Tax News April 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.

In this edition April 2023

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Best Filing Practices for Amended Corporate Tax Returns

The following tips will help ensure you or your client's corporate amended return is filed accurately.

Tips and Best Practices 

  • File online through your tax representative or tax preparation software. Electronic filing programs catch many errors before the return is submitted. 
  • File using FTB Form 100X. This is the most effective way to accurately and timely process the return.

To prevent misapplied payments:

  • Provide all available identification numbers for the entity. (i.e., FEIN, SOS ID, or FTB assigned ID).
  • Provide the full entity name exactly as registered with the Secretary of State or as previously filed.  This is particularly helpful in cases where entities have similar names. (i.e., Wall Street Bank I, Wall Street Bank III- New York, Wall Street Bank IV- South Dakota)

Avoid Common Errors

The most common errors include: 

  • Amended Returns - Incorrect amounts transferred from original return to amended return.
  • Payments and Credits – Amounts either incorrectly added or subtracted from total tax.
  • Estimated Tax Transfer – Incorrect refund amount transferred from previous tax year. 
  • Credits – Claimed amounts miscalculated due to income limitations or computation errors. 
  • Estimated Tax Payments – Claimed amounts do not match FTB records. 
  • Tax – Wrong amounts selected from the tax table on paper returns. 

Organized tax records make preparing a complete and accurate tax return much easier. A MyFTB account greatly assists with organizing your records. You can review estimated tax payments, credits, and previously filed tax return information all on your desktop. The ability to readily review this information helps avoid many of the above errors.

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Form 565 and 568 Identification Filing Requirements

When filing Forms 565 and 568, Limited Partnerships, Limited Liability Partnerships, and Limited Liability Companies are required to provide their Secretary of State (SOS) file number.  

If the business entity has not registered with the SOS, or is a General Partnership, they will need to provide their FTB Assigned ID number (previously referred to as FTB Temporary ID number) in the California Secretary of State file number field on the tax form. The FTB ID is typically assigned when the entity first initiates an action with FTB. (File or Payment).   

The FTB Assigned ID Number may be found in MyFTB by looking at the current client list. This information can also be provided by contacting the FTB customer service call center at 800-852-5711, or the Tax Practitioner Hotline at 916-845-7057.  

For new clients or to create a new MyFTB account for a business entity that has not registered with the SOS, or is a General Partnership, you will need to use the FTB Assigned ID number. 

If the entity is not required to register with the SOS or is not able to obtain their FTB Assigned ID as described above, then the entity can select the “Not Applicable” option when submitting an e-file return or Stand-Alone Electronic Funds Withdrawal (EFW) payment and provide the appropriate requested information. Please refer to your tax preparation software instructions or check with your software provider to confirm they offer this option. 

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Taxpayer Notices and Letters

We send notices or letters for issues that may include:

  • Balance due.
  • Change to amount of refund.
  • Delay in processing a return.
  • Change made to a return.
  • Clarify a question about a tax return.
  • Request additional information.

Responding to a Notice or Letter

If your client agrees with the notice or letter, they do not need to contact us. If, however, a response is requested, then follow the instructions found on the notice and contact us by mail, fax, or online.

If your client has a MyFTB account, they may be able to resolve the issue through their account. If a balance due is expected, we recommend a payment be made, even if only a partial payment. The best course of action would be to pay the full amount by the balance due date to avoid penalties and interest.

Keep a copy of the notice or letter for future reference. The notice includes valuable information in case the issue needs to be further resolved at a later date.

Common Notices and Letters

Go to Letters to view a list of common personal income tax and business entity notices and letters we send and learn more about why we send them and the most effective way to respond.

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Tax Information Authorization vs. Power of Attorney

As we continue with the 2023 tax filing season, tax practitioners are encouraged to confirm their active Tax Information Authorization (TIA) or Power of Attorney (POA) relationships with their individual, fiduciary, group nonresident return, and business entity clients and to establish and/or renew such authorizations when necessary.

TIA

A TIA allows tax practitioners to access some tax account information for their clients. A TIA is valid for all tax years and generally valid for 13 months unless it is otherwise revoked. It can be renewed online through MyFTB or by submitting a new TIA form.

When we approve a new TIA relationship, we automatically grant tax practitioners limited online account access to their clients’ information in MyFTB which is limited to viewing notices and correspondence regarding any and all tax years that were sent within the last 12 months. 

If a tax practitioner requests full online account access, the taxpayer must approve this authority before such access is granted. Once full online account access is granted, the tax practitioner with TIA authorization may view information for all tax years, including: 

  • Account balance and tax year details. 
  • Estimated payments and credits.
  • California wage and withholding information (for individuals only). 
  • Notices & Correspondence. 
  • Account history. 
  • Compliance status.

POA

A POA allows tax practitioners both to access tax account information as well as to act on behalf of their clients in FTB matters.  A POA is authorized for the tax year(s) specified on the POA declaration and is generally valid for 6 years unless it is otherwise revoked. However, POA declarations filed on or before January 1, 2018, will remain valid until the listed expiration date, or December 31, 2023, whichever is earlier, unless otherwise revoked.  Upon expiration, a new POA must be submitted.

When we approve a POA declaration, we automatically grant tax practitioners limited online account access to their clients’ information in MyFTB which is limited to viewing notices and correspondence sent from us in the last 12 months for the tax year(s) specified on the POA declaration.

If a tax practitioner requests full online account access, the taxpayer must approve this authority before such access is granted. Once full online account access is granted, the tax practitioner with POA authorization may view information for the tax year(s) specified on the POA Declaration, including: 

  • View images of tax returns.
  • Protest a proposed assessment. 
  • Respond to a proposed assessment by requesting a 30-day deferral in order to file a tax return.

Refer to Submit a TIA and Submit a POA for additional guidance.  

Additional Information for Online Account Access:

If multiple POA and/or TIA relationships exist between a client and a tax practitioner, the most recent online account access authorization will override any existing online account access authorization level for that tax practitioner.

Online account access authorization does not affect the information a tax practitioner with POA or TIA authority can receive over the phone, via secure chat, in person, and in writing.

Online account access is not available for fiduciary or 540NR group nonresident return accounts.

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Resources for Small Business Owners

It is a good time to remind your clients of the many resources available to small business owners. Having access to the most current information is very important and should be reviewed regularly by small business owners so they are aware of new and changing laws.  

In an effort to provide the most accurate information possible, FTB and other California state agencies have informative websites and publications to assist you and small business owners.

Informative Websites

  • FTB – Our Business section provides useful links and filing information for the different forms of business ownership. The section includes information on Doing Business in California and important due dates* that should be noted. There is a Business help webpage that includes Revivor information if a business is suspended, and links for information on how to dissolve or cancel a business entity. Convenient online services, such as Web Pay can also be found there.  
  • The California Office of the Small Business Advocate (CalOSBA) – CalOSBA offers a comprehensive website to feature a business learning center, quick start guide, and links to financial assistance. If you or your client is in need of permit assistance, CalGold is a helpful website that can point you in the right direction for which permits and licenses you may need for your particular business and location. 
  • California Secretary of State (SOS) – The SOS website has a Business section that allows you to search and access public records for an entity, find forms to start or dissolve/cancel a business entity, and file statements of information online. 
  • Small Business Assistance Center – The Small Business Assistance Center is another great resource located at the California Tax Service Center or taxes.ca.gov. The website is sponsored by the state of California and contains useful information for all aspects of your business. 

Education and Outreach Events

  • The following two event calendars can be used to find upcoming Small Business Education and Outreach events near you. 
    • FTB Event Calendar – Our website provides an event calendar to show upcoming events that are part of our education and outreach efforts. Upcoming small business seminars are also listed here.
    • CDTFA Event Calendar – This is a comprehensive calendar that lists all upcoming events sponsored by the CDTFA, to include Small Business Seminars, New Business Orientation, Basic Sales and Use tax Classes, Nonprofit Seminars, and more. 

Publications

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Refund Information

We receive a high volume of calls for refund information and are certain you do as well.

Taxpayers and tax professionals can use Where’s my refund and Help with refunds to access refund information online and avoid potentially lengthy wait times if trying to call in. 

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Tax Preparer Fraud

“I trusted him, I thought he was honest”; “I’ve been going to him for several years”; “I referred my family and friends to him”; “I can’t believe this happened to me”; “He took money away that I needed for my family…” 

These are the words of taxpayers who were defrauded by their tax preparer.  

For the average taxpayer, filing taxes is an event that occurs only once a year. And for many first-time taxpayers, filing taxes will be a memorable experience they won’t forget – a rewarding experience knowing they did their part.  

The majority of professional tax preparers are honest and trustworthy; however, a small handful of tax preparers may decide to betray their client’s trust. A tax preparer may not start their tax profession with dishonest intentions, but the temptation for financial gain along the way may sway them off the honest path.  

The Franchise Tax Board (FTB) and FTB’s Criminal Investigation Bureau (CIB) pursue leads involving possible tax preparer fraud. The CIB and other business areas within FTB have several tools available to help uncover tax preparer fraud and work closely with other agencies to apprehend tax preparers involved in criminal activities.  

Not only will the CIB seek monetary restitution in the form of taxes owed on income, interest, penalties, and fines, but also prison terms that could extend for several years.  

A fraudulent tax preparer may be charged with several crimes, such as grand theft, forgery, perjury, identity theft, filing false state income tax returns, and tax preparer fraud - all of which can have life changing consequences. 

The actions of a fraudulent tax preparer can also have life changing consequences for their clients. The defrauded taxpayers may face a stressful and emotional recovery, and a difficult cleanup to remedy the issue. The taxpayers trust, however, will take even longer to rebuild. 

The CIB understands the impact faced by defrauded taxpayers and will work tirelessly and diligently to ensure the apprehension of fraudulent tax preparers. 

The Internal Revenue Service and FTB’s CIB conducted an investigation of a Southern California Tax Preparer who was ultimately sentenced to three and a half years in federal prison along with a five-year state prison sentence, and ordered to pay $4.3 million in restitution to the IRS, and $2.7 million to the FTB. To perpetrate the fraud, the tax preparer provided clients with false copies of their tax returns and submitted altered tax returns to the IRS and FTB.  

The exact number of victims may never be known but putting a stop to the activity of a few fraudulent tax preparers is a high priority for Franchise Tax Board’s Criminal Investigation Bureau. 

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What’s New with Tax Forms

Understand What’s New with Tax Forms, get updates on changes to existing tax forms.

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Internal Revenue Service (IRS) Updates and More

We partnered with the 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.  

Tax Time Guide: IRS provides easy access to tax refund status with Where’s My Refund? tool; no need to call 

IR-2023-46, March 15, 2023 — The Internal Revenue Service reminds taxpayers that the Where's My Refund? tool on IRS.gov is the most convenient way to check the status of 2022, 2021 and 2020 tax refunds. IRS2Go, the mobile app, offers another way for users to check their refund status.  

Werfel begins work as 50th IRS Commissioner 

IR-2023-45, March 13, 2023 — Danny Werfel began work today as the 50th commissioner of the Internal Revenue Service. 

Tax Time Guide: Using electronic payment and agreement options for taxpayers who owe can help avoid penalties and interest 

IR-2023-44, March 9, 2023 ― With the tax deadline approaching, the IRS reminded taxpayers they can avoid late filing and interest penalties by submitting their tax return and any payments due by April 18. For struggling taxpayers who can’t pay by the deadline, the IRS offers several different options to help. 

IRS reminder to many retirees: Last day to start taking money out of IRAs and 401(k)s is April 1 

IR-2023-43, March 9, 2023 — The Internal Revenue Service today reminded retirees who turned 72 during 2022 that, in most cases, Sunday, April 1, 2023, is the last day to begin receiving payments from Individual Retirement Arrangements (IRAs), 401(k)s and similar workplace retirement plans. 

2023 supplemental application period now open for Low Income Taxpayer Clinic grants 

IR-2023-42, March 8, 2023 — The Internal Revenue Service today announced it will accept supplemental applications for Low Income Taxpayer Clinic (LITC) matching grants from all qualified organizations. The application period will run from March 7, 2023, to April 18, 2023.  

IRS begins new Digital Intake initiative; Form 940 scanning process off to strong start; other forms to start soon 

IR-2023-41, March 8, 2023 — As part of ongoing transformation efforts, the Internal Revenue Service announced today the successful expansion of digital scanning. 

IRS issues renewed warning on Employee Retention Credit claims; false claims generate compliance risk for people and businesses claiming credit improperly 

IR-2023-40, March 7, 2023 — The Internal Revenue Service today issued a renewed warning urging people to carefully review the Employee Retention Credit (ERC) guidelines before trying to claim the credit as promoters continue pushing ineligible people to file. 

2023 IRS Nationwide Tax Forums to be held in five cities 

IR-2023-37, March 2, 2023 — Registration for this summer’s 2023 IRS Nationwide Tax Forums is now open. The forums return to an in-person format in five cities across the nation for the first time since 2019. 

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Ask the Advocate

Disaster Relief for Most Californians 

Brenda Voet, EA, Taxpayers' Rights Advocate.

Brenda Voet, EA
Taxpayers’ Rights Advocate

Would you say this has been an unprecedented year? Well, over the past few years, California has not escaped devastating disasters. We have been overwhelmed with wildfires, earthquakes, drought, and the COVID-19 pandemic. And yet again, here we are faced with another debilitating natural disaster.

As a result, I’m happy to report additional disaster relief is now available to most California taxpayers. Similar to the IRS, the state of California announced an extension to October 16, 2023, to file and make certain tax payments for individuals and businesses affected by the winter storms in California. Residents and businesses located in the counties listed as covered disaster areas in the IRS January 10 announcement, IRS January 24 announcement, and IRS March 17 announcement, are eligible for extended tax relief.   

The postponement of time to file and pay does not apply to residents and businesses located in the following three counties: Lassen, Modoc, and Shasta. Residents and businesses located in these three counties must file and pay by the normal established deadlines, including 2022 individual income tax returns due on April 18, and the quarterly estimated tax payments.   

FTB’s Emergency Tax Relief and Help with Disaster Relief websites are available for further information about the tax filing and payment extension. In addition, go to the List of California Disasters for a current list of the affected counties and their respective disaster codes.   

The disaster declarations were a challenging and fluid situation for us all. I appreciate the tax community’s patience while we navigate through this unique filing season together. The FTB is conducting an anonymous short survey during this extended filing season to better anticipate customer needs.  

If you would like to participate, please use this survey link:  

Tax Professional Disaster Extension Survey

For more information about MyFTB, or how to register for a MyFTB account, visit MyFTB.

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Tax News Flash Links March 2023

FTB extends filing deadline for taxpayers impacted by 2022-23 winter storms to Oct. 16, 2023 

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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.

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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.

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