Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 685 other subscribers

  • Blog Stats

    • 314,960 hits

  • Posts By Day

    June 2023
    M T W T F S S
     1234
    567891011
    12131415161718
    19202122232425
    2627282930  

  • Subscribe

  • Special Pages

Archive for the ‘Calif’ Category

« Previous Entries

Tax Day For 2022 Returns Is Now October 16 For Many In Calif.

Posted by taxguru on February 25, 2023

The residents of the formerly Golden State have been clobbered by so many major events that IRS has officially given them until October 16, 2023 to file their 2022 tax returns.

This also applies to tax filers in parts of Georgia and Alabama, who had their own miseries befall them.

The IRS Press Release:
May 15 tax deadline extended to Oct. 16 for disaster area taxpayers in California, Alabama and Georgia

Unlike the normal type of six month extension from April until October, this special change also allows tax payments to be postponed until 10/16/23 without any of the late penalties that would apply to tax due under a normally extended 10/16 filing.

Since this IRS pronouncement is so new, the California Franchise Tax Board hasn’t yet had a chance to issue its own press release regarding this new filing deadline for 2021 returns; but there’s no reason to suspect that they won’t conform to the IRS time schedule as they did in January.

Posted in Calif, IRS, TaxDay | Comments Off on Tax Day For 2022 Returns Is Now October 16 For Many In Calif.

D-I-Y Tax Audits

Posted by taxguru on December 31, 2021

Here’s something we will be seeing more of in the near future: Do It Yourself tax return audits.

I was reading the January 2022 Tax News from the California Franchise Tax Board and saw this announcement of a new tactic they are starting to use.

“Select taxpayers who reported large Schedule C expenses will receive self-correct letters

Beginning the week of January 10, 2022, Franchise Tax Board (FTB) will begin an outreach effort by sending self-correct letters to selected taxpayers who reported large Schedule C expenses on their 2019 tax returns that are “significantly higher than expected.”

The purpose of the self-correct letters is to encourage these taxpayers to review their 2019 tax return, and current tax years, for any discrepancies. The letter informs the taxpayers to file an amended tax return to correct any discrepancies.

This self-correct letter does not constitute an audit. The tax returns remain subject to audit until the expiration of the statute of limitations. The taxpayer should maintain documentation to substantiate their deductions are in line with their business activity.

We will start the outreach effort by sending a small volume of self-correct letters in January, and increase the volume over the next several months. Our goal is to expand future outreach efforts to include other issues and tax years.”

What this sounds like is that there will be a cursory review by FTB of tax returns with large Schedule C expenses, with letters going out to those taxpayers threatening full blown audits if they don’t “voluntarily” file amended returns to reduce those expenses. Obviously the threat will be implied, but it will be real.

While this may be starting in California, that State and its FTB have a long running reputation as a test-bed for tax administration and enforcement tactics by other States, as well as by the IRS. We can be sure that the head honchos at IRS and other State tax agencies will be monitoring the results of this FTB experiment very closely. With the current huge shortage of IRS auditors, this approach has to be very tempting as a means to cover many more tax returns than is possible with their limited resources.

Posted in audits, Calif | Comments Off on D-I-Y Tax Audits

Virus Extends Filing Deadlines

Posted by taxguru on March 13, 2020

For the past several days, there has been a lot of speculation that all of the disruption surrounding the nationwide panic over the Wuhan Virus would motivate IRS to officially extend the upcoming filing due dates for 2019 income tax returns; March 16 for 1120S (S-corps) and 1065s (LLC & partnerships) and April 15 for personal (1040), trusts (1041) and Gift Tax (709) returns.  With today’s declaration by the President of a National Emergency, that should be a certainty.  However, no official announcement has yet been made by IRS on their news page.

Normally in situations of large disasters and emergencies, IRS is the first to issue such filing extensions so that affected people can focus on dealing with their more pressing problems.  The State tax agencies then usually follow suit with their own announcements of filing extensions.  Some States, such as California, have a policy of automatically complying with any IRS sanctioned extension of filing deadlines.  In the current situation, the Calif Franchise Tax Board (FTB) has beaten IRS to the punch and has issued its own press release giving a new due date of June 15 for all tax returns that are due March 16 and April 15.  

This is different from a normal extension that taxpayers file, because that kind is only for requesting an extension of time to file the tax returns.  It is not an extension of time for paying the taxes owed.  Penalties and interest are assessed on late payments of taxes, while the normal extension avoids the much more expensive late filing penalties.  This new emergency related extension allows all Calif. taxes for 2019 to be paid up until June 15 without any additional charges for penalties or interest. 

Whether this June 15 date will stick as the due date will obviously depend on how long it takes for the panic in the country to subside and things to get back to normal.  If the virus scare stretches out for months and months. there is a possibility that the June 15 due date will itself be extended.

I intend to add to this post as news comes out, including the anticipated IRS announcement, as well as any by other States.

This is definitely going to be another very strange Tax Season.

[Update 3/14/2020] – Still no official announcement from IRS.  The U.S. Tax Court has announced that it has cancelled all of its March and April trials, which will really back things up for them.

[Updates 3/15/2020] – Still no official announcement from IRS. I’ve seen some mentions that any delay in deadlines requires an act of Congress, which makes no sense.  For the past several years, whenever there has been a presidentially declared disaster or emergency, such as from hurricanes and tornadoes, IRS has been pretty quick to announce official extensions of time to file returns for those in the affected areas, without any congressional action. On March 6, IRS announced an extended filing deadline of July 15 for those in the vicinity of the Nashville Tennessee tornadoes. This current virus panic is the same kind of thing, although on a much larger geographic scale, the entire country.

Some free tax assistance services, such as AARP’s Tax-Aide, have announced they have shut down due to this current health scare.  Seeing as how the affects of this virus are supposed to be much more dangerous for us older folks, that does seem to be a very prudent move.  As I have had to constantly remind clients, whenever it is necessary to prioritize between tax and health matters, health should always be first in line, with or without any official IRS permission.

Posted in Calif, extensions, IRS, TaxDay, TaxSeason | Comments Off on Virus Extends Filing Deadlines

What won’t the PRC Rulers tax?

Posted by taxguru on January 13, 2019

As anyone knows, an effective parody has to have a strong foundation in real world true facts.  

An excellent comment on the situation in California is this recent piece from the extremely creative satire website, The Babylon Bee.

California Legislature Unveils Plan To Raise Taxes On Wildfires Until They Move Out Of State

As with all of their parody articles, this one is very concise and pithy, as Bill O’Reilly used to say.  Check out the full thing, but this paragraph does an excellent job of describing the very real and very dangerous mindset of the bozos in power in Sacramento.

"Just as we’ve done with various businesses and private individuals, we will levy ever-increasing taxes on the fires," he said proudly. "Once they realize they’re being taxed to death, they’ll move on to greener pastures like Texas or Arizona." Brown said the taxes will be earmarked for public funding and pensions, but quickly added the state will likely "blow through the cash" on crazy pet projects faster than they could bring it in.

[Update 12/13/18]: Proving once again that the PRC Rulers are themselves parodies of actual leaders, they have one-upped the Babylon Bee by proposing to tax cell phone texts.

California mulls tax on text messaging

So, the question is still a very valid one.  Is there anything that the crazies on the left won’t tax in order to steal more money for themselves?  If George Harrison were still around, he would have to add so many things to his TaxMan song that it would be twice as long.

 

[Update 12/20/18]: The Babylon Bee has another great parody that could very well come true, given the environmental wackos’ insane blaming of humans breathing out carbon dioxide for the imminent destruction of the planet.

California Considering Tax On Breathing

This article includes another prediction that has actually already come true as part of the Federal TCJA, with its deduction limit of $10,000 for State and Local Taxes (SALT) on the 2018 Schedule A.

…California had unveiled a tax on taxes, charging residents a luxury tax for the privilege of being taxed.

[Update 1/13/19]:  This is not a parody, but one more indicator of California’s continuing slide into total socialism

Gavin Newsom’s budget calls for new tax on drinking water

Posted in Calif, parody, taxes | Comments Off on What won’t the PRC Rulers tax?

Calif FTB threatening audits…

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…

Another parody that could come true?

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?

2014 Calif Tax Rates

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

1031 Exchanges out of California

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

For 1031s 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.

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!
 

 

Posted in 1031, Calif | Comments Off on For 1031s out of California

2013 California Inflation Adjustments

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

Entity type

 Tax rate
Corporations other than banks and financials 8.84%
Banks and financials 10.84%
Alternative Minimum Tax (AMT) rate 6.65%
S corporation rate 1.5%
S corporation bank and financial rate 3.5%

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.

 

TaxCoach Software: Are you giving your clients what they really want?

 

Posted in Calif | Comments Off on 2013 California Inflation Adjustments

« Previous Entries