Form 540nr - Guidelines For Filing A Group 2001-2002 (Page 2 of 4) in pdf

G Reporting of Gains/Losses

K Estimated Tax Requirements

Capital Gains/Losses. All limitations normally applied at the individual

Generally, estimated tax payments are required if the group nonresi-

level apply on the nonresident group return. For instance, an

dent return’s net tax after allowable tax credits is $200 or more. If the

individual’s California source capital losses from a business entity may

tax is underpaid, a penalty for the underpayment of estimated tax will

only be deducted to the extent of California source capital gains, plus

be assessed based on the net tax of the group nonresident return. Get

$3,000. The allowable capital loss for each electing nonresident is

Form 540-ES, Estimated Tax for Individuals, and form FTB 5805,

totaled and entered on the return. The filing status of nonresident

Underpayment of Estimated Tax by Individuals and Fiduciaries, for

electing individuals is deemed to be single, limiting each to a $3,000

more information.

capital loss. The business entity must keep track of the allocable share

of the California source capital gains and losses (including carryovers)

L How to Make Estimated Tax Payments on

for each electing nonresident individual.

Form 540-ES

Internal Revenue Code (IRC) Section 1231 net losses are allowed in

To make group nonresident return estimated payments:

full.

1. Type or print the following information in the top margin of the

Passive Losses. The business entity must complete a single form

Form 540-ES:

FTB 3801, Passive Activity Loss Limitations, for the electing nonresi-

dent individuals included in the group return. Only California source

GROUP FILING PROGRAM MS A-2

passive losses are reported on form FTB 3801. Passive losses will be

ATTN IVS (732)

allowed only to the extent of passive income. When losses are not

2. Enter the name and address as shown on page 4 of this publication.

allowed, they are suspended at 100% for each electing nonresident

3. Mail the estimate voucher with payment to the address shown on

individual. When suspended passive losses are released by current

the Form 540-ES.

year passive income, the suspended prior year losses offset the current

year passive income on the group return. Suspended prior year losses

M Moving Estimated Payments Between the

are also released upon disposition of the entire interest in the passive

Group Nonresident Return and the Individual

activity. The business entity must keep track of the allocable share of

Nonresident Return

the suspended California source passive losses for each electing

nonresident individual included in the group return.

If the business entity made estimated tax payments on behalf of a

nonresident individual throughout the taxable year and the nonresident

H Individual Deductions Not Allowed on the

individual opts out of the group filing before the group return is filed,

Group Nonresident Return

then the individual’s distributive share of estimated tax payments may

be moved to the individual’s account and claimed on the individual’s

Individual deductions are not allowed on the group nonresident return.

return. To move payments, fax, or mail a letter to:

Individual deductions include, but are not limited to, the deduction for

GROUP FILING PROGRAM MS A-2

self-employment tax, itemized deductions, and the standard deduction.

ATTN INFORMATION VALIDATION SECTION (732)

However, there is an exception for the deduction for contributions to a

FRANCHISE TAX BOARD

deferred compensation plan. See Section I, Contributions to a Deferred

PO BOX 1468

Compensation Plan.

SACRAMENTO CA 95812-1468

A Net Operating Loss (NOL) cannot be claimed on the group return.

(FAX) (916) 845-0716

The NOL is an individual deduction limited to the taxpayer’s overall loss

taking into account worldwide income and deductions. An NOL is also

Include the following information in your letter:

limited by the individual’s California source loss. See instructions for

1. Business entity’s name;

form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and

2. Federal employer identification number (FEIN);

Disaster Loss Limitations — Individuals, Estates, and Trusts.

3. California Secretary of State (SOS) file number, if issued;

Contributions to a Deferred

4. Individual’s name;

Compensation Plan

5. Social security number;

6. Individual’s address;

A deduction under IRC Section 401 through Section 424, as modified

by California, is allowed on the group nonresident return. However, no

7. Estimated tax payments to be applied to each quarter;

deduction is allowed to any electing nonresident individual who has

8. Tax year;

earned income from any other source.

9. Contact person and phone number; and

The deduction is computed by multiplying the allowable federal

10. A statement indicating the tax identification number of the account

deduction by the electing nonresident individual’s California

the payment is to be moved from and the tax identification

apportionment percentage.

number of the account to receive the payment.

J Credits

The letter should be signed by a general partner, member-manager,

corporate officer, or an attorney-in-fact of the business entity.

Only credits directly attributable to the business entity’s activities can

Use the same procedure if the electing nonresident individual made

be claimed on the group nonresident return, such as the low-income

individual estimated tax payments and subsequently elected to be

housing credit and the manufacturers’ investment credit.

included in the group nonresident return.

Individual credits, such as the personal, blind, senior, or dependent

exemption credits and the other state tax credit, are not allowed on the

group nonresident return. To use individual credits, the individual

should file a separate Form 540NR and should not be included on the

group return.

Page 2 FTB Pub. 1067

(REV 12-2001)

Form 540nr - Guidelines For Filing A Group 2001-2002 Page 2

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