Why does California form CA records a $4K loss from the federal return as $4K income even though taxpayer received no W2 and no 1099, state or fed?

[artandanimal]

deciding factor seems to be, did taxpayer receive a W2 for same income. TP did not; TP reporting income with no W2 nor 1099.

[George4Tacks]

Probably an input error. What line of the CA is this on?

[artandanimal]

Thanks for getting back to me.

Part 1, sec b, line 3, business income (possibly column A and B, though my case, column A only)

I spoke with a Franchise Tax Board agent today; we discussed the FTB employee or independent contractor information regarding form California 540 CA. The critical item for moving income to line 3, as noted above, seems to be the taxpayer received a W2, and a 1099 or no 1099 for the same income.

My taxpayer received no W2 and no 1099; since there is no W2, ProConnect Tax should not have triggered moving the income to form CA. (The income was actually a schedule C loss of about $4.6K)

By the way, I did find a work around, but want to be sure I'm not subverting actual CA law!

Robert T

[George4Tacks]

Is this your only CA return? 

Section B, 3 Business Income or (Loss) - The first column is just repeating the same information that is on the 1040. Columns B & C are for adjustments due to changes in CA law. 

It has absolutely nothing to do with W-2 or (for ProConnect 1099) 

" (The income was actually a schedule C loss of about $4.6K)" means line 3 should have (4,600) on it.

[qbteachmt]

"(The income was actually a schedule C loss of about $4.6K)"

Are you sure you are not confusing Gross Income and business Net? You don't "make" a loss. You still make Income.

You would not get a W2 and a 1099-NEC for the same income. And if they got a 1099-NEC for the income of that business, that typically is only a subset of the income they have for the business that year. It would be an error to enter the 1099-NEC and also their Gross Income, in other words.