The Knucklehead of the Day award

Today’s winner is The California Franchise Tax Board. They get the award for the following.

Beware: A one-digit typo on a state tax return could cost the average California homeowner about $1,000.

The error is on 2.4 million copies of Schedule CA of Form 540. That’s where taxpayers pluck numbers from Schedule A of their federal 1040 form to adjust for California’s own rules. The erroneous form instructs taxpayers to jot down the number for a single deduction listed on line 13 of Schedule A — instead of the total for five deductions added up on line 15.

That mistake means taxpayers who follow the instructions on the form rather than the instruction booklet — which is printed correctly — will miss out on four deductions. That list starts with the largest write-off many homeowners get on their state taxes: the deduction for mortgage interest.

The Franchise Tax Board fixed the form it posts online (–forms/07–540ca.pdf), alerted software vendors and posted an announcement on its Web site that bore no mention of the mortgage deduction (

Still, the goof was news to Controller John Chiang and Board of Equalization boss Betty Yee — who oversee the tax agency — until MediaNews publicized the error in early January. They quickly ordered the agency to issue a news release (–04.shtml), ship corrected forms to FTB offices, libraries and post offices, and evaluate whether the agency can correct returns and refund money to homeowners who get shortchanged.

Such a wonderful display of Government efficiency. If the error was in favor of the taxpayer, The Board of course will be demanding payment from taxpayers who ‘misfiled’. The Board of Equalization, which oversees the tax agency(One board oversees another board. Interesting bureaucracy they have in California. It really shouldn’t surprise me, I lived in CA from April 85 to June 87) has problems of its own. Like not issuing refunds to businesses they owe money to.

I thought Florida’s tax system was so screwed up. Maybe it is, but the California Franchise Tax Board is today’s Knucklehead of the Day.

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