IRS Form 540: California Resident Income Tax Return

While the Golden State is known for its incredible climate and vibrant cities, it’s also infamous for being one of the most expensive places to live. Each spring, California residents use Form 540 to file their state income tax return. California tax rates are among some of the highest in the nation, with the top bracket taxed at 13.3%. Depending on your residency status, there are several different versions of Form 540 that can be used to get your taxes in order. Use the links below to navigate to a specific section, or keep reading to get a full overview of California tax Form 540.

• What is Form 540?
• Who Can File Form 540?
• Instructions for Form 540
• How Do I File an Extension on Form 540?
• Where Do I Send Form 540?

What is Form 540?

Form 540 is used by California residents to file their state income tax every April. This form should be completed after filing your federal taxes, such as Form 1040, Form 1040A, or Form 1040EZ, because information from your federal taxes will be used to help fill out Form 540.  

Who Can File Form 540?

Your California residency status makes a difference in how you file state taxes. Take a look at the four main groups you may fall under to find out how your income is affected by Form 540.

California Resident

• If you are a resident and earn a taxable income, then you are required to file in California with Form 540
• Form 540 EZ is a simple version of Form 540 that you can fill out if you meet certain criteria
  • Your filing status is single, married/RDP filing jointly, head of household, or qualifying widow(er)
  • You have 0-3 dependents
  • Your taxable income is:
  • Your income is from:
    • Wages, salaries, and tips
    • Taxable interest, dividends, and pensions
    • Capital gains from mutual funds (on Form 1099-DIV, Box 2a)
    • Taxable scholarship and fellowship grants (only if reported on Form W-2)
    • Unemployment
    • Paid Family Leave Insurance
    • U.S. Social Security
    • Tier 1 and tier 2 railroad retirement payments
  • No adjustments to total income
  • You only use standard deduction
  • Your payments are only California income tax withheld shown on Form(s) W-2 and 1099-R
  • Your exemptions are:
    • Personal exemption
    • Senior exemption
    • Up to three dependent exemptions
  • Your only credits are the nonrefundable renter’s credit and refundable California earned income tax credit

Part-Year California Resident

• If you live in California for part of the year and earned at least $11,698 from California sources or made at least $14,622 from any source, then you must file a Form 540
• Use Form 540NR to file a part-year resident tax return

California Resident Who Works in Different State

• Even if you work in a different state, you must fill out a California tax return if you are a California resident
• To avoid being taxed by both California and the state where you work, attach California Schedule S to your Form 540

Nonresident Who Worked or Sold Property in California

• If you are not a California resident but earned income from California, including the sale of property, you must file a California tax return
• Use Form 540NR Short to submit your return

 

Instructions for Form 540

When filling out an official Form 540, use the instructions below to ensure each step has been done correctly:

• Task 1: If you are a fiscal year filer, enter your starting and end dates at the top of Page 1.
• Task 2: Fill out you name, Social Security number or tax identification number, date of birth, and address. For joint filers, provide the same information for your spouse.
• Task 3: If your name or your spouse’s name was different on last year’s tax return, fill out the name from that tax year.
• Task 4: Check the appropriate box to indicate your filing status
• Task 5: Check the box on Line 6 if someone can claim you as a dependent
• Task 6: Use lines 7 through 11 to indicate all listed exemptions you are claiming, and then total it up.
• Task 7: On Line 12, use your Form(s) W-2 to fill in your state wages.
• Task 8: On Line 13, enter your adjusted federal adjusted gross income from Form 1040, Form 1040 A, or Form 1040 EZ
• Task 9: Use Line 14 through Line 19 to determine California adjustments (if any) and calculate your taxable income.
• Task 10: Use Line 31 through Line 35 to find the computation of your taxable income. Use the accompanying Tax Table and Tax Rate Schedule to assist you with these calculations.
• Task 11: Use Line 40 though Line 48 to determine special credits that you may be able to claim.
• Task 12: Use Line 61 through Line 64 to determine other taxes you may be responsible for.
• Task 13: Use Line 71 through Line 76 to indicate any payments already made on your tax liability.
• Task 14: Use Line 91 through Line 94 to calculate use tax.
• Task 15: Fill out Line 95 if you owe use tax on products bought and used in California on which no state sales tax was paid. The Use Tax Worksheet can be used to assist with this section.
• Task 16: Use Line 111 to indicate what you owe. If you have an amount on line 94, add the amount on line 94, line 95, and line 110, if any.
• Task 17: Use Line 112 through Line 114 to determine interest and penalties you may have to pay.
• Task 18: Use Line 115 to find out your refund or whether you have no amount due. Subtract the sum of line 110, line 112 and line 113 from line 96.
• Task 19: Fill out your direct deposit information so you can recieve your refund as fast as possible.
• Task 20: Sign and date Form 540.

 

How Do I File an Extension on Form 540?

If you want to file a tax extension for California tax Form 540, you can recieve an automatic 6 month extension to send in your return. It’s important to remember that this does not mean you have an extension on paying your taxes—those must be paid in full by the standard due date of April 15th if you want to avoid interest and penalties. If you fail to turn in Form 540 by October 15th, unfiled tax returns will likely be penalized with a fee.  

Where Do I Send Form 540?

No matter if you’re filling out Form 540 for the first time or have been doing it for years, it can be easy to forget where to send it. For a Form 540 that indicates a refund, zero balance, or balance due without payment, send to: FRANCHISE TAX BOARD PO BOX 942840 SACRAMENTO CA 94240-0001 For a Form 540 that requires payment with return, send to: FRANCHISE TAX BOARD PO BOX 942867 SACRAMENTO CA 94267-0001