Today, I'll answer questions about deducting losses on a Roth IRA and whether move-out payments made to homeowners and tenants are taxable. But first here's a small tax headache for self-employed people in California.

Thanks to an oversight by the Franchise Tax Board, some self-employed people who already filed their 2011 taxes might get a letter from the board asking for more money.

That's because California did not conform to a federal change in the deduction for self-employment taxes. By not conforming, the state will collect a few extra bucks from self-employed Californians.

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To collect the money, the tax board needed to add a line to the tax form where people make adjustments between their federal and state taxes. But when the tax board first published 2011 tax forms, it neglected to add this line.

It made the change to online forms on Feb. 8 and notified the public Feb. 16, but some makers of tax-preparation software still haven't incorporated the change.

The back story: Under federal and California law, self-employed people got to deduct one-half of their Social Security and Medicare taxes from their adjusted gross income. This is because they pay both the employer's and the employee's share of the taxes. (These are known as self-employment taxes if you work for yourself or payroll taxes if you work for someone else.)

The tax deduction is designed to give self-employed people parity with businesses that get to deduct the Social Security and Medicare taxes they pay on behalf of employees.

Before 2011, the employee and employer each paid 6.2 percent for Social Security (on wages or self-employment income up to a certain amount per year) and 1.45 percent for Medicare. That totaled 7.65 percent each for employee and employer or 15.3 percent if you are self-employed.

For 2011 and 2012, Congress cut the employee's Social Security tax by two percentage points, to 4.2 percent, but left the employer's share at 6.2 percent. So for this year and last, the self-employment tax is 13.3 percent instead of the usual 15.3 percent.

If the self-employed got to deduct only half of their self-employment tax, their deduction would be only 6.65 percent instead of the usual 7.65 percent. But Congress gave them a break and said they could still deduct the full employer's share, or 6.2 percent for Social Security and 1.45 percent for Medicare. As a result, for federal taxes they get to deduct more than half of what they actually pay in self-employment taxes. For most people the deduction works out to about 57.51 percent of the total instead of 50 percent. "On income of $50,000, the difference in the deduction is about $460," says Lynn Freer, president of Spidell Publishing.

California, however, did not conform to this tax break. For state taxes, the self-employed still can deduct only half of their self-employment taxes. The tax board overlooked this discrepancy when it published state-tax forms. It later updated its online tax form by adding a line to Schedule CA (540) where self-employed people can make an adjustment.

Anyone who used an original tax form or a software program that was not updated would not have made this adjustment. They would have gotten a smallish state-tax deduction they were not entitled to.

TurboTax did not update its software until Friday. "Online will be automatically updated. Desktop customers need to use the one-click update in the product to get this most recent change to California state forms," TurboTax spokeswoman Julie Miller says.

Here's the good news: The tax board will not require taxpayers who have already filed to file an amended return. Instead, it will send letters with a "proposed adjustment" to a limited number of people where the tax difference "is material," says tax board spokeswoman Denise Azimi. "We are not going to nickel-and-dime people." The letter will explain the issue, propose a corrected amount and let taxpayers respond before issuing a tax bill.

Q:Jeffrey M. asks, "I have a traditional IRA worth over $21,000. In 2004, I bought stock in a Roth IRA for $2,000. Last year, the stock was worth about $23. I sold the stock in September and after fees it was worth $1. Can I deduct the loss on my 2011 income tax form?"

A: Evan Appelman, an enrolled agent in Kensington, says you can deduct losses on a Roth IRA only when all Roth IRAs are liquidated. In this case, all Roth IRAs are combined and treated as a single Roth IRA to determine any loss.

If this is Jeff's only Roth IRA and he liquidates it, he can claim $1,999 as a miscellaneous deduction on Schedule A. However, miscellaneous deductions are only deductible to the extent that their total exceeds 2 percent of adjusted gross income.

The same rules apply to traditional IRAs, but separately. Jeff would not have to liquidate his traditional IRA to take the loss on his Roth IRA.

Q:Jay W. asks, "Homeowners who lose their home in a foreclosure or short sale often receive a form 1099-C from the lender reporting the amount of forgiven debt. Generally, this is taxable income, but at least through the end of 2012, if certain conditions are met this is not taxable.

"There have been reports lately of 'move-out' payments as high as $35,000 being made to homeowners to encourage them to cooperate in a short sale or leave the home in good condition in a foreclosure. It's likely that these payments would be reported on a 1099-MISC and would be taxable under any circumstance. But it's possible that they might be reportable on a 1099-C. Can your resources in the tax world comment on their taxability?"

A: Sunnyvale CPA Leonard Williams says they should be reported on 1099-MISC and taxed as ordinary income. However, "there are a lot of erroneous 1099-C's given to taxpayers, so it could wind up there." He says that even if forgiven debt reported on a 1099-C is tax-free, "the taxpayer nevertheless should report the move-out incentive as ordinary income."

IRS spokesman Jesse Weller agrees. "The payments would be taxable regardless of whether they are reported on Form 1099-MISC or 1099-C, but they should not normally be reported on 1099-C," he says.

This question got me wondering whether relocation payments made to tenants in certain cities with rent control are taxable.

In San Francisco, when tenants are evicted because the owner is moving in, the owner must pay $5,153 per tenant (up to $15,460 per household) plus $3,436 for each tenant over 60, or disabled or if there is a minor in the household. Tenants are entitled to similar payments under the Ellis Act when they are evicted because the owner is getting out of the rental business.

I spoke to several tenant advocates and real estate lawyers who thought these payments should not be taxable. However, all of the tax experts I spoke with said they are taxable. Freer notes that under the Internal Revenue Code, all income is taxable unless it is specifically excluded and there is no exclusion for this type of payment.

Weller says that certain relocation payments made to tenants by government agencies have been held to be nontaxable. "However, relocation payments made to tenants by individual landlords or other non-governmental entities would be taxable."

He adds that the landlord "would not be required to report the payments on Form 1099-MISC (or other Form 1099) unless the landlord was considered to be in a trade or business and the payments were made in the course of that trade or business."

Freer, however, points out that it's not clear when rental property qualifies as a trade or business.

Craig Schmitt, a CPA with EisnerAmper, believes these payments, while taxable, could be treated as a capital gain because they are "amounts received by a lessee for the cancellation of a lease."

The IRS could not confirm before my deadline whether this payment would be ordinary income or a capital gain.

If you get one, better check with a good accountant.