers income, deductions, credits, and taxes owed for the year.
• Form 540NR - California Nonresident or Part-Year Resident Income Tax Return
  If you were not a full-year California resident, you must use Form 540NR. This form is for non-residents and part-year residents who earned income in California during the year.

Supporting Forms and Schedules

• Schedule CA (540): California Adjustments for Residents
  This form adjusts your federal Adjusted Gross Income (AGI) to account for California-specific income and deductions. It’s necessary for most taxpayers.
• Form FTB 3514: California Earned Income Tax Credit (CalEITC)
  If you're eligible for the California Earned Income Tax Credit (CalEITC), you must complete this form to claim the credit. This credit can help reduce the amount of taxes you owe or provide a refund.
• Schedule P (540): Alternative Minimum Tax
  If you're subject to Alternative Minimum Tax (AMT), this form will help calculate the taxes you owe. It's generally required for higher-income earners.
• Form FTB 3532: Head of Household Filing Status Schedule
  If you're filing as head of household, this form is necessary to claim that status and its associated benefits.

Documents You Will Need to Complete Your Tax Return

• W-2 Forms: These forms report your income from employers and are required to ensure your income is accurately reported.
• 1099 Forms: If you worked as an independent contractor or received income from other sources (e.g., interest, dividends, or freelance work), you'll need any 1099 forms that report that income.
• Prior Year Tax Return: It’s helpful to have your prior year’s tax return to refer to when completing your California tax return, especially for carryover deductions or credits.
• Bank Account Information for Direct Deposit: If you’re due a refund, you must provide your bank account information to receive it via direct deposit.
• Records of Deductible Expenses: Keep records of any deductible expenses, such as charitable contributions, business-related expenses (for small business owners), or medical expenses. These can help reduce your taxable income.

Why These Forms Matter

The Franchise Tax Board (FTB) relies on accurate information to process your California tax return. Having the proper documents and forms helps ensure you're filing correctly and can avoid errors that may lead to delays or penalties.

Tax Credits and Deductions to Be Aware of in 2023

One of the key advantages of filing your California tax return is the opportunity to take advantage of various tax credits and deductions that can reduce your tax liability or increase your refund. In 2023, several credits and deductions are available to eligible taxpayers, ranging from the California Earned Income Tax Credit (CalEITC) to the Child Tax Credit. Here’s a breakdown of the most notable credits and deductions for California residents.

1. California Earned Income Tax Credit (CalEITC)

The CalEITC is a tax credit for working families and individuals with low to moderate incomes. For 2023, the maximum credit is up to $3,644, depending on your income and family size.

Eligibility:

• You must be a California resident.
• Your earned income must be below $30,951 (for households without children).
• You must have a valid Social Security number or ITIN (Individual Taxpayer Identification Number).

Even if you do not owe taxes, claiming the CalEITC may result in a refund, making it an essential benefit for qualifying taxpayers.

2. Young Child Tax Credit (YCTC)

In addition to the CalEITC, if you qualify for the CalEITC and have a child under the age of 6, you may be eligible for the Young Child Tax Credit (YCTC). This additional credit provides up to $1,000 for qualifying families, offering extra support for parents with young children.

Eligibility:

• You must already qualify for the CalEITC.
• You must have a child under six at the end of 2023.

This credit is available only to California residents who meet the income requirements, making it a valuable benefit for working parents.

3. Foster Youth Tax Credit (FYTC)

The Foster Youth Tax Credit is another significant benefit introduced for California residents. This credit, worth up to $1,117, is available for former foster youth between 18 and 25.

Eligibility:

• You must have been in California foster care between 13 and 18.
• You must be between 18 and 25 years old as of December 31, 2023.

The FYTC provides crucial financial relief to young adults who have aged out of foster care and are still working to establish independence.

4. Standard Deduction vs. Itemizing Deductions

For 2023, California offers a standard deduction of:

• $5,202 for single filers
• $10,404 for married couples filing jointly

If your deductible expenses (such as mortgage interest, medical expenses, or charitable contributions) exceed these amounts, consider itemizing your deductions instead of taking the standard deduction.

Standard itemized deductions include:

• Mortgage interest on your home
• Medical expenses exceeding 7.5% of your AGI
• State and local taxes (including property taxes)
• Charitable contributions above federal limits

5. Child Tax Credit (Federal and State)

The Child Tax Credit is a federal tax credit, but it can also impact your California tax return. In California, you may still benefit from the federal child tax credit, which can help reduce your overall tax liability. You can claim up to $2,000 per qualifying child if you qualify.

Eligibility for the Federal Child Tax Credit:

• You must have a child under 17 years old at the end of the tax year.
• Your income must fall within certain thresholds.

While California does not offer a separate state child tax credit, the federal credit can provide significant tax relief for families with children.

6. Other Deductions to Consider

In addition to the credits mentioned above, other tax deductions can help reduce your taxable income:

• State Disability Insurance (SDI): The amount you pay for California SDI is deductible.
• Charitable Contributions: Donations to qualifying charities are deductible, helping reduce your taxable income.
• Real Estate Withholding: If you sold property, the state might have withheld taxes during the sale, which could be credited back to you on your return.

How to Track Your Refund or Balance Due

Once you’ve filed your California tax return, the next step is to track your refund or any balance due. Thankfully, California provides a few helpful tools to make this process easy and efficient. Whether you’ve filed through CalFile, TurboTax, or on paper, here’s how to track your refund and stay updated on any payments or amounts owed.

Where’s My Refund Tool

The Franchise Tax Board (FTB) offers an online tool called Where’s My Refund that allows you to check the status of your California tax return. This tool is easy to use and provides real-time information about the status of your refund.

How to Access the Tool:

1. Visit the FTB website and navigate to the Where’s My Refund page.
2. Enter the Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), filing status, and the refund amount as reported on your California tax return.
3. Receive a real-time update on the status of your refund, including whether it has been processed, approved, or issued.

Processing Times:

• E-filed returns: Refunds typically take 3 weeks to process.
• Paper returns: Can take up to 8+ weeks due to manual processing.

FTB Online Account

Creating an online FTB account is another helpful way to track your refund and monitor your California tax return status. Once you have an account, you can access all your tax information in one place.

How to Create and Use Your FTB Account:

1. Create an account by visiting the FTB website and signing up.
2. After signing in, you can track your refund status, see your payment history, and get access to past tax returns.
3. You’ll also receive instructions for any steps needed to resolve issues related to your tax return.

Tracking Payments and Balances Due

If you owe taxes, tracking your balance and ensuring payments are made by the April 15 deadline to avoid penalties and interest is essential. You can use the FTB's online account to make payments, schedule future payments, or see if you owe any additional amounts after filing your return.

Paying Your Balance Due:

1. Visit the FTB’s payment page to use Web Pay or schedule estimated payments from your bank account.
2. You can also pay by credit card (though a service fee applies) or via check or money order if you filed on paper.

Common Issues to Watch For

• Missed Refunds: If you expect a refund but haven’t received it in the expected time, check for errors in your tax return (e.g., missing information or discrepancies with your IRS records).
• Missing or Incorrect Payments: Ensure you’ve included all necessary forms when submitting your tax return, especially if you have income from California and outside sources.

You can avoid issues by tracking your refund and balance due and ensuring everything is processed smoothly.

Common Mistakes to Avoid When Filing Your California Tax Return

Filing your California tax return can be straightforward, but mistakes are common and can lead to delays, penalties, or missed refunds. Knowing the most common errors and how to avoid them will help ensure your tax filing goes smoothly. Below are some mistakes to watch out for when preparing and submitting your California tax return.

Forgetting to Attach Required Forms and Schedules

One of the most frequent errors is failing to attach the necessary forms or schedules to your California tax return. For instance, if you’re adjusting your income, you must include Schedule CA (540), which details California-specific income adjustments. Double-check your filing instructions to ensure you’ve included all required documentation before submitting.

Incorrectly Calculating Estimated Tax Payments

If you're self-employed or have additional sources of income not subject to withholding, you’re likely required to make estimated tax payments throughout the year. A common mistake is underestimating these payments, leading to a larger balance due when filing your return. Use the FTB’s online resources to calculate your estimated tax payments accurately.

Using the Wrong Tax Table or Rate Schedule

California has tax rates and brackets that can differ from the federal tax system. A mistake often made is using the federal tax rate or an incorrect tax table when filing your California tax return. Always refer to the FTB’s tax tables and instructions specific to California to ensure you’re using the correct rates.

Claiming the Wrong Amount of Withholding

Another mistake is reporting the wrong amount of withholding from your W-2 forms. If you were employed in California but worked remotely for part of the year, it’s essential to ensure your W-2 accurately reflects the state taxes withheld for California. Check your W-2 forms carefully and cross-reference with your IRS and FTB records to ensure the amount of state withholding is accurate.

Missing the Signature

While this may sound like an obvious mistake, many people forget to sign their return, especially in the case of joint returns. Your California tax return will not be processed without your signature, which will delay any refunds and could result in penalties. Always make sure to sign your California tax return. For joint returns, both spouses must sign.

Not Filing on Time

One of the biggest mistakes is missing the filing deadline. You may be penalized if you fail to file by April 15, 2024, and don’t file an extension. Even if you file for an extension, the deadline for payment remains April 15, 2024. Mark your calendar and remember the deadlines. If you need more time, file for an extension—but remember to pay any taxes owed by April 15 to avoid penalties.

Not Taking Advantage of Tax Credits

Many taxpayers miss out on valuable tax credits that could lower their tax liability, such as the California Earned Income Tax Credit (CalEITC) or the Young Child Tax Credit (YCTC). These credits are designed to assist low-to-moderate-income residents, and failing to apply for them could mean missing out on a larger refund. Review your eligibility for any credits, and consult the FTB’s website or your tax preparer to ensure you're claiming all applicable benefits.

Frequently Asked Questions (FAQs)

What happens if I miss the deadline for April 15, 2024?

If you miss the April 15, 2024, deadline to file your California tax return, you can still file with an extension by October 15, 2024. However, interest and penalties on any unpaid taxes will apply. You can find options for submitting payments or extensions on the FTB file page. Be sure to upload payments and documents promptly to avoid further charges.

Can I e-file my California tax return for free?

CalFile, operated by the Franchise Tax Board (FTB), offers free e-filing for California tax returns. The file page on the FTB website gives you access to free tools and step-by-step instructions for submitting your return. You can also submit documents and receive a confirmation. Many taxpayers find this method efficient and secure, with testimonials praising its ease of use.

How can I track my California tax refund?

You can track your California tax return status using the FTB’s file page or by visiting the Where’s My Refund tool on the FTB website. Simply enter your Social Security number, filing status, and refund amount. This tool provides an update on your refund status in real time. It’s a convenient way to track your refund after uploading your federal tax return information.

Do I need to file both a federal and a state tax return?

Yes, if you're a California resident, you must file both federal and California tax returns. The federal tax return helps establish your Adjusted Gross Income (AGI), the basis for your California return. The file page on the FTB website provides instructions for completing both returns, and there are options for submitting both electronically.

How long should I keep copies of my California tax return and documents?

Keeping a copy of your California tax return and related documents for at least four years after filing is essential. This includes your federal tax return and supporting documentation like W-2s and 1099s. Having a file page and a secure account where you can upload documents makes tracking and storing them easier. Many people find that having these documents accessible helps answer questions about past returns.