Question for the tax experts

[rightytighty]

So if you overpay your taxes due, you get a refund. Ok, dummy here gets that.

But why is my State of California refund from last year considered “income” for this year??? WTF. I’ve always wondered why that is?

Doesn’t this seem like double jeopardy somehow? I don’t remember ever paying my state taxes with pre tax money....

 

[Jefftowz]

@shintoooo is the guy.

 

[King295]

I can fill in while @shintoooo is out living that glamorous moderator life.

Your prior year CA income tax refund it is taxable to the extent you received a benefit on your prior year federal return by deducting the CA tax (i.e. your federal income taxes were reduced by CA taxes paid but you didn't actually pay them as they were refunded). If you did not itemize your deductions in the prior year the CA refund will not be taxable. If you itemized your deductions, the CA refund will be taxable to the extent you exceed the current year standard deduction.

 

[shintoooo]

I can fill in while @shintoooo is out living that glamorous moderator life.

Your prior year CA income tax refund it is taxable to the extent you received a benefit on your prior year federal return by deducting the CA tax (i.e. your federal income taxes were reduced by CA taxes paid but you didn't actually pay them as they were refunded). If you did not itemize your deductions in the prior year the CA refund will not be taxable. If you itemized your deductions, the CA refund will be taxable to the extent you exceed the current year standard deduction.

Thank you. Perfect explanation. I assume you’re a bean counter too?

Either way, here you go. You might need this one day. [emoji1]

 

[shintoooo]

There is a “loophole” to get out of this. If you pay $10,000 or more in property taxes, you can opt to just deduct that on schedule A and not deduct your state income taxes paid. By doing that, you’re not receiving any benefit from deducting your state income taxes because you’re not deducting them and it won’t count as income the next year.

Your invoice is on the way. [emoji3][emoji3]

 

[Halvecto]

There is a “loophole” to get out of this. If you pay $10,000 or more in property taxes, you can opt to just deduct that on schedule A and not deduct your state income taxes paid. By doing that, you’re not receiving any benefit from deducting your state income taxes because you’re not deducting them and it won’t count as income the next year.

Your invoice is on the way. [emoji3][emoji3]

Well done Sched A Jedi.

 

[mjc]

So I will ad my state tax question here. I recieved a refund from on ca last year but now am a permanent AZ resident. Does CA want me to do something with it this year?

 

[shintoooo]

So I will ad my state tax question here. I recieved a refund from on ca last year but now am a permanent AZ resident. Does CA want me to do something with it this year?

No, just the IRS is you itemized last year.

 

[mjc]

No, just the IRS is you itemized last year.

Thank you

 

[CoolCruzin]

I hate taxes

 

[rrrr]

I hate doing my state income tax return.

Oh, wait..

 

[shintoooo]

I hate doing my state income tax return.

Oh, wait..

My biggest client is located in San Antonio. Although they don't pay any individual income taxes in Texas, they do pay taxes for their LLC. What we had to do was open up several LLC's in order to keep their gross receipts low but they still do pay a good chunk.

Here's how it works:

Texas Franchise Tax rates are:

• TX Corps, PCs, LLCs, PLLCs and LLPs-domestic and foreign: Pay 1% of gross receipts over $1,000,000.
• 0.5% for wholesalers and retailers.
• 0.575% for businesses with $10 million or less in annual revenue and filing E-Z Computation form.

 

[King295]

Thank you. Perfect explanation. I assume you’re a bean counter too?

Either way, here you go. You might need this one day. [emoji1]

View attachment 838432

Yep been doing the public accounting deal for about 7 years. Worked in private industry in the beginning of my career and transitioned into an assurance/consulting role with a mid-size firm out of the South Bay.

Appreciate the pass, I will keep it handy

 

[shintoooo]

Yep been doing the public accounting deal for about 7 years. Worked in private industry in the beginning of my career and transitioned into an assurance/consulting role with a mid-size firm out of the South Bay.

Appreciate the pass, I will keep it handy

Good luck with tax season.