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California Differences - ERTC

California has no equivalent credit. Because there’s no credit benefit on the state return, the employer may claim 100% of the wage expense as a deduction on the California return. For individuals, adjustment will be made on 540 )or540-NR) Schedule CA, Part 1, Section B, line 3 (2022 version).

ERC Refund Taxability

The FTB was considering taxing ERC refunds. They in late February 2023 have since reconsidered that idea and have stated an employer receiving the ERC is not required to include the portion of the credit that reduces the employer’s applicable employment taxes, nor the refundable portion of the credit, in its gross income for California income tax purposes.

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