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California income tax (paper Form 540) requires attaching a copy of the taxpayer's federal return. If, when filing a given year's California Form 540 for the first time (not amended), the federal return has already been amended, then what exactly should be attached?

The original federal return includes Form 1040 and associated schedules, with some incorrect information. The amended federal return includes Form 1040-X (summarizing changes) and only the schedules that needed correction. Thus, the original federal return still seems important to provide to California, because not all federal information is captured in the amended return.

It seems that both the amended federal return and the original federal return should be attached to Form 540. But if all these federal forms and schedules are attached consecutively in the same mailing, it seems likely to lead to confusion about which is the newer correct info and which is the older incorrect info. So is the best practice to add a label across the top of each federal page saying either "Amended federal return" or "Original federal return"?

A possible alternative would be to create a single, notional, complete and correct federal return (Form 1040 and all relevant schedules) as if it had been correctly filed in the first place, and attach that to Form 540. However, this is not the format in which the info was provided to the IRS (since it is not the way the IRS directs amended returns to be filed), so it might appear discrepant or fictitious, and it would require additional work.

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You should attach both. Use a paper clip to collate the 1040 and its attachments and the 1040X and its attachments. The information on your 540 should flow from the numbers on your 1040X.

You will likely need to paper-file. If your efile provider allows efiling in this situation then the returns would be transmitted electronically and you don't need to worry about potential confusion.

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  • Yes, I am talking about paper filing, as specified in the question ("paper Form 540"). I am not clear on the utility of paper clips, etc. (other than in making sure FTB doesn't accidentally leave anything in the envelope). I suspect the first thing that happens when the envelope is opened at FTB is that a clerk removes all fasteners like paper clips and staples, and feeds all the sheets into a scanner to be further processed electronically. Thus the details of which groups of pages were fastened together will be lost, leaving sequential order (hopefully) but no hierarchy.
    – nanoman
    Apr 16 at 23:33
  • @nanoman they will scan each clipped package separately, it helps ensuring that the pages and attachments don't mix up. But eventually yes, it's a manual process and mistakes can happen.
    – littleadv
    Apr 16 at 23:46

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