California Notice Received for W-2 CA Adjustment

Forum|Forum|6 years ago
December 6, 2019
2 replies
22 views

My client received a notice from California stating that her imputed income from her Medical expenses is taxable. However, the medical insurance covered her son and her husband. Shouldn't this amount be tax free for California purposes? Even on her W-2, there was an adjustment for this amount and it was titled "Misc Non-Taxable Compensation." Can someone confirm what I'm saying above is true and if so, what's the CA tax code?

Lacerte Tax

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Best answer by itonewbie

The adjustment is probably for HSA since CA does not conform to §223. What is surprising is that this adjustment should have already been reflected in Box 16 of your client's W-2 as that should have been programmed into the payroll setup.

itonewbieAnswer

Level 15

The adjustment is probably for HSA since CA does not conform to §223. What is surprising is that this adjustment should have already been reflected in Box 16 of your client's W-2 as that should have been programmed into the payroll setup.

---------------------------------------------------------------------------------Still an AllStar

S

sb62_2Author

Level 2

Thank you for your quick response. Box 1 is different than Box 16 and so that's how I entered it when completing the return. Is the response to the FTB as simple as showing them the W-2 that was received?

On the notice, California stated the following:

"A review of your return indicates that your Schedule CA is incorrect.

Schedule CA is used only to report adjustments to federal adjusted gross income (AGI) when that income is taxed differently for state and federal purposes. The difference in taxation must arise from differences between state and federal tax law, not from the source of income."

George4Tacks

Level 15

Look at the W-2. Is box 1 the same as box 16? Is there an entry in box 12 with code W? If you made either of those entries Lacerte should have picked up the difference.

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