Proposition 30 California Tax Increase –Tax Penalty Waiver.

The Franchise Tax Board has announced that taxpayers affected by the retroactive personal income tax increase (Proposition 30), may pay the amount due with their 2012 tax return.   Taxpayers subject to underpayment of estimated tax penalties may request relief by completing Form 5808 Underpayment of Estimated Taxes by Individual and Fiduciaries and completing Part 1, question 1 with the explanation that the underpayment is due to Proposition 30.

Have You Been a Bad Bad Taxpayer? No Worries California is Willing to Give You a Break

Even if you have been a bad taxpayer, California is willing to give you a break.

Voluntary Compliance Initiative 2 (VCI 2) is an opportunity for taxpayers who underreported their California income tax liabilities, through the use of abusive tax avoidance transactions (ATAT) or offshore financial arrangements (OFA), to amend their returns for 2010 and prior tax years and obtain a waiver of most penalties.

Filing period: August 1, 2011 to October 31, 2011

Applicable tax years: 2010 and prior

Eligibility

You are eligible to participate in VCI 2 if you (or one of your related entities):

  • Filed a tax return that underreported your income or tax liability through the use of an ATAT or OFA.

You are eligible even if you:

  • Are currently under FTB examination for an ATAT or OFA.
  • Are currently under administrative protest or appeal for an ATAT or OFA.
  • Participated in the IRS’s Offshore Voluntary Disclosure Initiative.

Participation

You must take the following steps to participate:

  1. File a completed Participation Agreement form with us between August 1, 2011 and October 31, 2011.
  2. Attach the form to your amended return to report all income from all sources, without regard to the ATAT and including all income from the OFA.
  3. Pay all tax and interest by October 31, 2011. See payment options for more information.

Benefits

Participation in VCI 2 will allow you to avoid:

  • The cost of litigation.
  • Certain penalties and the associated interest.
  • Criminal prosecution.

Penalties

You can avoid the following penalties under VCI 2:

  • Noneconomic Substance Transaction Understatement Penalty
  • Accuracy Related Penalty
  • Interest Based Penalty
  • Fraud Penalty

If you are eligible but do not participate, you will be subject to the full range of penalties and interest, and may be subject to criminal prosecution.

The Large Corporate Understatement Penalty (LCUP) and the Amnesty Penalty cannot be waived under this initiative.

March FTB News: Includes Info on How to Efile Your California Return With a New Home Credit

Updated Taxpayers´ Bill of Rights

[The FTB] recently revised [their]  publication 4058C, California Taxpayers’ Bill of Rights. / more+

Does your client know where to send the “state copy” of an information return?

You may be asked by your client where they need to send the “state copy” of an information return. If they filed paper returns with IRS, they do not need to send a paper copy to FTB. / more+

Available now: Free California source income withholding webinars

[The FTB]  will host free California source income withholding webinars in March 2010. / more+

The best way to file a protest

Has your client recently received a Notice of Proposed Assessment for added tax resulting from [an FTB] audit examination? Does your client plan to file a protest? / more+

New home credit can be e-filed

Did you know you can e-file California returns that contain the New Home Credit?  / more+

Do all your tax stuff online!

With instant access to taxpayer information, 24 hours a day, doing your tax stuff online will save you, and your clients, time and hassle. / more+

Need W-2 information?

Some clients may have difficulty getting their W-2 information. / more+

Small Business

Small Business Virtual Webinar

[The FTB] partnered with Board of Equalization (BOE) to present cost effective and convenient educational products, including a complete online seminar package that enables taxpayers to get answers to the most commonly asked questions. / more+

Ask the Advocate

FTB responds to tax community´s proposals

The annual Taxpayers´ Bill of Rights Hearing was held December 3, 2009. [The FTB] received several proposals and recommendations from the tax community. / more+

Inside FTB

Take a look at the changes happening at FTB. / more+

Criminal Corner

[The] monthly summary on bringing tax criminals to justice, and closing the tax gap one case at a time. / more+

Big Business

Interested Parties Meeting on Specialized Tax Service Fees

[The FTB] scheduled an interested parties meeting for March 16, 2010, at 1 p.m. to discuss amendment of California Code of Regulations, title 18, section 19591 (Specialized Tax Service Fees), to establish the amount of the fee for the issuance of a limited partnership revival confirmation letter, as required by Revenue and Taxation Code section 19591, subdivision (b)(3), for periods on or after January 1, 2011. / more+

California February Tax News From the FTB – Includes Info on California’s New Job Tax Credit

Top 12 tax scams

It’s a new year and a good time to remind [you] about the top tax scams. / more+

Pass-through entities must timely file original tax returns claiming new jobs tax credit in order for owners to claim the credit

A new jobs tax credit of $3,000 is available to small businesses with 20 or less employees for each additional net full-time employee hired and employed in California for tax years beginning on or after January 1, 2009. The total amount of the credit that we can allocate may not exceed $400 million, and claims must be made before a statutorily provided “cut-off” filing date. / more+

Using the Annualization Method in 2009 and 2010

Estimated tax payments have undergone many changes since we started filing season one year ago. / more+

Small Business

Timing is everything

[Are you]considering making an S corporation election? Selling or exchanging 50 percent or more of the total interests in an LLC or limited partnership? / more+

Ask the Advocate

Withholding and estimate tax payment changes

This summer the California legislature again revised the estimated tax payment percentages, and also passed some clean-up legislation to clear up confusion on how wage earners with only wage withholding would meet the new estimated tax payment requirements. / more+

Inside FTB

Take a look at the changes happening here at FTB. / more+

Criminal Corner

[The FTB's] monthly summary on bringing tax criminals to justice, and closing the tax gap one case at a time. / more+

Big Business

California code of civil procedure and foreclosures

Will you clarify how California civil procedures interact with the Internal Revenue Code (IRC)? Specifically how does California Civil Procedure Code (CCP) Sections interact with IRC Section 108, Income from Discharge Indebtedness? / more+

California FTB News – Includes Info on Same Sex Marriages

California recognizes out-of-state same-sex marriages

On October 11, 2009, the Governor signed Senate Bill 54, which provides that a marriage between two persons who have entered into a same-sex marriage outside the State of California prior to November 5, 2008, that was valid by the laws of the jurisdiction in which the marriage was contracted, is valid in California. / more+

Military Spouses Residency Relief Act

The Military Spouses Residency Relief Act (MSRRA) was signed into law by the President on November 11, 2009. For taxable years beginning on or after January 1, 2009, a service member’s spouse is considered a nonresident for tax purposes if the servicemember and spouse have the same legal residence or domicile outside of California and the spouse is in California solely to be with the service member who is serving in compliance with military orders. / more+

Mandatory e-pay penalty update: Not assessed in 2010

When you are required to make electronic payments but pay by other means, [the FTB] can assess a penalty equal to one percent of the amount paid, unless your failure to pay electronically was for reasonable cause and not willful neglect. / more+

Luxury Auto Pilot Program

Each year, [the FTB] receive and process millions of income information records. The nonfiler program uses federal tax return information, information from other California state agencies, third-party data, and income estimates from self-employed activities to determine if a taxpayer has a filing requirement. / more+

EITC Awareness Day is January 29, 2010

The IRS in partnership with local organizations in your area will kick off of the Earned Income Tax Credit (EITC) Awareness Day event on January 29 to promote the federal tax credit. / more+

Consultants wanted: California seeks experts knowledgeable in abusive tax shelter transactions

Abusive Tax Avoidance Transactions (ATAT) cost California billions of dollars each year. In 2004, [the FTB] collected a record $1.4 billion from taxpayers participating in tax shelters during [their] Voluntary Compliance Initiative. / more+

Get ready for the filing season with e-Services

During these difficult times, it is increasingly important to work both smart and efficiently. / more+

Head of Household guidelines

Our filing season is just around the corner. Some of your clients may inquire about claiming our head of household filing status. This filing status provides a lower tax liability and a higher standard deduction than the single filing status. / more+

California’s Enterprise Zones Wage Credit

In our June 2009 issue of Tax News we asked the question, “Are you familiar with California’s Enterprise Zones?”

[The FTB] now ask, “Are you aware some taxpayers who work in an Enterprise Zone may be entitled to a credit for the wages they earned?”  / more+

Small business

Misleading letter schemes target corporations and LLCs

Your business clients may receive a misleading letter to file board minutes and/or a statement of information for a fee. Because the letters look and sound official, your clients may be quick to send payment. But wait! Read the fine print, “…products or services being offered are not approved or endorsed by any government agency.” / more+

Ask the advocate

Taxpayers’ Bill of Rights Hearing

The Annual Taxpayers’ Bill of Rights Hearing was held December 3, 2009, at FTB headquarters in the Gerald H. Goldberg Auditorium. We received four proposals in advance and representatives from two organizations made presentations. We are in the process of preparing responses to the proposals we received. / more+

Inside FTB

Take a look at the changes happening here at FTB. / more+

Criminal corner

Our monthly summary of bringing tax criminals to justice and closing the tax gap one case at a time. / more+

December California News From the Franchise Tax Board

Legislative wrap-up 2009
Here is [an] annual summary of tax-related legislation enacted this session. / more+

Free backup withholding webinar
California conforms to federal backup withholding beginning January 1, 2010. / more+

Corporation tax law changes in California
Recently enacted California legislation adopted new statutes and amended existing statutes that result in major changes to how corporations are taxed in California. / more+

Find forms faster and easier with our form locator
On December 15, 2009, [the FTB] will have a new search tool on our forms webpage; it is called the Form Locator. / more+

Provisional payment plan pilot program begins December 2009
[The FTB's] collection response and resolution section will begin to offer a provisional payment plan for personal income taxpayers. Taxpayers who qualify for this pilot program will be allowed to make payments towards their tax liability without involuntary collection action taking place, while they prepare and submit their missing valid tax returns to us. / more+

Top 10 personal income tax errors that delay return processing – 2009
Check to see where [the FTB] found the most common errors on personal income tax returns. / more+

Top 10 business entity errors that delay return processing – 2009
Check to see where [the FTB] found the most common errors on business entity returns. / more+

Small business

Will your client qualify for the new jobs credit?
Newly enacted state law, ABX3 15 (Assembly Budget Committee, Stats. 2009 Third Extraordinary Session, Ch. 10) allows a potential income tax credit of $3,000 to a qualified taxpayer for each additional full-time employee hired. / more+

Ask the advocate

Communication guidelines
Quite often [the FTB] receive questions from taxpayers and practitioners on issues relating to the interpretation of provisions of the R&TC as well as policies and procedures of [the FTB's] department. / more+

Inside FTB
Take a look at the changes happening here at FTB. / more+

Criminal corner
[The FTB] monthly summary on bringing tax criminals to justice, and closing the tax gap one case at a time. / more+

Big business

Gross receipts fees discussed at CalCPA
On October 28, [the FTB] attended the CalCPA Committee on Taxation, [the FTB's] annual liaison meeting. [the FTB] shared legislative updates affecting [the FTB], changes to [their] auditing and collections, and new communication products available to [their] taxpayers and tax professionals. / more+

November FTB News – Includes how to Handle a Foreclosed Home for Tax Purposes

540X Easy Reply Amended Return Pilot Program

[The FTB] will soon begin a pilot program giving certain taxpayers the option of quickly concluding an audit when first contacted by [the FTB], if the taxpayer agrees with the proposed adjustments to their return. / more+

Useful Information Found on MyFTB Account
MyFTB Account is a resource that’s available for your clients to access useful tax information 24/7. / more+

Documents, Second Mortgages, Tax Reporting – How to Handle a Foreclosed Home for Tax Purposes

In [the] July 2009, Foreclosure and Short Sales, and October 2009, Business Foreclosures or Short Sales, issues of Tax News, [the FTB] addressed some of the questions [they] received related to a foreclosure. / more+

FTB/CSEA Liaison Meeting a Success
On September 25, [the FTB] attended the California Society of Enrolled Agents (CSEA) annual Liaison meeting. / more+

540NR Booklet Mass Mailing Discontinued
[The FTB] decided to discontinue the mass mailing of our Nonresident or Part-Year Resident Income Tax Booklet California 540NR directly to taxpayers. / more+

Small Business
Announcing the California Child Support Guide for Business
DCSS announces the California Child Support – A Guide for Business — a complete step-by-step web-based guide designed to help employers meet child support requirements in California. / more+

Ask the Advocate
Taxpayers’ Rights Advocate Role
[The advocate continues] to be pro-active, visible, and accessible to taxpayers. / more+

Inside FTB
Take a look at the changes happening at FTB. / more+

Criminal Corner [Stacie says: my favorite]
[A] monthly summary on bringing tax criminals to justice, and closing the tax gap one case at a time. / more+

California Franchise Tax News – October

[Stacie says: This directly from the Calfiornia Franchise Tax Board's website, is October Tax News]

Coming Soon – Resident, Nonresident, and Real Estate Withholding Form and Processing Changes Begin in 2010

Effective January 1, 2010, we will be implementing changes for withholding forms and payments. / more+

Adjusted Interest Rate for January 2010 to June 2010
Pursuant to Revenue and Taxation Code Section (R&TC) 19521 (formerly 19269), the adjusted interest rate has been determined for the period January 1, 2010, through June 30, 2010. / more+

Thousands of Businesses Need to File State Tax Returns
On September 14, 2009, we began contacting more than 35,000 companies that did business in California in 2007, but failed to file a state tax return for that year. / more+

Form 540 Gets a Mini-Makeover
Each year our forms section revises the previous year forms and publications to reflect the new tax year, new information, and law changes. / more+

IRS Tax Calendar
The Tax Calendar for Small Businesses and Self-Employed is now available. / more+

It’s Official! California Backup Withholding Begins January 1, 2010
Beginning January 1, 2010, with certain limited exceptions, payers that are required to withhold and remit backup withholding to the Internal Revenue Service (IRS) are also required to withhold and remit seven percent of the payment to FTB. / more+

Small Business
What Does Conformity Mean to the Small Business Owner?
California conformity to federal tax law is an area of interest for California taxpayers and small business owners. / more+

Ask the Advocate
Indexing Tables
I have received a number of questions through our Systemic Issue Management System on indexing since California released its indexing tables in August. / more+

Inside FTB
New Policy for FTB Installment Agreements
In our public outreach efforts, we offer different forums for CPAs, enrolled agents, attorneys, corporate tax personnel, and all other tax professionals to have the opportunity to discuss cutting-edge tax topics, provide input, while earning Continuing Professional Education credits. / more+

Criminal Corner
Our monthly summary on bringing tax criminals to justice, and closing the tax gap one case at a time./ more+

Big Business
Business Foreclosures or Short Sales
In our July 2009 Tax News, we addressed some of the questions we had been receiving related to a foreclosure or a short sale of a personal residence. The other question we have received asks, “What if the foreclosure is on my rental property?” / more+

California Franchise Tax Board Reminds Us That Your Third Estimated Tax Payment is Due September 15

Your third 2009 quarterly estimated tax payment is due by September 15, 2009.

The FTB has a free Web Pay service to easily pay your estimated tax online. You will need the following to pay online:

Your social security number

The last name you used when you filed your 2007 income tax return.
Your bank account number and bank routing number.

Don’t want to use Web Pay?

View all your payment options.

If you mail a check or money order, be sure to include Form 540-ES, Estimated Tax for Individuals, with your payment.

September California Franchise Tax News

More information directly from the California Franchise Tax Board.

Clarification of the “Cash for Clunkers” Tax
Rules

The federal “Cash for Clunkers” program has generated a lot of interest among consumers and we have received many inquires about the tax implications of this popular program. / more+

Did You Know NHSC Loan Repayment Awards Are Exempt Under California Law?
National Health Services Corps (NHSC) loan repayment program provide payment of student loans for participants who provide certain services in areas where shortages of these services exist. / more+

Federal and State Income Tax Changes

Federal, State, and Revised 2009 Withholding Tables. / more+

How to Select a Tax Preparer

How to Select an Income Tax Return Preparer, FTB 982, is an educational tool for taxpayers. / more+

Chiang Determines Date to Stop Issuing IOUs

State Controller John Chiang today announced he has completed “stress testing” the Department of Finance’s cash projections from the state’s newly-revised budget and has determined the new spending plan will provide the State Treasury with enough cash to stop issuing IOUs on September 4, almost one month earlier than expected. / more+

Small Business
Does Your Client Know to Dissolve, Surrender, or Cancel Their Business Entity When They Are No Longer Doing Business?

It is very important for taxpayers to understand that business entities registered with the California Secretary of State (SOS) must be dissolved, surrendered, or canceled when they are ceasing operations in California.

/ more+

Ask the Advocate

Reasonable Cause

Recently, I have received requests from taxpayers to have certain penalties waived for what they believe may qualify for reasonable cause. / more+

Inside FTB

New Policy for FTB Installment Agreements

We have implemented a uniform Installment Agreement (IA) Policy throughout our department, and external website. / more+

Criminal Corner

Our monthly summary on bringing tax criminals to justice, and closing the tax gap one case at a time./ more+

California Franchise Tax Board Tax News August 2009

The following infomation is from the California Franchise Tax Board’s web site.

Registered Warrants Can Pay Your State Income Tax Bill
[The FTB will] accept California registered warrants (IOUs) as payment of current and past due personal and corporate tax obligations. / more+

State’s New Home Tax Credit Gone
[The FTB] stopped accepting applications for the new home tax credit at midnight, Thursday, July 2, 2009. / more+

FTB Provides Guidance for California Treatment of the Revised Texas Franchise Tax
On July 20, 2009, [the FTB] responded to the request for taxpayer guidance to determine the general eligibility for the Other State Tax Credit (OSTC) and the deductibility of the Revised Texas Franchise Tax (RTFT). / more+

Did You Know [the FTB works with others]?
[The FTB] came together with the Board of Equalization, Employment Development Department, and the IRS in a cooperative partnership called the Joint Tax Agency Communications Committee. / more+

15th Annual Tax Practitioner/IRS Town Hall Meetings
In September, [the FTB] will be working with the IRS and other state agencies at the 15th Annual Tax Practitioner/IRS Town Hall Meetings. / more+

Striking Gold in California
Striking Gold in California is an educational tool for small business owners that provide basic tax information from the Internal Revenue Service and the three California tax agencies, all in one place. / more+

Small Business
Converting a California LLC to a Corporation
[Do you want] to convert [your] limited liability company (LLC) to an S-Corporation and continue to have the profits and losses flow through to its members? Did you know that you can convert an LLC into an S-corporation by making an election? / more+

Ask the Advocate
Systemic Issue Management System (SIMS) at Work
This month, I share the efforts we are taking by discussing an issue that was submitted to us and our response… / more+

Criminal Corner
Our monthly summary on bringing tax criminals to justice, and closing the tax gap one case at a time. / more+

Big Business
Disclosing Deferred Intercompany Stock Account (DISA) Balances
FTB issued Notice 2009-5 on July 17, 2009, to extend the due date until October 15, 2009, for taxpayers to file a completed FTB Form 3726, Deferred Intercompany Stack Account (DISA) and Capital Gains Information. / more+

2009 California Tax Law Changes

Estimated Tax Payments – Installments due for each taxable year beginning on or after January 1, 2009 are now required to be 30 percent of the required estimated tax liability for the 1st and 2nd required installments and 20 percent of the required estimated tax liability for the 3rd and 4th required installments. Prior to this law change, installments were made in four equal (25%) payments.

Taxpayers with adjusted gross income over $1,000,000 ($500,000 for married/RDP filing separately) may no longer compute estimate payments based on 100% of the tax shown on the return of the preceding year. Estimates must be based on the current years income.
Taxpayers with a tax liability less than $500 ($250 for married/RDP filing separately) do not need to make estimated tax payments.

Electronic Payments – Taxpayers are required to remit their payments electronically if they make an estimated or extension payment exceeding $20,000 for taxable year 2009 or the total tax liability shown on their original 2009 tax return exceeds $80,000. Once you meet the threshold, all payments regardless of amount, tax type or taxable year must be remitted electronically. Electronic payments can be made using Web Pay on FTB’s website, by using electronic funds withdrawal (EFW) as part of the e-file return, or by using your credit card.

Any taxpayer required to remit a payment electronically who makes a payment by other means, shall pay a penalty of one percent of the amount paid, unless it is shown that the failure to make a payment as required was for a reasonable cause and was not the result of willful neglect.

Net Operating Loss – For taxable years beginning in 2008 and 2009, California has suspended the net operating loss (NOL) carryover deduction. Taxpayers may continue to compute and carryover an NOL during the suspension period. However, taxpayers with net business income of less than $500,000 or with disaster loss carryovers are not affected by the NOL suspension rules.

The carryover period for suspended losses is extended by:
• Two years for losses incurred in taxable years beginning before January 1, 2008.

• One year for losses incurred in taxable years beginning on or after January 1, 2008, and before January 1, 2009.

Also, NOL carrybacks, NOL carryovers, and the number of taxable years to which the loss may be carried, are modified. For more information, see form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Individuals.

Whats New 2008 California Tax Law Changes

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