Sept/Oct 2004 Tax News
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- Paid Family Leave Program benefits not subject to CA income tax
- California 2004 indexed tax rates
- Fees for services
- FTB mails head of household questionnaires
- Ask the Advocate
- SB 615
- Amnesty FAQs
- Guide to FTB Website
- Tax e-News
- Mandatory e-file
- Three public service counters closed permanently
- Interest Rates
State won't tax Paid Family Leave Program benefits
State Controller and Franchise Tax Board (FTB) Chair Steve Westly announced that benefits paid to employees participating in the Paid Family Leave program are not subject to California income tax.
"I'm delighted to tell Californians they can take time to be with their newborn children or care for their loved ones without worrying about getting stuck with a state tax bill,” said Westly.
The new law (SB 1661 Kuehl, Stats. 2002, Ch. 901) extends disability compensation to people who take time off work to care for a seriously ill child, spouse, parent, domestic partner, or to bond with a new baby or adopted child. Because the benefits paid are in the nature of unemployment compensation, California law considers it nontaxable income for state purposes. Anyone eligible starting July 1, 2004, can claim weekly benefits of up to $728 for a maximum of six weeks.
The Paid Family Leave program is part of the State Disability Insurance (SDI) program administered by the Employment Development Department. An estimated 13 million California workers covered by SDI or a similar Voluntary Plan are eligible for this benefit.
The Paid Family Leave program is funded through worker contributions. To learn more about it, visit the Employment Development Department’s Website at www.edd.ca.gov or call (877) 238-4373.
California 2004 indexed tax rates
California taxpayers will pay less in income taxes next year due to the state’s 2004 indexed tax rates, according to State Controller, Steve Westly.
“We’re adjusting the tax rates for inflation so that families will pay less in state income taxes next year and keep more money in their pockets,” said Westly.
The tax rates have been indexed by 3.1 percent for the 2004 tax year, which means that the average family will pay less in state income taxes if their income was unchanged from last year. Indexing takes the inflation rate into account and adjusts tax brackets, filing requirement thresholds, the standard deduction, and certain credits. We compute the indexed values using the inflation rate as measured by the California Consumer Price Index for all urban consumers from July 1, 2003 to June 30, 2004.
We design the minimum filing requirement thresholds to ensure that most people who will not owe taxes are not required to file a tax return. We adjust these tables each year to include the added senior exemption and the dependent exemption credits. The tax threshold, the amount of income reached where a tax liability is incurred, has risen to $10,492 of adjusted gross income for single and married filing separate taxpayers and $20,931 for married, surviving spouse, and head of household taxpayers.
The indexed values for tax year 2004 are as follows:
The personal exemption credit for single, separate, and head of household taxpayers will increase from $82 to $85. For joint or surviving spouse taxpayers, the personal exemption credit will increase from $164 to $170.
|Single, married filing separate, and head of household||$85|
|Married filing joint and surviving spouse||$170|
|Age 65 and over||$85|
The dependent exemption credit will increase from $257 per dependent claimed in 2003 to $265 each in taxable year 2004.
The standard deduction amount for single or married
filing separate taxpayers will increase from $3,070 to $3,165.
For joint, surviving spouse, or head of household taxpayers, the standard deduction increases from $6,140 to $6,330.
Credit for qualified senior head of household
The qualified senior head of household credit is two percent of California taxable income. The new adjusted gross income ceiling is $54,730, and the maximum credit amount $1,031.
Joint custody head of household/dependent parent credit
|Credit for Joint Custody Head of Household:||Lesser of $337 or 30 percent of net tax *|
Qualified parent credit/young infant credit
This credit has sunset and will not appear in the 2004 Personal Income Tax booklets. However, it has carryover provisions. It is included on the 2004 Form FTB 3540, Credit Carryover Summary.
For taxpayers filing single and married filing separate with a California Adjusted Gross Income of $29,955 or less, the credit is $60.
For taxpayers filing married filing joint, head of household, and surviving spouse, with California Adjusted Gross Income of $59,910 or less, the credit is $120.
Reduction of exemption credits
For each $2,500 ($1,250 if married filing separate) of adjusted gross income or fraction thereof which exceeds the threshold value, a reduction of $6 ($12 joint) will apply. The new indexed threshold values are as follows:
|Single, Married Filing Separate||$139,921|
|Head of Household||$209,885|
|Joint, Surviving Spouse||$279,846|
Reduction of itemized deductions
The new indexed threshold amounts are as follows:
|Single, Married Filing Separate||$139,921|
|Head of Household||$209,885|
|Joint, Surviving Spouse||$279,846|
Editor's Note: You can find additional tax rates and filing requirement amounts on Tax News Online, located on our Website, www.ftb.ca.gov.
Fees for services
Effective January 1, 2005, we will begin charging a fee to set up payment arrangements for taxpayers and to perform certain expedited services.
The new fees are the result of recently enacted legislation that created California Revenue and Taxation Code Section 19591 that requires us to recoup our costs for certain specialized tax services.
The law states that fees must be reasonably related to the actual costs we incur to provide the specialized services. We anticipate that the following fees will apply to the following services:
- Installment payment programs $20
- Expedited services for:
- Corporation revivor requests $100
- Tax clearance certificate requests $100
- Tax-exempt status requests $50
FTB mails head of household questionnaires
The 2003 head of household audit season begins in September with the first mailing of audit questionnaires. These important facts about our Head of Household Program can help you better serve your affected clients.
e-Filers get a leg up
In general, taxpayers who completed a Head of Household Questionnaire, Form FTB 4803e, at the time they e-filed their tax return will not receive a head of household questionnaire unless the Form FTB 4803e was incomplete or contained conflicting information.
Need help? We’re on the Internet.
Our Head of Household Webpage provides the rules for qualifying for the head of household filing status, information about our audit process, and the answers to frequently asked questions. There’s also a self-test to help taxpayers determine if they qualify for the filing status.
To get there, go to our Franchise Tax Board home page, www.ftb.ca.gov, and type in the key words Head of Household.
Don’t have Internet access?
Call our Head of Household Automated Assistance Line and ask for a copy of FTB Pub. 1540. Taxpayers or tax preparers who don’t have access to the Internet can also call our Head of Household Automated Assistance Line at (800) 555-4005. This automated line has tips on how to complete the audit questionnaire, explains who may qualify a taxpayer for the head of household filing status, and has answers to frequently asked questions. The assistance line provides answers in both English and Spanish.
FTB Pub.1540, California Head of Household Filing Status, summarizes the general rules for qualifying for the head of household filing status, has self-tests, frequently asked questions and definitions of commonly used terms. It can be ordered through our Head of Household Automated Assistance Line. A Spanish version, FTB Pub. 1540SPAN, California Información Sobre el Estado Civil Cabeza de Familia, is also available.
Ask the Advocate
Back in July we teamed up with Spidell Publishing to present two tax gap symposiums. Your feedback regarding our tax gap efforts, and ideas for reducing it, all went towards making both events a success. I want to thank everyone who participated and to share with the rest of the tax professional community some of your ideas and comments regarding the tax gap.
The comments I received from the symposiums indicated
that while the tax gap itself is not a new concept to you (or us), the
ways in which people try to avoid paying their fair share of taxes is
always changing. As a result, our strategies for identifying these folks
and making them comply with the tax law are evolving as well. The ideas
voiced at the symposiums fell into one or more of the following categories:
Focused enforcement on a particular industry
- Choose an industry and audit a significant number of businesses in that industry, citing that the Internal Revenue Service had a lot of success when they used this tactic with the fishing industry in Alaska, and that as word of the increased enforcement activity spread, other tax cheats would be encouraged to come into compliance.
- Increase investigations into home daycare and in-home elder care industries, day workers, and landscape workers.
- More vigorous investigation and prosecution of bad tax preparers and issuing cease and desist orders to tax preparers who are not following the rules or are not licensed.
- Create an avenue for taxpayers and tax preparers to report tax preparers who promote ways for taxpayers to underreport income and over deduct.
- Cross-check preparer information on returns against license lists to ensure that preparers are properly licensed.
- Put more criminal investigators on the job to deal with the huge problem of cash pay.
- Be more involved with California Tax Education Council. Fine non-registered preparers. And conduct compliance visits in the April to December timeframe too.
- Go after tax shelter promoters.
Use what we have
- Work with other agencies, e.g. Employment Development Department, Board of Equalization, etc. to share information to locate tax cheats.
- Use driver's license numbers to track taxpayers.
- Do more data matching-use county data, city data, and BOE.
- Do reconciliation of BOE sales tax data to Schedule C that is filed.
- Real estate withholding (AB 2065). Allow for reduced withholding if small gain.
- Use bank records to find unreported income.
- Use Form 1098 to tell if correct amount of income was reported on tax return. Information Return Enforcement
- Use Schedules K-1 to make sure partnership income is reported on tax returns.
- Add balance sheet to schedule C to allow for identification of more audit issues.
- Do more cross-checking of information with returns-CP 2000 programs really work.
- Audit any taxpayer that for two years in a row reports total income less than their home mortgage interest deduction.
- Have taxpayers include an addendum of entities/individuals who provide work/services for them.
- Do audits for Form 1099 compliance-make sure Schedule C has all Forms 1099 reported. (IRS Schedule C has a new line contract labor.)
- If Form 1099 is not issued, do not allow business the deduction.
- Form 1099 reporting should be expanded to corporations. Publicity/Education
- Many felt we needed to educate the public about the tax gap and increase public awareness. The suggestions made most frequently included:
- Do press releases when we hire new auditors.
- Increase our advertising to combat the radio ads such as: pay pennies on the dollar of your tax liability, or : incorporate in Nevada and don't pay California taxes." People hear this so much they begin to feel that they are "saps" for paying their taxes.
Do more media campaigns
- Most people think working for cash is ok. Publicize examples of this and how we have taken action on this issue.
With the enactment of Senate Bill 615, California now conforms to federal law on certain key provisions of the Servicemembers Civil Relief Act of 2003 (H.R. 100). Most notably, under the new law, the military pay of military servicemembers not domiciled in California may not be used to increase the tax liability imposed on other income of military servicemembers or their spouses.
H.R. 100, which President Bush signed into law on December 19, 2003, provides nontax civil relief and various forms of federal and state tax relief to military servicemembers. Before the enactment of SB 615, California did not conform to the provisions of H.R. 100, therefore, while we did not tax the military pay of military servicemembers not domiciled in California, non-domiciled military servicemembers who had other California source income were required to include their military pay in their total income calculation when filing a return to report their other California taxable income. Their total income amount determined the tax rate applied to their nonmilitary income. Servicemembers who were domiciled in a community property state other than California, and whose spouses were California residents, had their spouses’ community half of the military pay excluded from their total income.
Under the new law, military servicemembers not domiciled in California can exclude their military pay when calculating, for tax purposes, the total income for themselves and their spouses. For affected taxpayers this change affects their tax rate, credit percentage, and deduction percentage. It also requires a special calculation to arrive at a modified federal adjusted gross income for threshold limitations.
The new law does not affect servicemembers domiciled in California or their spouses. They must include all of their military wages when calculating total income. This is true even when servicemembers or their spouses are permanently stationed outside of California and are required to file because of having California source income, such as from a California rental property.
Under S.B. 615 servicemembers not domiciled in California do not include their military pay when calculating:
- Federal adjusted gross income threshold limitations (i.e., personal and dependent exemptions, medical and dental expenses, charitable contributions, and miscellaneous itemized deductions) and phase-outs (i.e., IRA deduction, student loan interest deduction, and PALS).
- Gross income for purposes of determining a filing requirement.
- Alternative minimum taxable income.
Under SB 615 the following applies to military members:
- Native American military servicemembers whose legal residence or domicile is a federal Indian reservation are treated as living on the federal Indian reservation and their military pay is deemed as derived wholly from federal Indian reservation sources.
- The running of the statute of limitations is suspended for the period of a military servicemember's military service for the purposes of bringing an action in a court or administrative proceeding (i.e., Board of Equalization appeal).
- The rate of interest is limited to a maximum of six percent per year on any underpayment incurred before a military servicemember enters military service.
SB 615 applies to any taxable year for which the period for making assessments or allowing a claim for refund or credit has not expired as of December 19, 2003. A claim for refund must be filed within the latter of:
- Four years from the original due date of the return.
- Four years from the date a timely return is filed.
- One year from the date of overpayment. The statute of limitations may be extended by disaster loss, periods spent outside the U.S., and/or service in a combat zone.
If you have clients who are military servicemembers not domiciled in California and have not yet filed their 2003 California income tax return, they can file an original return using the new SB 615 rules.
If you have affected military clients who already filed current or prior year returns including their military pay in total income, they can file amended returns for the eligible tax years. Here are some guidelines for ensuring proper processing:
- Use Form 540X, Amended Individual Income Tax Return.
- Write "Military - HR 100" in red at the top of form 540X, and include a daytime phone number.
- Attach a copy of the military W-2 to the amended return.
- Include a revised Form 540NR, Schedule CA (540NR), and any other affected forms or schedule with the amended return.
If your clients are amending a tax year for which the normal statute of limitations is closed, attach a statement of why the normal statute of limitations does not apply. If the statute is open because of military service in a combat zone or outside the United States, attach a copy of any documents that shows when they served in a combat zone or overseas.
Here are some examples of tax situations involving military servicemembers that illustrate the effects of the new law:
|Example A: Military member domiciled in California and stationed in California.|
|Facts: John is a military member domiciled in California and stationed in California the entire year. John earned $25,000 in military wages.|
|Before SB 615||After SB 615|
|Schedule CA - 540||Schedule CA -540|
|Military wages||25,000||Military wages||25,000|
|Conclusion: John is a resident of California and reports income from all sources.||Conclusion: The exclusion provision of SB 615
apply to military members domiciled in California. John reports
the military income to California.
|Example B: Military member domiciled in California and stationed outside the state on PCS orders.|
|Facts: Bob is domiciled in California and stationed in Nevada on PCS orders. Bob earned $35,000 in military wages and had rental income of $15,000 from a California rental property.|
|Before SB 615||After SB 615|
|Schedule CA -540NR||Schedule CA -540NR|
|Military wages||35,000||35,000||0||Military wages||35,000||35,000||0|
|Rental income||15,000||15,000||15,000||Rental income||15,000||15,000||15,000|
|Conclusion: Bob included military wages in Total AGI.||Conclusion: The exclusion provision of SB 615
does not apply to military members domiciled in California.
Even though Bob is considered a nonresident of California, he does not
qualify under SB 615 for the exclusion of income. Therefore, Bob includes
military income in Total AGI.
|Example C: Military member domiciled outside California and stationed in California on PCS orders.|
|Facts: Mary is domiciled in Oregon and stationed in California on PCS orders. Mary earned $25,000 in military wages during the year. She also had business income of $14,000 working on the weekends as a real estate broker in California.|
|Before SB 615||After SB 615|
|Schedule CA -540NR||Schedule CA -540NR|
|Military wages||25,000||25,000||0||Military wages||25,000||25,000||0||0|
|Business Inc.||14,000||14,000||14,000||Business Inc.||14,000||14,000||14,000|
|Conclusion: Mary included military income in Total AGI.||Conclusion: Mary excludes military income from
Total AGI on the
Schedule CA (540NR), Column B.
|Example D: Military member domiciled in community property state other than California and nonmilitary resident spouse.|
|Facts: Tom is domiciled in Texas (a community property state) and stationed in California on PCS orders the entire year. Tom earned $20,000 in military wages. Karen is a resident spouse and earned $25,000 wages from a California computer firm. They filed a joint return.|
|Before SB 615||After SB 615|
|Schedule CA -540NR||Schedule CA -540NR|
|Military wages||20,000||10,000||10,000||0||Military wages||20,000||20,000||0||0|
|S - Wages||25,000||25,000||25,000||Business Inc.||25,000||25,000||25,000|
|Conclusion: For military members domiciled in community property state other than California, the resident spouse was allowed a military pay adjustment of one-half of the community share of military income on the Schedule CA (540NR), Column B.||Conclusion: SB 615 provides that the military compensation of a servicemember not domiciled in California will not increase the tax liability imposed on other income of the service member or spouse. Therefore, the entire military wages are subtracted on the Schedule CA (540NR), Column B.|
Tax amnesty program coming in 2005
Recent legislation authorizes the Franchise Tax Board and the Board of Equalization to administer a Tax Amnesty Program in early 2005. The following frequently asked questions and answers provide some preliminary information about the program, who is eligible to participate, and when to apply. This information is also available on our Website, www.ftb.ca.gov. As more details become available, we will update our Website and notify you via our Tax e- News email service.
What is tax amnesty?
Tax amnesty is a limited-time chance for individuals and businesses to pay past-due income, franchise, sales, or use taxes and the related interest penalty-free and without the fear of criminal prosecution. It runs from February 1, 2005, through March 31, 2005. Taxpayers eligible to participate in amnesty but choosing not to do so will be subject to additional penalties.
Who is eligible?
Amnesty is open to both individuals and businesses for taxable years 2002 and prior, if they did any of the following:
- Did not file the required California tax returns.
- Underreported income on a previously filed tax return.
- Claimed excessive deductions.
- Did not pay income/franchise, sales, or use taxes on time.
The following taxpayers or transactions are not eligible for amnesty:
- Taxpayers currently under criminal investigation or prosecution on tax-related matters.
- Abusive tax shelter transactions that were eligible for relief under California's Voluntary Compliance Initiative or the 2003 IRS Offshore Voluntary Compliance Initiative - These initiatives applied to taxpayers with nonreported or underreported tax liability amounts attributable to an investment in an abusive tax shelter. Note: These taxpayers are eligible for amnesty for non-abusive tax shelter items.
How and when can clients apply?
- Complete and return a signed amnesty application by March 31, 2005. Amnesty runs from February 1, 2005, through March 31, 2005. (Since March 31 is a state holiday, we will accept applications postmarked April 1, 2005.)
- File all missing income tax returns for amnesty years by May 31, 2005.
- File amended income tax returns for taxable years where you underreported your income for tax amnesty years by May 31, 2005.
- Pay all outstanding tax liabilities and interest for amnesty years by May 31, 2005. Or, set up an installment payment agreement that will be fully paid by June 30, 2006 for those amnesty years.
Where to get forms?
- The amnesty application and tax forms for 1985-1993 will be available on this Website by January 15, 2005.
- Tax forms for years 1994-2002 are currently available on this Website under Forms & Publications.
- Tax forms for years before 1994 are available by phone order at (800) 852-5711.
Can I delay filing and paying past-due taxes for clients until the amnesty period begins?
No. The State will continue its normal compliance, enforcement, and collection efforts to enforce the tax laws. This means that new audits will be conducted, and nonfiler enforcement efforts will proceed as planned. It also means that normal billing and collection actions will continue. This can result in a levy against bank accounts, garnishments of wages, filing of a tax lien, and other actions allowed by law.
What if my clients do not file for amnesty?
Amnesty legislation provides for increased enforcement actions for years 2002 and prior. The accuracy-related penalty increases from 20 to 40 percent on new tax assessments. This penalty is assessed for negligence or disregard of rules or regulations, any substantial understatement of income tax (10 percent), and other reasons.
- An amnesty penalty is imposed at the rate of 50 percent of the existing unpaid interest amount on years for which you could have applied for amnesty.
- An amnesty penalty is imposed at the rate of 50 percent of unpaid interest on tax assessments that become final after the amnesty ending date.
Can my clients apply for amnesty if they are in bankruptcy?
Yes. However, if your clients are in an active bankruptcy, they will need the approval of the Court/Trustee to participate in the amnesty program.
Can I file an extension for amnesty?
No. Amnesty applications must be postmarked by March 31, 2005. (Since March 31 is a state holiday, we will accept applications postmarked April 1, 2005.)
If I file an application for my clients during amnesty, can they file the returns and pay after the deadline?
Yes, but you must file returns and make payments by May 31, 2005. If entering into an installment payment plan, the taxes and interest can be paid over time, but the entire balance must be paid by June 30, 2006.
Guide to FTB Website
If you are one of the thousands of tax practitioners who felt overwhelmed by the Internet about 10 years ago, don’t beat yourself up too badly. No doubt you had good reasons back then for not embracing the concept of e-commerce on the World Wide Web. Perhaps purchasing the necessary equipment was not in your budget, or perhaps your clients, wary of the new technology, held you back by threatening to leave if you used it to file their returns.
That was just 10 short years ago. Many of the practitioners
who shied away from the Internet back then are now some of our most
enthusiastic e-file professionals. As for customer resistance, today
we see more and more taxpayers seeking out preparers who
e-file instead of avoiding them. And it is pleasantly ironic to hear tax practitioners express surprise when we do not (yet) have a Web-based option for a particular service.
Now is a great time to get familiar with our Website, www.ftb.ca.gov, so turn on your computer, point your browser to www.ftb.ca.gov, and get ready to have some fun surfing our Website. We’ll begin with our new and improved search engine.
FTB Website search engine
Our Website’s search engine, powered by Google technology, is one of our site’s most valuable features for your needs. Using the search function—always located in the upper right-hand corner of the Webpage—will help you quickly find what you need on our site. Take some time to familiarize yourself with our search engine now and you will save yourself valuable time come filing season.
Most items on our Website can be easily found by using a common word or brief term associated with the information you are looking for. You can widen or narrow your search results simply by the number of search terms you use; typically, the more words you input, the fewer search results you will get. You can also use the Advanced Search and Search Tips links located on the search results page for help. That is where you will find tips on how to best narrow your search criteria.
The search engine works with Tax News as well. If you are looking for a particular Tax News article about a specific topic, input the topic you are looking for into the search engine and it will retrieve Tax News articles containing your search criteria dating back to 1997. Play around with the search engine. Master it and you will master our Website.
Tax Professionals Gateway
We have assembled the items we think you will find most helpful, put them in one location on our Website, and called it the Tax Professionals Gateway. You will find it in the middle of our Website’s Homepage. If you are in the business of preparing tax returns, or supporting those in the industry that do, this is your gateway. Information and services in the Tax Professionals Gateway are grouped under these major headings:
- What's new
- e-file, online services, and other paperless filing options
- General information
- Assistance and self-service options
- Law and legislation
- Special taxes and withholding
- California tax credits
- Useful forms and publications
- Links to other government agencies and professional organizations
Go to the Useful forms and publications section, for example, and from this single location on our Website you can:
- Get information and forms for establishing power of attorney.
- Access common forms for individual taxpayers.
- Access common forms for businesses.
- Order California Package X.
- View or subscribe to Tax News and Tax News Online.
- Access a directory containing the names and telephone numbers of organizations within FTB.
- Access FTB internal procedure manuals.
We also have two other gateways - one for individuals and one for businesses:
- The information in the Individual Gateway is geared specifically for individual personal income tax return filers.
- All the links listed in the Businesses Gateway address the concerns of business entities looking to either file returns, conduct business, or to cease doing business in California.
Guide to e-services available on our Website
Here are a few of the many features available on our Website that every tax professional should know about:
Forms and Publications Updates
Where you will find it: There is a CSN link under Quick Links, located on the right side of our Homepage.
Description: FTB Forms are often updated after their initial release. This feature lets you select specific forms and check for recent updates.
Customer Service Number (CSN) Look up
Description: Lets your clients look up their four-digit authentication number. The CSN also allows you, with your clients’ permission, to track their account activity online.
The CSN helps ensure taxpayer confidentiality and security when conducting business online with us. It gives you and your clients access to many convenient and free e-Services, including View Payments Online, View Account Balance Online, Web Pay, and Apply for an Installment Agreement. To acquire your clients’ CSN you will need their Social Security Number and a shared secret from their prior year tax return.
Check e-file Return Status
Where you will find it: Click on the Tax Professionals Gateway, go to the e-services Webpage and look under the heading Get Answers.
Description: This application lets you check the status of e-file returns and to verify when we received them. To access the feature you will need your clients’ Social Security Number and Declaration Control Number (for more information about Declaration Control Numbers, go to our e-file Webpage).
View Payments and Balance Due
Where you will find it: There is a Check Account Balance link under Quick Links, located on the right side of our Homepage. Or, use the search engine and type My account into the search box.
Description: This application allows you to view the total current balance due on an account. Use it to get an up-to-date summary of your clients’ account, including total tax amount, penalties, interest, and credits on tax years with a balance owing, as of the date the service is accessed. You can also view up to 60 of the most recent payments applied to the balance due. To access this service you will need their Social Security Number and CSN.
Where you will find it: There is a Refund Status link under Quick Links, located on the right side of our Homepage.
Description: This application lets you check the status of clients’ current year refunds. Use it to quickly confirm the amount of their tax refund and when they can expect to receive it. You will need your clients’ Social Security Number, the numbers in their mailing address, Zip Code, and the refund amount.
Check Estimate Tax Payments
Where you will find it: Located in the Assistance and self-service options section of the Tax Professionals Gateway.
Description: This application allows you to monitor the estimate payments applied to clients’ accounts. Use it to view up to 25 estimate tax payments, estimate transfers, and extension payments waiting to be applied to their tax return. You will need their Social Security Number and CSN.
e-file, online services, and other paperless filing options
Where you will find it: Located in the Tax Professionals Gateway.
Description: This is the one place for you to get anything related to e-file, including joining our e-file program.
Paperless Schedule K-1 Program
Where you will find it: Located in e-file, online services, and other paperless filing options section of the Tax Professionals Gateway.
Description: A convenient way to submit Schedules K-1 (565 or 568). Partnerships, limited liability companies, (or their representatives) may file hundreds of Schedules K-1 (565 or 568) by CD or diskette, instead of sending paper schedules. We provide everything you need to participate, including two types of TestWare. TestWare allows you to test your files before sending them to us, thus ensuring that your files will pass our mainframe edit program.
Where you will find it: Click on the Payment Options link, located in the Quick Links section of the Homepage.
Description: Web Pay is a secure online service for making tax payments. This secure service lets your clients pay the current amount they owe and schedule future payments, such as estimated tax, up to one year in advance. Taxpayers select the amount they want to pay and when they want to pay it. We will deduct their payment from their account on the day they select. To use it, you will need your clients’ Social Security Number and CSN.
Pay by Credit Card is another secure online service for making tax payments. Taxpayers can pay with their Discover/NOVUS, MasterCard, Visa, or American Express. Payments can be made online or by phone. Payments are effective the same day. Official Payments Corp. charges a convenience fee of 2.5 percent (minimum $1) to use this service.
Our Electronic Installment Agreement Webpage provides online information about the installment agreement request process, who qualifies, and special requirements for an installment agreement. From this page your clients can apply and check the status of their request. To apply online, they will need:
Social Security Number
A Customer Service Number
Bank account number and bank routing number
Head of household self-test
Where you will find it: Located in the Return filing assistance section of the Individuals Gateway. Or type head of household into the search engine.
Description: Gives taxpayers a test to see if they qualify to use the head of household filing status. The legal requirements for the head of household filing status are more complicated than simply being the head of the house. Use this self-test to help ensure your clients claim the correct filing status.
Fillable forms for withholding agents
Where you will find it: Located in the Special taxes and withholding section of the Tax Professionals Gateway.
Description: Allows users to access real estate withholding forms and complete them online. Some of the larger escrow offices process thousands of withholding forms. The fillable forms allow them to complete the forms online continuously. They could then print completed forms and submit them to us.
Abusive Tax Shelters Website
Where you will find it: There is an Abusive tax shelter link under Quick Links, located on the right side of our Homepage. Or type abusive into our search engine.
Description: Provides information for registering and reporting on abusive tax shelter transactions. This comprehensive Website provides answers to frequently asked questions about participating in an abusive tax shelter, including reporting and penalty information for tax professionals and organizers of potentially abusive tax shelters. The information on this Website can help your clients avoid penalties for failure to report and list abusive tax shelters and transactions.
Where you will find it: Located in the Return filing assistance section of the Individuals Gateway.
Description: Automatically calculates tax for individual taxpayers. Quick and easy calculator for determining the amount of tax to input on line 17 of Form 540A, or line 20 of the Form 540. To use it you will need your clients’ California taxable income. It will not calculate tax for 540 2EZ filers.
Where you will find it: On our Homepage under Ayuda en Español.
Description: This Webpage is dedicated to explaining all of our e-Services in Spanish. Spanish-speaking individuals can obtain information regarding available e-Services.
Law and Legislation
Where you will find it: Click on the Law and Legislation link located on our Homepage.
Description: This Webpage contains:
- Legal notices and rulings
- Proposed and final regulations
- FTB notices explaining changes made to California Income Tax laws
Our staff analyzes all legislation that could affect California Revenue and Taxation law and provides their analysis to our Board members, the California Legislature, State and Consumer Services Agency, the Department of Finance, and the Governor. The bill analyses are available on this Webpage for your use. The webpage also contains links to:
- California Revenue and Tax Code
- California Code of Regulations (CCR)
Also, the Legislative Council for California maintains the official site for California legislative information. Located at www.leginfo.ca.gov, this site contains the full text of bills, resolutions, and constitutional amendments, and their status, history, votes, analyses, and veto messages. If you know the bill, select the session and House of origin, and type the bill number to retrieve this information. Don't know the bill? Use the site's search engine to locate bills by author, key words, or enactment date.
Want the most current information about a bill as soon as it is available? Sign up for their email subscription service that allows users to subscribe to a specific bill(s). Subscribers are notified, via email, if any changes occur to the bill(s).
Face it: As much as we love email, we hate spam. Spam (unsolicited, junk email sent to large numbers of people to promote products or services) is a major annoyance, but don’t let it prevent you from getting your Tax e-News.
Make sure you add our from address (CSBEmailServices) and our title (FTBTaxNews) to your email address book (and to your safe senders list if you have one). This will prevent your Tax e-News from being swept up by an overly aggressive spam filter.
Tax e-News is an email information service that provides tax professionals with information about matters of general interest regarding the taxes and programs administered by the California Franchise Tax Board. You’ll receive frequent updates about laws and legislation, e-services, tax practitioner events, and updates on all the programs and services that are essential to the tax practitioner community.
Tax e-News is free, easy to use, relevant, and because we know how busy you are, non-intrusive. We intentionally make our bulletins simple and straightforward. We don’t bog down your computer with unessential attachments; instead we give you the news first then we tell you where, and how you can get more detailed and comprehensive information, usually from our Website, www.ftb.ca.gov.
Tax e-News subscribers also receive, free of charge, the electronic version of Tax News. You will not only receive your Tax News free, but you will also get it first, since we load it to our Website several days before we mail the print version.
To subscribe to Tax e- News, go to www.ftb.ca.gov, click on Tax News Online, and look for the Subscriptions Webpage. If you need help subscribing, call the Tax News Helpdesk at (916) 845-7070.
Thanks to your participation, we’ve had an extremely
successful e-file year! Many of you joined our program due to recent
mandatory e-file legislation and you helped make the first year of the
mandate a success. We know the first year of e-filing can be the most
challenging and we appreciate your efforts.
We also know that many of you who are mandated to e-file were not able to participate for various reasons. We are currently contacting those who did not participate to ensure they comply with the law. If you were subject to the mandate and were unable to participate, it’s not too late to get on board. We have many tools available to help you get started and make your transition to e-file easier.
Visit our Website at www.ftb.ca.gov and search for: Mandatory e-file. There you’ll find:
- What you'll need to join our e-file program, including our online enrollment form, answers to frequently asked questions regarding the mandate and how it affects you.
- A link to our e-file tutorial with tips and ideas from professionals like you who e-file.
- A list of approved e-file software for California.
- Links to the actual legislation and new legislative updates.
- Various references and handouts for you and your clients.
- Would you like to provide input on how we can better assist you or make suggestions for updating products like our e-file tutorial? Email us your suggestions and comments at email@example.com.
Business entities e-Services
As the corporate filing season heats up we would like to remind you that we offer an assortment of e-services for businesses:
Electronic Funds Transfer (EFT)
This is a faster, more efficient way for business entities to pay their taxes. EFT allows business entities to transfer money from their bank account to the state’s bank account electronically, eliminating the use of paper checks. All businesses can use EFT. Trying EFT to see how it works does not obligate you to continue using it.
If a business entity’s quarterly estimated tax payment or extension payment exceeds $20,000 or if its total tax liability exceeds $80,000 for any income year beginning on or after January 1, 1995, it must make all future payments via EFT. Once a corporation remits a payment that meets the criteria for mandatory participation, we will notify the corporation of its mandatory status and provide information on how to use EFT. The payment options available are the Automated Clearing House (ACH) debit and credit and Fedwire. Fedwire payments are available for emergency purposes only.
Paperless Schedule K-1 Program
This is a great way to submit your Schedules K-1 (565 or 568). Through the Paperless Schedule K-1 (565 or 568) Program, partnerships and limited liability companies taxable as partnerships, or their representatives, may file hundreds of Schedules K-1 (565 or 568) on one CD or diskette, instead of a stack of paper schedules K-1s. The Paperless Schedule K-1 Program can reduce your costs to produce and mail K-1s. It can also ensure 100 percent accuracy in updating this data to our files.
1099 Internet Filing
1099 Internet Filing is the fast, easy, and convenient filing option for Forms 1098, 1099, 5498 and W-2G. With 1099 Internet Filing, you can securely send this information via a text file from your system to ours. You will receive immediate confirmation when your file is received. The text file must be in an acceptable format. For more information regarding formatting requirements and on using this service, check out our Website at www.ftb.ca.gov.
In 2006, we are planning to implement e-filing for business entity forms, starting with the partnership return, FTB Form 565. Other business entity forms will be added in subsequent years (568, 100, 100S, and 100W). For more information visit our Website at www.ftb.ca.gov.
e-file Workshops for 2004
Our e-file workshops, conducted with the Internal Revenue Service, continue to generate enthusiasm among tax professionals interested in learning about the e-services we offer. If you haven't attended a workshop before, now is a good time to come and learn about the e-services before the next filing season. Look for the schedule of upcoming workshops on our Website at www.ftb.ca.gov and search for: e-file workshops.
Important dates for our e-file Program
If you participate in our e-file program, you don't want to forget these important dates:
October 15, 2004 -- Last day to transmit
October 20, 2004 -- Last day to retransmit rejected returns
December 31, 2004 -- Last day for electronic return originators and transmitters to retain acknowledgment file material for returns e-filed in 2003. Remember: electronic return originators must retain the Form FTB 8453, California e-file Return Authorization, for each return they e-filed, for four years from the due date of the return or for four years from the date the return is filed, whichever is later.
December 2004 -- The following e-file publications for California individual income tax returns are available for your reference:
1. e-File Handbook (FTB Pub. 1345)
2. e-File Handbook Supplement (FTB Pub. 1345A)
January 14, 2005 -- California begins accepting tax year 2004 e-file returns.
If you are not already a member of the California e-file program team, join now! When you e-file your clients' returns you get:
- Proof of receipt - We provide acknowledgement that we have accepted a return for processing.
- The opportunity to correct errors - Our system performs up-front edits on e-file returns to detect errors, which allows you time to make corrections prior to filing. This reduces the chance your clients will receive a notice due to an error on their returns.
- Accurate returns - Because we perform up-front edits, less than one percent of e-file returns require special error handling after they are filed.
To e-file, you must be an approved Electronic Return Originator (ERO). If you are not yet an approved ERO and want to e-file your clients' tax returns, you must first enroll with the Internal Revenue Service. Once you have your Electronic Filing Identification Number (EFIN), complete and submit the California e-file Program Enrollment Form (FTB 8633) online at www.ftb.ca.gov, search for: join e-file. There's nothing to mail. You will be enrolled within 48 hours and generally can begin submitting e-file returns at that time. You will receive confirmation from us by mail within seven days.
In July we said we were adding electronic signature options to our e-file signature procedures beginning with taxable year 2004 returns. Our procedures will mirror those used by the Internal Revenue Service.
For example, along with the traditional method of printing, signing, and retaining the California e-file Return Authorization (Form FTB 8453), we will accept electronic signatures using the Self-Select personal identification number (PIN) and Practitioner PIN methods.
Using the Self-Select PIN method, your clients will be asked to complete a click-through agreement. Their signature will then consist of both a 5-digit PIN that they select and a shared secret. The shared secret will be the taxpayer’s prior-year California adjusted gross income (AGI).
Using the Practitioner PIN method, you can enter your clients’ PIN on their behalf. Your clients must sign the California e-file Signature Authorization (form FTB 8879). You complete a click-through agreement and enter their PIN when prompted by your software. A shared secret is not required with this method. You retain Form FTB 8879 for four years.
If your clients chooses to sign their returns with a PIN, then you will be required to sign using the Electronic Return Originator (ERO) PIN, which will consists of your 6–digit EFIN and a five-digit PIN that you select. Both the ERO PIN and the taxpayer’s PIN can be any five digits except all zeros. Look for more information soon on our Website at www.ftb.ca.gov.
Three public service counters closed permanently
The Long Beach, Van Nuys, and West Covina public service lobbies permanently closed on July 1, 2004 due to budget constraints. If taxpayers need further assistance, they can visit our Website at: www.ftb.ca.gov, call the telephone number on their billing notice, call our toll-free number at (800) 338-0505, or visit one of these field offices:
|Los Angeles Field Office
300 S. Spring Street
Los Angeles CA 90013
|Sacramento Field Office
3321 Power Inn Road
Sacramento CA 95826
|San Francisco Field Office
121 Spear Street
San Francisco CA 94105
|Oakland Field Office
1515 Clay Street
Oakland CA 94612
|San Diego Field Office
7575 Metropolitan Drive
San Diego CA 92108
|Santa Ana Field Office
600 W. Santa Ana Blvd
Santa Ana CA 92701
For the period of January 1, 2005, through June 30, 2005, the adjusted interest rate on underpayments and overpayments of California personal income taxes will be four percent.
The interest on corporation overpayments for the same period will be one percent.
Here is an index of the interest rates for personal income taxes over the last 10 years.
|1 Jan. 1994||to||30 June 1994||7%|
|1 July 1994||to||1 Dec. 1994||7%|
|1 Jan. 1995||to||30 June 1995||8%|
|1 July 1995||to||31 Dec. 1995||9%|
|1 Jan. 1996||to||30 June 1996||9%|
|1 July 1996||to||31 Dec. 1996||9%|
|1 Jan. 1997||to||30 June 1997||9%|
|1 July 1997||to||31 Dec. 1997||9%|
|1 Jan. 1998||to||30 June 1998||9%|
|1 July 1998||to||31 Dec. 1998||9%|
|1 Jan. 1999||to||30 June 1999||8%|
|1 July 1999||to||31 Dec. 1999||7%|
|1 Jan. 2000||to||30 June 2000||8%|
|1 July 2000||to||31 Dec. 2000||8%|
|1 Jan. 2001||to||30 June 2001||9%|
|1 July 2001||to||31 Dec. 2001||9%|
|1 Jan 2002||to||30 June 2002||7%|
|1 July 2002||to||31 Dec. 2002||6%|
|1 Jan. 2003||to||30 June 2003||6%|
|1 July 2003||to||31 Dec. 2003||5%|
|1 Jan. 2004||to||30 June 2004||5%|
|1 July 2004||to||31 Dec. 2004||4%|
|1 Jan. 2005||to||30 June 2005||4%|
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