Posted by taxguru on August 3, 2015
In its latest Tax News newsletter, the California Franchise Tax Board stated the following.
We noticed a large number of taxpayers who claim unreimbursed employee business expenses (EBE) on Schedule A that appear questionable.
In August, we will increase the number of audits for taxpayers deducting EBE on personal income tax returns, starting with the 2011 and 2012 tax years.
There appears to be a bit of scare strategy at work here. Normally, FTB doesn’t do many actual audits of items on income tax returns. Instead, as with most other States, they just let IRS do the bulk of the examination work and then use the IRS results to make changes to the State tax returns. They are explicitly encouraging people who don’t think they will survive an examination to file amended tax returns and do their job for them.
Your clients can file amended tax return(s) if their business expenses do not qualify.
Notice that they mention going back to 2011, highlighting the fact that the Statute of Limitations for California income tax returns has long been Four (4) years, compared to the long-standing Three (3) years with IRS.
Also, notice that the focus of this concern is just deductions on Schedule A of individual income tax returns. It doesn’t mention any problems with expenses claimed on business forms (i.e. Schedule C) or corporate tax returns (hint hint).
Posted in audits, Calif | Comments Off on Calif FTB threatening audits…
Posted by taxguru on January 12, 2015
I have always been a big fan of parody and satire when it’s done well. The Onion and National Report have been turning out great satire on the web. I can’t resist the urge to post the tax related ones that may soon become reality, such as this one from National Report.
California Withholding Tax Refunds Due in 2015 Until 2016 – This is so effective because it piggybacks on tactics that the rulers of the PRC have actually used in previous years, delaying tax refund payments in order to help the State’s cash flow. It has also long been true that the FTB is much more ruthless and aggressive than the IRS when it comes to collecting taxes that it believes are owed. It is not a parody that the FTB actually helps train IRS agents on how to more effectively squeeze money out of people.
Posted in Calif, humor | Comments Off on Another parody that could come true?
Posted by taxguru on September 18, 2014
Spidell has a handy two page pdf of the new inflation adjusted tax rate schedules for California income taxes.
Posted in Calif | Comments Off on 2014 Calif Tax Rates
Posted by taxguru on December 9, 2013
As I discussed previously, the PRC is trying to keep tabs on real estate investors who use IRC Section 1031 to defer their profits to non-California property.
While all of the forms and procedures are not yet established, the FTB just posted this update on how this is supposed to work, effective for disposals after 12/31/2013.
Posted in 1031, Calif, CapGains | Comments Off on 1031 Exchanges out of California
Posted by taxguru on November 1, 2013
Under IRC Section 1031, it has always been allowable to defer gains from the sale of property in one state by replacing it with like kind property in another state. However, if that replacement property is ever sold, the gain that was deferred from the first state is supposed to be reported and paid to that state. That has pretty much been handled on the honor system for sellers to voluntarily report to the previous state.
It appears that the rulers in Sacramento don’t much trust this honor system for former investors in California property and are now instituting new requirements for those sellers to keep in touch with the FTB every year until the replacement property is sold. Because the replacement property may be exchanged for another like kind property, and on and on, this could go on for several decades. In fact with the popular “swap til you drop” technique of investing, it is possible that there will never even be a taxable sale of the replacement property.
As explained in this article from the most recent FTB newsletter, this rule takes effect as of January 1, 2014; but they are still working out the details as to the exact forms and procedures for the annual notification filing. Since this situation applies to many of our clients, who disposed of California property and reinvested into other states, this is something that I will be dealing with for a long time to come; so I will be commenting on any interesting new developments as I learn of them.
Posted in 1031, Calif | Comments Off on For 1031s out of California
Posted by taxguru on August 23, 2013
Unlike the IRS, where the inflation adjustments to the tax brackets and other figures are announced before the beginning of the next year, the Calif FTB doesn’t announce theirs until the year is almost over.
They have just released their inflation adjustments for the 2013 tax rates and figures on their website, based on their calculation of the rate of inflation being 1.7% between 7/1/12 and 6/30/13.
For those comparing taxes between states, the summary at the top of this page is handy:
Corporate tax rates
|Corporations other than banks and financials
|Banks and financials
|Alternative Minimum Tax (AMT) rate
|S corporation rate
|S corporation bank and financial rate
Individual tax rates
- The maximum rate for individuals is 12.3%
- The AMT rate for individuals is 7%
- The Mental Health Services Tax Rate is 1% for taxable income in excess of $1,000,000.
Posted in Calif | Comments Off on 2013 California Inflation Adjustments
Posted by taxguru on February 11, 2013
Posted in Calif, Texas | Comments Off on Luring Tax Refugees
Posted by taxguru on February 4, 2013
From Argus Hamilton:
California demographers said Hispanics will pass whites as the state’s majority race by late this year. It’s absolutely chaotic. The headwinds from the number of Mexicans coming into California for amnesty are mixing with the tailwinds from the number of white people going out of California over tax hikes and creating funnel clouds over Interstate 15.
Posted in Calif, humor | Comments Off on
Posted by taxguru on January 23, 2013
California residents, businesses consider bailing on Golden State over taxes – It’s not just the high taxes that motivated us to leave the PRC 20 years ago. It’s also the never ending micromanagement of every part of everyone’s life by the rulers in Sacramento that was unbearable for us.
Court Holds IRS Can Get Key Tax Records Even Held by Your Lawyer – As I’ve long pointed out, the basic protections we have under the Constitution are null and void when it comes to tax matters. This is just one of dozens of examples of this.
Posted in Calif | Comments Off on
Posted by taxguru on December 20, 2012
Will people be held prisoner inside high-tax states if they can’t or won’t pay the Exit Fees? Desperate money hungry State rulers may just stoop this low.
When Will Death Spiral States Impose Taxes On Fleeing Citizens?
New tax increases in California stir debate about adding to exodus
From Rush Limbaugh, who was a tax refugee from New York to Florida 15 years ago, but still has to undergo audits from the New York Tax goons every year to prove that he didn’t work inside the State borders.
Death-Spiral States Eye Exit Taxes
Posted in Calif, StateTaxes | Comments Off on Taxing refugees from high-tax states?