Question

In: Accounting

1)The California adjustment for the deducible part of self-employment tax for a part-year resident uses which...

1)The California adjustment for the deducible part of self-employment tax for a part-year resident uses which of these formulas?

a) Self-employment income while a California resident is divided by the total self-employment income.

b) Add self-employment income while a California resident plus self-employment income from California sources while a nonresident. These are divided by the total self-employment income.

c) Self-employment income from California sources while a nonresident is divided by the total self-employment income.

d) Add self-employment income while a California resident plus self-employment income from California sources while a nonresident. These are divided by self-employment income from non-California sources.

____________________________________________________________________

2) Where would a California nonresident pay state income taxes on a pension earned while teaching in California?

a) California.

b) Their state of residence (if it is a state with income taxes).

c) If they live in a state without an income tax, they would pay the taxes to California.

d) The taxes would be split between California and their state of residence

Solutions

Expert Solution

1)The California adjustment for the deducible part of self-employment tax for a part-year resident uses which of these formulas?

Answer. b) Add self-employment income while a California resident plus self-employment income from California sources while a non-resident. These are divided by the total self-employment income.

Explanation: As per the FTB of State of California, Part-year resident can deduct the self-employment tax paid “which limited to a percentage of Total California Adjustments/Deductions”. The percentage is calculated as follows;

(Self-employment income while a California resident +

Self-employment income from California sources while a non-resident)

/

Total Self-employment income.

After calculating percentage, we should multiply this percentage with Total California Adjustments/Deductions to find the deducible part of self-employment tax.

2) Where would a California non-resident pay state income taxes on a pension earned while teaching in California?

Answer. b) Their state of residence (if it is a state with income taxes).

Explanation: As per the Pension and Annuity Guide lines by FTB of State of California, “California doesn’t levy any taxes on pension earned while teaching in California by a California non-resident after Dec 31, 1995.”

But California non-resident must have to pay Tax to their sate of residence (if it is a state with income taxes) on pension earned while teaching in California.

There are few states doesn’t have state income taxes or doesn’t tax pension Income, for example; Alaska, Florida, Mississippi, New Hampshire, Nevada, Pennsylvania, South Dakota, Tennessee, etc. So, California non-resident not required to pay Tax in these states on pension earned while teaching in California.


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