Tax News December 2024

Assembly Bill (AB) 2660 - Estimated Tax Payment Updates for Taxable Year 2024

For taxable years that begin on or after January 1, 2021, and before January 1, 2026, AB 2660 (Ch. 120, Stats. 2020) allows nonresident aliens that receive California source income to elect to be included on a group nonresident return instead of filing an individual nonresident return. A California group nonresident tax return must be filed by an authorized representative.

As a result of the administrative burden to process estimated tax payments for electing nonresident aliens, FTB has not required estimated tax payments to be made for electing nonresident aliens that were included on a California group nonresident tax return for the 2021, 2022, and 2023 taxable years. FTB will also not require estimated tax payments to be made for electing nonresident aliens included on a California group nonresident tax return for the 2024 taxable year.

For additional information about AB 2660, including how to make a payment, and how to include a nonresident alien who is not eligible for or has not been issued a federal Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) in the group nonresident return, review AB 2660 estimated tax payment information  or California group nonresident tax return.

Introduction to Direct File

The IRS launched the innovative Direct File pilot in January 2024. The pilot allowed eligible taxpayers in 12 states to try the new service to file their federal tax returns online for free directly with the IRS. Pilot states included: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State, and Wyoming. Direct File was designed using taxpayer feedback. This resulted in the use of inclusive design and plain language best practices to help taxpayers understand complicated tax concepts, reduce anxiety, and establish trust. Direct File was also made available in Spanish and designed to be user-friendly for taxpayers with disabilities.

In early 2025, IRS Direct File opens for filing and expands to 24 participating states with additional features. Direct File is an option for eligible taxpayers who lived in the following states for the entire 2024 taxable year: Alaska, Arizona, California, Connecticut, Florida, Idaho, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington State, Wisconsin, and Wyoming. While Direct File does not prepare state returns, it provides taxpayers with an option to use a state-supported preparation and filing tool after finishing the federal return.

For California taxpayers, FTB continues to partner with the IRS to support the state's filing preparation using FTB CalFile. For nearly 16 years, CalFile allows eligible Californians to e-file their state tax returns quickly, easily, and for free. It is available to California taxpayers who meet specific income and filing criteria. Taxpayers receive real-time FTB confirmation once they successfully submit their tax return. CalFile is a safe and secure way to file taxes and ensures the fastest refund using direct deposit.

For the upcoming 2025 tax season, after taxpayers complete their federal return with IRS Direct File, California taxpayers will get a web link to CalFile to complete their state tax return. And starting in January 2026, taxpayers will have the option to import their federal data directly into CalFile.

Both IRS Direct File and FTB CalFile continue to provide eligible taxpayers the opportunity to file both their federal and state tax returns quickly, securely, and for free. These online services allow eligible taxpayers to claim valuable, cash-back credits such as the state and federal Earned Income Tax Credit and California's Young Child Tax Credit.

For updates and more information, go to IRS Direct File and FTB CalFile.

Business Entity Pre-Suspension and Suspension Processes Resume

FTB delayed the business entity pre-suspension and suspension processes from February 1, 2022, through November 14, 2024. The Business Entity Pre-Suspension and Suspension Processes have all resumed starting with Corporations on September 1, 2023, and Limited Liability Companies on November 15, 2024.

If you or your client receive a pre-suspension or suspension letter and plan to revive an entity, you can submit your request online using the Online Revivor Assistance Request Form to connect with one of our team members for account specific assistance. You can also call the Revivor Unit at (888) 635-0494 or follow any instructions included in the letter.

For more information, go to My Business is Suspended.

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.

Many businesses must report beneficial ownership information to Treasury by Jan. 1; free webinar can help

IR-2024-288, Nov. 12, 2024 — The IRS will sponsor a free one-hour webinar designed to help the many businesses that must report their beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network.

IRS: Healthcare FSA reminder: Employees can contribute up to $3,300 in 2025; must elect every year

IR-2024-287, Nov. 7, 2024 — The IRS reminds taxpayers that during open enrollment season for flexible spending arrangements (FSAs) they may be eligible to use tax-free dollars to pay medical expenses not covered by other health plans.

IRS publishes 2024 Financial Report; resolves longstanding significant deficiency

IR-2024-286, Nov. 7, 2024 — The IRS released financial information and highlighted selected accomplishments and challenges in its fiscal year 2024 Financial Report.

401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000

IR-2024-285, Nov. 1, 2024 — The IRS announced that the amount individuals can contribute to their 401(k) plans in 2025 has increased to $23,500, up from $23,000 for 2024.

IRS hires new Associate Chief Counsel to focus on partnerships and other passthrough entities

IR-2024-284, Oct. 29, 2024 — The IRS announced the selection of the first Associate Chief Counsel for the newly created Passthroughs, Trusts and Estates office that will focus exclusively on partnerships, S corporations, trusts and estates. Staffing for this office will be drawn from the current Passthroughs and Special Industries office.

National Cybersecurity Awareness Month reminder: IRS and Security Summit supply online safety tips

IR-2024-283, Oct. 28, 2024 — As National Cybersecurity Awareness Month concludes and preparation for next tax season begins, the IRS and its Security Summit partners reminded taxpayers to be wary of online threats like identity theft and fraud.

Treasury and IRS issue guidance for the Energy Efficient Home Improvement Credit

IR-2024-280, Oct. 24, 2024 — The Department of the Treasury and the IRS issued Revenue Procedure 2024-31 and proposed regulations to provide guidance for the Treasury and IRS to issue guidance for the Energy Efficient Home Improvement Credit.

IRS encourages all taxpayers to sign up for an IP PIN for the 2025 tax season 

IR-2024-278, Oct. 23, 2024 — As the 2025 tax season approaches, the IRS encourages all taxpayers to take an important step to safeguard their identity by signing up for an identity protection personal identification number (IP PIN).

Ask the Advocate: Annual Liaison Meetings

Each year, our annual liaison meetings provide an opportunity for FTB and the tax professional community to meet and review concerns and issues identified through our interactions over the past year. With this information, we work to improve FTB processes and services, to better serve taxpayers and tax professionals.

Each meeting's format is similar in which FTB delivers presentations on topics members are interested to learn more about. This year, we presented:

• 2026-2030 FTB Strategic Plan

• Resident/Nonresident Withholding

• Real Estate Withholding

• Benefits of Self-Services

After the presentations, a portion of the meeting was dedicated to FTB responding to questions submitted by each organization prior to the meeting. We appreciate your attendance at the meetings and especially those of you who brought forward questions and shared your insight.

These interactions allow tax professionals to voice their concerns, provide constructive feedback, and help us identify areas where improvements in processes and services are possible. While many of you belong to CSEA or CalCPA, membership in one of these organizations isn't necessary for you to have your concerns heard or to present your ideas. In fact, you can present your ideas at the annual Taxpayers' Bill of Rights Hearing held Tuesday, December 10, as part of our regularly scheduled quarterly board meeting. If you are interested in attending, go to Meetings for more information.

As the Advocate, one of my goals is to ensure every interaction with FTB goes as smoothly as possible and everyone is treated with fairness and respect. FTB's management team shares this collective goal, and your input is valuable.