Form 1040 Tax Return Explained

Homework_chang/Chang - Form 1040 - Calendar 2014.pdf
F
o
rm 1040 Department of the Treasury—Internal Revenue Service
(99)U.S. Individual Income Tax Return 2014 OMB No. 1545-
0074 IRS Use Only—Do not write or staple in this space.
For the year Jan. 1–Dec. 31, 2014, or other tax year beginning ,
2014, ending , 20 See separate instructions.
Your first name and initial Last name Your social security
number
If a joint return, spouse’s first name and initial Last name
Spouse’s social security number
▲ Make sure the SSN(s) above
and on line 6c are correct.
Home address (number and street). If you have a P.O. box, see
instructions. Apt. no.
City, town or post office, state, and ZIP code. If you have a
foreign address, also complete spaces below (see instructions).
Foreign country name Foreign
province/state/county Foreign postal code
Presidential Election Campaign
Check here if you, or your spouse if filing
jointly, want $3 to go to this fund. Checking

a box below will not change your tax or
refund. You Spouse
Filing Status
Check only one
box.
1 Single
2 Married filing jointly (even if only one had income)
3 Married filing separately. Enter spouse’s SSN above
and full name here. ▶
4 Head of household (with qualifying person). (See
instructions.) If
the qualifying person is a child but not your dependent, enter
this
child’s name here. ▶
5 Qualifying widow(er) with dependent child
Exemptions 6a Yourself. If someone can claim you as a
dependent, do not check box 6a . . . . .
b Spouse . . . . . . . . . . . . . . . . . . . . . . . .
}
c Dependents:
(1) First name Last name
(2) Dependent’s
social security number

(3) Dependent’s
relationship to you
(4) ✓ if child under age 17
qualifying for child tax credit
(see instructions)
If more than four
dependents, see
instructions and
check here ▶
d Total number of exemptions claimed . . . . . . . . . . . . . . . . .
Boxes checked
on 6a and 6b
No. of children
on 6c who:
• lived with you
• did not live with
you due to divorce
or separation
(see instructions)
Dependents on 6c
not entered above
Add numbers on
lines above ▶
Income
Attach Form(s)
W-2 here. Also
attach Forms

W-2G and
1099-R if tax
was withheld.
If you did not
get a W-2,
see instructions.
7 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . .
7
8a Taxable interest. Attach Schedule B if required . . . . . . . . . .
. . 8a
b Tax-exempt interest. Do not include on line 8a . . . 8b
9 a Ordinary dividends. Attach Schedule B if required . . . . . . .
. . . . 9a
b Qualified dividends . . . . . . . . . . . 9b
10 Taxable refunds, credits, or offsets of state and local income
taxes . . . . . . 10
11 Alimony received . . . . . . . . . . . . . . . . . . . . . 11
12 Business income or (loss). Attach Schedule C or C-EZ . . . . .
. . . . . 12
13 Capital gain or (loss). Attach Schedule D if required. If not
required, check here ▶ 13
14 Other gains or (losses). Attach Form 4797 . . . . . . . . . . . . . .
14
15 a IRA distributions . 15a b Taxable amount . . . 15b

16 a Pensions and annuities 16a b Taxable amount . . . 16b
17 Rental real estate, royalties, partnerships, S corporations,
trusts, etc. Attach Schedule E 17
18 Farm income or (loss). Attach Schedule F . . . . . . . . . . . . . .
18
19 Unemployment compensation . . . . . . . . . . . . . . . . . 19
20 a Social security benefits 20a b Taxable amount . . . 20b
21 Other income. List type and amount 21
22 Combine the amounts in the far right column for lines 7
through 21. This is your total income ▶ 22
Adjusted
Gross
Income
23 Educator expenses . . . . . . . . . . . 23
24 Certain business expenses of reservists, performing artists,
and
fee-basis government officials. Attach Form 2106 or 2106-EZ
24
25 Health savings account deduction. Attach Form 8889 . 25
26 Moving expenses. Attach Form 3903 . . . . . . 26
27 Deductible part of self-employment tax. Attach Schedule SE
. 27
28 Self-employed SEP, SIMPLE, and qualified plans . . 28

29 Self-employed health insurance deduction . . . . 29
30 Penalty on early withdrawal of savings . . . . . . 30
31 a Alimony paid b Recipient’s SSN ▶ 31a
32 IRA deduction . . . . . . . . . . . . . 32
33 Student loan interest deduction . . . . . . . . 33
34 Tuition and fees. Attach Form 8917 . . . . . . . 34
35 Domestic production activities deduction. Attach Form 8903
35
36 Add lines 23 through 35 . . . . . . . . . . . . . . . . . . . 36
37 Subtract line 36 from line 22. This is your adjusted gross
income . . . . . ▶ 37
For Disclosure, Privacy Act, and Paperwork Reduction Act
Notice, see separate instructions. Cat. No. 11320B Form 1040
(2014)
Form 1040 (2014) Page 2
Tax and
Credits
38 Amount from line 37 (adjusted gross income) . . . . . . . . . . .
. . . 38
39a Check
if:

{ You were born before January 2, 1950, Blind.
Spouse was born before January 2, 1950, Blind.
} Total boxes
checked ▶ 39a
b If your spouse itemizes on a separate return or you were a
dual-status alien, check here ▶ 39b
Standard
Deduction
for—
• People who
check any
box on line
39a or 39b or
who can be
claimed as a
dependent,
see
instructions.
• All others:
Single or
Married filing
separately,
$6,200
Married filing
jointly or
Qualifying
widow(er),
$12,400
Head of
household,
$9,100
40 Itemized deductions (from Schedule A) or your standard

deduction (see left margin) . . 40
41 Subtract line 40 from line 38 . . . . . . . . . . . . . . . . . . . 41
42 Exemptions. If line 38 is $152,525 or less, multiply $3,950
by the number on line 6d. Otherwise, see instructions 42
43 Taxable income. Subtract line 42 from line 41. If line 42 is
more than line 41, enter -0- . . 43
44 Tax (see instructions). Check if any from: a Form(s) 8814 b
Form 4972 c 44
45 Alternative minimum tax (see instructions). Attach Form
6251 . . . . . . . . . 45
46 Excess advance premium tax credit repayment. Attach Form
8962 . . . . . . . . 46
47 Add lines 44, 45, and 46 . . . . . . . . . . . . . . . . . . . ▶ 47
48 Foreign tax credit. Attach Form 1116 if required . . . . 48
49 Credit for child and dependent care expenses. Attach Form
2441 49
50 Education credits from Form 8863, line 19 . . . . . 50
51 Retirement savings contributions credit. Attach Form 8880
51
52 Child tax credit. Attach Schedule 8812, if required . . . 52
53 Residential energy credits. Attach Form 5695 . . . . 53
54 Other credits from Form: a 3800 b 8801 c 54

55 Add lines 48 through 54. These are your total credits . . . . . .
. . . . . . 55
56 Subtract line 55 from line 47. If line 55 is more than line 47,
enter -0- . . . . . . ▶ 56
Other
Taxes
57 Self-employment tax. Attach Schedule SE . . . . . . . . . . . . . .
. 57
58 Unreported social security and Medicare tax from Form: a
4137 b 8919 . . 58
59 Additional tax on IRAs, other qualified retirement plans, etc.
Attach Form 5329 if required . . 59
60 a Household employment taxes from Schedule H . . . . . . . . .
. . . . . 60a
b First-time homebuyer credit repayment. Attach Form 5405 if
required . . . . . . . . 60b
61 Health care: individual responsibility (see instructions) Full-
year coverage . . . . . 61
62 Taxes from: a Form 8959 b Form 8960 c Instructions; enter
code(s) 62
63 Add lines 56 through 62. This is your total tax . . . . . . . . . . .
. . ▶ 63
Payments 64 Federal income tax withheld from Forms W-2 and
1099 . . 64

65 2014 estimated tax payments and amount applied from 2013
return 65
If you have a
qualifying
child, attach
Schedule EIC.
66a Earned income credit (EIC) . . . . . . . . . . 66a
b Nontaxable combat pay election 66b
67 Additional child tax credit. Attach Schedule 8812 . . . . . 67
68 American opportunity credit from Form 8863, line 8 . . . 68
69 Net premium tax credit. Attach Form 8962 . . . . . . 69
70 Amount paid with request for extension to file . . . . . 70
71 Excess social security and tier 1 RRTA tax withheld . . . . 71
72 Credit for federal tax on fuels. Attach Form 4136 . . . . 72
73 Credits from Form: a 2439 b Reserved c Reserved d 73
74 Add lines 64, 65, 66a, and 67 through 73. These are your
total payments . . . . . ▶ 74
Refund
Direct deposit?
See
instructions.
75 If line 74 is more than line 63, subtract line 63 from line 74.
This is the amount you overpaid 75

76a Amount of line 75 you want refunded to you. If Form 8888
is attached, check here . ▶ 76a
▶
▶
b Routing number ▶ c Type: Checking Savings
d Account number
77 Amount of line 75 you want applied to your 2015 estimated
tax ▶ 77
Amount
You Owe
78 Amount you owe. Subtract line 74 from line 63. For details
on how to pay, see instructions ▶ 78
79 Estimated tax penalty (see instructions) . . . . . . . 79
Third Party
Designee
Do you want to allow another person to discuss this return with
the IRS (see instructions)? Yes. Complete below. No
Designee’s
name ▶
Phone
no. ▶
Personal identification
number (PIN) ▶
Sign
Here

Joint return? See
instructions.
Keep a copy for
your records.
Under penalties of perjury, I declare that I have examined this
return and accompanying schedules and statements, and to the
best of my knowledge and belief,
they are true, correct, and complete. Declaration of preparer
(other than taxpayer) is based on all information of which
preparer has any knowledge.
Your signature Date Your occupation Daytime phone number
Spouse’s signature. If a joint return, both must sign. Date
▲
Spouse’s occupation If the IRS sent you an Identity Protection
PIN, enter it
here (see inst.)
Paid
Preparer
Use Only
Print/Type preparer’s name Preparer’s signature Date
Check if
self-employed
PTIN
Firm’s name ▶
Firm’s address ▶

Firm's EIN ▶
Phone no.
www.irs.gov/form1040 Form 1040 (2014)
Version A, Cycle 11
Internal Use Only
DRAFT AS OF
December 19, 2014
Version A, Cycle 11
Internal Use Only
DRAFT AS OF
December 19, 2014
2014 Form 1040
SE:W:CAR:MP
U.S. Individual Income Tax Return
Form
1040
Department of the Treasury—Internal Revenue Service
(99)
U.S. Individual Income Tax Return
2014
2014. Catalog Number 11320B.
OMB No. 1545-0074
O M B Number 1545-0074. For Disclosure, Privacy Act, and
Paperwork Reduction Act Notice, see separate instructions.
IRS Use Only—Do not write or staple in this space.
See separate instructions.
▲
Make sure the SSN(s) above and on line 6c are correct.
Presidential Election Campaign
Check here if you, or your spouse if filing jointly, want $3 to go
to this fund. Checking a box below will not change your tax or
refund.

Filing Status
Check only one box.
1
Single
2
Married filing jointly (even if only one had income)
3
Married filing separately. Enter spouse’s SSN above and full
name here. ▶
4
Head of household (with qualifying person). (See instructions.)
If the qualifying person is a child but not your dependent, enter
this child’s name here. ▶
5
Qualifying widow(er) with dependent child
Exemptions
6
a
Yourself. If someone can claim you as a dependent, do
not check box 6a
b
Spouse
}
c
Dependents:
(1) First name Last name
(2) Dependent’s
social security number
(3) Dependent’s relationship to you
(4) ✓ if child under age 17 qualifying for child tax credit
(see instructions)
(4) Check if child under age 17 qualifying for child tax credit
(see instructions).
If more than four dependents, see instructions and check
here ▶
d

Total number of exemptions claimed
Boxes checked on 6a and 6b
No. of children on 6c who:
• lived with you
• did not live with you due to divorce or separation
(see instructions)
Dependents on 6c not entered above
Add numbers on lines above ▶
Income
Attach Form(s) W-2 here. Also attach Forms W-2G and
1099-R if tax was withheld.
If you did not
get a W-2,
see instructions.
7
Wages, salaries, tips, etc. Attach Form(s) W-2
7
8
a
Taxable interest. Attach Schedule B if required
8a
b
Tax-exempt interest. Do not include on line 8a
8b
9
a
Ordinary dividends. Attach Schedule B if required
9a
b
Qualified dividends
9b
10
Taxable refunds, credits, or offsets of state and local income
taxes
10
11

Alimony received
11
12
Business income or (loss). Attach Schedule C or C-EZ
12
13
Capital gain or (loss). Attach Schedule D if required. If not
required, check here ▶
13
14
Other gains or (losses). Attach Form 4797
14
15
a
IRA distributions
15a
b Taxable amount
15b
16
a
Pensions and annuities
16a
b Taxable amount
16b
17
Rental real estate, royalties, partnerships, S corporations, trusts,
etc. Attach Schedule E
17
18
Farm income or (loss). Attach Schedule F
18
19
Unemployment compensation
19
20
a

Social security benefits
20a
b Taxable amount
20b
21
Other income. List type and amount
21
22
Combine the amounts in the far right column for lines 7 through
21. This is your total income ▶
22
Adjusted Gross Income
23
Educator expenses
23
24
Certain business expenses of reservists, performing artists, and
fee-basis government officials. Attach Form 2106 or 2106-EZ
24
25
Health savings account deduction. Attach Form 8889
25
26
Moving expenses. Attach Form 3903
26
27
Deductible part of self-employment tax. Attach Schedule SE
27
28
Self-employed SEP, SIMPLE, and qualified plans
28
29
Self-employed health insurance deduction
29
30

Penalty on early withdrawal of savings
30
31
a
Alimony paid
b Recipient’s SSN ▶
31a
32
IRA deduction
32
33
Student loan interest deduction
33
34
Tuition and fees. Attach Form 8917
34
35
Domestic production activities deduction. Attach Form 8903
35
36
Add lines 23 through 35
36
37
Subtract line 36 from line 22. This is your adjusted gross
income ▶
37
For Disclosure, Privacy Act, and Paperwork Reduction Act
Notice, see separate instructions.
Cat. No. 11320B
Form 1040 (2014)
Form 1040 (2014)
Page 2
Tax and Credits
38
Amount from line 37 (adjusted gross income)
38

39
a
Check if:
{
}
Total boxes checked ▶
39a
b
If your spouse itemizes on a separate return or you were a dual-
status alien, check here ▶
Standard Deduction for—
• People who check any box on line 39a or 39b or who can be
claimed as a dependent, see instructions.
• All others:
Single or Married filing separately, $6,200
Married filing jointly or Qualifying widow(er), $12,400
Head of household, $9,100
40
Itemized deductions (from Schedule A) or your standard
deduction (see left margin)
40
41
Subtract line 40 from line 38
41
42
Exemptions. If line 38 is $152,525 or less, multiply $3,950 by
the number on line 6d. Otherwise, see instructions
42
43
Taxable income. Subtract line 42 from line 41. If line 42 is
more than line 41, enter -0-
43
44
Tax (see instructions). Check if any from:
a
b

c
44
45
Alternative minimum tax (see instructions). Attach Form 6251
45
46
Excess advance premium tax credit repayment. Attach Form
8962
46
47
Add lines 44, 45, and 46 ▶
47
48
Foreign tax credit. Attach Form 1116 if required
48
49
Credit for child and dependent care expenses. Attach Form 2441
49
50
Education credits from Form 8863, line 19
50
51
Retirement savings contributions credit. Attach Form 8880
51
52
Child tax credit. Attach Schedule 8812, if required
52
53
Residential energy credits. Attach Form 5695
53
54
Other credits from Form:
a
b
c

54
55
Add lines 48 through 54. These are your total credits
55
56
Subtract line 55 from line 47. If line 55 is more than line 47,
enter -0- ▶
56
Other Taxes
57
Self-employment tax. Attach Schedule SE
57
58
Unreported social security and Medicare tax from Form:
a
b
58
59
Additional tax on IRAs, other qualified retirement plans, etc.
Attach Form 5329 if required
59
60
a
Household employment taxes from Schedule H
60a
b
First-time homebuyer credit repayment. Attach Form 5405 if
required
60b
61
Health care: individual responsibility (see instructions)
61
62
Taxes from:
a

b
c
enter code(s)
62
63
Add lines 56 through 62. This is your total tax ▶
63
Payments
64
Federal income tax withheld from Forms W-2 and 1099
64
65
2014 estimated tax payments and amount applied from 2013
return
65
If you have a qualifying child, attach Schedule EIC.
66
a
Earned income credit (EIC)
66a
b
Nontaxable combat pay election
66b
67
Additional child tax credit. Attach Schedule 8812 .
67
68
American opportunity credit from Form 8863, line 8
68
69
Net premium tax credit. Attach Form 8962
69
70
Amount paid with request for extension to file
70
71

Excess social security and tier 1 RRTA tax withheld
71
72
Credit for federal tax on fuels. Attach Form 4136
72
73
Credits from Form:
a
b
c
d
73
74
Add lines 64, 65, 66a, and 67 through 73. These are your total
payments ▶
74
Refund
Direct deposit? See instructions.
75
If line 74 is more than line 63, subtract line 63 from line 74.
This is the amount you overpaid
75
76
a
Amount of line 75 you want refunded to you. If Form 8888 is
attached, check here ▶
76a
▶
▶
b
Routing number
▶ c Type:
d
Account number
77
Amount of line 75 you want applied to your 2015 estimated

tax ▶
77
Amount You Owe
78
Amount you owe. Subtract line 74 from line 63. For details on
how to pay, see instructions ▶
78
79
Estimated tax penalty (see instructions)
79
Third Party Designee
Do you want to allow another person to discuss this return with
the IRS (see instructions)?
Designee’sname ▶
Phoneno. ▶
Personal identificationnumber (PIN) ▶
Sign Here
Joint return? See instructions. Keep a copy for your records.
Under penalties of perjury, I declare that I have examined this
return and accompanying schedules and statements, and to the
best of my knowledge and belief, they are true, correct, and
complete. Declaration of preparer (other than taxpayer) is based
on all information of which preparer has any knowledge.
Your signature
Date
Spouse’s signature. If a joint return, both must sign.
Date
▲
If the IRS sent you an Identity Protection PIN, enter it
here (see inst.)
Paid Preparer Use Only
Preparer’s signature
Date
Check if
self-employed
www.irs.gov/form1040

Form 1040 (2014)
f1_01: f1_02: f1_03: f1_04: PATRICKf1_05: CHANGf1_06:
123456789f1_07: ROSEf1_08: CHANGf1_09: 234567890f1-10:
1001 GREENWOOD AVE.f1-11: f1-12: SAN JOSE, CA
95113f1_13: f1_14: f1_15: c1_01: c1_02: c1_03: MJf1-16:
f1_17: c1_04: c1_05: f1_18: f1_19: f1_20: c1_06: f1_21: f1_22:
f1_23: c1_07: f1_24: f1_25: f1_26: c1_08: f1_27: f1_28: f1_29:
c1_09: c1_10: f1_30: 2f1_31: 0f1_32: 0f1_33: 0f1_34: 2f1_35:
157,000f1_36: ---f1_37: 1,105f1_38: ---f1_39: 0f1_40: ---
f1_41: 1,400f1_42: ---f1_43: 1,400f1_44: ---f1_45: 750f1_46: --
-f1_47: f1_48: f1_49: f1_50: c1_11: f1-_51: 58,859f1_52: ---
f1_53: f1_54: f1_55: f1_56: f1_57: f1_58: f1_59: f1_60: f1_61:
f1_62: f1_63: f1_64: f1_65: f1_66: f1_67: f1_68: f1_69:
23,000f1_70: ---f1_71: 19,550f1_72: ---f1_73: f1_74: f1_75:
f1_76: 238,664f1_77: ---f1_78: f1_79: f1_80: f1_81: f1_82:
f1_83: f1_84: f1_85: f1_86: xxxxxxxxxf1_87:
xxxxxxxxxxxxxxxxxf1_88: f1_89: f1_90: f1_91: f1_92: f1_93:
f1_94: f1_95: f1_96: f1_97: f1_98: f1_99: f1_100: f1_101:
f1_102: f1_103: f1_104: f1_105: 0f1_106: ---f1_107:
238,664f1_108: ---f2_01: 238,664f2_02: ---c2_01: c2_02:
c2_03: c2_04: f2-03: c2_05: f2_04: 26,940f2_05: ---f2_06:
211,724f2_07: ---f2_08: 7,900f2_09: ---f2_10: 203,824f2_11: --
-c2_06: c2_07: c2_08: f2_12: f2_13: 36,643f2_14: ---f2_15:
0f2_16: ---f2_17: 0f2_18: ---f2_19: 36,643f2_20: ---f2_21:
f2_22: f2_23: f2_24: f2_25: f2_26: f2_27: f2_28: f2_29: F2_30:
f2_31: f2_32: c2_09: c2_10: c2_11: f2_33: f2_34: f2_35: f2_36:
0f2_37: ---f2_38: 36,643f2_39: ---f2_40: f2_41: c2_12: c2_13:
f2_42: f2_43: f2_44: f2_45: f2_46: f2_47: f2_48: f2_49: c2_14:
Yesf2_50: f2_51: c2_15: c2_16: c2_17: f2_52: f2_53: f2_54:
f2_55: 36,643f2_56: ---f2_57: 40,000f2_58: ---f2_59: f2_60:
f2_61: f2_62: f2_63: f2_64: f2_65: f2_66: f2_67: f2_68: f2_69:
f2_70: f2_71: f2_72: f2_73: f2_74: f2_75: f2_76: c2_18: c2_19:
c2_20: c2_21: f2_77: f2_78: f2_79: f2_80: 40,000f2_81: ---
f2_82: 3,357f2_83: ---c2_22: f2_84: 3,357f2_85: ---c2_23:
f2_88: 0f2_89: ---f2_90: f2_91: f2_92: f2_93: c2_24: f2_94:
f2_95: f2_96: f2_97: f2_98: f2_99: f2_100: f2_101: c2_25:

f2_102: f2_103: f2_104: f2_105: f2_106:
Homework_chang/Chang - Schedule A - Calendar 2014.pdf
SCHEDULE A
(Form 1040)
Department of the Treasury
Internal Revenue Service (99)
Itemized Deductions
▶ Information about Schedule A and its separate instructions is
at www.irs.gov/schedulea.
▶ Attach to Form 1040.
OMB No. 1545-0074
2014
Attachment
Sequence No. 07
Name(s) shown on Form 1040 Your social security number
Medical
and
Dental
Expenses
Caution. Do not include expenses reimbursed or paid by others.
1 Medical and dental expenses (see instructions) . . . . . 1
2 Enter amount from Form 1040, line 38 2
3 Multiply line 2 by 10% (.10). But if either you or your spouse
was

born before January 2, 1950, multiply line 2 by 7.5% (.075)
instead 3
4 Subtract line 3 from line 1. If line 3 is more than line 1, enter
-0- . . . . . . . . 4
Taxes You
Paid
5 State and local (check only one box):
a Income taxes, or
b General sales taxes } . . . . . . . . . . . 5
6 Real estate taxes (see instructions) . . . . . . . . . 6
7 Personal property taxes . . . . . . . . . . . . . 7
8 Other taxes. List type and amount ▶
8
9 Add lines 5 through 8 . . . . . . . . . . . . . . . . . . . . . . 9
Interest
You Paid
Note.
Your mortgage
interest
deduction may
be limited (see
instructions).
10 Home mortgage interest and points reported to you on Form
1098 10
11
Home mortgage interest not reported to you on Form 1098. If
paid

to the person from whom you bought the home, see instructions
and show that person’s name, identifying no., and address ▶
11
12
Points not reported to you on Form 1098. See instructions for
special rules . . . . . . . . . . . . . . . . . 12
13 Mortgage insurance premiums (see instructions) . . . . . 13
14 Investment interest. Attach Form 4952 if required. (See
instructions.) 14
15 Add lines 10 through 14 . . . . . . . . . . . . . . . . . . . . . 15
Gifts to
Charity
If you made a
gift and got a
benefit for it,
see instructions.
16
Gifts by cash or check. If you made any gift of $250 or more,
see instructions . . . . . . . . . . . . . . . . 16
17
Other than by cash or check. If any gift of $250 or more, see
instructions. You must attach Form 8283 if over $500 . . . 17
18 Carryover from prior year . . . . . . . . . . . . 18
19 Add lines 16 through 18 . . . . . . . . . . . . . . . . . . . . . 19

Casualty and
Theft Losses 20 Casualty or theft loss(es). Attach Form 4684.
(See instructions.) . . . . . . . . 20
Job Expenses
and Certain
Miscellaneous
Deductions
21
Unreimbursed employee expenses—job travel, union dues,
job education, etc. Attach Form 2106 or 2106-EZ if required.
(See instructions.) ▶ 21
22 Tax preparation fees . . . . . . . . . . . . . 22
23
Other expenses—investment, safe deposit box, etc. List type
and amount ▶
23
24 Add lines 21 through 23 . . . . . . . . . . . . 24
25 Enter amount from Form 1040, line 38 25
26 Multiply line 25 by 2% (.02) . . . . . . . . . . . 26
27 Subtract line 26 from line 24. If line 26 is more than line 24,
enter -0- . . . . . . 27
Other
Miscellaneous
Deductions

28 Other—from list in instructions. List type and amount ▶
28
Total
Itemized
Deductions
29
Is Form 1040, line 38, over $152,525?
29
No. Your deduction is not limited. Add the amounts in the far
right column
for lines 4 through 28. Also, enter this amount on Form 1040,
line 40. } . .Yes. Your deduction may be limited. See the
Itemized Deductions
Worksheet in the instructions to figure the amount to enter.
30
If you elect to itemize deductions even though they are less than
your standard
deduction, check here . . . . . . . . . . . . . . . . . . . ▶
For Paperwork Reduction Act Notice, see Form 1040
instructions. Cat. No. 17145C Schedule A (Form 1040) 2014
Version A, Cycle 4
IINTERNAL USE ONLY
DRAFT AS OF
December 11, 2014
2014 Form 1040 (Schedule A)

SE:W:CAR:MP
Itemized Deductions
SCHEDULE A (Form 1040)
Department of the Treasury Internal Revenue Service (99)
Itemized Deductions
▶ Information about Schedule A and its separate instructions is
at www.irs.gov/schedulea.
▶ Attach to Form 1040.
OMB No. 1545-0074
2014
2014. Catalog Number 17145C.
Attachment
Sequence No. 07
Attachment Sequence Number 07. For Paperwork Reduction Act
Notice, see Form 1040 instructions.
Medical
and
Dental Expenses
Caution. Do not include expenses reimbursed or paid by
others.
1
Medical and dental expenses (see instructions)
1
2
Enter amount from Form 1040, line 38
2
3
Multiply line 2 by 10% (.10). But if either you or your spouse
was born before January 2, 1950, multiply line 2 by 7.5% (.075)
instead
3
4
Subtract line 3 from line 1. If line 3 is more than line 1, enter -
0-
4
Taxes YouPaid

5
State and local (check only one box):
a
b
}
5
6
Real estate taxes (see instructions)
6
7
Personal property taxes
7
8
8
9
9
InterestYou Paid
Note.Your mortgage interest deduction may be limited (see
instructions).
10
Home mortgage interest and points reported to you on Form
1098
10
11
Home mortgage interest not reported to you on Form 1098. If
paid to the person from whom you bought the home, see
instructions and show that person’s name, identifying no., and
address ▶
11
12
Points not reported to you on Form 1098. See instructions for

special rules
12
13
Mortgage insurance premiums (see instructions)
13
14
Investment interest. Attach Form 4952 if required. (See
instructions.)
14
15
15
Gifts toCharity
If you made agift and got abenefit for it,see instructions.
16
Gifts by cash or check. If you made any gift of $250 or more,
see instructions
16
17
Other than by cash or check. If any gift of $250 or more, see
instructions. You must attach Form 8283 if over $500
17
18
Carryover from prior year
18
19
19
Casualty and
Theft Losses
20
Casualty or theft loss(es). Attach Form 4684. (See
instructions.)
20

Job Expensesand Certain Miscellaneous Deductions
21
Unreimbursed employee expenses—job travel, union dues, job
education, etc. Attach Form 2106 or 2106-EZ if required. (See
instructions.) ▶
21
22
Tax preparation fees
22
23
Other expenses—investment, safe deposit box, etc. List type
and amount ▶
23
24
24
25
Enter amount from Form 1040, line 38
25
26
Multiply line 25 by 2% (.02)
26
27
Subtract line 26 from line 24. If line 26 is more than line 24,
enter -0-
27
Other Miscellaneous Deductions
28
28
Total
Itemized Deductions
29

Is Form 1040, line 38, over $152,525?
29
No. Your deduction is not limited. Add the amounts in the far
right column
for lines 4 through 28. Also, enter this amount on Form 1040,
line 40.
}
Yes. Your deduction may be limited. See the Itemized
Deductions
Worksheet in the instructions to figure the amount to enter.
30
If you elect to itemize deductions even though they are less than
your standard deduction, check here ▶
For Paperwork Reduction Act Notice, see Form 1040
instructions.
Cat. No. 17145C
Schedule A (Form 1040) 2014
PATRICK AND ROSE CHANG
123-45-6789
f1_1: f1_2: f1_3: f1_4: f1_5: f1_6: f1_7: f1_8: f1_9: 0f1_10: ---
c1_1: 1f1_11: 16,000f1_12: ---f1_13: 3,800f1_14: ---f1_15:
140f1_16: ---f1_17: f1_18: f1_19: f1_20: f1_21: 19,940f1_22: -
--f1_23: f1_24: f1_25: f1_26: f1_27: f1_28: f1_29: f1_30:
f1_31: f1_32: f1_33: f1_34: f1_35: 0f1_36: ---f1_37:
7,000f1_38: ---f1_39: f1_40: f1_41: f1_42: f1_43: 7,000f1_44: -
--f1_45: 0f1_46: ---f1_47: f1_48: f1_49: f1_50: f1_51: f1_52:
f1_53: f1_54: f1_55: f1_56: f1_57: f1_58: f1_59: f1_60: f1_61:
f1_62: 0f1_63: ---f1_64: f1_65: f1_66: f1_67: 0f1_68: ---f1_69:
26,940f1_70: ---c1_2: c1_3:
Homework_chang/Chang - Schedule D - Calendar 2014.pdf

SCHEDULE D
(Form 1040)
Department of the Treasury
Internal Revenue Service (99)
Capital Gains and Losses
▶ Attach to Form 1040 or Form 1040NR.
▶ Information about Schedule D and its separate instructions is
at www.irs.gov/scheduled.
▶ Use Form 8949 to list your transactions for lines 1b, 2, 3, 8b,
9, and 10.
OMB No. 1545-0074
2014
Attachment
Sequence No. 12
Name(s) shown on return Your social security number
Part I Short-Term Capital Gains and Losses—Assets Held One
Year or Less
See instructions for how to figure the amounts to enter on the
lines below.
This form may be easier to complete if you round off cents to
whole dollars.
(d)
Proceeds
(sales price)
(e)

Cost
(or other basis)
(g)
Adjustments
to gain or loss from
Form(s) 8949, Part I,
line 2, column (g)
(h) Gain or (loss)
Subtract column (e)
from column (d) and
combine the result with
column (g)
1a Totals for all short-term transactions reported on Form
1099-B for which basis was reported to the IRS and for
which you have no adjustments (see instructions).
However, if you choose to report all these transactions
on Form 8949, leave this line blank and go to line 1b .
1b Totals for all transactions reported on Form(s) 8949 with
Box A checked . . . . . . . . . . . . .
2
Totals for all transactions reported on Form(s) 8949 with
Box B checked . . . . . . . . . . . . .
3

Box C checked . . . . . . . . . . . . .
4 Short-term gain from Form 6252 and short-term gain or (loss)
from Forms 4684, 6781, and 8824 . 4
5
Net short-term gain or (loss) from partnerships, S corporations,
estates, and trusts from
Schedule(s) K-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6
Short-term capital loss carryover. Enter the amount, if any,
from line 8 of your Capital Loss Carryover
Worksheet in the instructions . . . . . . . . . . . . . . . . . . . . . . . 6
( )
7 Net short-term capital gain or (loss). Combine lines 1a
through 6 in column (h). If you have any long-
term capital gains or losses, go to Part II below. Otherwise, go
to Part III on the back . . . . . 7
Part II Long-Term Capital Gains and Losses—Assets Held More
Than One Year
lines below.
whole dollars.
(d)
Proceeds

(sales price)
(e)
Cost
(or other basis)
(g)
Adjustments
to gain or loss from
Form(s) 8949, Part II,
line 2, column (g)
(h) Gain or (loss)
Subtract column (e)
from column (d) and
combine the result with
column (g)
8a Totals for all long-term transactions reported on Form
1099-B for which basis was reported to the IRS and for
which you have no adjustments (see instructions).
However, if you choose to report all these transactions
on Form 8949, leave this line blank and go to line 8b .
8b Totals for all transactions reported on Form(s) 8949 with
Box D checked . . . . . . . . . . . . .
9

Box E checked . . . . . . . . . . . . .
10
Box F checked . . . . . . . . . . . . . .
11
Gain from Form 4797, Part I; long-term gain from Forms 2439
and 6252; and long-term gain or (loss)
from Forms 4684, 6781, and 8824 . . . . . . . . . . . . . . . . . . . . . .
11
12 Net long-term gain or (loss) from partnerships, S
corporations, estates, and trusts from Schedule(s) K-1 12
13 Capital gain distributions. See the instructions . . . . . . . . . . .
. . . . . . . 13
14
Long-term capital loss carryover. Enter the amount, if any, from
line 13 of your Capital Loss Carryover
Worksheet in the instructions . . . . . . . . . . . . . . . . . . . . . . . 14
( )
15
Net long-term capital gain or (loss). Combine lines 8a through
14 in column (h). Then go to Part III on
the back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

For Paperwork Reduction Act Notice, see your tax return
instructions. Cat. No. 11338H Schedule D (Form 1040) 2014
Schedule D (Form 1040) 2014 Page 2
Part III Summary
16 Combine lines 7 and 15 and enter the result . . . . . . . . . . . . .
. . . . . 16
• If line 16 is a gain, enter the amount from line 16 on Form
1040, line 13, or Form 1040NR, line
14. Then go to line 17 below.
• If line 16 is a loss, skip lines 17 through 20 below. Then go to
line 21. Also be sure to complete
line 22.
• If line 16 is zero, skip lines 17 through 21 below and enter -0-
on Form 1040, line 13, or Form
1040NR, line 14. Then go to line 22.
17 Are lines 15 and 16 both gains?
Yes. Go to line 18.
No. Skip lines 18 through 21, and go to line 22.
18 Enter the amount, if any, from line 7 of the 28% Rate Gain
Worksheet in the instructions . . ▶ 18
19
Enter the amount, if any, from line 18 of the Unrecaptured
Section 1250 Gain Worksheet in the

instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ 19
20 Are lines 18 and 19 both zero or blank?
Yes. Complete the Qualified Dividends and Capital Gain Tax
Worksheet in the instructions
for Form 1040, line 44 (or in the instructions for Form 1040NR,
line 42). Do not complete lines
21 and 22 below.
No. Complete the Schedule D Tax Worksheet in the
instructions. Do not complete lines 21
and 22 below.
21 If line 16 is a loss, enter here and on Form 1040, line 13, or
Form 1040NR, line 14, the smaller of:
• The loss on line 16 or
• ($3,000), or if married filing separately, ($1,500) } . . . . . . . .
. . . . . . . 21 ( )
Note. When figuring which amount is smaller, treat both
amounts as positive numbers.
22 Do you have qualified dividends on Form 1040, line 9b, or
Form 1040NR, line 10b?
Worksheet in the instructions
for Form 1040, line 44 (or in the instructions for Form 1040NR,
line 42).
No. Complete the rest of Form 1040 or Form 1040NR.
Schedule D (Form 1040) 2014
Version A, Cycle 2

INTERNAL USE ONLY
DRAFT AS OF
February 12, 2014
2014 Form 1040 (Schedule D)
SE:W:CAR:MP
SCHEDULE D (Form 1040)
Department of the Treasury Internal Revenue Service
(99)
▶ Attach to Form 1040 or Form 1040NR.
▶ Information about Schedule D and its separate instructions is
at www.irs.gov/scheduled.
▶ Use Form 8949 to list your transactions for lines 1b, 2, 3, 8b,
9, and 10.
OMB No. 1545-0074
2014
2014. Catalog Number 11338H.
Attachment
Sequence No. 12
Attachment Sequence Number 12. For Paperwork Reduction
Act Notice, see your tax return instructions.
Part I
Short-Term Capital Gains and Losses—Assets Held One Year or
Less
lines below.
whole dollars.
lines below.
whole dollars.
(d)
Proceeds
(sales price)

(e)
Cost
(or other basis)
(g)
Adjustments
to gain or loss from Form(s) 8949, Part I, line 2, column
(g)
(h) Gain or (loss)
Subtract column (e) from column (d) and combine
the result with column (g)
1a
Totals for all short-term transactions reported on Form 1099-B
for which basis was reported to the IRS and for which you have
no adjustments (see instructions). However, if you choose to
report all these transactions on Form 8949, leave this line blank
and go to line 1b
Line 1a. Item 1. (b)
1b
Totals for all transactions reported on Form(s) 8949 with Box
A checked
Line 1b. Item 2. (b).
2
B checked
Line 1. Item 2. (b).
3
C checked
Line 1. Item 3. (b).
4
Short-term gain from Form 6252 and short-term gain or (loss)
from Forms 4684, 6781, and 8824
4
5

Net short-term gain or (loss) from partnerships, S corporations,
estates, and trusts from Schedule(s) K-1
5
6
Short-term capital loss carryover. Enter the amount, if any,
from line 8 of your Capital Loss Carryover Worksheet in the
instructions
6
( )
7
Net short-term capital gain or (loss). Combine lines 1a through
6 in column (h). If you have any long-term capital gains or
losses, go to Part II below. Otherwise, go to Part III on the
back
7
Part II
Long-Term Capital Gains and Losses—Assets Held More Than
One Year
lines below.
whole dollars.
lines below.
whole dollars.
(d)
Proceeds
(sales price)
(e)
Cost
(or other basis)
(g)
Adjustments

to gain or loss from Form(s) 8949, Part II, line 2, column
(g)
(h) Gain or (loss)
Subtract column (e) from column (d) and combine
the result with column (g)
8a
Totals for all long-term transactions reported on Form 1099-B
for which basis was reported to the IRS and for which you have
no adjustments (see instructions). However, if you choose to
report all these transactions on Form 8949, leave this line blank
and go to line 8b
Line 8a. Item 1. (b).
8b
D checked
Line 1. Item 2. (b). Totals for all transactions reported on
Form(s) 8949 with Box D checked.
9
E checked
Form(s) 8949 with Box E checked.
10
F checked
Form(s) 8949 with Box F checked.
11
Gain from Form 4797, Part I; long-term gain from Forms 2439
and 6252; and long-term gain or (loss) from Forms 4684, 6781,
and 8824
11
12

Net long-term gain or (loss) from partnerships, S corporations,
estates, and trusts from Schedule(s) K-1
12
13
Capital gain distributions. See the instructions
13
14
Long-term capital loss carryover. Enter the amount, if any, from
line 13 of your Capital Loss Carryover Worksheet in the
instructions
14
( )
15
Net long-term capital gain or (loss). Combine lines 8a through
14 in column (h). Then go to Part III on the back
15
For Paperwork Reduction Act Notice, see your tax return
instructions.
Cat. No. 11338H
Page 2
Part III
Summary
16
Combine lines 7 and 15 and enter the result
16
• If line 16 is a gain, enter the amount from line 16 on Form
1040, line 13, or Form 1040NR, line 14. Then go to line 17
below.
• If line 16 is a loss, skip lines 17 through 20 below. Then go to
line 21. Also be sure to complete line 22.
• If line 16 is zero, skip lines 17 through 21 below and enter -0-
on Form 1040, line 13, or Form 1040NR, line 14. Then go to

line 22.
17
Are lines 15 and 16 both gains?
Yes. Go to line 18.
No. Skip lines 18 through 21, and go to line 22.
18
Enter the amount, if any, from line 7 of the 28% Rate Gain
Worksheet in the instructions ▶
18
19
Enter the amount, if any, from line 18 of the Unrecaptured
Section 1250 Gain Worksheet in the instructions ▶
19
20
Are lines 18 and 19 both zero or blank?
Worksheet in the instructions for Form 1040, line 44 (or in the
instructions for Form 1040NR, line 42). Do not complete lines
21 and 22 below.
No. Complete the Schedule D Tax Worksheet in the
instructions. Do not complete lines 21 and 22 below.
21
If line 16 is a loss, enter here and on Form 1040, line 13, or
Form 1040NR, line 14, the smaller of:
• The loss on line 16 or
• ($3,000), or if married filing separately, ($1,500)
}
21
( )
Note. When figuring which amount is smaller, treat both
amounts as positive numbers.
22
Do you have qualified dividends on Form 1040, line 9b, or
Form 1040NR, line 10b?

Worksheet in the instructions for Form 1040, line 44 (or in the
instructions for Form 1040NR, line 42).
No. Complete the rest of Form 1040 or Form 1040NR.
f1_001: PATRICK AND ROSE CHANGf1_002: 123-45-
6789f1_003: f1_004: f1_005: f1_006: f1_300: f1_301: f1_302:
f1_303: f1_007: f1_008: f1_009: f1_010: f1_011: f1_012:
f1_013: f1_014: f1_015: f1_016: f1_017: f1_018: 0f1_019:
74,234f1_020: 15,375f1_021: f1_022: 58,859f1_304: f1_305:
f1_306: f1_307: 0f1_023: f1_024: f1_025: f1_026: 0f1_027:
f1_028: f1_029: f1_030: 0f1_031: 0f1_032: 0f1_033: 0f1_034:
0f1_035: 58,859f2_001: 58,859c2_01_0_: Yesf2_002: 0f2_003:
0c2_02_0_: Yesf2_005: c2_03_0_:
Homework_chang/Chang 2015 Mock Return Workpapers.xlsx
ChangWagesFedCAPatrick37,00037,000Rose120,000120,000Int
erestBasisProceedsGainsChase1,1051,105Schedule
D$15,375$74,234$58,859LTDividends1,4001,400Capital
Gains58,85958,859Tax Refund750- 0Social Security19,550-
0GI/AGI238,664218,364Itemized DeductionsTaxes2014 CA
Taxes Withheld Patrick4,000- 02014 CA Taxes Withheld
Rose12,000- 0CA DMV Taxes140140CA Real Property
Taxes3,8003,800Charitable7,0007,000Interest Mortgage- 0-
0Itemized Deductions26,94010,940Income After ID B4
Exemptions211,724207,424Exemptions7,900- 0Taxable
Income203,824207,424Tax Liability36,64314,308CA Exemption
Credit- 0(432)Tax Liability36,64313,876Taxes
Withheld40,00016,000Taxes Overpaid/Refunded(3,357)(2,124)
Chang SS1. Enter the total amount from box 5 of all your Forms
SSA-1099 andForms RRB-1099. Also, enter this amount on
Form 1040, line 20a . . . . . . 1.123,0002. Enter one-half of line
1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 2.211,5003. Enter the total of the amounts from Form
1040, lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17through 19,
and 21 . .[ALL TAXABLE INCOME EXCEPT SOCIAL

SECURITY] . . 3.3219,1144. Enter the amount, if any, from
Form 1040, line 8b . . . . . [TAX EXEMPT INTEREST] . . . 4.4-
05. Add lines 2, 3, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5230,6146. Enter the
total of the amounts from Form 1040, lines 23 through 32, plus
any write-inadjustments you entered on the dotted line next to
line 36 . . . .[ANY DEDUCTIONS FOR AGI] . 6.6- 07. Is the
amount on line 6 less than the amount on line 5?No. STOP None
of your social security benefits are taxable. Enter -0- on Form
1040, line20b.Yes. Subtract line 6 from line 5 . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7230,6148. If you
are:• Married filing jointly, enter $32,000• Single, head of
household, qualifying widow(er), or married filingseparately
and you lived apart from your spouse for all of 2009,enter
$25,000 }. . . . . . . . . . . . . . 8.832,000• Married filing
separately and you lived with your spouse at any timein 2009,
skip lines 8 through 15; multiply line 7 by 85% (.85) andenter
the result on line 16. Then go to line 179. Is the amount on line
8 less than the amount on line 7?No. STOP None of your social
security benefits are taxable. Enter -0- on Form 1040, line20b.
If you are married filing separately and you lived apart from
your spousefor all of 2009, be sure you entered “D” to the right
of the word “benefits” online 20a.Yes. Subtract line 8 from line
7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.9198,61410. Enter: $12,000 if married filing jointly; $9,000 if
single, head of household, qualifyingwidow(er), or married
filing separately and you lived apart from your spouse for all of
2009 . . 10.1012,00011. Subtract line 10 from line 9. If zero or
less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.11186,61412. Enter the smaller of line 9 or line 10 . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.1212,00013. Enter one-half of line 12 . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.136,00014.
Enter the smaller of line 2 or line 13 . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 14.146,00015. Multiply line 11
by 85% (.85). If line 11 is zero, enter -0- . . . . . . . . . . . . . . . . .

. . . . . . . . . . . 15.15158,62216. Add lines 14 and 15 . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.16164,62217. Multiply line 1 by 85% (.85) . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.1719,55018. Taxable social security benefits. Enter the
smaller of line 16 or line 17. Also enter this amounton Form
1040, line 20b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 18.1819,550
Chang Sch D1. Enter the amount from Form 1040, line 43.
However, if you are filing Form2555 or 2555-EZ (relating to
foreign earned income), enter the amount fromline 3 of the
Foreign Earned Income Tax Worksheet . . . . . . . . . . . . . . . . . .
. . . 1.203,82412. Enter the amount from Form 1040, line 9b* . .
. . . . . 2.1,40023. Are you filing Schedule D?*58,8593Yes.
Enter the smaller of line 15 or 16 of Schedule D. If either line
15 or line 16 isblank or a loss, enter -0- 3.No. Enter the amount
from Form 1040, line 134. Add lines 2 and 3 . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 4.60,25945. If filing Form 4952 (used to
figure investmentinterest expense deduction), enter any amount
fromline 4g of that form. Otherwise, enter -0- . . . . . . . . . . 5.-
056. Subtract line 5 from line 4. If zero or less, enter -0- . . . . .
. . . . . . . . . . . . . . . . . 6.60,25967. Subtract line 6 from line 1.
If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . .
7.143,56578. Enter:$xx,xxx if single or married filing
separately,$73,800 if married filing jointly or qualifying
widow(er),$xx,xxx if head of household. . . . . . . . . . . . . .
8.73,80089. Enter the smaller of line 1 or line 8 . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 9.73,800910. Enter the smaller
of line 7 or line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .10.73,8001011. Subtract line 10 from line 9. This amount is
taxed at 0% . . . . . . . . . . . . . . . . . .11.- 01112. Enter the
smaller of line 1 or line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .12.60,2591213. Enter the amount from line 11 . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13.- 01314.
Subtract line 13 from line 12 . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .14.60,2591415. Enter:$xxx,000 if

single,$xxx,000 if married filing separately,$457,600 if married
filing jointly or qualifying widow(er),$xxx,000 if head of
household.. . . . . . . . . . . . . 15.457,6001516. Enter the smaller
of line 1 or line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .16.203,8241617. Add lines 7 and 11 . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17.143,5651718.
Subtract line 17 from line 16. If zero or less, enter -0- . . . . . . .
. . . . . . . . . . . . .18.60,2591819. Enter the smaller of line 14 or
line 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.19.60,2591920. Multiply line 19 by 15% (.15) . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 20.9,0392021. Add lines 11
and 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .21.60,2592122. Subtract line 21 from line 12 . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22.- 02223.
Multiply line 22 by 20% (.20) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 23.- 02324. Figure the tax on the amount on
line 7. If the amount on line 7 is less than $100,000, use the Tax
Table to figure the tax. If the amount on line 7 is $100,000 or
more, use the Tax Computation Worksheet . 24.27,6042425.
Add lines 20, 23, and 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . .. . . . . 25.36,6432526. Figure the tax on the amount on line
1. If the amount on line 1 is less than $100,000, use the Tax
Table to figure the tax. If the amount on line 1 is $100,000 or
more, use the Tax Computation Worksheet .. 26.44,3182627.
Tax on all taxable income. Enter the smaller of line 25 or line
26. Also include this amount on Form 1040, line 44. If you are
filing Form 2555 or 2555-EZ, do not enter this amount on Form
1040, line 44. Instead, enter it on line 4 of the Foreign Earned
Income Tax Worksheet 27.36,64327*If you are filing Form
2555 or 2555-EZ, see the footnote in the Foreign Earned Income
Tax Worksheet before completing this line.
Homework_chang/Homework-Directions.docx
HOMEWORK -
2015 ACTG 67: California Problem 2 Patrick and Rose Chang

Patrick was born August 31, 1947 and worked as a hardware
engineer at JCN Corporation, his taxable wages (after 401k
deductions, etc.) is $37,000 for 2014 (he retired in March
2014). His wife Rose (born September 15, 1947) is an
accounting manager for Holloway Systems – she earned
$120,000 during the year. Their wage amounts are the same for
federal and California. Patrick received $23,000 in gross social
security payments from the federal government.
Patrick has had $10,000 of Federal income taxes withheld from
his paychecks and $4,000 California income taxes withheld
from his paychecks. Lilly had $27,700 Federal income tax and
$12,000 California income tax withheld from her paycheck.
Patrick had $2,300 of federal income taxes withheld on his
social security payments.
They have sold some stocks during the year – see Schedule D.
All stocks were purchased after 2011 and the basis has been
reported by the brokerage to the IRS, thus only Schedule D is
required for reporting for federal purposes. You may assume
that the cost basis for California purposes is the same as for
federal purposes. None of the stocks sold are qualified small
business stock.
They received $1,400 of qualified dividend income from their
JCN Corporation stock. They also received interest income of
$1,105 from Chase Bank.
In April 2014, the Chang’s filed their 2013 California income
tax return and received a $750 tax refund from the state of
California. They itemized their deductions in 2013.
They have children but they have graduated from college and
moved out – they provide no support.
They have owned their own home in San Jose since 1983, their
mortgage is all paid off, and they have property taxes of
$3,800. They own two cars and the deductible part of their
DMV fees is $140.
Here is a list of the Chang’s cash donations to various
organizations:
Saint Joseph’s Church $2,000

San Jose Mercury News Book Drive $500
San Jose State University (Fundraising Campaign) $2,000
American Red Cross $2,000
Make-A-Wish Foundation $500
With time on his hands, Patrick has prepared and filed the
family Form 1040 but he has hired you to prepare the California
Form 540 (and any required schedules). You have reviewed the
Federal forms and have already concluded they are correct.
You need to prepare a California Form 540 and a California
Schedule CA540. If required, you should also prepare a
California Schedule D540 (hint: read the directions). You may
assume there is NO Federal or California AMT to consider.
Check figure: Form 540, Line 91 Overpaid Tax is $2,124.
CA_540_examples/ACTG067 CA Form 540 and Schedule _CA_
Narrative _2015_.pdf
ACTG067 Introduction to Federal & California Taxation
California Form 540 and CA (540) – step by step
Foothill College, Los Altos Hills, CA (revised 2/2015) Page 1
of 13
A tour of the primary forms used in a California individual
income tax return.
Introduction

Before you read any further, I encourage you to download
copies of Form 540 and
Schedule (CA) 540, along with the instructions. Refer to these
as you read.
The biggest single difference between Federal and California
tax forms is their starting
point: Federal forms take most of their information from the
taxpayer’s records (“list
your dividends here”, “list your total charitable contributions
here”). The starting point
for most California tax forms is the Federal tax return. The
California form then shows
the Federal/California differences (if any), and then the same
tax information but
according to California law.
Although most tax items per Federal law are treated the same
under California law, there
are some differences. Note that there are some
Federal/California tax differences which
are fairly unusual – those are beyond the scope of this class.
What follows is a section-by-section walk through of the two

most frequently used forms
in a California individual tax return. Schedule CA (540) is a
reconciliation schedule that
traces each type of income and deduction from a Federal 1040
and then shows the
adjustment amounts to get to those amounts per California tax
law. What the schedule
does not show is how or when to adjust – this comes from the
instructions and
researching the California law. Form 540 is California’s
equivalent to the Federal 1040
but it does not look like a Form 1040: the California Form 540
only summarizes the
taxpayer’s income and deductions, dependents, taxable income,
tax liability, tax
payments, and net refund or additional tax due.
When doing a California return, much of the detail we expect to
see on a Federal
1040 is actually presented on a Schedule CA (540), not the
Form 540 itself. The
Schedule CA (540) feeds information into the Form 540.
Because Schedule CA (540) feeds into Form 540, we discuss CA

(540) first. The 2014
tax year of these forms are used.
(continued next page)
of 13
Schedule CA (540)
Part I – Income Adjustment Schedule
Section A – Income

Column A – Federal Amounts
Look at the snapshot of CA (540) Part I Section A- Income:
Take a minute to browse the row-by-row descriptions for this
section – the first thing that
you should notice is that each row is in the same order as page 1
of Federal Form 1040.
Every separate type of income or adjustment for AGI which is
shown on a 1040 is
reported here. Using the amounts as they are reported on
federal Form 1040 is not a
suggested starting point, it is required. This provides an audit
trail for the California
Franchise Tax Board to trace numbers from a taxpayer’s records
to the Federal return and
then to the California return. It also makes it easier for you to
prepare.
Reading the California forms, instructions, and law, you will
notice that California tax
law frequently mentions Federal law “by reference.” This means
California law
essentially says “California follows Internal Revenue Code
Section 1234 as of January 1,

20XX.” Because California laws often start with Federal tax
law, having California tax
returns also start with Federal amounts makes perfect sense.
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CA (540) Section B – Adjustments to Income
Section B mirrors Lines 23 to 37 of Form 1040 – these are
“Deductions FOR Adjusted
Gross Income (‘AGI’)”. Column A reports Federal law AGI
adjustments but Columns B
and C report any “adjustments to the adjustments.” Notice in
some rows, Columns B or
C (or both) are blacked out, indicating that no adjustment is
ever allowed. Line 37 totals
are transferred to Form 540, Page 1.

In other words, preparing Column A of Page 1 of Schedule CA
(540) is pretty simple –
you take the appropriate numbers directly from Federal Form
1040. There should be no
exceptions to this (that the instructors are aware of, anyway).
Look at the snapshot of CA (540) Section B below:
CA (540) Sections A and B -- Columns A, B and C
Each row of Section A and Section B is divided into three
columns:
– these should be the same as
what is reported on
Form 1040.
deral income to
California income.
income.
Notice that the amounts “added to” and “subtracted from” go
into separate columns; you

do not “net” your amounts in one column.
Example (for Line 8(a)): Lee receives $5,000 in U.S. Treasury
Bill interest income –
which is taxable for Federal law but tax-exempt for California.
Lee also receives $3,000
in City of Miami Florida Municipal bond interest – which is
tax-exempt for Federal
of 13
purposes but taxable for California purposes. Lee should put
$5,000 in column B and
$3,000 in column – Lee should NOT show a net $2,000 in
column B.
Notice that there is no “Column D” on this form that shows the
resulting California
income by line. Instead, you calculate totals by column and
carry those totals to Form

540.
Federal/California adjustments were previously discussed but
they are worth reviewing
here. Common adjustments include:
– taxable for Federal but exempt
for California
-California state, county, or municipal bond interest –
tax-exempt for Federal
but taxable for California. California only exempts bonds from
political
subdivisions (i.e. cities, counties) inside California or from the
State of California.
Note: some states exempt bonds from anywhere but others
exempt only bonds
from within their state. If you prepare other state returns, you
must check on a
state-by-state basis.
– a refund is
never taxable in
California because the state income tax was never deducted on a
California return
in the first place.
– completely tax exempt in

California.
– completely tax exempt in
California.
– “California Lottery” (the official state
run lottery) prizes
are tax exempt in California. I think this includes the multi-
state gigantic jackpot
if California participates. Other types of gambling income
(including winnings
from a casino inside the state [i.e. an Indian tribal casino] is
taxable for California.
owner
is depreciation expense for fixed assets (equipment, furniture,
computers, etc).
Some types of business assets are depreciated under slightly
longer lives for
California and the Section 179 expense limit is smaller for
California than it is for
Federal. The 2014 limit for Section 179 is $500,000 for federal
purposes but only
$25,000 for California purposes.
If you have an asset that you can fully expense for Federal
purposes but not

California, then the remaining basis is depreciated for
California purposes as a
mini-asset. These differences create different depreciation
expense amounts for
federal and California, which results in an adjustment on
Schedule CA (540) and
a different net business profit on the California return.
This difference is reported as an addition or subtraction to Line
12 (Business
Income) on Schedule CA (540).
of 13
Here is an example:

John Smith is a self-employed machinist with his own shop with
$600,000 of net income
in 2014 before buying the following new asset. In 2014, he
purchases a new milling
machine that costs $75,000****. Under Federal law, he can
expense up to $500,000 of
purchased fixed assets as a Section 179 depreciation expense
(limited to his business
income). Therefore, he can expense the entire $75,000 cost of
the machine for Federal
purposes. California has a similar Section 179 depreciation
expense option but only
$25,000 per year is allowed (the CA limit has not kept up with
the Federal amount
because of CA budget problems).
So, the first two years of this depreciation expense will be as
follows:
Year Federal expense California expense* Increase (Decrease)
to CA income
2014 $75,000 $35,000** $40,000
2015 $0 $16,000*** ($16,000)

Notice that in this example, (assuming Smith does not purchase
any other depreciable
assets in 2014 and 2015), his California income will be higher
than federal income in
2014 but then be lower in future years as the California
depreciation expense becomes
larger than the Federal expense. The reason is the depreciation
expense allowed.
For federal purposes, the depreciation is reported on federal
Form 4562, then onto
Schedule C, then onto Form 1040. For California purposes, the
depreciation adjustment
is reported on CA Form 3885A, then the difference goes onto
Schedule CA (540), Line
12 - either Column B or Column C (depending on the whether
the adjustment increases
or decreases the business income).
*Assumes 5-yr double-declining balance MACRS (see Ch. 7 &
Pub 946)
**$25,000 California Sec. 179 exp. + $10,000 ($50,000 asset
basis x 20%) = $35,000.
***$50,000 asset basis x 32% = $16,000.

****I don’t know what a milling machine really costs – it’s just
an example.
There are other federal/California adjustments to income but
most of them are pretty
unusual – it is not practical to discuss them in an introductory
level tax class.
The schedule’s instructions provide a useful overview of
common adjustments and how
to report them.
(continued next page)
of 13

CA (540) Part II – Adjustments to Federal Itemized Deductions
Part II is for converting your itemized deductions from federal
amounts to California
amounts. Part II is formatted differently from Part I and it is
actually simpler. The good
news about most common itemized deductions is that with one
big exception (state and
foreign taxes), total federal itemized deductions before any high
income limits are usually
the same for California.
On Line 38, add together each of the “category” sub-totals from
federal Schedule A (i.e.
total deductible medical costs, total interest, total taxes, etc.).
Notice that you do NOT
simply use the Federal Schedule A Line 29 grand total from the
bottom of the
Federal Schedule A (this is a common error by students).
The reason that you add together all of the Federal itemized
deduction sub-totals before

the Federal limitation of itemized deductions is because
California calculates the itemized
deduction limitation differently. In fact, the federal itemized
deduction limitation
returned in 2013 after several years of not being part of the law
but the California
limitation has always been in force.
In years when federal has an itemized deduction limitation, the
federal calculation uses
different dollar amounts and sometimes a different calculation
method than for the
California itemized deduction limitation. Don’t blame
California for this confusion--- the
California calculation has stayed the same for over twenty years
while Congress keeps
changing the federal calculation for political reasons.
Line 39 and 40 calculate the biggest single difference between
federal and California
itemized deductions. On Line 39, list any state income taxes (or
state sales taxes)
deducted on the federal return, along with any California State
Disability Insurance taxes

of 13
(some California employees have this on their paychecks – it is
deductible for federal
purposes) and any foreign taxes which are deducted (rather than
claimed as a “foreign tax
credit”).
Notice that real estate property taxes and personal property
taxes (i.e. the
deductible part of CA DMV car registrations) which are
deducted for Federal
purposes are also deducted for California purposes.
Line 40 is simply your total itemized deductions, less the Line
39 non-deductible taxes.
On Line 41, list any other adjustments to itemized deductions
that are necessary. Items
here are unusual but not unheard of. One of the instructors

actually used this space on his
return several years ago: there is a federal credit which allows
pre-approved first-time
homebuyers to claim up to 15% of their mortgage interest as a
tax credit, instead of as an
itemized deduction. In turn, only 85% of the mortgage interest
is deducted on the Federal
Schedule A (otherwise, that 15% of the mortgage interest
benefits the taxpayer twice).
On the instructor’s California return, that “missing” 15% of
mortgage interest was
included on Line 41 as additional mortgage interest for
California purposes because
California does not give a similar tax credit. This is an example
of the kinds of odd
adjustments that tax preparers should be watchful for.
Lines 43 and 44 are fairly mechanical – taxpayers with a federal
AGI exceeding a certain
amount have their total itemized deductions reduced. It is
important to remember that
the California itemized deduction limitation for high AGI
taxpayers might be
calculated differently than the limitation on federal tax returns.

Always do the
California calculation separately – do not just use the federal
calculation.
We will have a brief re-visit of the itemized deduction
limitation briefly here. It is
actually a pretty “mechanical” calculation and there is a
worksheet on page 7 of the
Schedule CA (540) instructions that is useful:
of 13
1. Start with your “gross” California itemized deductions (i.e.
after you have
removed the taxes that are only deductible for Federal tax
purposes).
2. Check your California filing status and determine if your
Federal AGI is
above the stated amount (example: for MFJ, it is $352,830 in

2014)
3. Note that these amounts vary by filing status and are adjusted
each year
for inflation. If the answer is “no”, then your deductions are
not limited.
4. Using the California calculated amount, you determine the
total for any
itemized deductions that are “exempt” from the high-AGI
limitation. This
list includes medical costs, investment interest expense,
casualty losses,
and deductible gambling expenses. Subtract this amount from
your
“gross” California itemized deductions and you now have the
total
California itemized deductions which may be reduced due to
having a
high AGI. If all of your itemized deductions are “exempt”, then
you have
no limitation (note that I have never actually seen this happen
but it’s
possible).
5. Multiply the amount you determined in step 3 by 80%. This

is the largest
amount by which your California itemized deductions can be
reduced. In
other words, even if you are Larry Ellison and make hundreds of
millions
each year, you still get to claim at least 20% of your itemized
deductions.
6. Subtract the stated amount you determined in Step 2 from
your Federal
AGI and determine the excess amount. For example, if you file
MFJ and
your Federal AGI is $500,000, your “excess amount” is
$147,170
($500,000 minus $352,830).
7. Multiply the “excess amount” from Step 5 by 6%. This
amount is your
potential reduction amount. Continuing the example from Step
5, the
reduction amount is $8,830 ($147,170 x 6%).
8. Compare the potential reduction amount from Step 6 with the
80% worst
case reduction amount from Step 4. Use the smaller amount and
subtract
it from your California itemized deductions which are subject to

limitation. That net amount is what is reported on Line 43 of
Schedule
CA (540).
Example: Fred and Wilma file MFJ and have a Federal AGI of
$500,000 and “gross”
California itemized deductions of $80,000 (that is, Federal
itemized deductions less any
taxes which are not deductible for California). They have a
$10,000 net medical expense
deduction from Line 4 of the Federal Schedule A but all of their
other itemized
deductions are subject to the limitation. Therefore, their gross
California itemized
deductions which may be limited is $70,000. 80% of $70,000 is
$56,000 (the “worst case
of 13
scenario”). Their potential reduction amount is $8,830 (see

steps 5 & 6 above for how
this was calculated). The smaller of $8,830 or $56,000 is used
to reduce their California
itemized deductions. Thus, their “net” California itemized
deductions is $71,170
($80,000 minus $8,830) which goes on Line 43 of Schedule CA
(540).
If the taxpayer’s “net” California itemized deductions are
smaller than the California
standard deduction, they may claim a standard deduction for
California purposes. Notice
that the California standard deductions amounts are different
from the Federal amounts.
Is it legal for a taxpayer to itemize deductions on the Federal
return and claim a standard
deduction on the California return or the other way around?
YES -- the form instructions
discuss how to address this unusual situation. The net
deduction amount is then
transferred to Form 540, Page 1, Line 18.
Many students have complained about how confusing this
Schedule can be. An example

of a prepared Schedule CA (540) (“John & Mary Smith) is
posted in the module for you
to see.
Form 540
As discussed before, Form 540 is very different from Federal
Form 1040 in that it does
not list taxable income by category – Schedule CA (540) does
that. Instead, the form
starts with Federal AGI and summarizes the various adjustments
determined on Schedule
CA (540).
We will walk through Form 540 section-by-section, highlighting
differences with the
Federal Form 1040.
Filing Status
Generally speaking, California filing status conforms to Federal
rules for filing status.
Prior to the 2013 Supreme Court decision striking down the
Defense of Marriage Act, a

same-sex couple could not file a married-filing-jointly tax
return for federal purposes but
could do so for California purposes. From 2013 onward, a
same-sex couple will be able
file MFJ for federal and California purposes. Note that this
issue varies on a state-by-
state basis; if you prepare a state return for another state,
different rules may apply.
If you become a tax preparer and encounter this situation with
one of your clients, be sure
to check for the most up to date information on this area.
Exemptions – a California tax credit (not a tax deduction)
Generally speaking, California conforms to the Federal rules for
qualifying to claim
personal and dependent exemptions. The big Federal/California
difference is in how the
actual calculations are performed so that exemptions reduce
your final tax liability.
There are two notable differences in how these benefits impact
the final tax liability:

Foothill College, Los Altos Hills, CA (revised 2/2015) Page
10 of 13
2014 the exemption
is given as a $108 tax credit per taxpayer and as a $333 per
dependent. The final
impact is essentially the same (a reduction in the gross tax
liability) but for some
reason, California uses a credit. In other words, the exemption
“benefit” is in a
different place in the tax calculation formula.
tax credit, instead of
a larger standard deduction. On the Federal return, the blind
and/or over 65
receive a benefit only if they claim a standard deduction. In
California, a taxpayer
can itemize deductions and still get these extra tax benefits.

Just like the itemized deductions, these exemption credits are
subject to a phase-out for
high AGI taxpayers. The cut-off amount depends on your filing
status and it adjusts
every year. For 2014, the cut-off begins at $176,413 for
single/married (or RDP) filing
separate, $352,830 for married (or RDP) filing jointly, and
$264,623 for Head of
Household (I believe these cut-off amounts are the same as
those used for itemized
deductions).
There is a calculation worksheet on Page 9 of the Form 540
instructions – it essentially
reduces the amount of the exemption credits as the taxpayer’s
AGI increases. It is a good
idea to try doing a quick self-study of this calculation with
sample numbers.
(continued on next page)

11 of 13
Page 2
Taxable Income
Lines 12 – 19 are really pretty straightforward because the
taxpayer is simply transferring
summary data which is reported on their Form W-2, Federal
1040, and California
Schedule 540 (CA).
Note – the Form 540 and instructions available from the FTB
website completely
omits Lines 20 to Line 30, Line 36 to 39, Lines 41 to 42, Lines
49 to 60, Lines 65 to
70, Lines 76 to 90, and Lines 96 to 109. In other words, the
form just skips from
Line 19 to Line 31, and so on. A similar format was used last
year. There is no
explanation for why these line numbers are missing. The good
news is that it is only

the line numbering that seems strange – the “flow” of the form
itself is still
presented in a logical fashion.
Tax
Line 31 is where most California taxpayers will report their
income tax. If taxable
income is under $100,000, use the tax table – not the tax rate
formulas. FTB Form 3800
and 3803 are applicable for taxpayers who include their child’s
taxable income on their
return under California equivalent of the “Kiddie Tax.” Consult
the form instructions for
more details should this situation arise.
The exemption credits are deducted from the taxpayer’s gross
tax liability on Line 32.
Line 34 - Schedule G-1 and Form 5870A taxes are from lump-
sum retirement
distributions and distributions from foreign trusts (consult the
instructions). Any
discussion of those issues is beyond the scope of an

introductory income tax class.
12 of 13
Special Credits
Lines 40 to 48 is where you deduct other California tax credits.
While some are similar
to credits at the Federal level (adoption costs or dependent care
expenses, for example),
there are numerous California only credits. You can view the
list of credits on the FTB
website – there are too many to discuss in any detail and many
of them target very
specific groups (dependent parents, renter’s credits, and so on).
Page 3
Other Taxes

Like Federal, California has an Alternative Minimum Tax. The
good news is that it is
computed in almost the same manner as the Federal AMT
(please consult Federal
Chapter 6 in your textbook and modules for a discussion of
AMT). The California AMT
is computed on Schedule P (540) and any AMT is reported on
Line 61.
We will not do a line-by-line discussion of Schedule P (540)
because the California AMT
concept is almost the same as the federal AMT concept.
There is one big difference between the Federal AMT and
California AMT:
The “AMTI Exclusion” (Line 17 on Schedule P (540)):
California has a special
AMT benefit for small-business owners’ which does NOT exist
in the Federal
AMT world. Those with $1 million or less gross receipts from
their small
business can exclude their self-employment earnings from the
CA AMT
calculation. In other words, having a small business in

California will almost
certainly NOT cause you to pay CA AMT. California has a
reputation as an
unfriendly place for business, so this is a really nice benefit to
small business
owners.
Line 62: Mental Health Services tax: California levies an extra
1% tax on any taxable
incomes greater than $1 million (the first $1 million is not
subject to this tax).
On Line 63 you report any other miscellaneous taxes, such as
extra taxes on non-
qualified retirement plan distributions, or recaptures of tax
credits.
Lines 71 to 73 are for tax withholdings (from a paycheck,
certain real estate transactions)
and quarterly tax estimate payments.
Line 74 is for excess SDI/VPDI payments. Basically, a
taxpayer should pay SDI tax on
only the first part of their salary each year and after that amount
is earned, the employer

stops collecting the tax. What if you change jobs during the
year? Your new employer
basically “starts over” as if you haven’t earned anything during
the year – you wind up
paying SDI tax twice. These excess payments can be claimed as
payments toward your
income taxes or refunded. The Federal 1040 has a similar line
for excess social security
13 of 13
taxes. For 2014, excess SDI payments apply to your CA income
tax only if you have
paid more than $1,016.36 in SDI taxes. If this happens, only
the amount in excess of
$1,016.36 can be applied to your income taxes. Consult the
instructions for how to
calculate this credit.
Page 4

Use Tax and Contributions
Form 540 has a line for “Use Tax” (line 95). Under California
law (and in most other
states), if you make a purchase where the seller is “out of
state,” no sales tax is collected.
In this case, the purchaser is required to pay “use tax” (which is
simply a sales tax when
“sales tax” isn’t collected). Example: Many internet retailers
arrange their operations to
be outside major states (like California) for various tax reasons,
including not being
required to collect sales tax. Simply put, you are supposed to
voluntarily pay use tax
when sales tax isn’t collected and this line is where you pay it.
Admittedly, this is
difficult to enforce for now but there have been multi-state
projects to simplify sales tax
law that may change this someday (Large online retailers like
Amazon.com are starting to
collect sales tax in California now).
On page 4 are “contributions.” Contributions are what they
sound like – certain

charitable causes have been favored by the state government
with a place on the tax form
where you can donate. Participation is voluntary but you cannot
change your mind once
the return is filed – meaning you cannot amend your tax return
and take back the
contribution.
Page 5
The remainder of Form 540 is essentially the same as Form
1040 with sections for
amounts owed or refunds due, interest and penalties, direct
deposits, and a signature
under penalty of perjury.
Conclusion
In addition to Form 540 and Schedule CA (540), the Franchise
Tax Board has many other
tax forms that may be required. For example, Schedule P (540)
is for California
Alternative Minimum Tax and is almost identical to federal
Form 6251. While we don’t

have the time to cover other California forms, keep in mind that
they are either closely
modeled after their Federal equivalent or (like the Schedule CA
(540)) they use the
federal tax amounts as a starting point. A good understanding
of federal tax forms makes
it fairly easy to understand California (or other state) forms.
CA_540_examples/ACTG067 Sample CA _540_ Smith Schedule
CA _540_.pdf
Schedule CA (540) 2010 Side �
Part I Income Adjustment Schedule Federal Amounts
Subtractions Additions
A (taxable amounts from B See instructions C See instructions
Section A – Income your federal return)
7 Wages, salaries, tips, etc. See instructions before making an
entry in column B or C . . . . 7
8 Taxable interest (b)________________________ . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 8(a)
9 Ordinary dividends. See instructions. (b)
________________________ . . . . . . . . . . . 9(a)
�0 Taxable refunds, credits, offsets of state and local income
taxes . . . . . . . . . . . . . . . . . . . �0
�� Alimony received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . ��
�2 Business income or (loss) . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . �2
�3 Capital gain or (loss). See instructions . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . �3
�4 Other gains or (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . �4
�5 IRA distributions. See instructions. (a)
____________________ . . . . . . . . . . . . . . . . �5(b)
�6 Pensions and annuities. See instructions. (a)
____________________ . . . . . . . . . . . �6(b)
�7 Rental real estate, royalties, partnerships, S corporations,
trusts, etc. . . . . . . . . . . . . . . . �7
�8 Farm income or (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . �8
�9 Unemployment compensation . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . �9
20 Social security benefits (a) ____________________ . . . . . .
. . . . . . . . . . . . . . . . . . . 20(b)
2� Other income. a _____________ a _____________
a California lottery winnings e NOL from FTB 3805D, 3805Z,
b _____________ b _____________
b Disaster loss carryover from FTB 3805V 3806, 3807, or
3809 2� _______________ c _____________ c _____________
c Federal NOL (Form 1040, line 21) f Other (describe): d
_____________ d _____________
d NOL carryover from FTB 3805V
________________________ e _____________ e
_____________
________________________ f _____________ f
_____________
22 Total. Combine line 7 through line 21 in column A. Add line
7 through line 21f in
column B and column C. Go to Section B. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 22 _______________

Section B – Adjustments to Income
23 Educator expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 23
24 Certain business expenses of reservists, performing artists,
and fee-basis
government officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 24
25 Health savings account deduction . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 25
26 Moving expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 26
27 One-half of self-employment tax. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 27
28 Self-employed SEP, SIMPLE, and qualified plans . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 28
29 Self-employed health insurance deduction . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 29
30 Penalty on early withdrawal of savings. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 30
3�a Alimony paid. (b) Recipient’s: SSN ___ ___ ___ – ___ ___
– ___ ___ ___ ___
Last name ______________________________ . . . . 3�a
32 IRA deduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 32
33 Student loan interest deduction . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 33
34 Tuition and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 34
35 Domestic production activities deduction. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 35
36 Add line 23 through line 31a and line 32 through line 35 in

columns A, B, and C.
See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 36
37 Total. Subtract line 36 from line 22 in columns A, B, and C.
See instructions . . . . . . . . 37
SSN or ITIN -Name(s) as shown on return
7731103
-
{
California Adjustments — Residents
SCHEDULE
CA (540)
TAXABLE YEAR
2010
Important: Attach this schedule behind Form 540, Side 3 as a
supporting California schedule.
For Privacy Notice, get form FTB 1131.
Side 2 Schedule CA (540) 2010 7732103
Part II Adjustments to Federal Itemized Deductions
38 Federal itemized deductions. Add the amounts on federal
Schedule A (Form 1040), lines 4, 9, 15, 19, 20, 27, and 28 . . . .
. . . . . . 38 _________________

39 Enter total of federal Schedule A (Form 1040), line 5 (State
Disability Insurance, and state and local income tax, or
General Sales Tax), line 7 (new motor vehicle tax), and line 8
(foreign income taxes only). See instructions . . . . . . . . . . . . . .
. . . 39 _________________
40 Subtract line 39 from line 38 . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 40 _________________
4� Other adjustments including California lottery losses. See
instructions. Specify _________________________________. .
. . . . 4� _________________
42 Combine line 40 and line 41 . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 42 _________________
43 Is your federal AGI (Form 540, line �3) more than the
amount shown below for your filing status?
Single or married/RDP filing separately . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .$�62,�86
Head of household . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .$243,283
Married/RDP filing jointly or qualifying widow(er) . . . . . . . . .
. . . . . . . . . . . .$324,376
No. Transfer the amount on line 42 to line 43.
Yes. Complete the Itemized Deductions Worksheet in the
instructions for Schedule CA (540), line 43 . . . . . . . . . . . . . . .
. . . . . . . 43
44 Enter the larger of the amount on line 43 or your standard
deduction listed below
Single or married/RDP filing separately . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . .$3,670
Married/RDP filing jointly, head of household, or qualifying
widow(er) . . . . . . .$7,340
Transfer the amount on line 44 to Form 540, line �8 . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 44
Name 1: John and Mary SmithNumber 1: 123456789Dollar
Amount 1: 25000Dollar Amount 2: Dollar Amount 3: Dollar
Amount 4: 2000Dollar Amount 5: 1000Dollar Amount 6:
2000Dollar Amount 8: Dollar Amount 9: Dollar Amount 10:
Dollar Amount 11: 1000Dollar Amount 12: 1000Dollar Amount
13: Dollar Amount 14: Dollar Amount 15: 80000Dollar Amount
16: Dollar Amount 17: 40000Dollar Amount 18: Dollar Amount
19: Dollar Amount 20: Dollar Amount 21: Dollar Amount 22:
Dollar Amount 23: Dollar Amount 24: Dollar Amount 25:
Dollar Amount 38: 4400Dollar Amount 39: 4400Dollar Amount
40: Dollar Amount 41: Dollar Amount 42: Dollar Amount 43:
Dollar Amount 47: Text 1: Text 2: Dollar Amount 48: Dollar
Amount 49: amt52: Dollar Amount 50: 112400Dollar Amount
51: 6400Dollar Amount 52: 42000Dollar Amount 53: Dollar
Amount 54: Dollar Amount 55: Dollar Amount 56: Dollar
Amount 60: Dollar Amount 61: 5500Dollar Amount 62: Dollar
Amount 63: Dollar Amount 64: Number 2: Name 2: Dollar
Amount 75: 5500Dollar Amount 76: Dollar Amount 77: Dollar
Amount 78: 106900Dollar Amount 79: 6400Dollar Amount 80:

42000Dollar Amount 81: 50000Dollar Amount 82: 17000Dollar
Amount 83: 33000Text 3: Dollar Amount 84: Dollar Amount 85:
33000Dollar Amount 86: 33000Dollar Amount 87: 33000Dollar
Amount 7: Dollar Amount 4 a: Dollar Amount 63 b:

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