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California wages are subject to SDI (State Disability Insurance) or VDPI (Voluntary Plan Disability Insurance) withholding up to a specific annual amount. If the employer withholds more than this amount, the taxpayer must contact the employer for reimbursement from the employer for the excess. SDI/VP withholding is reported via Form W-2. 

If a taxpayer has two or more employers, and the combined withholding exceeds the annual capped amount, the taxpayer may claim a credit on Form 540/540NR for the excess withholding.

The Excess SDI/VPDI Withholding Worksheet is calculated separately for the taxpayer and spouse using data entered at the federal level in the W-2 input screens. The calculation automatically limits line 1 of the worksheet, Total SDI/VPDI withheld, to the amount that was correctly withheld on each W-2 per state instruction. To calculate the correctly withheld amount, the wages subject to SDI/VPDI withholding is multiplied by the current-year percentage for each W-2. The lesser of that amount, or the amount actually withheld, is included on line 1 of the worksheet. Refer to the California Excess SDI/VPDI Withholding Worksheet for details of the calculation for each W-2.

Required data entry

Wages subject to SDI/VPDI withholding:

State wages in W-2 Box 16 plus retirement contributions in Box 12, less SUB payments in Box 14 are used by default .

For part-year and nonresident returns, amounts in Boxes 12 and 14 are included in the calculation only when the postal code in the statement dialog is CA. To force an amount of SDI/VPDI subject wages different than the calculated amount, enter the amount in Local Wages, Box 18.

SDI withholding:

SDI withholdings may be entered in two places:

1. Box 19, Local W/H field: From the Box 20 fieldview, select code SDI or VP. UltraTax/1040-CA will enter State Dis or Voluntary in the Name of locality field.
2. Amount withheld in Box 14, Other field with code 5, State Disability Insurance withholding, with postal code CA.

The amount by which line 1 on the worksheet is in excess of the current-year SDI/VPDI limit is the amount of excess SDI withholdings that may be claimed on the tax return.

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