Tax News September 2022
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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. Tax News Flashes are posted in the Newsroom with a Tax News Flash label.
MyFTB Notification and Account Options
Manage your MyFTB account effectively
As MyFTB continues to enhance its online services, taxpayers and tax professionals will encounter updates to the MyFTB portal. With the goal of full self-service, FTB wants to be a leader in implementing advanced technology in order to ease the process for taxpayers and tax professionals and limit the amount of paper mail being used and delivered.
Each MyFTB account user can manage the method in which notifications are received. Users can select to receive most account information by mail or digitally through their MyFTB account. They can also elect to receive a text to notify them when they have received a notice or action through their MyFTB account.
Online Account Access Levels
If a taxpayer utilizes the services of a tax professional, the tax professional can also elect to receive an email notification any time their client receives a notice from FTB. This service has been implemented to better assist the tax professional community to monitor their clients’ accounts. Tax professional and power of attorney (POA) accounts can have either Limited Online Account Access or Full Online Account Access. Once a relationship is approved between the taxpayer and the tax professional or POA, the tax professional or POA will have access to the taxpayer’s information. The taxpayer will then have the option to authorize whether the tax professional or POA will have limited or full online account access.
To get more information on the differences between the access levels, visit Tax Professional Online Account Access | FTB.ca.gov
MyFTB Chat Feature
MyFTB also includes an option for communication where tax professionals can use a Live Chat feature to contact a representative. There is both a Non-Secure Chat line and Secure Chat line.
The Non-Secure Chat line is for general questions only, such as:
- Using MyFTB
- Our website
- Non-confidential tax questions
The Secure Chat line, with the appropriate authorizations in place, will allow a tax professional to access additional information, such as:
- Account balance
- Bills and notices received
- Refund status
Beginning in 2023, the list of digital notices that will be available through a MyFTB account will increase. The increase in permitted notices will work to further improve the relationship between tax professionals and their clients by continuing to introduce new technologies that save time and paper usage. Taxpayers and tax professionals should communicate to ensure they agree on how to manage their MyFTB accounts before setting them up.
Personal MyFTB Accounts
It is recommended that every tax professional manage their own personal MyFTB account. This will ensure full access to account details, no yearly renewal of information, and confidentiality.
Capital Account Analysis
Schedules K-1 (565) and (568) Reporting
Starting in taxable year 2022, and all subsequent years, eligible business entities that elect to be treated as partnerships filing Form 565 or Form 568 are required to report partners’ and members’ capital account information using the “tax basis method” described in the Instructions of IRS Form 1065, but calculated under California law, on their Schedule K-1 (565) and Schedule K-1 (568). Further guidance for the taxable year 2022 requirement will be provided in the instructions for Forms 565 and 568 for taxable year 2022.
For information about taxable year 2021, please see FTB Notice 2022-01 and our Capital Account Reporting Tax News Flash issued March 10, 2022.
California Middle Class Tax Refund Payments
Eligible taxpayers may receive an automatic, one-time payment up to $1,050
Payments are expected to be issued between October 2022 and January 2023.
To qualify, recipients must:
- Have filed their 2020 tax return by October 15, 2021. However, for ITIN filers who applied for, but did not receive, an ITIN by October 15, 2021, they must have filed their 2020 tax return by February 15, 2022.
- Meet certain California adjusted gross income (CA AGI) qualifications. To determine if you are eligible and your potential payment amount, review Middle Class Tax Refund.
- Have been a California resident for six months or more of the 2020 tax year.
- Not have been eligible to be claimed as a dependent in the 2020 tax year.
- Be a California resident on the date payment is issued.
No additional action is required to receive the Middle Class Tax Refund payment for qualified recipients if they meet the criteria above.
Taxpayers who filed electronically and received their 2020 tax return refund through direct deposit will receive their payment by direct deposit. The following taxpayers will generally receive their payment by mail in the form of a debit card:
- Taxpayers who filed a paper return.
- Taxpayers who received their refund by check.
- Taxpayers who had a balance due.
- Taxpayers who received their Golden State Stimulus payment by check.
- Taxpayers who received a refund advance from their tax service provider or paid their tax preparer fees using their refund.
For more information, go to Middle Class Tax Refund.
Information and Resources Available for You and Your Clients
We would like to remind you of the many resources available to the gig economy or shared economy. The Franchise Tax Board (FTB) and our Education and Outreach Team have made a concerted effort to identify ways in which we can help provide information to those involved in the gig economy. One of the tools available to help inform people about the gig economy is our gig economy webpage which provides valuable information and useful links about the tax aspects associated with it. This webpage also includes links to our Tax News Live Video dealing with gig economy filing tips and a Tax News Live Video on the gig economy and taxes.
Additionally, the webpage provides links to the different information returns that may be received when participating in the gig economy, such as; 1099-K, 1099-NEC, 1099-MISC, or a W-2. Information about estimated taxes, what forms to file, what records to keep, and payment options can also be found there as well. Near the bottom of the webpage the resources section contains many helpful links to filing information, useful publications, and IRS information.
Lastly, we participated in numerous education and outreach events to present important information, including income tax filing requirements for those involved in the gig economy. We presented to various tax practitioner groups and at small business seminars events both in-person and virtually. At the small business seminars, we also included information and resources about the gig economy and discussed the different forms of ownership for businesses. This includes information for sole proprietors, partnerships, corporations, and limited liability companies.
We will continue to use the various social media outlets available to us to share information as it is made available.
S Corporation Extended Due Date
File Form 100S for S Corporations by the extended due date of September 15
The original due date of the S corporation's return is the 15th day of the third month following the close of the S corporation's taxable year, which is March 15 if an entity is filing on a calendar year basis.
The six-month automatic extension allowed to file the S corporation return does not apply to the corporation’s tax liability. The automatic extension is an extension to file, not an extension to pay. An S corporation is required to pay its tax liability by the original due date, whether it files its return later using the six-month extension or not.
If the corporation does not file its return by the extended filing deadline, then the extension does not apply, and any applicable late return penalties will be measured from the original due date of.
For more information about S Corporations and other business entity due dates, visit our Business Due Dates webpage.
Changes to Business Credits
Assembly Bill 194 passed making changes to business credits for employers
Homeless Hiring Tax Credit
The Homeless Hiring Tax Credit is a credit for employers who hire individuals who have been homeless or have been receiving homeless services. Employees must be certified as meeting these requirements, and employers must obtain a tentative credit reservation from FTB.
This bill made the following changes:
- Specified that an employee certified as receiving services from a homeless services provider must have received those services within the prior 180 days.
- Allows eligible individual employees meeting the requirements to get a new certificate and allows an employer to get a new tentative credit reservation (through FTB's webpage) for these employees.
For information please go to Homeless Hiring Tax Credit.
CalOSBA’s Website is a Great Resource for You and Your Small Business Clients
Excellent resource for small business owners
CalOSBA helps support economic growth and innovation by working to ensure that California’s small businesses and entrepreneurs have the information, tools, and resources they need to plan, launch, manage, and grow their businesses successfully. One of the many ways they have done that is to launch calosba.ca.gov, a website that connects California’s small business community with critical resources available through the state-funded small business technical assistance program and other state resources. Highlighting programs that help historically underserved small business groups is an important component of the CalOSBA website.
More recently, on July 2, 2022, CalOSBA launched the Outreach and Engagement website. This new website offers a large and useful amount of outreach and marketing materials for technical assistance partners, including access to media toolkits for initiatives such as the Dream Fund, event amplification opportunities, and the opportunity to request a CalOSBA team member to speak or exhibit at an upcoming event
Overall, small business owners, entrepreneurs, and startups can access the following information:
- Small business technical assistance centers that offer specialized support for no-cost or at a low-cost
- Financing information including state and federal capital programs and tax/credit incentive programs
- Business Learning Center that helps business owners navigate the varying stages of the business development process
- Permits, licenses, and regulations
- Access to new markets, including e-commerce, international trade, and procurement and supply chain programs
For more information, visit calosba.ca.gov.
Ask the advocate
Brenda Voet, EA
Taxpayers’ Rights Advocate
One-time Penalty Abatement
California taxpayers granted a one-time abatement of a failure-to-file or a failure-to-pay timeliness penalty
Soon after the IRS introduced the first-time penalty abatement waiver to assist taxpayers dealing with federal tax issues, our department began the process of working to secure similar relief for California taxpayers. Over the years, we regularly submitted and supported legislative proposals to allow FTB to grant penalty relief similar to the IRS’ practice of granting administrative relief to compliant taxpayers.
I am pleased to share the good news that FTB has the authority to grant California taxpayers a one-time abatement of a failure-to-file, (Revenue and Taxation code (R&TC) section 19131), or a failure-to-pay timeliness penalty (R&TC 19132). This new statute, contained in Assembly Bill 194, was signed into law by the Governor on June 30, 2022.
Although similar to the federal first-time abatement penalty, there are some differences you should be aware of. The California penalty abatement is:
- A once in a lifetime abatement.
- It is only available to individuals subject to Personal Income Tax Law
- Not available to business entities.
- It is applicable to requests for abatement made for taxable years beginning on or after January 1, 2022.
To request a one-time abatement, taxpayers must:
- Otherwise, be compliant with tax return filing requirements.
- Have not previously been granted abatement under this section or has not been previously required to file a California tax return.
- Have paid or be current on an arrangement to pay all other tax, penalties, fees, and interest due other than the timeliness penalty they are seeking to abate.
However, taxpayers that are requesting a one-time abatement:
- Are not required to pay any penalties for which the abatement is being requested.
- May choose to forgo reasonable cause review or request abatement when reasonable cause is absent.
The one-time penalty abatement request process is in development, and we plan to share further details as they are made available.
To avoid having to request the one-time penalty abatement, I urge you to file returns for your clients as soon as possible, preferably using e-file, and not wait until the filing deadline. Filing early and electronically helps to avoid processing delays.
For assistance with e-filing, contact our e-File Help Desk at 916-845-3053, Monday through Friday, from 8:00 AM to 5:00 PM (PST).
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.
There were no Tax News Flashes sent for the month of August.
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.