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California Tax ACCT 456. Introduction (1) Prep Form 540 (2) CASales Taxes and Prop Taxes (local) (3)...
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Transcript of California Tax ACCT 456. Introduction (1) Prep Form 540 (2) CASales Taxes and Prop Taxes (local) (3)...
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California Tax
ACCT 456
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Introduction
(1) Prep Form 540
(2) CASales Taxes and Prop Taxes (local)
(3) Personal Inc Tax (and corp)
(4) CA v. federal - diffs; assume some knowl of fed (indiv)
Law as of + conformity/nonconformity
Reading - condensed material (Guidebook)
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Income Tax
Tax Rate Schedules and Tables Current Individual Rate Schedules and
Tables Individual Maximum Rate
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Current Corp Franchise Tax, Inc Tax Corp max and min
– max 8.84% (yrs begin after 96)– S Corps: 1.5%– min: 800
0 1st yr, 0 2nd yr (new C & S)
(yrs begin after 99)
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Combined CA Inc Tax and Fed Inc Tax Individuals: remember
– deduc of CA tax on fed return– upper brackets (phase outs: exemptions,
itemized - fed & CA)
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Return Prep - Formula
RESIDENTS (v. part yr, nonresidents) Formula - CA now an AGI state basically start fed AGI + or - modifications to income + or - modifications to itemized deductions;
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TI personal exemption credit(s) dep exemp credit other credits
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Much of Federal Law is Conformed to
e.g. AMT - Sch P e.g. Kiddie Tax - Form
3800 Due date 4/15 paperless ext. 10/15
paym Form 3519
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Return filing requirements:
Using CA GI & AGI Single
– GI– AGI
MFJ– GI– AGI
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Resident:
In state other than temporarily or transitorily
9 months presumption = resident or domicile in state and outside temporarily
or transitorily = resident see cases and factors
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Filing Status
usually same as fed exceptions: spouse
different state resident or active military - option
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Personal & Dep Exemptions:
Credits:– pers - t/p & sp – dependents
reduced if fed AGI> threshold – MFS 1250 x 6 – Single HOH 2500 x 6 – MFJ 2500 x 12
Blind and/or > age 65 - additional
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Standard Deductions
single, MFS MFJ, HOH, QW Dependent claimed on another return may elect differently from federal - i.e.,
standard v. itemized
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Conformity and Nonconformity and Other Diffs
Conformity or not (Spidell) – failure to adopt fed changes
Other Differences - state policy
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Modifications - To Fed AGI - (more imp) Schedule CA Interest on State & Local Obligationss - add
back other than CA Interest of Fed Obligations - subtract Deprec - post 86 MACRS & 87-92 179, CA
= fed (no addition or subtraction) – pre 87 not ACRS for CA but pre ACRS
methods– corps still use pre ACRS
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179 expense (an example of non-conformity)87-92 CA & fed same
93-96 CA 10,000; fed 17,500
97-98 CA 13,000 7 16,000; FED 18,000 & 18,500
99-02 CA & Fed same
99 19,000
00 20,000
01-02 - 24,000
03 – 25,000 CA; 100,000 Fed (JGTRRA ’03)
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Cap G&L - same after 86 (Sch D, 540)(except for depreciation differences)
State income tax refund – subtract if from CA or any other state– rationale: no tax benefit (not deduc’d
540) Unempl Comp - not taxed (subtract)
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Social Security - none taxed in CA (subtract if included on federal) (fed formula)
CA lottery winnings - exempt (subtract) IRA & Keogh - post 86 limits were same so
taxable on distrib same if all from post 86
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Expenses related to tax exempt income (see below)
PAL - rules same (except R/E pros - fed 93) other G or L (fed 4797) (CA D -1) (rules
same)
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NOL
No CB in CA 10 yr CF
00-01 55%
02-03 60%, suspended
04 100% No NOL 91 & 92
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Modifications – to fed itemized – (more imp) Schedule CA Need not elect same as fed (itemized or standard)
(need not attach Schedule A) Taxes – state & local inc taxes (incld SDI) NOT
deduc (sub) Attach Schedule A – usually not
Not 540A
540 if 1040 attached forms other than A&B (attach on file 1040)
If itemized CA, but not fed – mock A
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Tax Exempt Income Expenses: – fed obligs - not deduct exps bec not incld
inc (subtract)– state obligs: - deduct exps (add) (other
than CA) bec include in inc– CA (no change)
CA lottery - not deduct expenses (subtract)
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Itemized Deduc Phase Out
6% v. fed 3% fed AGI> threshold
single, MFS H of H MFJ
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Credits (more imp)
Order specified form for each > 3 attach Schedule P renters: back in 1998 non refundable
– amount– phaseout– 93-97: none
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Credit - Inc Taxes Paid to Another State net income tax paid to state (not local)
(exclude AMT or like) if income sourced to other state & taxed
also in CA intangibles producing income = attrib’d to
CA only (e.g., out-of-state bank acct of CA resid)
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Limit - proportion of CA tax
no c/o Schedule S & copy
of other state return
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Other Credits
Personal & dependency exceptions
Household & dep care credit– Back in 100, % of
federal, refundable
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Teacher Retention Credit
After `99, suspended ‘02 Teach in elem/sec/vocat sch/in CA, K-12 Credit Years of service req’d
– 250 4 – less than 6– 500 6 – less than 11– 1000 11 – less than 20– 1500 20 or more
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Limit teacher retention credit: 50% x total x ratio (teacher wages & salary (total AGI)
Ratio 1 Total tax = pers inc tax: before ests, less all
credits except teacher excess unemploym contribs, w/h any refundables
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Other Items
Excess SDI– (>annual amount)– (>1 employer usually)
Distinguish Contributions (compare federal presidential check off
Estimated Tax
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Penalties - including minimum Min pen: $100 or 100% of tax if return not
filed w/i 60 days due date Fail to file: 15%/mo; max 75% Fail to pay: 5% & ½%/mo
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Income Tax Administration - CA
FTB - State Controller, Director Department of Finance, Chair of SBE
FTB & IRS exchange info (CA t/p’s required to report changes to fed return)
Tax return preparers: CPA, PA, CA Bar, EA need not register
Others - register with Dept of Consumer Affairs-Ann fee, bond, (60 hrs, 20 CPE)
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FTB
issue rulings audit manual litigation fees taxpayer Bill of Rights
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Change of address Fed form 8822 CA 1-800-852-
5711 CA form 3533
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Deficiencies
FTB determines additional tax due math error Jeopardy assessment estimate income tax + levy notice of proposed deficiency denial renter’s credit
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Protest w/i FTB
w/i 60 days of mailing of notification signed by t/p or representative (power of attorney -Form 3520 - need not be
admitted or have particular qualifications) 2 copies of protest + notice suggested oral hearing - request, branch office,
representative
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Taxpayer Bill of Rts
Recovery of Litigation costs; but 10,000 pen for friv lit
State defense: substantially justified Also civil action for economic damages Plus possible reimb of reas fees on appeal
to SBE from FTB (discretionary) And burden shift on appeal to SBE And more
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Appeal - to SBE
upon notice of FTB action on protest w/i 30 days of date FTB notice 2 copies of appeal 2 copies of supporting documents (effective
1/1/92-SBE mails to FTB)
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Requirements - Appeal - SBE
In writing State: is an appeal Name of appellants Amounts, years
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date FTB notice facts points & authorities portion t/p concede signature
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Hearing - SBE
formal sworn testimony reps not req’d to be
admitted 30 days for petition
for rehearing
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SOL on assessment: CA SOL for mailing notice v. Fed SOL for assem:
General rule - CA 4 yrs after filing (if late, filing) (if early, from due date )
Fed 3 yrs from actual filing Waiver - possible, automatic if fed waiver
(runs to 6 mo after fed) Omit 25% GI - 6 yrs (like fed); False or no
return - no SOL (like fed);
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Fail to report changes or amendment of fed - CA open
if report - 2 yrs from report or CA SOL, whichever later; 4 yrs if out of time to report
T/p document w/i 60 days of assessment SOL - FTB has another 60 days lim: + 60 days
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No CA mitigation 3d party record keeper - intervention by t/p
to quash subpoena - suspend SOL (like fed)
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SOL on Collection
10 yrs federal similar
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Refunds
claim - usually 540X, individuals appeal - 90 days from disallowance by
FTB, to SBE SOL - general rule: 4 yrs from last day for
filing (w/o extension) or 1 yr from overpayment (later)
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federal refund SOL: 3&2, from actual filing unless file early
waivers - federal rules differ 2 yrs from giving notice of amended fed (if
>CA general rule)
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Suit: only after file claim
FTB no rt to appeal adverse dec by SBE
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Time to file: Later of– 4 yrs from due date return– 1 yr from date tax paid– 90 days from notice FTB action (no
action 6 mos - disallowance)– 90 days from notice SBE action
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Death Taxes (after 6/8/82)
Today - 2 death taxes: estate, GST = pickup = amount of state credit allowed
against fed taxes (state credit on fed 760 phasing out per EGTRRA `01)
previously - CA inheritance tax: 1893 - 6/8/82; CA gift tax 1939 - 6/8/82
State reaction to EGTRRA `01
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Fed credit depends on situs of prop, apportion credit among states based on gross value
Return due - DOD, delinquent after 9 mos File - CA + copy of Federal (form 706)
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Deficiency - State controller administers
4 yr SOL or agreement no SOL fraud or fail
to file GST - if resident at
transfer or prop (R/E or personal) w/i CA