Tax News February 2023

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Overview

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.

Form 4197 Information on Tax Expenditures

We have new reporting requirements per Revenue and Taxation Code (R&TC) 41 for Legislatively Mandated Reports. We are now required to report on specified deductions, credits, and exclusions to the California Legislature, thereby allowing them to evaluate the performance of each new program.

Generally, the Legislature specifies the metrics used to evaluate the program’s performance and occasionally require metrics not reported on the State’s tax return. To meet the requirements of these laws, we created Form 4197 to capture additional metrics.

Taxpayers must submit Form 4197 in addition to any other credit forms or expense schedules that are required to be filed with their tax return. If tax software does not support Form 4197, simply mail the form. The correspondence address for businesses link will direct you to the correct address. See Form 4197 instructions for more information.

For the 2022 taxable year, the new tax expenditures added to Form 4197 are:

  • Thomas and Woolsey Wildfires Exclusion
    • Taxpayers should report the amount of settlement payments being excluded from gross income.
  • Turf Replacement Water Conservation Program Exclusion
    • Taxpayer should report the amount of rebate, voucher, or other financial incentives issued by public water system and excluded from gross income.
  • Deployed Military Exemption
    • Taxpayers should report the number of employees (including themselves) working for a qualified LLC or corporation that is a small business solely owned by a deployed member of the U.S. Armed Forces.

If this information is not provided, the program may appear ineffective, and the Legislature may allow the program to sunset.

Tax Year 2022

Forms and Publications Search

To view previously released reports Data, reports, and plans



Adjusted Interest Rates

For the period July 1, 2023, through December 31, 2023, the interest rate will increase from 5% to 7%.

This is the rate compounded daily that accrues with respect to various state taxes, to include:

  • Personal income 
  • Corporate income
  • Franchise income

The rate for corporation tax overpayments for the same period will increase from 2% to 5%.

For more information on interest and estimate penalty rates.



Prefiling Payment Information

Payment Due Dates

Tax payments are due in 4 payments for California. To avoid a penalty, 2022 payments must have been paid on or before the listed dates below:

Payment Amount Due date
1 30% April 18, 2022
2 40% June 15, 2022
3 0% September 15, 2022
4 30% January 17, 2023

Estimate Tax Payments

Estimated tax is the payment of tax on income when the income is not subject to withholding. It’s the tax owed for the current tax year after subtracting:

  • Credits that will be taken
  • Taxes withheld throughout the year

Withholdings

Wage withholding is the prepayment of income tax.

The amount of tax withheld is determined by the following.

  • The amount of income subject to tax
  • The number of allowances claimed on Employee’s Withholding Allowance Certificate (W-4 or DE 4) submitted to employer

Non-wage withholding (nonresident withholding) is made when a non-wage payment is received, such as:

  • Trust distributions
  • Partnership and LLC distributions
  • Rents
  • Royalties
  • Gambling winnings

Your payer must take 7% from your CA income that exceeds $1,500 in a calendar year.

Checking Payments

Login or register for a MyFTB account to view estimate payments made. A MyFTB account provides individuals, business representatives, and tax professionals online access to tax account information to include estimate payments and credits available before filing.

Access to client tax account information is based on your relationship and online permission level. Visit Tax Professional Online Account Access.

Partnership Payments

If an entity’s Secretary of State (SOS) number does not work, or your entity does not have an SOS number, then your FTB Issued Identification (ID) number should be used. If you do not know the entity’s FTB ID number, you can request the number by Contact us.

Tax Practitioner Hotline

The Tax Practitioner Hotline 916-845-7057 is available weekdays from 8 AM to 5 PM, except State holidays, to assist with prefiling information.



Estimated Taxes for Your Small Business Clients

Since we are at the beginning of a new tax year, you or your small business clients may have questions on when estimated taxes are due for their specific form of business ownership.

Estimated taxes are due depending on how a business entity is classified. For example, if your client’s business entity is a sole proprietorship, partnership, or a single member or partnership classified LLC, then estimated taxes are due and paid from personal income taxes. Use the California Estimated Tax Worksheet in the Instructions for Form 540-ES to calculate the estimated tax. Estimated tax payments are due:

  • 1st payment: April 18, 2023
  • 2nd payment: June 15, 2023
  • 3rd payment: September 15, 2023
  • 4th payment: January 16, 2024

If your client’s business entity is a corporation or an LLC classified as a corporation, estimated taxes will be paid by using Corporation Estimated Tax (Form 100-ES). Estimated tax payments are due:

  • 1st payment: April 18, 2023
  • 2nd payment: June 15, 2023
  • 3rd payment: September 15, 2023
  • 4th payment: December 15, 2023

Get more information about estimated taxes for personal income tax. Get more information about estimated taxes for corporations.

Corporations, limited liability companies (LLCs), and partnerships use Web Pay for business, while sole proprietorships must use Web Pay for personal.

There are several different types of payments, and each differ depending on your client’s business entity type. You can make various payments such as, but not limited to:

  • Annual tax or fee
  • Bill or other balance due
  • Current year or amended tax return
  • Estimated tax
  • Extension

When logging in, the entity type and entity ID must match our records. Do not enter dashes and the length of your number should be:

Corporation LLC Partnership
7 digit number 9 or 12 digit number 9 digit number, FEIN

Some confusion is occurring for some small business owners on whether to use their FEIN (Federal Employer Identification Number) or the entity ID they received from the SOS (Secretary of State) or the FTB. In most cases, using the entity ID you received will allow you to use Web Pay correctly. The only entity currently allowed to use a FEIN is partnerships.

For additional help using Web Pay, go to Help with bank account payments.



What’s New with Tax Forms 

To provide further transparency and better support to our tax professional community, review the What’s New with Tax Forms webpage for updates about upcoming changes to existing tax forms.



IRS Updates and More

We have partnered with 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.

IRS Free File launch aims to save taxpayers hard-earned dollars

IR-2023-06, January 17, 2023 — The IRS’s Free File Guided Tax Preparation service is live and ready for taxpayers to use. Free File went live January 13, 2023, 10 days prior to the 2023 filing season start date. The IRS began accepting individual tax returns on January 23.

IRS sets January 23 as official start to 2023 tax filing season; more help available for taxpayers this year

IR-2023-05, January 12, 2023 — The IRS announced Monday, January 23, 2023, as the beginning of the nation's 2023 tax season when the agency will begin accepting and processing 2022 tax year returns.

National Taxpayer Advocate delivers 2022 Annual Report to Congress; focuses on taxpayer impact of processing and refund delays

IR-2023-04, January 11, 2023 — National Taxpayer Advocate Erin M. Collins released her 2022 Annual Report to Congress, saying taxpayers and tax professionals “experienced more misery in 2022” due to paper processing delays and poor customer service. But the report also says the IRS made considerable progress in reducing the volume of unprocessed tax returns and correspondence and is poised to start the 2023 filing season in a stronger position.

IRS: California storm victims qualify for tax relief; April 18 deadline, other dates extended to May 15

IR-2023-03, January 10, 2023 — California storm victims have until May 15, 2023, to file various federal individual and business tax returns and make tax payments.

IRS completes automatic corrections of tax year 2020 accounts related to unemployment compensation exclusion; 12 million refunds issued

IR-2023-02, January 6, 2023 — The IRS recently completed the final corrections of tax year 2020 accounts for taxpayers who overpaid their taxes on unemployment compensation they received in 2020.


Taxpayers' Bill of Rights Hearing Responses

As promised, the responses to the December 8, 2022, Taxpayer Bill of Rights Hearing issues and concerns are posted to the Your taxpayer rights webpage.


Ask the Advocate

2023 Tax Filing Season Begins

Brenda Voet, EA, Taxpayers' Rights Advocate.

Brenda Voet, EA
Taxpayers’ Rights Advocate

The 2023 tax filing season is now officially underway. FTB began accepting tax returns at the beginning of the year, however, tax returns filed between January 1, 2023, and January 16, 2023, were not viewable in MyFTB until January 17, 2023, or shortly thereafter. If you got a head start and filed returns early in the month, you may now revisit your MyFTB account to access your viewable tax year 2022 returns.

The past several filing seasons were certainly affected by the pandemic and now we are thrown a curve ball with the impact of severe winter storms to usher in the new year. To support Californians affected by the recent rain, wind, flooding and mudslides, California announced tax relief for individuals and businesses in impacted counties. FTB has extended the filing and payment deadlines until May 15, 2023.

This relief applies to deadlines falling on or after January 8, 2023, and before May 15, 2023, and includes 2022:

  • Individual tax returns and payments due on April 18, 2023.
  • Business entity tax returns and payments due on March 15, 2023.
  • Quarterly estimate tax payments due on January 17, 2023, and April 18, 2023.

In addition, we suspended the mailing of collection notices to affected taxpayers for 30 days beginning January 13, 2023.

And remember, qualifying taxpayers can claim a disaster loss deduction when filing their original or amended 2022 tax return. Refer to Disaster Loss for additional information and guidance.

I would also like to take this opportunity to offer a few pre-filing reminders.

  • Confirm with your clients that we have their current and correct contact information. It is much easier to communicate and resolve filing or return processing issues when their contact information is accurate. Incorrect contact information may result in your clients missing important notifications issued through our standard billing cycle and only learning of issues once collection action has already commenced. Also, for clients opting to receive a refund check, opposed to direct deposit into their bank account, an incorrect mailing address will result in a significant delay in receiving their refund.
  • Sign up for a MyFTB account and add clients to your list. This will provide online access to your clients’ tax account information as well as other online services.

If you still prefer to reach out using our traditional communications channels, here are some helpful telephone numbers:

Tax Practitioner Hotline

916-845-7057

Open weekdays, 8 AM to 5 PM

Remember to check our Wait Time feature to help you decide the best time to contact us.

Also, Virtual Hold technology for the Tax Practitioner Hotline will be available beginning March 1, 2023. This technology allows tax professionals to request a call back within a set time frame rather than having to wait on hold.

e-file Help Desk:

Phone

916-845-0353

Open weekdays, 8 AM to 5 PM

When a delay will create an immediate economic hardship for your client relating to a bank levy, wage garnishment, or tax lien, call this number:

Phone

800-883-5910

Open weekdays, 9 AM to 4 PM

If you need help to resolve an ongoing problem that you have been unable to resolve through our normal channels, please provide the facts and circumstances that need to be communicated using our online Unresolved Account Issues form, sometimes referred to as the “portal.” The information populated in the online form allows us to easily identify the issue and get it properly assigned.

I wish you all a successful 2023 tax filing season!


Tax News Flash Links

Tax News Flashes are real-time FTB news releases which inform taxpayers of the latest breaking tax-related events. These articles are published separately from our monthly Tax News edition.

California grants tax relief for those affected by the recent winter storms


FTB Career Opportunities

If you are a student, recent graduate, or experienced professional, we encourage you to apply. Find Careers with the State of California at Franchise Tax Board.


Event Calendar

As part of our education and outreach to the tax professional community, we participate in many different presentations and fairs. We provide a calendar that shows the events we attend, as well as other events happening with us, such as interested party and Board meetings.