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I just received two bills from the state of the california franchise tax board saying that my state tax for 2015 and 2016 are missing a few thousands plus interest. The reason was that turbotax way underestimated my CA taxable income by using the Schedule CA form. In the words of the notice:

We have made an adjustment to your California taxable income for the reasons stated below. As a result, we have recomputed your tax liability based on this revised taxable income.

A review of your return indicates that your schedule CA is incorrect. Schedule CA is used only to report adjustments to federal adjusted gross income (AGI) when that income is taxed differently for state and federal purposes. The difference in taxation must arise from differences between state and federal tax law, not from the source of the income.

We consider you to be a resident of this state during the taxable year and, as such, you are taxable on income from all sources.

We disallowed the deduction for those wages you subtracted on your Schedule CA (540) California Adjustments-Residents. As a California resident, all your wages are taxable, including those wages earned outside of California.

The point is, neither my wife nor I worked outside California during those two years, so there was no way we entered out of state information in turbotax. So why would turbotax make such a big mistake? Thanks for your help.

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    Don't think anyone outside of TurboTax could help you unless they were similarly affected and learned the cause from TurboTax. It could very well be that you incorrectly answered some of the interview questions, it is possible but seems less likely that TurboTax had a state-wide flaw. – Hart CO Feb 13 at 16:14
  • OP, were you a full-time resident of CA in those years? – The Photon Feb 13 at 17:17
  • @ThePhoton Yes both my wife and I were. We moved from NYC to CA in 2013. – John Jiang Feb 13 at 17:18
  • @HartCO it appears that turbotax subtracted my income from our joint CA taxable income. I don't understand why that happened. I checked my later years 2017 and 2018 and that didn't happen. The only difference between 2015/2016 and later years is that I used turbotax software from CDs for the first two years, and switched to online account for the later ones. – John Jiang Feb 13 at 18:09
  • Very curious, was your income reported on a W2 and did they have your CA address on them for those years? Did it trigger a NY return as well? Can you see the answers to your interview questions from those years? – Hart CO Feb 13 at 18:26
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It's unlikely anyone can answer this for you outside of TurboTax. It could be the result of an improper answer on the interview questions they use, or a legitimate error on their end.

If you just received notice, you should file a claim with TurboTax (I'm assuming this applies to your version of TurboTax). They'll investigate and either let you know what you did improperly or provide some sort of compensation for their error. One of the requirements for their accurate calculation guarantee is:

  • If you used a CD/download version of TurboTax, you registered your software and your program is up-to-date.

Guessing most people didn't bother to register, but a missing update could be the cause, though it seems unlikely that they would have the same flaw in their software 2 years that required a post-release update to correct.

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