State Tax Media Host Guide 2014
FRANCHISE TAX BOARD
PUBLIC AFFAIRS OFFICE
Taxes can be complex and confuse your broadcast audience. We try to get rid of tax time's hassle by offering taxpayers innovative ways to get tax help and file through the Internet. We appreciate your help to get this information to the people in your community who need it.
Frequently asked questions
The following questions might assist you in planning your interview. We encourage you to use these questions that taxpayers frequently ask.
What’s new this year?
- What's new for personal income tax filers?
- What's new for business filers?
- What tax credits are available for taxpayers to reduce their tax bill?
- Who has to file?
- What is CalFile?
- What is ReadyReturn?
- If taxpayers want to prepare their own tax return, how do they start?
- Why should taxpayers e-file?
- How do taxpayers calculate their estimate tax payments?
- Does FTB split refunds?
- What taxpayer assistance is available?
- What if taxpayers want to hire a tax professional?
- What are the common errors taxpayers make and how can they avoid them?
- What should taxpayers do if they cannot file by April 15?
- What if taxpayers owe and cannot pay?
- Why do taxpayers need to file separate federal and California tax returns?
- What form do taxpayers file if they moved into or out of California?
- What should taxpayers do if they changed their address during the year?
- What other services are available at ftb.ca.gov?
- How can taxpayers contact FTB?
- What should taxpayers do if they made an error on their tax return, forgot to claim a deduction, or received a late W-2?
- How long should taxpayers keep their tax records?
Other information to consider
- When or why does FTB audit?
- What should taxpayers do if the IRS audits them?
- What should taxpayers do if FTB sends them notices?
- What is use tax and how do taxpayers know if they owe it?
- What can taxpayers do if they think an FTB employee is being unreasonable?
- What is the tax gap?
- Tax Trivia: Did you know? (As of December 12, 2013)
What’s new this year?
Form 540A, California Resident Income Tax Return, eliminated
FTB no longer offer this form because:
- Volumes continue to decrease each year.
- Last year 52 percent of taxpayers that filed this form could have filed the simpler Form 540 2EZ.
Taxpayers can contribute to one or more charitable causes directly on their state tax form. New for 2013 are the:
- American Red Cross Fund.
- Protect Our Coast and Oceans Fund.
- Keep Arts in School Fund.
See FTB’s tax forms for a complete list of available charities. For more information, go to ftb.ca.gov and search for voluntary contributions.
Affordable Care Act
Although this is not a new law, FTB gets questions about how the federal Affordable Care Act affects California taxes. California tax code conforms to the 2010 federal income tax rules which allow individuals to exclude the value of medical coverage provided to nondependent adult children from California gross income. It also allows self-employed individuals to deduct health insurance premiums for nondependent adult children under age 27.
For California tax purposes:
- Any amount that an employee paid for such additional coverage is excluded from California taxable wages.
- Self-employed individuals may deduct the health insurance premiums paid for an adult child under age 27.
For more information, go to ftb.ca.gov and search for Affordable Care Act.
Repeal of Geographically Targeted Economic Development Area tax incentives
Assembly Bill (AB) 93 phases out California’s Enterprise Zone (EZ) and other economic development area tax credits and replaces them with a new economic development program. AB 93 replaces the EZ credits with a new employment credit and a statewide partial sales and use tax exemption for manufacturing equipment.
AB 93 repeals the EZ incentives as of January 1, 2014. However, taxpayers can continue to claim hiring credits for qualified employees that they hire on or after January 1, 2014. They can claim the credits during the employee's first 60 months of employment.
California Competes Credit
The Governor's Office of Business and Economic Development (GO-Biz) administers the California Competes Tax Credit. Businesses that want to come to or stay and grow in California can claim this.
For more information, go to ftb.ca.gov and search for California Competes.
The New Employment Credit
Taxpayers can take the New Employment Credit against corporate and personal income taxes from January 2014 through January 2021.
The credit is only available to qualified businesses in:
- Census tracts with the 25 percent highest share of both unemployment and poverty in the state.
- Former enterprise zones.
- Local Area Military Base Recovery Areas (LAMBRAs.)
Employers who hire qualified full-time employees and have a net increase in full-time jobs can claim the credit.
In general, the credit equals 35 percent of the wages between 1.5 and 3.5 times the minimum wage over a five years period.
Taxpayers can only claim the credit on a timely filed, original return.
Very important: Businesses that want to claim these credits must request a “tentative credit reservation” with FTB within 30 days of the employee’s hire date.
Employers can use the online searchable map to determine if a location is in the Designated Geographic Area (DGA.)
For more information, go to ftb.ca.gov and search for New Employment Credit.
e-file available for Form 541
Fiduciaries who file the Form 541, California Fiduciary Income Tax Return, can now e-file it.
Elimination of Tax Clearance Certificate for Estates
California no longer requires any estate to obtain a tax clearance certificate. State tax law changes repealed this requirement as of January 1, 2014 for all estates; including those with an appraised value of more than $1 million and those that make distributions of more than $250,000 to nonresident beneficiaries.
The amounts are based on filing status:
- Single or filing separately: $3,906.
- Joint, surviving spouse, or head of household: $7,812.
Personal Exemption Credit
The amounts are:
- $106 per individual.
- $212 for joint filers.
Blind individuals and seniors 65 years or older receive double the individual amount.
Dependent Exemption Credit
Families can reduce their tax bill by $326 per dependent.
- Single renters whose adjusted gross income is $36,955 or less can claim a $60 credit.
- Joint or head of household filers whose adjusted gross income is $73,910 or less can claim a $120 credit.
Federal Earned Income Tax Credit (EITC)
This is a federal incentive for low to moderate income individuals and families. Taxpayers who earn less than $51,567 can qualify for a refundable credit that can total up to $6,044. “Refundable” means that the federal government can issue a taxpayer a refund check even if they do not have a tax liability. If taxpayers want to know if they qualify, they can go to irs.gov and search for EITC Assistant.
California has no comparable state credit.
Surprisingly, not everyone has to file. Each year FTB gets thousands of tax returns from people who have no filing requirement. FTB bases their filing requirements on income amounts and exemption credits.
For 2013, taxpayers do not need to file if they are:
- Single or head of household and their total income was less than $15,702.
- Married or registered domestic partners and their total combined income was less than $31,406.
The income threshold amounts are higher if taxpayers have dependent or senior exemptions. Also, the rules differ if another person can claim the taxpayer as a dependent their tax return.
If taxpayers had wage withholding or they made estimated tax payments, they must file a tax return to get their refund.
CalFile is one of FTB's no-cost, easy-to-use e-file options. It is available to more than 6.4 million taxpayers. Taxpayers can use CalFile if they have income up to $345,235, itemized deductions, and some tax credits.
CalFile guides taxpayers through a simple question and answer process. It takes about 15 to 30 minutes to complete. CalFile offers convenient features to make it easier to use which include:
- Email confirmation that verifies the taxpayer filed the return.
- The ability to save information and come back later to finish it.
- The ability to file the current year 2013 tax return as well as the previous year.
ReadyReturn is another of FTB's free e-file options that provides taxpayers who file a simple tax return with a completed state income tax return. Taxpayers need to review their completed ReadyReturn and make necessary changes before they file.
ReadyReturn is based on a simple premise. FTB uses information they already have from taxpayers and their employers, such as W-2 information and last year’s tax return, to provide a completed tax return. FTB does most of the work, so taxpayers benefit.
Taxpayers are eligible if in 2013 they:
- Filed as single or head of household.
- Earned wages from one employer.
- Took the standard deduction.
- Claimed no more than five dependents.
- Claimed no credits other than the nonrefundable renter’s credit.
FTB estimates that nearly 2 million California taxpayers qualify to use ReadyReturn. If taxpayers want to find out if a ReadyReturn is waiting for them, they should go to ftb.ca.gov or call 800.338.0505.
For many, it’s not that hard.
They should do the following:
- Gather the documents they need to prepare their state tax return:
- Income reporting documents such as W-2s and 1099s.
- Tax deduction documents:
- Tax payment records.
- Mortgage interest expenses.
- Charitable contributions, etc.
- Complete their federal tax return first.
- Follow the instructions on the California tax return.
- To arrive at California taxable income, they start with their federal adjusted gross income and then make adjustments for differences between federal and state law.
- If they don't know, they shouldn't guess. They should contact FTB to get answers to their tax questions.
- They get a quick tax refund, normally within 7 to 10 days if they e-file and choose direct deposit. If taxpayers mail their tax return in January or February, they generally get their refund in a couple of weeks. However, if they wait until late March or April to file, they can expect to wait 6 to 8 weeks for their refund check.
- It’s safe, accurate, and fast. e-filed tax returns have fewer errors, which means they are less likely to hear from us later.
- FTB sends them confirmation almost immediately when they receive their tax return.
- It’s free if they use CalFile or ReadyReturn. Some commercial software companies offer free e-file to selected customers.
- It reduces government costs.
Besides CalFile, many e-file software packages can help ease the tax filing process. The programs walk them through a virtual tax interview and prompts them to take advantage of relevant tax credits. FTB's website provides links to many software vendors. They can e-file from their own computer or through a professional tax preparer.
To avoid an estimate penalty, taxpayers must pay:
- 30 percent during the first quarter (April 15).
- 40 percent during the second quarter (June 15).
- 0 percent during the third quarter (September 15).
- 30 percent during the fourth quarter (January 15).
California's scheduled amounts differ from federal.
Yes. Taxpayers can request that FTB electronically deposit their refunds into more than one account. This encourages taxpayers to split their refunds to save some of their refund money. FTB can split refunds into two accounts such as:
- Money market
Taxpayers should make sure their financial institutions accept deposits into certain accounts.
The Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA/TCE) programs offer free tax help. California has more than one thousand sites where trained volunteers provide free help to low to limited income, senior, disabled, and non-English speaking persons who file simple federal and state tax returns.
Many military bases provide this service for the U.S. Armed Forces.
Starting February 1 through April 15, taxpayers can search online by ZIP code, city, or county for locations. Go to ftb.ca.gov and search for VITA site.
For those who decide to hire an income tax return preparer, they may want to read FTB 982, How to Select an Income Tax Return Preparer. In this publication, the IRS and FTB offer tips on how to select someone to trust. Taxpayers are responsible for their tax return information accuracy.
- Claim incorrect estimated tax payments.
- Deduct the wrong amount for the standard or itemized deductions.
- Select the wrong amount of tax from the tax table on paper tax returns.
To avoid these errors, we suggest taxpayers:
- Go to ftb.ca.gov and access their account to verify the amounts that they have for their estimated tax payment amounts, wage and withholding information, and current balance due.
- Accurately add and transfer their total deductions to the correct line of the tax return.
- Double-check the tax amount they transferred from the tax table or the online tax calculator.
No problem. All taxpayers get an automatic six-month filing extension to October 15. The extension is only for filing tax returns and not for payment of any taxes that may be due. They need to pay the total tax due by April 15 to avoid penalties and interest.
If they do not have the financial ability to immediately pay in full, they may be eligible to make installment payments. FTB recommends they make the largest monthly payment possible to limit the amounts of interest and applicable penalties that accrue until they pay the tax liability in full.
FTB generally approves installment agreement requests if the the taxpayer owes $25,000 or less and can pay in full within 60 months. FTB generally does not file liens on these taxpayers’ accounts.
Taxpayers can request an installment agreement online. They should go to ftb.ca.gov and search for payment options. They can also request an installment agreement using their automated phone line at 800.689.4776. Information is available in both English and Spanish.
Individuals may pay taxes by credit card. FTB accepts Visa, Master Card, Discover/NOVUS, and American Express.
They can pay:
- Online at Official Payments Corporation: www.officialpayments.com
- By telephone at 888.2PAY.TAX or 888.272.9829.
Service providers charge a convenience fee for this service based on the amount charged.
Federal tax laws differ from California tax laws. FTB suggests that they prepare their federal return first to make it as easy as possible. California’s tax return starts with federal adjusted gross income and then makes adjustments for state differences.
They file Form 540NR, California Nonresident or Part-Year Resident Income Tax Return, long or short form for the year they moved. The short form is for those whose income is made up mostly from wages.
Depending on the laws of the state they moved to or from, they may need to file a tax return for that state also. Taxpayers may qualify for a credit for income taxes they paid to another state when California taxes the same income that the other state taxed.
They should notify FTB immediately.
- Website: Go to ftb.ca.gov to access their MyFTB Account and change their address online.
- Phone: 800.852.5711
They can also mail a completed FTB 3533, Change of Address to:
FRANCHISE TAX BOARD
PO BOX 942840
SACRAMENTO CA 94240-0002
Each year, the U.S. Post Office returns millions of dollars in refund checks to FTB as undeliverable. This is generally because taxpayers moved after they filed their tax return. The post office does not forward refund checks.
Taxpayers can do the following on the website:
- Find answers to frequently asked questions.
- Get tax forms and publications.
- e-file their tax return for free using ReadyReturn, CalFile, or other participating online filing services.
- Get their refund status.
- Check their MyFTB Account for wage and withholding data, balance due or payments made.
- Change their address.
- Use WebPay to authorize payments from their bank account.
- Make payments with a credit card.
- Apply for an installment agreement.
- Email their non-confidential tax questions.
- Calculate their taxes.
- Respond to head of household questionnaires.
- Report tax fraud.
- Get an Entity Status Letter.
- Request an email reminder to file or to make estimated tax payments.
- Research legal rulings, reports, statistics
Internet and Telephone Services
- Website: ftb.ca.gov
- 24/7 Automated Support: 800.338.0505
- Listen to recorded answers to frequently asked tax questions.
- Order state tax forms.
- Get their refund status.
- Verify their balance due or payments made.
- General Assistance: 800.852.5711
FTB is ready to answer questions from 7 a.m. to 5 p.m. weekdays, except state holidays.
- Federal Tax Questions: 800.829.1040
If taxpayers want to speak with an FTB representative in person, they can visit one of these walk-in field offices:
Office hours are 8 a.m. to 5 p.m. weekdays, except state holidays.
Important: FTB does not accept cash payments in the Los Angeles and Oakland field offices, but does accept checks, money orders and credit cards (for a fee.)
The San Diego, Santa Ana, San Francisco and Sacramento field offices accept cash, checks, and money orders; they do not accept credit cards.
Taxpayer may also pay through WebPay. It is a convenient, free and secure method of authorizing a payment from a bank account.
What should taxpayers do if they made an error on their tax return, forgot to claim a deduction, or received a late W-2?
They can correct their California tax return by filing Form 540X, Amended Individual Income Tax Return. It takes longer to process amended tax returns than original tax returns.
If they made a simple math error or forgot to include documents, they generally do not need to file amended tax returns. FTB typically corrects math errors when they process tax returns. They also contact taxpayers about missing documents.
After they file, they need to keep a copy of their tax return and all supporting records. FTB may request information about their tax return at any time within the California statute of limitations period, which is generally four years from the return's due date.
Other information to consider
They audit to verify information that taxpayers report on their returns such as income, exemptions, credits, or deductions. They may select taxpayers for audit based on information reported on returns or received from third parties.
Once the IRS completes their audit, taxpayers should let FTB know within six months. They have the option to file an amended tax return or send FTB a copy of the federal changes. FTB eventually receives the federal audit information from the IRS, but it is better to notify them as quickly as possible to reduce interest and penalties.
For more information, go to ftb.ca.gov and get FTB 1008, Federal Tax Adjustments and Your Notification Responsibilities to California, or call 916.845.4028 for assistance.
Most notices inform taxpayers of changes they made. If they ask for information, taxpayers must respond.
Information notices include:
- Notice of Tax Change
- Return Information Notice
They send these notices after they find and correct one or more errors while processing a tax return.
California law requires residents to pay use tax on purchases made from out-of-state sellers, such as by telephone, internet, mail, or in person if:
- The seller does not collect California sales or use tax.
- The taxpayer uses, gives away, stores, or consumes the item in California.
Taxpayers can use instructions provided in the state income tax booklet to report their use tax obligations on their state income tax return. The use tax due amount is based on the person’s adjusted gross income. Taxpayers can go to boe.ca.gov for more details.
If taxpayers feel that they are unable to resolve their problems through normal channels, they may contact the Taxpayers’ Rights Advocate.
- Website: Go to ftb.ca.gov and search for Advocate.
- Phone: 800.883.5910
- Fax: 916.843.6022
EXECUTIVE AND ADVOCATE SERVICES MS A381
FRANCHISE TAX BOARD
PO BOX 157
RANCHO CORDOVA, CA 95741-0157
The tax gap is the difference between taxes owed and paid. It continues to receive a lot of attention at both the state and federal levels.
Most of the tax gap comes from people and businesses that underreport their income or overstate their deductions.
Taxpayers can now help solve the tax gap by reporting suspected income tax fraud. They can go to ftb.ca.gov and search for tax fraud to use the new online report tax fraud service or call the Informant Hotline at 800.540.FILE (3453).
FTB special agents investigate alleged criminal violations of the Revenue and Taxation Code,including income tax fraud and tax evasion. They also assist in prosecuting noncompliant individuals for these criminal activities and publicize resulting convictions. These convictions bring additional tax revenue to the State of California and also serve as a deterrent to others from violating the tax laws.
- Last year:
- Californians filed more than 16.2 million tax returns.
- More than 10.7 million Californians received refunds averaging $935.
- More than 13 million California tax returns, or about 80 percent of the total, were filed electronically.
- The most common tax error is claiming the wrong amount of estimated tax payments.
- In 1929, the Legislature created the office of the Franchise Tax Commissioner to administer California’s new Bank and Corporation Franchise Tax Act. Charles McColgan was the first Franchise Tax Commissioner and served until his retirement in 1950. At that time, the Legislature abolished the office of the Franchise Tax Commissioner and created the Franchise Tax Board.