Tax News December 2023
Tax News is a monthly online publication to inform tax professionals, taxpayers, and business owners about state income tax laws, Franchise Tax Board (FTB) regulations, policies and procedures, and events that may impact or provide valuable information for the tax professional community.
We also periodically release Tax News Flashes to quickly notify subscribers of urgent time-sensitive information.
In this edition December 2023
- Annual Notices
- Assembly Bill (AB) 2660 Estimated Tax Payment Updates for Tax Year 2023
- Extension of Limited-Time Resolution Offered for Abusive Micro-Captive Insurance and Syndicated Conservation Easement Transactions
- When and How to Amend Form 593, Real Estate Withholding Statement
- New Self-Service Features Coming in January
- POA Declarations Set to Expire December 31, 2023
- 1099s will not be sent for 2023 Middle Class Tax Refund Payments
- Internal Revenue Service (IRS) Updates and More
- Ask the Advocate: A Year to Remember
- Ask the Advocate: We welcome a new Technical Advisor to the Advocate
Due to the tax filing extension from the winter storms, we delayed sending out annual notices. However, this month, we will begin to issue annual notices, including FTB 4963, State Income Tax Balance Notice. Follow the instructions or contact the telephone number listed on the notice for assistance.
Assembly Bill (AB) 2660 Estimated Tax Payment Updates for Tax Year 2023
For taxable years beginning on or after January 1, 2021, and until January 1, 2026, AB 2660 allows nonresident aliens receiving California source income to elect to be included on a group nonresident return filed by an authorized representative, in lieu of filing an individual nonresident return.
As a result of the administrative burden in processing estimated tax payments for electing nonresident aliens, the Franchise Tax Board (FTB) did not require estimated tax payments to be made for electing nonresident aliens that were included on a nonresident group return for the 2021 and 2022 tax year. Similarly, for the 2023 tax year, FTB will not be requiring estimated tax payments to be made for electing nonresident aliens included on a nonresident group return for the 2023 tax year.
For additional information regarding AB 2660, including how to make a payment and information on how to include a nonresident alien who is not eligible for or has not been issued a federal SSN or ITIN in the group nonresident return, see our previously published news article AB 2660 estimated tax payment information or California group nonresident tax return webpage.
Extension of Limited-Time Resolution Offered for Abusive Micro-Captive Insurance and Syndicated Conservation Easement Transactions
FTB Notice 2023-02 allows Eligible Taxpayers to resolve eligible transactions that may be subject to the non-economic substance transaction understatement penalty (NEST penalty) under Revenue and Taxation Code section 19774. The terms of resolution and participation procedures of FTB Notice 2023-02 provide that an Eligible Taxpayer must submit an FTB Notice 2023-02 Closing Agreement between July 10, 2023, and November 17, 2023, and make payment in full of the additional taxes, applicable penalties, and interest by November 17, 2023, or enter into an acceptable installment payment arrangement as described in FTB Notice 2023-02.
Pursuant to FTB Notice 2023-03, the participation period for the FTB Notice 2023-02 resolution program has been extended through January 31, 2024. Taxpayers now have until January 31, 2024, to participate in the FTB Notice 2023-02 resolution program.
We sent letters to identified taxpayers inviting them to participate in this resolution. However, participation is not limited to those who received an invitation letter and is open to any Eligible Taxpayer who wishes to participate.
To participate, Eligible Taxpayers must submit a completed and signed FTB Notice 2023-02 Closing Agreement by January 31, 2024, and either pay all taxes, applicable penalties, and interest by January 31, 2024, or enter into an installment payment plan by January 31, 2024, to pay the full amount over a period not to exceed 12 months.
For more information see Resolution of Transactions.
When and How to Amend Form 593, Real Estate Withholding Statement
California law requires withholding when California real estate is sold or transferred unless a full or partial exemption applies.
Form 593 needs to be completed in its entirety and correctly. This ensures the withholding credit is applied correctly and is available when the seller files their California income tax return. This also helps us process the form efficiently.
If a mistake is identified after the form is filed, it may be necessary to file an amended Form 593. Here are some common mistakes that require an amended Form 593 to correct them:
- The wrong seller’s name or incorrect seller’s tax identification number is included in Form 593, Part II. Most commonly this occurs when a trustee’s name or tax identification number is used instead of the nongrantor trust. To correct this, the remitter must:
- Complete a new Form 593 with the correct information.
- Check the amended box on the top left corner of the form.
- Submit the form to FTB.
- The wrong tax year form is used, or wrong closing date is included in Form 593, Part VII. To correct this, the remitter must:
- Complete a new Form 593 with the correct tax year that the withholding was completed. Do not check the amended box on the top left corner of the form.
- Complete a second Form 593 using the same tax year as originally filed. Check the amended box in the top left corner of the form and enter $0.00 as the amount withheld.
- Submit both Form 593s.
There are other mistakes that don’t require an amended Form 593 to correct them. They include:
- Listing a grantor trust as the seller instead of the individual grantor.
- Transposing two digits in the taxpayer identification number.
To correct these types of errors, call us at 888-792-4900 for further instructions.
New Self-Service Features Coming in January
We continually strive to improve our website capabilities and provide enhanced services. Coming on January 16, 2024, enhanced services include:
Enhancements to Request an Online Individual Status Letter
Occasionally, we will receive a request for written verification of the status of a tax year account as of a certain date. These are commonly referred to as Individual Status Letters (ISL) and may help to obtain a student loan or financing from the California Department of Veterans Affairs. We may provide an ISL for these purposes.
Beginning on January 16, 2024, an individual, the parent of a minor child, or an authorized representative, can request an ISL on the public website using an online application. This option does not require an individual to have a MyFTB account; they only need to follow the directions on the application and upload the required documents. To request an ISL using the online application, go to ftb.ca.gov and search “ISL”.
An ISL can be requested for the current tax year after the original due date of the return. ISLs can only be requested for the prior five tax years where the original due date of the most recent return has passed. For instance, in January 2024, the years that can be requested are 2022, 2021, 2020, 2019, and 2018. After April 15, 2024, the years that can be requested are 2023, 2022, 2021, 2020, and 2019.
If individuals choose not to use the new application, there will continue to be other methods to request the ISL (MyFTB, email, or in person at a field office).
New Payment Plan Request and Modify Options on MyFTB
MyFTB account holders will soon be able to request a payment plan and access additional payment plan options such as:
- Make an additional payment,
- Modify a payment,
- Change a payment date,
- Change bank information,
- And more!
To request a payment plan or access additional payment plan options starting on January 16, 2024, MyFTB account holders select "Request or Manage Payment Plan" from the services dropdown menu. These enhancements will be incorporated in phases throughout the year to reduce the risk of impacts to both FTB and external customers.
New Online Response Options for Financial Institutions and Employers
In 2023, we introduced the Notice-Based Self-Service (NBSS) to allow taxpayers the option to respond online to specific notices. In 2024, we plan to expand this service to withholding orders to allow financial institutions, employers, and third-party payers the option to respond online. Withholding orders are legal orders we issue to collect past-due income taxes, or a bill owed to local or state agencies. This option will also be incorporated in phases throughout the year to reduce the risk of impacts to both FTB and external customers. Our ultimate goal is to provide all employers, financial institutions, and third parties the capability to respond using the Uniform Resource Locator (URL) option. If the taxpayer has the option to respond using NBSS, there will be an “Electronic Upload” option under “Send Documents” on the notice. The URL will be available for timely responses only, as indicated for the type of notice the taxpayer receives. After submission, the taxpayer or representative will receive a confirmation number validating a response was sent. If the taxpayer or representative chooses not to use the online NBSS option, there will continue to be other methods on the notice to provide a timely response (mail, phone, or MyFTB). Refer to the notice for response instructions.
Please note, as we validate new functionalities, not every account will have the same self-service options for resolution. Follow the instructions on each notice to prevent any delays. We plan to implement these new features for every account in the coming year.
We will continue to provide updates as more services are made available.
Some Older POA Declarations Set to Expire December 31, 2023
POA declarations filed before January 1, 2018, that do not provide for an expiration date, are set to expire on December 31, 2023. We set this date to align older declarations that did not have an expiration date with the current six-year duration for POAs.
This was previously communicated to tax professionals in the December 2021 edition of Tax News. We notified taxpayers through FTB 3912 – Power of Attorney – Active Representatives on File, which we sent in the fall of 2021 and again this year.
If you need to continue a relationship that is scheduled to expire on December 31, 2023, you must submit a new POA declaration. We encourage you to submit these as soon as possible to ensure there is no break in the relationship. For more information on filing a POA go to ftb.ca.gov/poa.
To determine which POAs are set to expire, log in to MyFTB, navigate to your Client List, and enter 2023 in the filter box for the Expiration Date column. This will display only those POAs expiring this year. Another option is to select the Expiration Date header to sort your client list. This will bring the POAs set to expire soon to the top of the list.
1099s will not be sent for 2023 Middle Class Tax Refund Payments
We sent the vast majority of Middle Class Tax Refund (MCTR) payments. If you or your client received a payment in 2023, be aware we will not issue a 1099-MISC for this income.
It was previously shared (see Tax News article for California MCTR November 2022) that taxpayers receiving a MCTR payment would receive a 1099-MISC in January 2024. However, it has been determined that a 1099-MISC will not be issued.
The Internal Revenue Service released a statement that it would not challenge the taxability of these payments and the payments are not required to be reported as income.
For additional information, see Middle Class Tax Refund, Help with the Middle Class Tax Refund and IRS issues guidance on state tax payments to help taxpayers.
Internal Revenue Service (IRS) Updates and More
We partnered with the IRS to provide monthly IRS articles to assist our tax professional and small business communities. We are excited to share this information; however, if you have questions about the content, you will need to contact the IRS directly.
FS-2023-25, Nov. 2023 — Following a dramatically improved 2023 Filing Season thanks to Inflation Reduction Act investments, Treasury and IRS announced additional improvements taxpayers will experience next Filing Season. Treasury and IRS also announced meeting the first goal of the Paperless Processing Initiative announced in August by Secretary of the Treasury Janet L. Yellen and Commissioner of the IRS Danny Werfel. Taxpayers are now able to digitally submit all correspondence and responses to notices.
IR-2023-202, Nov. 1, 2023 — IRS announced that sellers of clean vehicles can now register using the new IRS Energy Credits Online tool, available free from the IRS.
IR-2023-212, Nov. 13, 2023 — As part of ongoing efforts to protect taxpayers, the IRS reminds people that International Fraud Awareness Week serves as an important time to protect personal and financial information from scam artists and tax schemes.
IR-2023-210, Nov. 13, 2023 — With the nation’s tax season rapidly approaching, the IRS reminds taxpayers there are important steps they can take now to help “get ready” to file their 2023 federal tax return.
IR-2023-208, Nov. 9, 2023 — IRS announced the annual inflation adjustments for more than 60 tax provisions for tax year 2024, including the tax rate schedules and other tax changes.
IR-2023-207, Nov. 9, 2023 — The Internal Revenue Service Advisory Council (IRSAC) issued its annual report for 2023, including recommendations to the IRS on new and continuing issues in tax administration.
IR-2023-206, Nov. 8, 2023 — IRS reminded dealers and sellers of clean vehicles to register their organizations immediately on the Energy Credits Online tool.
IR-2023-203, Nov. 1, 2023 — IRS announced the amount individuals can contribute to their 401(k) plans in 2024 increased to $23,000, up from $22,500 for 2023.
Ask the Advocate: A Year to Remember
Angela Jones, Taxpayers' Rights Advocate
Greetings! Can you believe we are rapidly approaching the end of 2023?
Before this year’s holidays blur into a new year, let’s take a moment to pause, reflect, and consider the year’s accomplishments. As we reflect, my team and I are always identifying ways to improve our services and processes.
Due to the California winter storms and disaster declarations, this has been an unprecedented filing season. I thank the FTB, tax professionals, taxpayers, and other external stakeholders for their collaboration as we navigated through this unique filing season together.
I truly value and appreciate the collaborative relationships we have with our external partners. Without these relationships, working through these challenges would not be possible.
Looking back at the Taxpayers’ Rights Advocate’s Office 2023 highlights:
- Assisted more than 17,100 taxpayers with our partners in Executive Advocate Services. This included 14,000 phone calls and 3,100 correspondences (mail, online, fax).
- Responded to over 1,310 small business owner inquiries through our Small Business Liaison email.
- Provided 34 presentations about California Tax Updates, Common Forms of Business Ownership, and many of the products and services we offer. Serving more than 4,600 taxpayers and tax professionals.
- If you’d like one of our team members to make a presentation, visit Education and Outreach for more information.
- Updated the Tax News publication layout and actively sought ways to provide more “how-to” and emerging issue articles. Tax News also includes sections for FTB Careers, What’s New with Tax Forms, and select IRS notifications.
- Evaluated more than 465 systemic issue submissions. Report a systemic issue | FTB.ca.gov
- Resolved 63 taxpayer cases in our Tax Appeals Assistance Program | FTB.ca.gov. 58 law students supervised by our experienced TAAP attorney made this possible.
- Worked with Digital Services Section to implement an external stakeholder suggestion to include a numerical listing of FTB notices (previously only available alphabetically).
- Hosted our annual liaison meetings with California Society of Enrolled Agents (CSEA) and California Society of Certified Public Accountants (CalCPA).
I look forward to continued collaborations and partnerships in 2024!
As we close out the year, I wish you all a very happy, healthy, and joyous Holiday Season spent with cherished family and friends.
Ask the Advocate: We welcome Anna Cowperthwaite as our new Technical Advisor to the Advocate
Anna Cowperthwaite, Technical Advisor
Anna has been with the Franchise Tax Board (FTB) for 18 years and joins us from the Criminal Investigations Bureau (CIB), where she was a Forensic Auditor. Anna assisted special agents to conduct complex technical examinations of seized individual and business bank records to reconstruct income and compute tax liabilities to the standard of proof required for criminal tax prosecution. Anna served as the liaison for CIB which responds to sensitive and confidential inquiries and other issues from various law enforcement personnel, prosecutors, and concerned citizens. In her role as a forensic auditor, Anna participated in numerous search warrants as a searcher, mapper, photographer, and interviewer, and was the subject matter expert to provide Tax Computation Training.
Prior to joining CIB, Anna worked in the Residency Unit managing a variety of audit workloads to include, residency, sourcing of compensation, capital gains/losses, community property, employee stock options, net operating loss, partnership basis, sourcing of partnership income, mortgage interest, Schedule C, tribal income, passive income/loss, mortgage interest, and other state tax credit.
Anna holds a Bachelor of Science in Business Administration with a concentration in Accountancy from California State University, Sacramento. In her spare time, she enjoys traveling, golfing, paddle boarding, volunteering with numerous organizations, and spending quality time with her family.