Tax News January 2026

Los Angeles County Disaster Relief Assistance

Individuals and businesses with their principal residence, or principal place of business, in Los Angeles County during the fires that began January 7, 2025, qualified for a postponement to file and pay taxes until October 15, 2025. Taxpayers located outside the covered disaster area may have qualified for disaster postponement if the tax records necessary to meet a filing or payment tax deadline were located in Los Angeles County (e.g. with their tax practitioner). Only income tax filings and payments due between January 7, 2025, and October 15, 2025, qualified for a postponement to October 15, 2025. Refer to Los Angeles County fires and disaster declaration tax payments for examples of tax returns and payments eligible for postponement.

Los Angeles County taxpayers who did not mark “disaster” on their tax returns and received penalty notices, or taxpayers and tax professionals who have questions about disaster relief, should contact FTB by:

• Email: LA County disaster relief
• Online: MyFTB

The email address is only for individuals and businesses affected by the Los Angeles County disaster. Taxpayers and tax professionals should provide the full name, address during the disaster, email address, telephone number, and 10-digit FTB identification number. Email is the fastest and most efficient way to resolve account matters related to the Los Angeles County disaster.

For frequently asked questions, go to help with Los Angeles County fire relief. Taxpayers with questions not related to the Los Angeles County fires may use one of the many options to contact FTB.

Franchise Tax Board (FTB) Mandatory Electronic Filing Requirements

We would like to remind you of our individual and business income tax return mandatory electronic filing requirements.

Individual Electronic Filing Mandate

The electronic filing of individual tax returns is mandatory for tax returns prepared by tax preparers meeting certain criteria. California law requires tax preparers who prepare more than 100 individual state income tax returns annually and prepare one or more using tax preparation software to electronically file (e-file) all current year individual income tax returns.

If you reside or have an office outside California and meet the requirements of the mandate, all California individual tax returns you prepare are required to be e-filed.

A penalty of $50 per tax return will be assessed for each tax return filed by paper that should have been e-filed unless the failure is due to reasonable cause and not willful neglect.

If your client elects not to e-file or a tax preparer cannot e-file due to reasonable cause, complete the FTB 8454, e-file Opt-Out Record for Individuals.

For more information go to e-file for individuals.

Business Electronic Filing Mandate

California law requires business entities that prepare an original or amended tax return using tax preparation software to electronically file (e-file) their tax return. In addition, for recent Senate Bill (SB) 711 changes on the impacts to business electronic filing, review Tax News article Senate Bill 711 Federal Conformity Bill – Impacts to Business Electronic Filing Mandate and Research Credit.

A business entity shall be assessed with a penalty of $100 for an initial failure to electronically file a return and a $500 penalty for each subsequent failure unless a business entity e-file waiver was submitted and approved by FTB or the failure is due to reasonable cause and not willful neglect.

Any business entity required to file a tax return electronically may annually request a waiver from their e-file requirement by visiting Business entity e-file waiver request.

For more information go to e-file for business.

New Real Estate Withholding for Foreign Sellers Video

A new video for Real Estate Withholding for Foreign Sellers is now available.

The video reviews:

• Real Estate Withholding Requirements
• Definitions
• Withholding Exemptions
• Remitter Responsibilities
• How to Submit Form 593 for a Foreign Seller
• Form 593 with Foreign Sellers/Transferor Information
• Filing Instructions
• Liability and Penalties
• Resources

Attend a Virtual Withholding Presentation

We offer two 25-minute virtual withholding presentations followed by a Question-and-Answer session conducted through Microsoft Teams or Zoom.

California Nonresident Withholding

The California nonresident withholding presentation is held the second Wednesday of each month at 10 AM PST.

We will review:

• California nonresident withholding requirements
• Income subject to withholding
• Withholding agent requirements
• Withholding exceptions, waivers, and reductions
• Withholding liability and penalties
• Resources
• Questions

To attend this presentation, email us at FTB CA Non Resident Withholding Education.

California Real Estate Withholding

The California real estate withholding presentation is held the third Tuesday of each month at 10 AM PST.
We will review:

• Real estate withholding requirements
• Common mistakes made on Form 593, Real Estate Withholding Statement
• Withholding responsibilities
• Installment sales
• Trusts
• Foreign sellers
• Limited liability companies
• Resources
• Questions

To attend this presentation, email us at FTB Real Estate Education.

For the latest information, subscribe to nonresident withholding and real estate withholding.

California Competes Tax Credit (CCTC)

For the second application period of Fiscal Year 2025/2026, the Governor's Office of Business and Economic Development (GO-Biz) will accept applications for the CCTC January 05, 2026, through January 26, 2026.

The application period has $308 million available for allocation. Applications for the credit will be accepted at calcompetes.ca.gov.

For more information go to California Competes Tax Credit.

Important Tips on Web Pay for Small Businesses

Your small business clients can use Web Pay for free with their checking or savings account. Corporations, limited liability companies (LLCs), and partnerships use Web Pay for business, while sole proprietorships must use Web Pay for personal.

There are several different types of payments, and each differ depending on your client’s business entity type.

Your client can make the following payments such as, but not limited to:

• Annual tax, minimum tax, or limited liability company fee
• Bill or other balance due
• Current year or amended tax return
• Estimated tax
• Extension

When logging in, the entity type and entity ID must match our records. Do not enter dashes, it is important to ensure owners enter the correct number.

In most cases, Web Pay accepts the entity ID number. For additional help using Pay by bank account (Web Pay), go to Help with bank account payments.

Internal Revenue Service (IRS) Updates

We partnered with the IRS to provide monthly IRS articles to assist our tax professional and small business communities, and we are excited to share this information; however, questions about the content should be directed to the IRS.

IRS updates frequently asked questions on changes to the Limitation on the Deduction for Business Interest Expense

IR-2025-126, Dec. 23, 2025 — The IRS updated frequently asked questions in Fact Sheet 2025-09 regarding changes to the limitation on the deduction for business interest expense (Section 163(j)) under the One, Big, Beautiful Bill.

IRS seeks public comment on Voluntary Disclosure Practice proposal

IR-2025-124, Dec. 22, 2025 — The IRS opened a 90-day public comment period, ending March 22, 2026, for proposed updates to its Voluntary Disclosure Practice, including a more streamlined penalty framework.

Treasury, IRS announce forthcoming guidance on a new method for recovering federal excise tax paid on dyed fuel established under the One, Big, Beautiful Bill

IR-2025-125, Dec 22, 2025 - The Department of the Treasury and the IRS announced forthcoming guidance on a new method for recovering federal excise tax paid on dyed fuel established under the One, Big, Beautiful Bill.

Treasury, IRS provide safe harbor for taxpayers claiming the carbon capture credit

IR-2025-122, Dec. 19, 2025 — The Department of the Treasury and the IRS provided guidance for taxpayers claiming the tax credit for carbon capture and sequestration, which was expanded and modified in the One, Big, Beautiful Bill. Notice 2026-01 provides a safe harbor for taxpayers that wish to claim the credit for qualified carbon oxide captured and disposed of in secure geological storage occurring during calendar year 2025.

IRS-CI issues fiscal year 2025 annual report showcasing banner investigative results

IR-2025-120, Dec. 12, 2025 — IRS Criminal Investigation released its Fiscal Year 2025 Annual Report on Dec. 11, 2025, showcasing banner investigative results fueled by new partnerships and innovative financial investigative techniques.

Treasury, IRS allow States to make an Advance Election to participate in the new federal tax credit for individual contributions to Scholarship Granting Organizations under the One, Big, Beautiful Bill

IR-2025-121, Dec. 12, 2025 — The Department of the Treasury and the IRS issued Revenue Procedure 2026-6 allowing States, including the District of Columbia, to make an Advance Election to participate in a new tax credit for calendar year 2027.

Treasury, IRS provide guidance on new tax benefits for health savings account participants under the One, Big, Beautiful Bill

IR-2025-119, Dec. 9, 2025 — The Department of the Treasury and the IRS issued Notice 2026-05 providing guidance on new tax benefits for Health Savings Account participants under the One, Big, Beautiful Bill.

IRS and Security Summit partners announce 10th Annual National Tax Security Awareness Week

IR-2025-118, Dec. 3, 2025 —The IRS working with the Security Summit partners announced that the 10th National Tax Security Awareness Week began this week to raise awareness about tax-related identity theft.

Treasury, IRS issue guidance on Trump Accounts established under the Working Families Tax Cuts; notice announces upcoming regulations

IR-2025-117, Dec. 2, 2025 — The Department of the Treasury and the IRS issued a notice announcing upcoming regulations and providing guidance regarding Trump Accounts, which are a new type of individual retirement account for eligible children.

It’s not too early to get ready for the 2026 tax season

IR-2025-116, Nov. 26, 2025 — The IRS encourages taxpayers to take steps now to prepare for the upcoming filing season by visiting IRS.gov/GetReady for tips on what is new and what to consider before filing.

Treasury, IRS request comments on implementation of the new federal tax credit for individual contributions to Scholarship Granting Organizations under the One, Big, Beautiful Bill

IR-2025-115, Nov. 25, 2025 — The Department of the Treasury and the IRS issued Notice 2025-70, requesting comments on the implementation of a new tax credit for individuals established under the One, Big, Beautiful Bill.

Ask the Advocate - Taxpayers’ Bill of Rights Hearing

As the 2026 filing season begins, I thank California’s tax professional community for your continued partnership, engagement, and dedication to serving taxpayers.

At the Taxpayers’ Bill of Rights Hearing on December 8, 2025, tax professionals raised several important issues that will help shape our work in the year ahead. These included the need for more proactive guidance on new legislation and regulations particularly in light of Senate Bill (SB) 167 and the absence of any Chief Counsel Legal Rulings since 2020. In addition, tax professionals expressed concerns regarding delays in the resolution of tax controversies, including protests and appeals. The community also emphasized the value of providing tax transcripts similar to those available through the IRS, and noted the administrative burden placed on FTB to collect and share tax information for non-tax purposes.

I appreciate your recognition of the strong partnership with the Taxpayers’ Rights Advocate’s Office and join you in commending FTB for its handling of the Los Angeles County disaster postponements and its work supporting the passage of SB 711, California conformity.

I will work with the appropriate FTB program areas to address these concerns and develop written responses by February 3, 2026, which will be posted on FTB’s public website.

Your valued input remains critical to identifying systemic issues and advancing taxpayer-focused solutions. I look forward to working closely with you throughout the filing season and the year ahead.