Client with a 2010 W2 with Californi state wages and no federal wages.
CA disability paid. No medicare or SS paid. In 2009 her tax person showed W2 as adjustment on CA return and wages ($6,600) as Schedule C apartment on 1040.. Is this legal?
Who is the employer? Is the taxpayer showing you all the W-2 copies he received.. I do not understand what you are saying.
Whoever prepared this W-2 did it incorrectly. CA state disability would be reported on a 1099G, if it is reported at all, and would come from Sacramento or Rancho Cordova. It sometimes takes a battle to get an employer to make a correction, until you inform them of the IRS penalty for preparing an incorrect W-2.
I don't understand this W-2 either, but I think Pat meant that SDI was withheld.
I think you need to ask the client some questions. However, it is (theoretically at least) possible to have compensation taxable at the state level but not taxable at the federal level.
Just a thought... often, lately, many disabilities are entered on a W-2 if the person is collecting before normal retirement age...as the income qualifies as earned income for the Earned Income Credit, funding an IRS, stimulus credit, etc
No. It is not disability income. It was paid to her for acting as in-house apartment manager and, it appears, as a way to pay Calif SDI.
Is there any way I can find out of the W2 was actually filed with SSA?
I supposed you can have the client file 4506-T to find out what what actually filed with the IRS.
That W-2 is NOT CORRECT !!! There cannot be anything on a W-2 that would be taxable to CA and not to the Federal. I saw something like this years ago, when some stupid person thought that a W-4 marked "exempt" meant the taxpayer's wages were exempt from tax. It took a month of faxing pages from Circular E, including the penalty for preparing an incorrect tax return, to the employer before the correction was made and I could prepare the client's tax return.
All you can do is fight the battle to get a corrected W-2.
I am no CA expert.
But, the value of housing furnished to the employee who is required to live on the premises (sounds like the situation here) is not federal taxable wages. Would it be taxable in CA?
I have been a CA tax preparer since 1968. The W-2 is not correct. You need to get a corrected W-2.
I would take Charlotte's advice since she knows whereof she speaks.
The W-2 could be correct. It is not stating that it's NOT Federal taxable, just that it's reported on W-2 for the state for disability reporting. This happens all the time for teachers in CA who pick up some outside training work. Although their W-2's help in preparation as it states the federal reporting should be done on Form 1099-MISC. When it's less than the $600 they don't receive the 1099-Misc. which can cause confusion.
So in summary, the W-2 reports the state income only. That is not to say is is federal Exempt. It has always been federally taxable in the returns I prepare. Usually goes on Schedule "C" with an adjustment to California so not double taxed.
