Troubleshooting California ref. 1126 - wage adjustment on Schedule CA (540NR), line 7b in Lacerte

The following critical diagnostic is generating in Lacerte:

The wage adjustment on California Schedule CA (540NR) line 7b may be incorrect. Typically, it is incorrect to use "State wages, if different" to allocate wages on a nonresident return. This could result in an incorrect tax calculation on Form 540NR. See California FTB Publication 1001 for items that can create a wage subtraction on the California return. Generally, line 7a and 7d should equal each other, with the line 7e reflecting only the California "source" portion. Refer to the Multi-state/Nonresident section of the [F1] Help for correct wage "sourcing" procedures. (ref. #1126)

Follow these steps to resolve this diagnostic:

1. Go to Screen 10, Wages, Salaries, Tips.
2. Scroll down to the State and Local section.
3. Remove the amount entered in (16) State wages, if different.
   • Don't use this field when preparing a part-year, nonresident, or multi-state return. Instead, allocate income to the appropriate state(s) in (1) Wages, tips, etc.

Related topics

• Allocating Multi-State W-2 Double and Separate Taxed Income
• Allocating W-2 Wages and Withholdings for Multi-State Return