Hello tax experts,

My wife is a non-resident alien and she has opted to be resident alien for tax purposes. We filed the form 1040 (long form) by declaring her foreign income in line7 along with my W2 wages, filed form 2555-EZ (foreign earned income exclusion but no housing deductions), filed W7 (for ITIN) and sent the package for IRS ITIN processing center @ Austin, TX. We used "Married filing jointly" option.

Now we are doing the CA tax returns.
Since my wife is a non-resident for State (California) tax purposes and I was a resident of California for 2008, I am wondering which form to use? Is it 540 or 540-2EZ or 540-NR?

Also, should the foreign excluded income be in the additions (Column C) or subtractions (Column B) of the Schedule CA form, line 21? Based on the entries on Column B or C what would Column A in line 21 reflect? +ve number or a -ve number?

Could I request the tax experts to shed some light on this?

Thanks much,
Nick.

Nick:

Use Form 540NR, because you are NOT claiming the foreign income on the California return.