SCHEDULE CA NONCONFORMITY CHECKLIST - Spidell

2020/2021 Federal and California Tax Update

Practitioner Aids

SCHEDULE CA NONCONFORMITY CHECKLIST

Use this checklist to ensure that you have properly reported all of the TCJA, SECURE Act,

FFCRA, CARES Act, and AB 5 nonconformity items on Schedule CA.

Schedule CA Nonconformity Checklist

Part I ¡ª Income Adjustment Schedule

Section A: Income

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California employee/federal independent contractor: Some taxpayers may be classified as

independent contractors for federal purposes and as employees for California purposes. If the

taxpayer is classified as an employee for California purposes, enter the amount reported as gross

income of the business from federal Schedule C (Form 1040), line 7, as wages on line 1, column C.

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Sinai Peninsula: California does not conform to the extension of combat zone tax benefit to the

Sinai Peninsula of Egypt. Enter the amount of combat pay excluded from federal income on line 1,

column C.

Section B: Additional Income

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Alimony received: California does not conform to the TCJA change that excludes alimony

received from income if made under post-2018 divorce/separation agreement. Enter the alimony

received on line 2a, column C.

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FFCRA paid sick and family leave credits: California does not conform to the FFCRA provision

requiring employers who claim paid sick and family leave credits to include the credit amount in

gross income. Enter the credit amounts in line 3, column B.

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Entertainment expenses and transportation fringe benefits: California does not conform to the

repeal of transportation fringe benefits, or 50% of entertainment expenses. Enter the additional

California deductions on line 12, column B.

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California employee/federal independent contractor: Some taxpayers may be classified as

independent contractors for federal purposes and as employees for California purposes. If the

taxpayer is classified as an employee for California purposes, enter the amount of federal business

income on line 3, column B.

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Entertainment expenses and transportation fringe benefits: California does not conform to the

repeal of transportation fringe benefits, or 50% of entertainment expenses. Enter the additional

California deductions on line 12, column B or C.

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Professional gamblers: For professional gamblers, California does not conform to the provision

limiting gambling deductions to gambling winnings. Enter the additional California deductions

on line 3, column B.

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Limitation on business interest: California does not conform to the limitation on the net interest

expense deduction for businesses. Figure the difference between the amounts using federal and

California law. Enter the difference on line 3, column B.

(continued)

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2020/2021 Federal and California Tax Update

Practitioner Aids

Schedule CA Nonconformity Checklist (continued)

Section B: Additional Income (continued)

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Qualified equity grants: California does not conform to the new IRC ¡ì83(i) election to defer the

recognition of income attributable to qualified stock. If you elected to defer income for federal

purposes, make an adjustment on line 8f, column C.

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IRC ¡ì529 accounts: California does not conform to the provisions expanding qualified education

expenses to include K¨C12 tuition costs, registered apprenticeship costs, and qualified education

loan repayments. If these amounts were excluded for federal purposes, make an adjustment on

line 8f, column C.

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Sexual harassment settlement: California does not conform to the provision prohibiting a

deduction for any settlement, payout, or attorney fees related to sexual harassment or abuse if the

payments are subject to a nondisclosure agreement. Enter the amount received and included in

federal income on line 3, column B.

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Excess business loss limitation: California does not conform to the retroactive repeal of the excess

business loss limitation for the 2018¨C2020 tax years. Enter the amount of California¡¯s excess

business loss limitation on line 8f, column C.

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Employer payments of student loans: California does not conform to the educational assistance

program exclusion of student loan payments on behalf of an employee by an employer. Enter the

amount of the loan payment on line 8f, column C.

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Repatriation and GILTI income: California does not conform to the federal repatriation or GILTI

provisions. If you included IRC ¡ì965 repatriation income on your federal Schedule 1 (Form 1040),

enter the amount on line 8f, column B, and write ¡°IRC ¡ì965¡± on line 8f and at the top of Form 540.

If you included GILTI on your federal Schedule 1 (Form 1040), enter the amount on line 8f,

column B, and write ¡°IRC ¡ì951A¡± on line 8f.

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Employer payments of student loans: California does not conform to the educational assistance

program exclusion of student loan payments on behalf of an employee by an employer. Enter the

amount of the loan payment on line 8f, column C.

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Repatriation and GILTI income: California does not conform to the federal repatriation or GILTI

provisions. If you included IRC ¡ì965 repatriation income on your federal Schedule 1 (Form 1040),

enter the amount on line 8f, column B, and write ¡°IRC ¡ì965¡± on line 8f and at the top of Form 540.

If you included GILTI on your federal Schedule 1 (Form 1040), enter the amount on line 8f,

column B, and write ¡°IRC ¡ì951A¡± on line 8f.

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California employee/federal independent contractor: Some taxpayers may be classified as

independent contractors for federal purposes and as employees for California purposes. If the

taxpayer is classified as an employee for California purposes, enter the amount of selfemployment tax claimed on the federal return on line 14, column B, and the amount of any selfemployed health insurance deduction related to the independent contractor business on line 16,

column B.

(continued)

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Practitioner Aids

Schedule CA Nonconformity Checklist (continued)

Section C: Adjustments to Income

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Alimony paid: California does not conform to the provision disallowing deductions for alimony

paid if made under any post-2108 divorce or settlement agreement. Enter the alimony paid on line

18a, column C.

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Excess deduction on termination of an estate or trust: California allows taxpayers to claim these

deductions as miscellaneous itemized deductions. Enter these amounts on line 22, column B.

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Living expenses for Congressional members: Members of Congress will still be permitted to

deduct $3,000 per year of living expenses incurred while on official business in Washington, D.C.

Enter the amount of living expenses on line 11, column C.

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Moving expenses: California does not conform to federal law regarding the suspension of the

deduction for moving expenses, except for members of the Armed Forces on active duty.

Nonmilitary taxpayers enter either the excess moving expense reimbursements or moving

expenses in excess of reimbursements reported on federal Form 3903, Moving Expenses, on line

13, column C.

Part II ¡ª Adjustments to Federal Itemized Deductions

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Taxpayers who did not itemize on their federal return: Taxpayers who did not itemize

deductions on their federal return but will itemize on their California tax return must complete

federal Schedule A (Form 1040). Then check the box at the top of Schedule CA (540), Part II, and

complete lines 1 through 30. Attach a copy of federal Schedule A (Form 1040) to the Form 540.

Medical and Dental Expenses

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California employee/federal independent contractor: Some taxpayers may be classified as

independent contractors for federal purposes and as employees for California purposes. If the

taxpayer is classified as an employee for California purposes, they may treat the amounts

deducted as self-employed health insurance as a medical and dental expense by entering the

amount of federal self-employed health insurance deduction that exceeds 7.5% of federal AGI on

line 4, column C.

Taxes Paid

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Deduction for state and local taxes: California allows deductions for foreign property taxes, and

does not conform to the $10,000 SALT limitation. Enter taxes in excess of the $10,000 limitation on

line 53, column C and foreign property taxes paid on line 6, column C.

Interest Paid

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Mortgage interest: California will continue to allow a deduction for acquisition debt of $1 million

and equity debt of $100,000 (not allowed for AMT) for a maximum of $1.1 million. Enter an

adjustment on line 8, column C for the amount over the federal limit.

(continued)

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2020/2021 Federal and California Tax Update

Practitioner Aids

Gifts to Charity

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Qualified charitable contributions: For California purposes, charitable contributions will

continue to be limited to a percentage of federal AGI. Figure the difference between the amount

allowed using federal law and the amount allowed using California law. Enter the difference on

line 11, column B. California does not allow an above-the-line deduction for cash charitable

contributions made in 2020 and only allows charitable deductions to be claimed as an itemized

deduction. Enter any difference in itemized deduction amounts on line 11, column B.

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College athletic seating rights: California does not conform to the elimination of the charitable

contribution deduction for contributions made to institutions of higher education for which the

taxpayer receives the right to purchase tickets for seating at an athletic event. Enter the amount on

line 11, column C.

Casualty and Theft Losses

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Casualty or theft losses (other than qualified disaster losses): Taxpayers are still permitted to

deduct casualty losses on their California returns. Complete another federal Form 4684 using

California amounts, and enter the difference between the federal and California amount on line

15, column B or C.

Job Expenses and Certain Miscellaneous Deductions

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Unreimbursed employee expenses: California allows deductions for unreimbursed employee

business expenses. Enter these deductions on line 19. Attach a copy of federal Form 2106 if

required.

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California employee/federal independent contractor: Some taxpayers may be classified as

independent contractors for federal purposes and as employees for California purposes. These

employees may claim unreimbursed employee expenses on line 19.

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Tax preparation fees: California allows deductions for tax preparation fees. Enter these

deductions on line 20.

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Excess deduction on termination of an estate or trust: California allows excess deductions on

termination of an estate or trusts. Enter these deductions on line 21.

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Other miscellaneous itemized deductions: California will continue to allow miscellaneous

itemized deductions subject to 2% of federal AGI. This includes:

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Home office for employees;

Union dues, uniforms, and safety equipment;

Investment advisor fees and/or asset management fees;

Hobby expenses;

Expenses related to nonbusiness income; and

Attorney fees.

Enter these amounts on line 21.

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Itemized deduction limitation: The TCJA suspended the limitation on itemized deductions.

California phases out the amount of itemized deductions that may be claimed for taxpayers with

federal AGI above certain thresholds. Compute this limitation on line 29.

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