Category Archives: California Tax News

Congressional and IRS Practices Impact Fraud

IRS WATCHDOG PROVIDES CONGRESS WITH MID-YEAR REPORT AMID ALLEGATIONS OF BAD IRS PRACTICES

Author’s Note:  This post explains why we advocate that taxpayers select a professional tax practitioner who is either a CPA, attorney or Enrolled Agent.  If you don’t,  you may end up the victim of fraud and the problems attached to it.

CAUTION ExclamationTiming is everything, and the National Taxpayer Advocate Service (an independent *watchdog* group within the IRS ) just presented its mid-year report to Congress revisiting its 2002 Congressional recommendation to authorize the IRS to establish *minimum standards* for tax return preparers. Continue reading →

FTB Of CA Penalties and their meaning

AN EDUCATED TAXPAYER IS OUR BEST CUSTOMER.

We help our clients understand the ever-changing federal and state tax laws so they can maximize their tax deductions, and adopt best recordkeeping practices.

Franchise Tax Board, State of CAMany of our clients have come to us after having a bad tax preparation experience that resulted in penalties and interest.  When we come across a reference document that we feel is valuable for the taxpayer – we promote it.

We have linked to the 18-page Penalties and Interest Reference Table published by the Franchise Tax Board of California.

  1. If I pay my taxes late, what interest and penalties will I be charged?
  2. What are past and current interest and estimate penalty rates?
  3. I have an extension of time to file my return. Why did I get a penalty?
  4. I filed my return on time. Why did I get a penalty?

FTB of CA Penalty Reference ChartPenalty reference chart (pdf)

 

 

 

 

 

 

EDD extension for San Diego wildfire

header_ca_govEDD extension for San Diego wildfire

San Diego County – May 2014

Employers in San Diego County directly affected by the wildfire may request up to a 60-day extension of time from the EDD to file their state payroll reports and/or deposit state payroll taxes without penalty or interest. This extension may be granted under Section 1111.5 of the California Unemployment Insurance Code (CUIC). Written request for an extension must be received within 60 days from the original delinquent date of the payment or return to file/pay.

If you have any questions, contact the EDD’s Taxpayer Assistance Center at (888) 745-3886 or at  www.edd.ca.gov/Payroll_Taxes/Emergency_and_Disaster_Assistance_for_Employers.htm

 

Source:

Nonprofit Organizations Conducting Campaign Activity

CAUTION TAX FORMS NEEDED!REPORTING REQUIREMENTS SPOTLIGHT NAMES OF CONTRIBUTORS and AMOUNTS

Back on December 31 our post on What You Need to Know about NFP 501(c)(4) organizations outlined the changes, including a new definition in 501(c)(4) social welfare organizations.

Beginning January 1, 2014 the Government Code relating to campaign activity was amended to add reporting requirements for “reporting nonprofit organizations” that engage in campaign activity.

Government Code Section 54964.6 was added to require reporting nonprofit organizations – that engage in political activity – of specific amounts to:

  • File FTB 3589 with CA FTB and post on the nonprofit’s Internet website the identity and amount of each specific source or sources of funds it receives for campaign activity. (As of this posting, Form FTB 3589 is not available, and will not be available until 2015.  You should contact your tax professional or the Franchise Tax Board.)
  • Deposit into a separate bank account all “specific source or sources of funds” it receives.
  • Pay for all campaign activity from that separate bank account.
  • Provide a description of the campaign activity.
  • Report the identity and amount of payments the organization makes from the required separate bank account.

 

Flash – 2013 Short Sellers Get State Tax Relief

 

Franchise Tax Board, State of CAFranchise Tax Board of California 

We updated our website to include information about mortgage debt relief for taxpayers who sold their principal residences through a short sale in 2013.

According to an Internal Revenue Service (IRS) Information Letter dated September 19, 2013, the IRS determined that California taxpayers who sell their principal residences for less than what is owed on the home as part of a short sale, in which the lender agreed to the short sale, do not incur cancellation of indebtedness income. Instead, the amount of forgiven debt is included in the amount realized in determining gain on the sale of that residence.

The IRS guidance is limited to California short sales only. The IRS guidance did not specifically address other types of real estate transactions such as non-judicial foreclosures and mortgage loan modifications.

We will update information and FAQs on our website soon. For more details and updates, please go to ftb.ca.gov and search for mortgage forgiveness debt relief.

 

Pat Michael and his team at US-TaxLaws is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.
Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation
Corporate Tax Preparation   Incorporation-Choice of Entity    Business Support Services    Corporate Compliance    Audit Representation   Retirement Tax Planning   Wills & Trusts   Estate Planning   Bookkeeping   Payroll 

One Million+ getting a letter from the Franchise Tax Board!

uh oh signMore than 1 million Californians did not file a 2012 state income tax return!

Sacramento – Last year, the FTB collected more than $727 million dollars through their diligent campaign to find people who did not file!

The FTB receives more than 400 million income records from bank, employers, state departments, the IRS and other sources.

This program is designed to find wage earners and self-employed who did not file – it also tracks down other nonfilers through sources such as occupational licenses and mortgage interest payments.

If contacted,  you have 30 days to file or to show why one isn’t due.  For those who do not respond, the FTB will issue a tax assessment using income records to estimate the amount of state tax due.  It will include interest, fees and penalties.  If you get a letter, contact us immediately.  Do not wait.  Do not hesitate.  Call us at 619-589-8680.

The FTB administers two of CA’s major tax programs – Personal Income Tax and Corporation Tax.  They take their job seriously and are responsible for collecting more than 65% of California’s general fund.  For more information visit taxes.ca.gov.

Tax information is not tax advice.  Always speak with your tax professional before making decisions.  If you need to speak with a tax professional, give us a call today at 619-589-868.

 

 

Sacramento County Woman Sentenced to 3 years for Tax Evasion and Embezzlement Scheme

Franchise Tax Board, State of CASacramento –An Elk Grove Woman was sentenced to 3 years  in state prison for grand theft with a white collar crime enhancement, forgery,  and filing a false state income tax return, the Franchise Tax Board (FTB) announced.

Rosa Contreras, 45, was formerly employed as the  office manager for a Sacramento County dermatologist. Between 2007 -2010,  Contreras abused her position of trust and embezzled more than $182,000 through  forged checks, which she then deposited into her personal bank accounts.
Contreras also failed to claim this illegal income on her state income tax  returns for the same years. All income is subject to taxation including income  from illegal sources.

Contreras was also ordered to pay restitution  of more than $256,000 to her former employer representing the amount of the  embezzlement plus fees, penalties, and interest.

Sacramento County Superior Court Judge Laurel  D. White handed down the sentence Thursday, Jan. 2, in Department 8 of the  Sacramento County Superior Court. Sacramento County Deputy District Attorney  Ron Linthicum prosecuted the case.

Source: https://www.ftb.ca.gov/aboutFTB/Press/2014/release_02.shtml

Anyone who has knowledge of tax fraud may  call the FTB informant hotline at 1-800-540-3453.

FTB’s criminal investigation program identifies and  investigates cases of tax evasion and tax fraud to encourage compliance with  California income tax laws and maintain the public trust.

Troubled or Modified Loans?

If you had a loan modified, or lost a property in foreclosure or short sale in 2013, I will need to have all the details.  You can’t put behind you until we deal with the tax issues.

For instance, you might have income from cancellation of part of the mortgage.  Look for Forms 1099-A and/or 1099-C in the mail.  I must see these.

What I also need from you are all the details surrounding what happened.  I need the history of all the loans associated with the property.  It will help to see mortgage statements.  Many times these cases involve more than simply tax law, so please be as thorough as possible.

If you have any questions – don’t hesitate to call.  The number is 619-589-8680.

ATTN: California Taxpayers – Head of Household

Newest update on the ‘Head of Household’ Audit Letters

Sacramento – The Franchise Tax Board (FTB) announced mailing more than 100,000 audit letters to taxpayers to verify their “Head of Household”(HOH) filing status on their 2012 state tax return. We are encouraging all of our clients – once the questionnaire is received – to call for an appointment to come in at (619) 589-8680.

Taxpayers who do not qualify will have their tax reassessed at either the single or married-filing-separate filing status. FTB assessed $26 million in additional tax to the nearly 38,000 taxpayers who used this status last year and did not meet its requirements.  Continue reading →

Attention California Business and Schedule C Taxpayers

Do you know about California’s City Business Tax Program?You may be getting a notice from your city.  The FTB and cities are looking for revenue and the newest participants are Downey, Escondido, Fresno, Salinas, Santa Maria, and Tustin.

According to Spidell’s “…in June, cities were reminded to transmit 2012 business license information to the FTB on or before June 30.”  For more information on the City Business Tax Program, click here.

“From this information, the FTB will send filing enforcement notices to self-employed individuals and other businesses that have failed to file a return.

Cities happily send this information in exchange for a list of businesses that have filed tax returns. The cities use this information to contact the business and assess fees, penalties, and interest for failing to file and pay for a city business license. The FTB sends the data to the cities in December of each year.”

Each city has different requirements as to who must have a license.

For a pdf of participating cities, click here

 

Source:  Spidell’s July 2013 California Taxletter

 

UPDATE: Fire Fee & State Responsibility Area Map Changes

Are You Affected by the State Responsibility Area Maps Update? Homeowners statewide will no longer receive refunds.

Back on May 28, we wrote that the Court ruled the $150 Fire Prevention Fee assessed by the California State Board of Equalization (BOE) against each structure in a “state responsibility area” is no longer deductible as a tax under IRC §164. Continue reading →

UPDATE : California Offset Program Expands

California To Collect Debts From Out-Of-State Residents

The California offset program has been expanded to allow reciprocal agreements for California to collect debts from out-of-state residents. The Delinquent Taxpayer Accountability Act added Revenue and Taxation Code Section 19377.5, granting the Franchise Tax Board (FTB) the authority to enter into reciprocal agreements with other states to offset refunds to pay personal income tax (PIT) debts owed to the partner state. Continue reading →

Federal Income Tax Changes Summary for 2012

The Franchise Tax Board of California has provided their report of the Federal Income Tax Changes Summary for 2012.  60 pages of changes.  The FTB 2012 summary explains new federal laws, along with the effective dates, and the corresponding California law, if any. It includes an explanation of any changes made in response to the new federal law, and the impact on California revenue if California conforms to the federal changes.

New information return for some like-kind exchanges (06-17-13)

Beginning January 1, 2014, taxpayers who complete a like-kind exchange of California property for property located out-of-state will be required to file an information return with the FTB. (New R&TC §§18032, 24953 added by AB 92)

The information return must be filed for the year in which the exchange is completed and each subsequent year that the gain or loss is deferred. If the taxpayer fails to file an information return, and a required tax return is not filed, the FTB may estimate net income and assess tax, interest, and penalties.

For the full text of the bill, go to:

http://leginfo.ca.gov/pub/13-14/bill/asm/ab_0051-0100/ab_92_bill_20130614_enrolled.pdf

CA Residents – Head of Household Audit Questionnaire Coming

The State of California Franchise Tax Board (FTB) will be mailing out Head of Household (HOH) Audit Questionnaires in mid-July.  They will be sending out ~100,000 Audit Letters for 2012 tax year.  We are urging our clients to respond by the stated due date to avoid the *failure to furnish information* penalty.  Failure to respond to the questionnaire or whose responses indicate they do not qualify for HOH can expect a Notice of Proposed Assessment that disallows their HOH filing status. Continue reading →