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Does TAXSIM-35 give the California YCTC to zero-earned-income filers without the wage and net loss limits? #1365
Description
Does TAXSIM-35 give the California Young Child Tax Credit to zero-earned-income filers without the wage and net loss limits?
For a filer with California earned income of zero or less, R&TC § 17052.1(b)(1)(B) allows the YCTC only if net losses and wages are each within $30,000 (indexed; $32,490 in 2022). The current executable gives the full credit ($1,083 in 2022, $1,154 in 2024) in all of these rows, including wages of $71,846 and a net loss of $60,000.
taxsimid,year,state,mstat,page,sage,depx,age1,pwages,psemp,idtl,opt1,opt1v
1,2022,5,2,31,30,1,3,71846,-92009,2,30,1
2,2022,5,2,31,30,1,3,20000,-30000,2,30,1
3,2022,5,2,31,30,1,3,20000,-80000,2,30,1
4,2022,5,2,31,30,1,3,40000,-45000,2,30,1
5,2022,5,2,31,30,1,3,0,-5000,2,30,1
6,2024,5,2,31,30,1,3,71846,-92009,2,30,1
| id | Wages | SE income | Earned income | Net loss | TAXSIM v40 / siitax |
Statute |
|---|---|---|---|---|---|---|
| 1 | 71,846 | −92,009 | −20,163 | 20,163 | 1,083 / −1,083 | 0 (wages over $32,490) |
| 2 | 20,000 | −30,000 | −10,000 | 10,000 | 1,083 / −1,083 | 1,083 |
| 3 | 20,000 | −80,000 | −60,000 | 60,000 | 1,083 / −1,083 | 0 (net loss over $32,490) |
| 4 | 40,000 | −45,000 | −5,000 | 5,000 | 1,083 / −1,083 | 0 (wages over $32,490) |
| 5 | 0 | −5,000 | −5,000 | 5,000 | 1,083 / −1,083 | 1,083 |
| 6 (2024) | 71,846 | −92,009 | −20,163 | 20,163 | 1,154 / −1,154 | 0 (wages over the 2024 limit) |
"(B) Meets all of the following requirements: (i) Would otherwise have been allowed a tax credit under Section 17052, but has earned income, as defined in Section 32(c)(2) of the Internal Revenue Code, as modified by Section 17052, of zero dollars ($0) or less. (ii) Does not have net losses in excess of thirty thousand dollars ($30,000) in the taxable year. (iii) Does not have wages, salaries, tips, and other employee compensation in excess of thirty thousand dollars ($30,000) in the taxable year."
2022 Instructions for Form FTB 3514, Step 8, line 23a: "If the amount entered on line 23a exceeds $32,490, stop here, you do not qualify for the credit." Line 23b:
"For purposes of this line, total net loss means the amounts by which total losses generated during the year exceeds total income, without regard to utilization limitations. ... If your total net loss amount exceeds $32,490, check the box on line 23b and stop here, you do not qualify for the credit."
In the CPS census comparison, two California households (2022–2025) get the YCTC in TAXSIM only: one with wages of $71,846 and an S-corp loss of $1.66 million, and one with no wages and an S-corp loss of $48 million. PolicyEngine had a similar error in its wage and loss tests; we are fixing it in PolicyEngine/policyengine-us#9880 (PR PolicyEngine/policyengine-us#9881).
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