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Taxpayers Reminded to Report

Inside ...
Premature Distributions 2 ... Taxpayer suggestions aired at
Bill of Rights hearing
When taxpayers take a premature distribution The inserts, instituted as a pilot project, will 2 ... SBE opinions
of retirement funds, they may end up with an be distributed beginning this month. They 3 ... What to expect during
assessment notice from the Internal Revenue will be included in 10 percent of the partnership audits
Service. At the same time, some Californians approximately 10,000 IRS notices that will be 3 ... New Taxpayer Service Centers
will also receive a special reminder from the issued. open
Franchise Tax Board. Generally, distributions from such retirement 4 ... How to order Package X
The IRS will include an FTB insert with its vehicles as 401(k) and 457 deferred 4 ... Electronic funds transfer:
A win/win situation
premature distribution notices. The insert compensation plans and Individual
5 ... “Striking gold” for small
tells taxpayers that they must notify FTB Retirement Arrangements (IRAs) are businesses
when IRS tax adjustments affect their state tax considered premature if the taxpayer is under 5 ... Small Business Tax Day set for
liabilities. age 59½. California, however, has exceptions Long Beach
5 ... FTB calendar
CONTINUED ON PAGE 9 6 ... Where to get copies of new
6 ... Electronic filing application
deadline extended
Sorting for Savings 6 ... New laws affect economic
development areas
7 ... Two reminders for electronic
7 ... More invited to phone in tax
7 ... Electronic filing (graphic)
7 ... One million paperless returns?
8 ... Tax News on the Web
8 ... Voucher developed for personal
income tax payments
8 ... The question column - What
are common itemized deduction
9 ... A matter of trust
9 ... Are you moving?
9 ... Need a tax form fast?
10 ... File Schedule K-1s without
10 ... Are your scannable/substitute
forms approved?
11 ... Better late than never: File
1996 returns
11 ... New rules for excluding gain in
home sale
12 ... Keep Tax News coming
12 ... Clarification
12 ... 1997 Tax News index
Handling outgoing mail is a nonstop activity at the Franchise Tax Board. Now, mail is
getting out the door more efficiently and cost effectively. A new Multi-Line Optical CONTINUED ON PAGE 3
Character Reader barcodes mail and sorts it for delivery nationwide.
Page 2

Taxpayer Suggestions Aired at

Volume 98-1 January 1998
Bill of Rights Hearing
TAX NEWS is a bimonthly Responding to a taxpayer’s suggestion at • A definition of “final federal
publication of the Taxpayer Advocate the 1997 Taxpayer Bill of Rights hearing, determination,” which FTB currently
Bureau, California Franchise Tax the three-member Franchise Tax Board is working on.
Board. Its primary objective is to
provide information to income tax voted to support Assembly Bill 417 that • Adding to the Taxpayer’s Bill of
preparers about state income tax would permit elective combination. The Rights language that states
laws, regulations, policies and board also indicated that it is not in favor
procedures. California’s intent to collect taxes in
of a unitary definition for non-electors. a “fair and impartial” way.
Members of the Board:
At this year’s hearing, held in Sacramento Franchise Tax Board members State
Kathleen Connell, Chair on November 17, other taxpayers called Controller Kathleen Connell, who serves
State Controller for: as the board’s chair, State Board of
Ernest Dronenburg, Jr. • FTB staff to work with the Equalization Chair Ernest J. Dronenburg,
Chair, State Board of Equalization Employment Development Jr. and Department of Finance Director
Craig L. Brown attended the November
Craig L. Brown Department to simplify forms so that
Director, Department of Finance “Nanny tax” payers could more meeting.
———————— easily comply with tax laws.
Executive Officer:
Gerald H. Goldberg
Pat Huberty SBE Opinions
To update or correct your address or
to subscribe to TAX NEWS (send $12 Appeal of Eugene and Lily Heller,
for a one-year subscription), write: evidentiary showing of attempts made to
TAX NEWS November 20, 1997. SBE upheld the ascertain their California filing
P.O. Box 520 imposition of a late filing penalty for requirement before the due date of the
Rancho Cordova, CA 95741-0520 nonresident partners who filed a late
or call: (916) 845-7070. return. The SBE also stated that
return reporting California-source limited taxpayers had an obligation to cooperate
For information about a client’s partnership income. Explaining that with the FTB during the appeal process
account, contact: limited partners of a partnership that has
Tax Practitioner Support Unit and to respond to the FTB’s requests for
(916) 845-7057 (phone) California source income have a supporting information concerning
(916) 845-6377 (fax) California filing requirement, SBE taxpayers’ allegations of reasonable
For recorded answers to questions reconciled the ambiguous language in the cause.
on California taxes, to order forms Appeal of Amman & Schmid Finaz AG,
or check on a refund, call: 96-SBE-008, with the fundamental Appeal of Louis P. Halvas,
F.A.S.T. (800) 338-0505 principle set forth in Appeal of H.F. November 20, 1997. The State Board of
From outside U.S. (916) 845-6600 Equalization’s opinion in Appeal of
Ahmanson & Co, 65-SBE-013 that the
To send a facsimile about a client’s source of a limited partner’s distributive Michael Curtis, 97-SBE-012, August 1,
account, transmit to: share is where the partnership business is 1997, was clarified. Although a child
Electronic Correspondence who was unrelated to the taxpayer lived
(916) 845-6377 carried on. To the extent that Amman
—————————- suggested that a distributive share of with the taxpayer and the child’s mother
Information Center: California source partnership income did in the taxpayer's home throughout the
(800) 852-5711 year and qualified as the taxpayer's
From outside U.S. (916) 845-6500 not give rise to a California filing
requirement and so conflicted with dependent, because the child lived with
Hearing Impaired: Ahmanson, Amman was disapproved. In his mother during the year, the child
TDD (800) 822-6268 cannot be considered the taxpayer's foster
__________________ response to appellants’ assertion that they
lacked the information necessary to child. Therefore, the taxpayer is not
FTB on the Internet determine if they had a California filing entitled to head of household filing status.
At press time, case numbers had not been
requirement prior to the due date of their
Printed on recycled paper. 1990 return, SBE held that taxpayers have assigned to these opinions.
an obligation to make a reasonable
attempt to gather the information needed
to file their federal and state returns and
that taxpayers must make an affirmative

January 1998
Page 3

Part 1

What to Expect New Taxpayer

Service Centers
During Partnership Audits Open
This is the first of two articles on interest. The Franchise Tax Board is
partnership audits. • Nonfiling nonresident partners. In participating in two new
When your partnership clients learn that some cases, California partnerships Taxpayer Service Centers
the Franchise Tax Board is about to audit clearly generated California source with other state tax
the partnership at the entity level, their income, but nonresident partners did authorities.
first reaction may be surprise. not report their distributive shares on New centers in San
However, FTB has reviewed and California tax returns. Because Bernardino and Stockton
examined many partnership returns during California-source income rules may allow tax practitioners and
the last two years. And several areas have be confusing to nonresidents, FTB taxpayers to get a variety of
been identified as compliance issues for has improved the way that a tax information and assistance
both partnerships and partners, partnership’s California source at one location.
particularly when the partnership involves income is identified on the Schedule
K-1. In San Bernardino, FTB has
numerous tiered entities and multiple moved to a new location with
activities. Depending on the nature of the the Employment
The most notable areas involve: partnership, if your clients are involved in Development Department.
a partnership audit, they will probably The joint office is located in
• Exclusion of income from the need to show FTB some or all of these
discharge of indebtedness. The the lobby of the San
documents: Bernardino Government
main issues are the determination of
insolvency and the reduction of tax • The partnership agreement and all Center Building, which is the
attributes, which must be made at the amendments. CalTrans District 8
partner level. Some taxpayers fail to • The partnership prospectus or other Headquarters. The address is
properly calculate their insolvency. offering statement. 464 West 4th Street, Room
Others fail to properly reduce tax 454l, San Bernardino
• All Securities and Exchange 92401-1419.
attributes such as net operating losses Commission filings related to the
and various credits, use the wrong partnership. In Stockton, EDD and the
amounts or make the reductions in State Board of Equalization
the wrong order. • The partnership’s books and records have joined FTB at its current
and, if they do not reconcile with the office. The address is 31 E.
• Partnership liquidation. Often, a entity’s tax returns, an explanation of
partner’s gain or loss on liquidation Channel Street, 2nd floor,
the disparity. Stockton 95202-2394.
was incorrectly computed, and some
partners did not reduce their basis in • Any other documents that relate to The new centers join
a distributed property accurately or at the issues being examined during the Taxpayer Service Centers
all. In addition, some taxpayers audit. For example, if the sale of a already established in
incorrectly characterized income or partnership asset is being examined,
FTB will ask to see, among other
Bakersfield and Ventura. †
loss when the property was disposed
of; although the sale of a capital asset things, the sales agreement and
generates a capital gain or loss, evidence that supports the
partners must “recapture” the amount computation of the adjusted basis in
of depreciation that was taken in the the asset.
past and report it as ordinary income. Your clients also can expect FTB to: Inside ...
• Abuses of partnership law. In • Work with them on the audit’s CONTINUED FROM PAGE 1
some cases, sales or transfers logistics because, in some cases, 13 ... New name for withhold-at-
between related parties or controlled merely notifying all the partners of source
entities were disguised; these the audit can be a considerable task. 14 ... Order Tax Talk videos
transactions were motivated solely by 15 ... Report non-California muni
• Work with them on setting timelines bond interest income
tax considerations and had no and due dates for information, 15 ... News from the State Board
economic substance. correspondence and other major of Equalization
• Partner’s basis. Some partners did milestones. FTB will want to 16 ... Interest rate reminder
not properly maintain their records or 16 ... Wage garnishments set for
track their basis in the partnership CONTINUED ON PAGE 4 electronic data exchange
Page 4

Electronic Funds Transfer:

A Win/Win Situation
Everyone using the Franchise Tax approximately 14,000 corporate
How to Order Board’s electronic funds transfer (EFT) taxpayers were routinely remitting
Package X program comes out a winner. their tax payments by EFT. And 75
Individuals using the program never have percent of all tax revenue from
to worry about writing a check on time, corporations is collected by EFT.
Have you ordered your 1997
Package X? because the funds are automatically • Individuals. Starting in 1997,
transferred. Employers who must garnish individuals who were approved to
The order form that you wages and financial institutions that pay their tax liabilities in installments
should use to order the process checks and other transactions usually must pay by EFT. During the
California Package X in realize significant savings once their first six months, FTB received
either a paper or CD-ROM manual processing procedures are 21,375 payments totaling
version was printed on the reduced or eliminated. The state saves by approximately $3.3 million. And
last page of the November reducing both the amount of paper it since the EFT program was
1997 issue of Tax News. Do receives and processes and the number of instituted, the default rate for
not use an order form from errors associated with paper transactions; installment payments has been
another year. the state also receives its revenues faster reduced from 40 percent to 5 percent.
If you have misplaced the and more efficiently. And finally, the • Banks and employers. FTB is
November Tax News, you environment is a winner because EFT is a working on an EFT process that will
can obtain another order form paper-free process. enable employers and financial
by calling (916) 845-7070. Are your clients taking advantage of institutions to electronically remit
With the form, you may order EFT? Individuals and business entities payments that are required by wage
the Package X in a paper that must or may use EFT include: garnishments and bank levies.
version for 1997 or for • Corporate taxpayers. Bank and Employers who would like to participate
previous years. The cost is corporation taxpayers must pay their in a pilot program for wage garnishment
$12. If you order the Package taxes by EFT if their total tax liability payments should call the EFT Help Desk
X on a CD-ROM, you will is more than $80,000 or if any single at (916) 845-4025. Call the Help Desk,
receive California Package X estimated or extension tax payment too, for information on the other EFT
forms and instructions for exceeds $20,000. Taxpayers that programs. (Also see “Wage
1997 and the three previous have smaller tax liabilities and Garnishments Set for Electronic Data
years, 1997 Internal Revenue
Service Package X forms and
payments can join the EFT program Exchange” on page 16.) †
voluntarily. By the end of 1997,
information on California
electronic filing. The
CD-ROM is $19.
The Package X in both paper What to Expect During Partnership Audits
and CD-ROM versions are CONTINUED FROM PAGE 3
available now, and orders are
being shipped on a first-come, conduct the audit as efficiently and the partnership tax forms to increase
first-served basis. effectively as possible. their usefulness and encourages
• Acknowledge that its responsibility compliance by means of articles in
does not end when the audit does. various publications and speaking
FTB staff will be available to answer engagements at community forums.
questions that may come up once the If you have questions or comments, send
case is closed. a letter with “Partnership Audits” written
• Continue to analyze the results of at the top to Division Chief, Audit
Branch, Mail Stop D-15, P.O. Box 1779,
audits so that it can develop cost-
effective ways to improve Rancho Cordova, CA 95741-1779. †
compliance with tax laws. Along
these lines, FTB already has made
some clarifications and redesigned

January 1998
Page 5

“Striking Gold” for Small Businesses

Each year, approximately 60,000 small scheduled in your area, call your local FTB Calendar
businesses start up in California. And SCORE, CSEA or SBDC office.
approximately 60,000 go out of business. Before being distributed statewide, the January
For many, a lack of awareness of tax laws “Striking Gold” materials were part of a
is a contributing factor. But help is on the pilot test in the greater Sacramento area • Demands to file 1996 tax
way. for 14 months.† returns are mailed to
The Small Business Tax Connection has • Package X is published
produced a series of items designed to and distributed.
educate new and prospective small • Tax News debuts on the
business people to their various tax Small Business Internet.
requirements and responsibilities. The
Small Business Tax Connection is a Tax Day Set for 12 Electronic filing return
transmissions begin.
committee of representatives from the
California Franchise Tax Board, Internal Long Beach 15 Fourth quarter 1997
personal income tax
Revenue Service, Employment
estimate payments are
Development Department and State If you or your clients live in the Long due.
Board of Equalization. Beach area, you can take advantage of a
free event for small business owners. 20 Previous month
The Connection’s first educational withholding at source
package, “Striking Gold in California,” February 20 is the date of the Long payments are due if total
includes a: Beach/South Bay Small Business Tax withholding exceeded
• Video. The video runs 23 minutes Day at the Long Beach Convention and
and features a gold rush theme. Entertainment Center. The event is 31 Deadline for applying to
Practical tax information is designed to help small business owners participate in California’s
and prospective ones understand and electronic filing program.
interspersed with historical vignettes
starring such successful members of comply with their tax responsibilities. February
California’s small business The Tax Day, which runs from 8:30 a.m. • Notices of Proposed
community of the 1850s as Levi to 3 p.m., will feature information booths Assessment are mailed to
Strauss, Domingo Ghirardelli, and a variety of workshops. Topics for corporations that failed to
“Wheelbarrow Johnny” Studebaker, the workshops include bad check comply with requests
Henry Wells and William Fargo. enforcement, the worker’s compensation issued in prior months for
1995 tax returns.
• Booklet. A 40-page booklet is a insurance fund, independent contractor/
20 Long Beach/South Bay
companion to the video. It also will employee issues, state income tax, federal
deposit rules for employment returns, Small Business Tax Day.
stand alone on the State Board of
Equalization’s http://www.boe.ca.gov property assessment, social security 20 See January 20.
site on the Internet at the end of requirements, immigration and March
January. naturalization requirements, sales tax • Notices of Proposed
returns and exemptions, exporting, Assessment are mailed to
• Directory. The Small Business starting a business and ways to have a
Development Center produced this corporations that failed to
profitable business. comply with requests
guide to information and services that issued in prior months for
small business owners and hopefuls The Franchise Tax Board is among the
1995 tax returns.
can use. participants, along with the Employment
Development Department, Immigration 20 See January 20.
By the end of January, all three elements and Naturalization Service, Internal April
in the “Striking Gold” package will debut Revenue Service, Los Angeles County
statewide at seminars and counseling 15 1997 personal income tax
Assessor, Los Angeles District Attorney, returns are due.
sessions. These free events will be Small Business Development Center,
provided by participating local offices of Social Security Administration, State 15 First quarter 1998
the Service Corps of Retired Executives personal income tax
Board of Equalization, State estimate payments are
(SCORE), the California Society of Compensation Insurance Fund and U.S. due.
Enrolled Agents (CSEA) and the Small
Business Development Center (SBDC),
Department of Commerce.
20 See January 20. †
the project’s three community sponsors. For more information on the Long Beach/
South Bay Small Business Tax Day, call
To find out when and if an event is
(310) 516-4330. †
Page 6

New Laws Affect

Where to Get
Copies of
Economic Development Areas
New Laws A series of new laws have changed some
of the rules for economic development
binding for a 15-year period beginning
January 1, 1998. SB 200 provides for
Are you interested in learning area businesses. two Manufacturing Enhancement Areas.
more about the new laws Your clients operating in enterprise zones, Businesses that operate in the areas are
affecting economic the Los Angeles Revitalization Zone entitled to take a hiring credit based on
development areas? (LARZ) or a Local Agency Military Base the hiring and employment of qualified
Recovery Area (LAMBRA) should know disadvantaged individuals. AB 1217
You can obtain copies of provides for one Targeted Tax Area.
these laws (see article on this about new laws dealing with:
Businesses that operate in the area and
page) and others by writing Carryover deductions. According to that are engaged in specific businesses
the Legislative Bill Room, Senate Bill 1106 (Ch. 97-604), when an including manufacturing, warehousing,
Room B-32, State Capitol, enterprise zone or the LARZ expires, it is certain transportation fields or the
Sacramento, CA 95814. Or deemed to remain in existence for the wholesale trade may take a hiring credit
call the Bill Room at purpose of claiming a carryover net based on hiring and employing qualified
(916) 445-2323. operating loss and determining the zone disadvantaged individuals, a sales or use
If you have Internet access, income that can be offset by the loss. A tax credit for the purchase of qualified
you also will find new laws at previously enacted law instituted a similar property, a business expense deduction
http://www.leginfo.ca.gov provision for LAMBRAs. for the purchase of qualified property and
which is the Official Sales or use tax elections. Assembly a 100 percent net operating loss
California Legislation Bill 1040 (Ch. 97-605) removed the carryover. Businesses that qualify for
Information Web site election language from the LARZ and these incentives must operate under
address. LAMBRA sales or use tax credits and the certain Standard Industrial Classification
(SIC) Codes.
LAMBRA hiring credit. These changes
are considered to reflect the original Tax credit reports. AB 797 (Ch. 97-
intent of the LARZ Act and the 461) requires the Franchise Tax Board to
LAMBRA Act, so they are retroactive to report to the Legislature and the Trade
Electronic Filing all open years. Prior law required and Commerce Agency the dollar value of
Application taxpayers to elect on the original return
which one credit they were going to take
the enterprise zone tax incentives claimed
each year. To meet this requirement,
Deadline Extended if an item of qualified property or wages FTB will use information that taxpayers
for a qualified employee qualified the provide on form FTB 3805Z, “1997
The deadline for applying to taxpayer to take more than one credit for Enterprise Zone Deduction and Credit
participate in California’s the same item of property or the same Summary,” which is part of the
electronic filing program has qualified employee under the California “Enterprise Zone Business Booklet.” The
been extended to Revenue and Taxation Code. Generally, Legislature and the Trade and Commerce
January 31, 1998. this election language impacted taxpayers Agency use the information for a number
qualifying for the LARZ sales or use tax of purposes including evaluating the
The deadline was changed in credit, the enterprise zone sales or use tax
order to accommodate tax incentives’ usefulness and benefits to
credit and the manufacturer’s investment taxpayers, determining whether the
professionals who have not tax credit; they were limited to claiming
yet received their Electronic incentive programs need improvement
only one credit. Now, if the property and making decisions about the future of
Filer Identification Number qualifies the taxpayer to take all three
(EFIN) from the Internal the programs and whether they should be
credits, the taxpayer can either claim the continued. Previously enacted laws
Revenue Service. Tax LARZ sales or use tax credit or claim
professionals must be provide that taxpayers operating in the
both the enterprise zone sales or use tax LARZ should report this credit
accepted into the IRS credit and the manufacturer’s investment
electronic filing program information on form FTB 3806, “Los
tax credit. Taxpayers are limited to one Angeles Revitalization Zone Deduction
before applying with credit for qualified property or wages
California and must provide and Credit Summary,” and that taxpayers
only if they claim the LARZ or LAMBRA operating in a LAMBRA should use form
an EFIN on their applications. sales or use tax credit or the LAMBRA FTB 3807, “Local Agency Military Base
To obtain an electronic filing hiring credit. Recovery Area Deduction and Credit
application or information,
call the Help Desk at
New economic incentive areas. Both Summary.” †
(916) 845-0353. † SB 200 (Ch. 97-609) and AB 1217
(Ch. 97-602) created new economic
incentive areas. The designations are

January 1998
Page 8

Voucher Developed for

Personal Income Tax Payments
Tax News Individuals who owe taxes for the 1997 can be attached with a payment to
tax year should include a new voucher scannable Forms 540 and 540A, which
on the Web with their tax payments. are computer-generated.
Tax News is now in The voucher, Form 540-V, “Return Originally, a similar voucher was
cyberspace. Payment Voucher for Individuals,” will intended for use by business entities as
be published in all 1997 personal income reported in the November 1997 issue of
Starting this month, Tax tax booklets. Tax News. However, the business entity
News is part of the Franchise voucher will be introduced next year
Tax Board’s Home Page on Taxpayers who include the new payment
voucher with their checks or money instead.
the Internet. To view the
publication on the World orders will assist the Franchise Tax Board Form 540-V is available on the Internet at
Wide Web, contact FTB at its in processing payments accurately and FTB’s http://www.ftb.ca.gov address. It
http://www.ftb.ca.gov Internet efficiently. Although FTB encourages also may be ordered from Tax Forms
address. use of the Form 540-V, there is no penalty
for not using it.
Request, P. O. Box 307, Rancho
Cordova, CA 95741-0307. †
The voucher should be attached to Forms
540, 540A, 540EZ and 540NR. It also

The Question Column

What Are Common Itemized Deduction Errors?
The Franchise Tax Board has could not identify them and then
compared state and federal itemized recomputed the federal taxable
deductions to determine whether income. Taxpayers then failed to
taxpayers correctly adjusted their amend their state returns with the
federal deductions on the Schedule CA. revised federal amount.
What kinds of problems were • Medical and miscellaneous
identified? itemized deductions. Taxpayers
Most of the mistakes involved state and failed to limit these deductions by the
local income taxes. Taxpayers usually applicable percentages of the
did not adjust their federal itemized adjusted gross income. Or they
deductions by subtracting any state and added on the California Schedule CA
local income taxes on the Schedule CA. the amount not allowed on the federal
Or they subtracted only state disability Schedule A for medical and
insurance and not state income tax. miscellaneous deductions.
Other problems involved: • Mortgage interest. Taxpayers who
• Mathematics. Addition and reduced their federal mortgage
subtraction errors occurred both on interest deduction by a mortgage
the federal Schedule A and the interest credit should have added
California Schedule CA. back on the Schedule CA the amount
of the credit.
• Transfers. Taxpayers transposed
numbers when copying amounts from As a result of the comparison of state and
the federal Schedule A to the federal itemized deductions, FTB has
California Schedule CA. issued more than 120,000 notices, alerting
taxpayers of changes to their tax returns.
• Itemized deduction breakdown. The program began as a pilot in late 1995
Taxpayers failed to break down the
various components of the total
and is now fully implemented. †
itemized deductions claimed on the
federal Schedule A. As a result, the
IRS disallowed the items because it

January 1998
Page 9

A Matter of Trust
Which trusts can your clients trust? trusts has defrauded them should contact
The answer is: Most of them. Your clients the nearest state attorney general’s office.
probably use legitimate trusts for such They may call either (800) 952-5225 or
(916) 322-3360. Or they may register a
Are You
purposes as estate planning, making a
genuine transfer of property to charity or complaint about an abusive trust
promotion by writing Attorney General’s
holding property for minors and people
declared incompetent. Office, P.O. Box 944255, Sacramento, Do you plan to move soon?
CA 94244-2550.
Recently, however, some trust Be sure to alert Tax News if
arrangements that appear to be abusive If your clients participated in an abusive you change your address.
have surfaced. Abusive trusts claim to trust arrangement, they should file a Send your new address and
reduce or eliminate federal and state taxes correct tax return for 1997 and amend telephone number to: Tax
in ways that are illegal. They also have returns for any other years that they were News, P.O. Box 520, Rancho
no economic substance. included in the trust arrangement. Cordova, CA 95741-0520.
How can your clients spot an abusive For more information, see the September Also include the account
1996, July 1997 and September 1997
trust? Promoters of the trusts often
market their products by promising issues of Tax News. † number that is printed above
your name and address on the
features that will: †
last page of this issue.
• Reduce or eliminate income that is
subject to income tax. Taxpayers Reminded to
• Create tax deductions for
nondeductible personal expenses. Report Premature
• Provide excessive depreciation Distributions
deductions. Need a Tax
• Step up the basis for property put in CONTINUED FROM PAGE 1
Form Fast?
the trust.
to the general rule. The insert, form FTB
• Disguise the true ownership of assets 1121, states that “California law is similar Do you need some tax forms
and income. to federal tax law on the premature quickly?
You can help your clients avoid getting distribution tax. But, there are differences If you neglected to order a
involved in abusive trust arrangements. in the way we compute the taxable Package X and want a
Tell them that, if they are in doubt about a amount of the distribution and some particular tax form today,
trust arrangement’s legitimacy, they premature distributions are exempt from look on the Internet.
should: this tax.” It also notes that premature
distributions of retirement funds are California tax forms are
• Check out the promoter with the available on the Internet at the
subject to a 2.5 percent tax.
consumer protection department of Franchise Tax Board’s http://
either the local district attorney’s For additional information, the insert
refers taxpayers to FTB Publication 1005,
www.ftb.ca.gov Web site. †
office or the state attorney general’s
office. They also can call the Better “Pension and Annuity Guidelines,” which
Business Bureau. These may be ordered at no charge by calling
organizations may be able to tell your FTB at (800) 338-0505. The publication
clients if any complaints have been also is available in the 1997 Package X
and from FTB’s http://www.ftb.ca.gov
registered against the promoter.
address on the Internet.
• Ask the promoter for references and
verify them.
• Get a second opinion about the trust
arrangement before going ahead.
• Consider that, if the arrangement
seems too good to be true, it probably
Clients who believe a promoter of abusive
Page 7

Two Reminders for Electronic Filers

Do you have clients who file Package X, may be downloaded from
electronically? FTB’s http://www.ftb.ca.gov Internet
If so, the Franchise Tax Board has two address or may be
suggestions: ordered by calling F.A.S.T. (Fast One Million
Answers about State Taxes) at Paperless
• Remind your clients to pay any tax (800) 338-0505.
liability by April 15. For the last two
years, taxpayers were able to file • Be sure to keep the forms that your Returns?
electronically even though they had clients must sign when they file
electronically to declare that the Will Californians file one
balances due. Unfortunately, once million paperless state tax
the electronic filing transaction was information on their tax returns is
“true, correct and complete.” In the returns in 1998?
completed, some forgot to send in
their checks. past, some tax practitioners have sent This could be the year that
them to FTB instead of keeping the returns filed through one of
Electronic filers who owe taxes forms in their own files. You must the Franchise Tax Board’s
should send their checks to the keep any form FTB 8453, “California three paperless options will
Franchise Tax Board with form FTB Individual Income Tax Declaration hit the one million mark.
3582, “Payment Voucher for for Electronic Filing,” for four years
Electronically Transmitted Returns.”
The form is available in the 1997
from the return’s due date.† Taxpayers may send FTB a
paperless tax return by:
• Filing electronically.
• TeleFiling.
More Invited to Phone in Tax Returns • Filing from personal
This year, more taxpayers may use the computers and using a
and if FTB sends them a 1997 TeleFile
Franchise Tax Board’s TeleFile program third-party transmitter
Tax Booklet.
to file their personal income taxes. through FTB’s
As a result of the additional potential Transmitter/On-Line
California’s TeleFile program is now market for the TeleFile program, FTB is Service (TROLS).
open to some taxpayers whose filing mailing 1.8 million TeleFile booklets to
status is married filing joint and who have Although paper returns are
taxpayers, an increase of 200,000 over
no dependents. Previously, only single expected to diminish greatly
last year.
taxpayers without dependents could file in the coming decades, in
Taxpayers who qualify for the program 1997 they still accounted for
by telephone. can phone in their tax data any hour of the about 95 percent of all returns
In all cases, taxpayers can participate in
the TeleFile program only if they qualify
day or night, seven days a week, from †
January 2 through October 15. However,
to file a Form 540EZ, “California any tax amount due must be paid by
Resident Income Tax Return for Single April 15.†
and Joint Filers With No Dependents,”

Electronic Filing
345 The number of taxpayers who will file their California tax
1994 (pilot year) returns electronically in 1998 is expected to be almost
four times the number who filed in 1995.
1995 159,000 (TeleFiling and on-line filing are expected to add
another 400,000 returns to the total
1996 240,000 number of paperless returns filed.)

1997 365,000

1998 600,000 (projected)

Page 10

Are Your Scannable/Substitute Forms

File Are you planning to use scannable or CCH Federal and State Tax Unit
Schedule K-1s substitute 1997 state tax forms? CCH Incorporated (Torrance) (310) 543-6200
CCH Incorporated (Wichita, KS)
Without Paper If so, make sure they meet the Franchise
Tax Board’s requirements. Otherwise,
(316) 685-8100
CLR/Ace Division (770) 432-1996
Last year, 28 percent of the the software you use may produce forms CLR/Fast Tax (800) 327-8829
partnership Schedule K-1s that cannot be processed quickly. CompuCraft Tax Services (800) 435-7829
Processing problems are especially likely Computer Systems Analysis Corporation
filed with the Franchise Tax
to happen when unapproved Schedule Consolidated Business Systems
Board were provided on (800) 262-4461
magnetic tape or diskette. K-1 forms are filed. CPASoftware (800) 434-2685
This year, will you help All companies that publish, produce or CPSystems, Inc. (804) 346-0640
increase the number? sell electronically-processed substitute Creative Solutions Inc. (313) 426-5860
For the 1997 tax year, the California tax forms or image-processed Cronos Capital Corporation (415) 677-8990
scannable Forms 540 and 540A must file Curtis Publications Inc.
second year that FTB offered D.A. Bailey and Sons Publishing Co., Inc.
magnetic media filing for an agreement to comply with FTB (800) 665-7402
Schedule K-1s, more than 200 requirements for the forms. Also, FTB Data Technology Group, Inc. (617) 661-1118
partnerships took advantage must approve the forms before they are Dave Gomberg’s JCF Systems
of the simpler, paper-free sold or provided to tax preparers. (415) 731-7793
method of filing. In all, FTB Companies that sell or provide David Osman’s Tax and Accounting
received photocopies of official FTB forms do not Deloitte & Touche Tax Technologies LLC
need approval. (800) 966-1639
1.3 million Schedule K-1s via DRAKE Software (704) 524-8020
magnetic media or on disk To date, the companies listed below have EXACTAX Inc. (800) 352-3638
and 1.4 million on paper. filed form FTB 1096, “Agreement to Federated Tax Service Inc.
If you prepare Schedule K-1s Comply with FTB Publication 1098,” for Gear Up Tax Seminars (916) 268-6508
for large or small the 1997 tax year. The form states that Gemisys Corporation (303) 705-6000
partnerships, you can find out the companies agree to follow certain Hambrecht & Quist (415) 576-3300
more about FTB’s magnetic rules for developing scannable and H&R Block/Tax Systems Development
substitute forms. Filing form FTB 1096, (816) 753-6900
media program by reading Hayden R. Wisdom, E.A. (916) 888-1040
FTB Publication 1062, however, does not constitute approval Hogan & Hartson, L.L.P. (202) 637-8566
“Guide for K-1 (565) Filing from FTB. HowardSoft (619) 454-0121
by Diskette or Magnetic Be sure to ask a company to show you Independent Preparer Services, Inc.
Media.” To obtain the FTB’s letter of approval before you use (818) 701-3090
publication, download its forms. Do not accept a general Inland Society of Tax Consultants
a copy from FTB’s Intuit, Inc. (619) 784-4274
statement that the forms have been
http://www.ftb.ca.gov Internet ITS, Inc. (800) 487-8291
approved. Instead, give the company a Jackson Hewitt Tax Service (757) 473-3300
address. Or call FTB’s list of the forms you plan to use, and JTR Bookkeeping & Tax (888) 869-4017
Electronic Filing Help Desk
make sure that each one is approved. KPMG Peat Marwick LLP
at (916) 845-0353. Lacerte Software Corporation (972) 490-8500
Companies that have filed form FTB
1096 to date are: Les Blend Co. (650) 917-0558
MAVRICC Management Systems
AEI Fund Management, Inc. (248) 614-4500
Abel-Wagner Inc. (714) 572-8585 Mercury Printing and Stationery Co.
Accountant Stationers & Printers (800) 421-2220
(800) 423-9717 Micro Vision Software, Inc. (800) 829-7354
Accountware (513) 561-1881 Nelco, Inc. (920) 337-2848
Alpine Data Inc. (800) 525-1040 ORRTAX Software (800) 377-3337
AM Software (816) 741-7848 Pencil Pushers Tax Software (617) 273-4556
American Tax Services PETZ Enterprises, Inc. (209) 835-2720
Applied Information Solutions Prestige Graphics (619) 560-8213
(303) 893-8936
Price Waterhouse LLP (214) 754-7900
Arthur Andersen LLP (941) 365-9469
Professional Stationers Inc. (800) 874-7383
Atilla M. Taluy (805) 984-0248
Probate Software Co., Inc. (970) 330-3260
ATX Forms (207) 455-4848
RealNet Software, Inc.
Block Financial Corporation (Tax Cut)
(913) 599-2885 Reynolds & Reynolds (formerly Duplex
Brass Tax Presentations (619) 487-2553
BSoft Corporation (408) 438-7071

January 1998
Page 11

Better Late Than Never:

File 1996 Returns New Rules for
The due date for 1996 personal income complete copy of the return. Excluding Gain
tax returns has come and gone, even for
people who had filing extensions. Even
• Whenever you move, notify FTB. in Home Sale
FTB needs your most current address
so, many individuals have not used the in order to contact you quickly California has conformed to
time to file their returns. whenever a problem with your tax new federal law that changes
The Franchise Tax Board began sending account comes up. Even if you plan the rules for excluding gain
notices to these nonfilers in December to move out of state, make sure FTB when taxpayers sell their
1997, and notices will continue to go out has your new address.† homes.
to almost 700,000 people during the Generally, for sales and
coming year. The notices advise exchanges of personal
taxpayers that FTB is unable to locate residences that take place
their 1996 tax returns although outside Are Your Scannable/ after May 6, 1997, joint filers
sources, such as W-2 forms filed by may exclude up to $500,000
employers and 1099s filed by financial Substitute Forms in gain. Single taxpayers may
and other institutions, indicate that they
have received income and/or conducted Approved? exclude up to $250,000. The
new law replaces the former
business activities during 1996. rollover rules and the one-
Here are a few suggestions that you can time exclusion for taxpayers
pass along to clients who receive a notice Products, Inc.) (408) 934-8540 age 55 and older.
or who know that they have not filed a Rosemberg Escobar Services (213) 563-0497
Service Data Corporation (402) 691-6338 Under the new rules, a seller
1996 personal income tax return: Short Form Software (914) 353-4177 must own and use the
• Contact FTB before FTB contacts Spidell Publishing Inc. (714) 776-7850 property as a principal
you. If you have not filed yet, file STF Services Corporation (800) 541-7197 residence for combined
now before you receive a notice Tax-Aid, Inc. (612) 888-2712 periods of two or more years
requesting the tax return. Once the Tax And Accounting Software Corporation within a five-year period.
(800) 998-9990
filing enforcement process starts, you In California, two recently
Tax Biz (408) 243-1472
may end up with a higher penalty and Tax Form Library (800) 466-9110 enacted legislative bills
fees for failing to file. Tax Forms, Inc. combine to effect the
• Do not ignore the notice. If you do Tax Link, Inc. (614) 457-1949 conformity to the new federal
not respond to the notice by filing a Tax Systems, Inc. (713) 682-1791 home sale exclusion. Senate
return or showing that you are not TAXBYTE, Inc. (800) 245-8299 Bill 5 – Lockyer (Ch. 97-610)
required to file, you are subject to Tax$imple, Inc. (800) 989-8955 allows the exclusion from
additional penalties and fees. If you Taxware Systems, Inc. (800) 877-1065 May 7, 1997, through
Taxworks by Laser Systems (801) 552-8800 June 30, 1998. SB 1233 –
believe that the notice is erroneous,
Technology Funding, Inc. (505) 982-2200
contact FTB at the telephone number TFP Data Systems
Lockyer (Ch. 97-612)
given on the notice. FTB will continues the exclusion past
investigate and get back to you.
TK Publishing Inc. (Tax Shop)
(407) 351-0966 June 30, 1998. †
• If you filed the return that FTB is TMI Tax Services, Inc. (612) 935-6111
requesting, check your copy. Is the Total Peripherals, Inc.
Universal Tax Systems (706) 232-7757
social security number on the return U.S. Tax Systems, Inc. (800) 966-8787
the same one stated on the notice? If Visible Computer Service (630) 377-2586
not, that may be the problem. You Wallace Computer Service (630) 377-2586
may be able to resolve the issue Weaver Tax Service (408) 258-0912
quickly by calling (800) 545-5009, Westpro LTD
and entering both of the social William H. Downs, CPA (818) 981-4313
security numbers at voice prompts. XPRESS Software, Inc. (800) 285-1065†
If that does not solve the problem,
you should send FTB a copy of the
front page of your tax return and the
notice. However, if the social
security numbers on your tax return
and on the notice are identical, you
probably will need to send FTB a
Page 12

1997 Tax News Index

Adjustments Corporations: Take Credit Where Credit Is
Are Adjustment and Examination the Same? – Due – September, p. 2.
September, p. 16. Proposed Laws Zero in on Credits – May,
Calendar p. 10.
Keep Tax News FTB Calendar – January, March, May, July, Reducing the R&D Credit: S Corporations
September, November, p. 5. and Shareholders Use Different Rates –
Coming California Tax Forms/Software
November, p. 7.
State Disability Insurance Credit Refunds
Is your Tax News 1997 Scannable and Substitute Forms Issued – March, p. 15.
Producers Need FTB Approval –
subscription about to expire? September, p. 7. Depreciation
Address Correction – November, p. 17. Clarification – November, p. 7.
If so, the Franchise Tax
Does Your Software Support Fiscal-Year The Question Column – September, p. 6.
Board will send you a
Filing? – November, p. 15. Disasters
renewal form by mail. Be
sure to return the form Follow Special Rules for Computer-Generated Disaster Victims Reside in 14 Counties –
Returns – January, p. 11. November, p. 16.
immediately so that you will FTB Approval Needed for Scannable and Forty-eight Counties Named Disaster Areas –
not miss any upcoming
Substitute Forms – January, p. 10. March, p. 5.
issues. Make Revisions to 1996 Forms – March, Need to Replace Tax Return Lost in Flood? –
p. 10. March, p. 5.
Scannable Returns: Looking Good – New Tax Law Aids Disaster Victims –
September, p. 15. November, p. 16.
Scannable/Substitute Forms Producers Need Notices to Disaster Victims Delayed – March,
FTB Approval – November, p. 15. p. 5.
Substitute Forms Released Before Approval – President Designates Disaster Areas – March,
March, p. 15. p. 4.
Use Revised 100X to Amend Corporate Three Counties Are Firestorm Disaster Areas
Return – March, p. 16. – January, p. 3.
Use Revised Form 100X – November, p. 6. Was Tax Return Destroyed in Firestorm? –
Watch for Tax Form Changes – July, p. 7. January, p. 3.
Combined Reporting Were Tax Returns Lost in Flood? –
November, p. 16.
FTB Notice Addresses Combined Reporting
Clarification Issue – May, p. 12. What Is a Disaster Loss? – March, p. 4.
When to Claim Storm and Flood Losses –
In a November Tax News March, p. 4.
Assessments Proposed for 120,000 – March,
article titled “Reducing the p. 9. Economic Development Areas
R&D Credit: S Corporations Better Now Than Later: 1995 Tax Returns Determining Zone Credits for Corporations –
Sought – March, p. 16. May, p. 14.
and Shareholders Use Did You Take Enterprise Zone Hiring Credit?
Different Rates,” an incorrect Collections Information Is Just a Fax Away –
September, p. 9. Check Your Software – July, p. 11.
tax year was used in the Economic Development Areas: Defining the
Corporations with California Connections
example. The reduced credit May Owe 1995 Returns – September, Terms – May, p. 15.
for shareholders is 89 percent p. 12. Program Areas Converted – January, p. 7.
of the full credit for tax years FTB Drops Two Billing Forms – July, p. 10. What Carries Over When Economic
prior to 1996 and 90.7 Nonfilers Have Questions – September, p. 2. Development Areas End? – July, p. 11.
percent of the full credit for Out-of-State Businesses: How to Pay Back When to Take Enterprise Zone, LARZ and
Taxes for Six Years Only – July, p. 4. LAMBRA Incentives – January, p. 7.
tax year 1996 and subsequent
years. The Question Column: How Do Other States
Collect Taxes Here? – March, p. 12.
Electronic Filing
1996 Returns: Electronic Filing Calendar –
S Corporation Shareholders and Back Taxes – September, p. 12.
July, p. 4. 1997 Electronic Filing Calendar – March,
Wanted: 1995 Tax Returns – January, p. 9. p. 10; May, p. 4.
Corporations Electronic Filers: Hang on to Declarations –
January, p. 6.
Corporations: New Laws Mean New
Procedures – January, p. 5. Electronic Filers Have Low Error Rate –
January, p. 6.
No Business License Tax Offsets for Financial
Corporations – January, p. 10. Electronic Filing: Good for Business – March,
p. 10.
The Question Column: Corporation Tax
Returns – July, p. 9. Electronic Filing Is on the Rise – March,
p. 10.
Walk in to S.F. Office – Walk out with
Revivor – July, p. 3. Electronic Filing: Looking Ahead – July,
p. 10.
Court Cases
Electronic Filing: Rapid Refunds Have Appeal
Court Decisions – May, p. 9.

January 1998
Page 13

1997 Tax News Index

– July, p. 10. p. 14.
Electronic Filing: Two New Advantages – More Tax Laws Proposed – May, p. 6.
New Name for
November, p. 4.
Electronic Filing: Two-Year Review – May, p.
Proposed Laws: Conformity Is the Theme –
May, p. 6.
Electronic Filing: Who Needs to Apply –
Tax Statistics on the Internet – September,
p. 7.
November, p. 4. Visit FTB in Cyberspace – November, p. 14.
Remind Electronic Filers to Pay Balance Due Where to Get Copy of Legislative Bill – May, The Nonresident Withholding
– January, p. 6; March, p. 10. p. 7. Section is the new name for
Will More Taxpayers File Electronically? – Legislation the Franchise Tax Board’s
September, p. 13.
Interested in Legislation? – September, p. 8. Withhold at Source Unit.
Your Clients Can File Electronically…from
Your Place…or Theirs – May, p. 4. It’s the Law! – November, p. 9. The section’s telephone and
Electronic Funds Transfer Legislation to Watch – March, p. 7. fax numbers and address
Electronic Funds Transfer a Must for Proposed Laws Zero in on Credits – May, remain the same.
Installment Payments – January, p. 8. p. 10.
Electronic Funds Transfers Open to Employ- Small Business Protection Act: Will To contact the Nonresident
ers with Withholding Orders – May, p. 5. California Conform? – January, p. 16. Withholding Section, call
FTB Has New EFT Bank – November, p. 14. Want Copy of New Law? – November, p. 9. (916) 845-4900 for an
Fraud Where to Get Copy of Legislative Bill – interactive voice response.
March, p. 7. Or you can fax the section at
FTB Refund Fraud Unit Saves Millions –
January, p. 1. Limited Liability Companies (916) 845-4831. The address
FTB Information Advice for Growing Limited Liability is Nonresident Withholding
Company Population – September, p. 1.
April 15: Going Down to the Wire – July, Section, Franchise Tax
p. 1. Limited Liability Companies: Registration
Information – September, p. 11. Board, P.O. Box 651,
April 15 – Now and Then – July, p. 2. Sacramento, CA 95812-
Dronenburg Is Franchise Tax Board Member
– March, p. 12.
Nontax Debt Collection
FTB Collects Defaulted Student Loans – 0651.†
September, p. 9.
FTB on Call – May, p. 1.
FTB to Collect Unpaid Student Loans –
Information Directory Published in Tax News January, p. 2.
– January, p. 4.
Keeping in Touch with FTB – May, p. 2.
The Question Column: Divorcing Couples:
Questions Answered According to Topic – Who Gets Tax Overpayment – March,
November, p. 5. p. 13.
Tax Practitioner Contacts – November, p. 17. Package X
Taxpayer Service Centers Open – January, 1997 Tax News/Package X Order Form –
p. 16. November, p. 20.
Head of Household Did You Order Package X? – January, p. 16.
Head of Household Status Examined Sooner – How to Order Package X, Tax News –
May, p. 6. November, p. 3.
The Question Column: Who Qualifies for Need a Package X? – May, p. 8.
Head of Household Status? – March,
p. 13. Package X: CD-ROM Orders Increase –
March, p. 11.
Information Reporting
Package X on CD-ROM Is Updated – March,
1099 Reporting of Punitive Damages: p. 11.
California Follows Federal – November,
p. 2. Package X Order Form Coming in November
– September, p. 10.
1099s: When Magnetic Media Is Required –
November, p. 14. Package X: Order Now for January Delivery –
November, p. 1.
Installment Payments
Package X: What’s on the CD-ROM –
Electronic Funds Transfer a Must for November, p. 3.
Installment Payments – January, p. 8.
What Are Package X CD-ROM
Installment Payment Program Is Streamlined – Specifications? – November, p. 4.
November, p. 1.
Where to Get a Package X – March, p. 11.
Interest Rates – May, p. 13; November, p. 10.
Doing Business: Limited Partnership, Yes/
Internet Limited Partner, No – January, p. 4.
Explore FTB’s Internet Links – September, Partnerships: A Paperless Way to File – May,
p. 16. p. 11.
Internet Has 1995 Median Income Data – Partnerships: Make the K-1 Connection –
September, p. 14. January, p. 4.
Internet Has Legislative Bills – July, p. 8.
Look for Tax Forms on the Internet – January, CONTINUED ON PAGE 14
Page 14

1997 Tax News Index

Pointers for Partnership Returns – March, Coming Up Fast: Tax Talk Discount Deadline
p. 3. – September, p. 3.
Order Tax Talk Some Partnerships File on Wrong Date – July,
p. 6.
Correction – January, p. 2.
Have Speech, Will Travel – January, p. 14.
Videos Payments Make a Date with Tax Practitioners’ Institute
Quick Collect Payment Fee Increases – – May, p. 13.
Two Tax Talk learn-at-home March, p. 11. Members of the California Tax Education
video courses are now Send Vouchers With All 1997 Tax Payments Council – March, p. 2.
– November, p. 17. Need a Speaker? – March, p. 14; September,
Power of Attorney p. 4.
“California Tax Rules for Power of Attorney: Notarization Not Required Program Set for Tax Practitioners’ Institute –
Nonresidents” is the second – January, p. 15. September, p. 10.
home study course developed Refunds Seven Topics Set for Tax Talk – July, p. 3.
this year. The first in the Legal Notice Addresses Refund Claims – Sign up for Tax Talk – July, p. 3.
series was “Office-in-Home November, p. 2. Tax Practitioners’ Institute Adds Southern
Deductions.” The Question Column: Cashing a Refund Sites – September, p. 10.
Check for a Deceased Spouse – July, Tax Practitioners’ Institute Heads South –
Each course includes a one- p. 9. July, p. 9.
hour videotape, textbook, Ruling on Refund Claims Withdrawn – July, Tax Practitioners’ Institute Is Upcoming –
workbook and brief, “open p. 2. July, p. 9.
book” examination. If you SBE Opinions Tax Practitioners’ Institute Travels to Eight
correctly complete the January, p. 9. Sites – May, p. 13.
examination, you will earn March, p. 8. Tax Talk: Coming to a Location Near You –
July, p. 4. September, p. 3.
three continuing education
September, p. 15. Tax Talk: Earn Credits Three Ways –
credits. Each course is an September, p. 3.
expanded adaptation of a Tax November, p. 12.
Tax Talk Expands into Video Series – March,
Talk seminar presentation and Schedule K-1 p. 6.
costs $60. K-1 Filers: How to Save a Tree – July, p. 12. Tax Talk Is October 7 – May, p. 2.
To order one or both of the New Publications Aid Schedule K-1 Filers – Tax Talk Offers Learn-at-Home Videos –
March, p. 3 November, p. 10.
videos, call (916) 845-7070 Partnerships: A Paperless Way to File – May, Tax Talk Presents: Federal Tax Changes –
for an order form. Or you p. 11. September, p. 1.
may place your order at the Partnerships: Make the K-1 Connection – Tax News Newsletter
Franchise Tax Board’s http:// January, p. 4.
1996 Tax News Index – January, p. 12.
www.ftb.ca.gov/Education/ Schedule K-1: Tips on Filing, Avoiding Errors
– September, p. 4. 1997 Tax News/Package X Order Form –
taxtalk.htm Internet
November, p. 20.
address. Small Business
Are You a Tax News Subscriber? –
Big Opportunities for Small Businesses – November, p. 11.
September, p. 13.
Have You Moved? – May, p. 16.
Phone for Small Business Fair Information –
March, p. 6. How to Order Package X, Tax News –
November, p. 3.
Small Business Fair Offers One-Stop
Shopping – March, p. 6. Index Lists 1996 Tax News Articles –
January, p. 12.
Small Business Tax Day Announced –
September, p. 14. Is Your Tax News Subscription Expiring? –
January, p. 13.
Keep Tax News Coming – March, p. 12.
April 15 – Now and Then – July, p. 2.
Planning to Move? – September, p. 12.
California’s Tax Filing Season – May, p. 3.
Renew Tax News – September, p. 9.
Electronic Filing: Two-Year Review – May, p.
5. Renew Tax News Now – November, p. 3.
Keeping in Touch with FTB – May, p. 2. Renew Tax News Subscription – May, p. 8;
July, p. 8.
Study Shows 1995 Income Gain – September,
p. 14. Watch for Tax News Index – November,
p. 13.
Tax Return Error Rate – July, p. 5.
Tax Practitioner Support Unit
Tax Return Errors by Type – July, p. 5.
Call New Number for Tax/Client Information
Tax Statistics on the Internet – September, – May, p. 10.
p. 7.
Hotline: Same Number, New Name – January,
Withholding Verification/January 2 – April p. 11.
15, 1997 – May, p. 2.
Phone Line Heats Up – September, p. 6.
Tax Education
After the Tax Preparer Program: Business as
Usual – March, p. 1. CONTINUED ON PAGE 15

January 1998
Page 15

Report Non-California Muni Bond Interest Income

Payers of interest or interest-dividend
income earned on non-California
past 10 years. FTB staff has worked
closely with New York state staff and the
News from the
municipal bonds held by California financial services industry to eliminate as State Board of
taxpayers must file an information return many implementation problems as
with the Franchise Tax Board. possible for the banks, mutual funds and
The information returns, required by brokerage houses that are required to
Revenue and Taxation Code (R&TC) comply.
Have you visited the State
Section 18639, are due June 1, 1998, for Payers with 250 or more returns must Board of Equalization’s
the 1997 tax year. provide the information to FTB on Internet site lately?
The new law primarily affects banks, magnetic media. Payers with fewer than
You will find more
mutual funds and brokerage houses. The 250 returns may report the information on
information than ever before.
non-California municipal bonds on which magnetic media or paper. Detailed
Contact the SBE at its
they will be reporting are issued by instructions about the specific information
another state or entity such as a county, to be provided and its format will be
address, and you can access
city, sewer facility or school district available by January 15, 1998, from
these recent home page
outside California. FTB’s Magnetic Media Office at (916)
845-3778. California payers that are
Although it is exempt from federal headquartered out of state or that use a • An expanded Publication
income tax, the interest and interest- clearing facility in another state may wish section with more than
dividend income earned on non-California to contact their clearing facility to 60 different forms,
municipal bonds are taxable to California determine if software programs are regulations and
residents, according to R&TC Section already available to report the information publications that you can
17143. The information returns will be to FTB and what they will need to do to view and download.
used to verify that this income is being
properly reported.
fulfill the filing requirement. For more • An expanded California
information about the reporting City and County Sales
requirement or its imple-mentation, call
New York state has had a similar and Use Tax Rates
information return requirement for the FTB at (916) 845-6600. section.
• A new How to Contact
Us section with details on
1997 Tax News Index where to call or write.
CONTINUED FROM PAGE 14 • A new Registration
Reminder: Hotline Has New Name – March, Trusts: Too Good to Be True? – Part 1 – July, section with information
p. 16. p. 7. on sales and use tax and
Reminder: Tax Practitioner Support Unit Has Trusts: Too Good to Be True? – Part 2 – special taxes registration.
New Number – July, p. 12. September, p. 5.
• A new Taxable Sales in
Tax Returns Trusts: Internal Revenue Service Notice 97-24
– July, p. 7; September, p. 5. California section
The Question Column: What Attaches to State
Return? – March, p. 13. Wage Verification showing taxable sales by
Tax Return Error Rate – July, p. 5. Wage Amounts to Be Verified – November, type of business, city and
Tax Return Errors by Type – July, p. 5. p. 18. county.
Tax Returns Have Fewer Errors – July, p. 5. What Are PIT Wages? – January, p. 8. • A new Frequently Asked
Taxpayer Advocacy Withhold at Source Questions section about
California Has New Taxpayers’ Bill of Rights Withhold at Source Phone Service Improved – sales and use tax.
– November, p. 8. March, p. 14.
Taxpayers’ Bill of Rights Hearing Is This Withholding Verification • A new Legislation
Month – November, p. 8. Automated Checks Lead to Withholding section featuring laws
Telecommunications Adjustments – November, p. 18. that impact tax programs
Comments Sought on Proposed Withholding Amounts Must Match – May, administered by the SBE
Telecommunications/Electronic Services p. 2. and that were enacted
Regulation – November, p. 17. Withholding Amounts To Be Verified On-line during the first half of the
TeleFiling – January, p. 8. 1997-1998 legislative
More Taxpayers Punch in the Numbers –
May, p. 3.
Withholding Verification/January 2 –
April 15, 1997 – May, p. 2 session.†
TeleFile’s Second Year: What’s New? – Withholding Verification Spots Federal
January, p. 2.
TeleFilers Ring in the New Year – March,
Amounts on California Returns – March,
p. 14.
p. 14.
Page 16

Wage Garnishments Set for

Interest Rate Electronic Data Exchange
Reminder Things may soon become simpler for your reduction in personnel costs, paper
employer clients who occasionally hear processing and the errors that come with
The interest rates on under- from the Franchise Tax Board about wage handling paper.
and overpayments of garnishments. FTB is seeking employers interested in
California income taxes will FTB is developing a program that will reducing the burden of the current
be 9 percent for the first six allow the agency and employers to process, which is heavy with paperwork,
months of 1998. exchange wage garnishment information by participating in a pilot program. For
For a table of interest rates through an electronic data interchange information about the EDI wage
since 1986, see the November (EDI). EDI is a technology that allows garnishment pilot program, call
1997 issue of Tax News. † data to move between systems in (916) 845-6670 or e-mail
machine-readable formats with a laurie_rhea@ftb.ca.gov.
minimum of human intervention. For information on wage garnishments
The benefits of processing wage and electronic funds transfer, see
garnishments using EDI include “Electronic Funds Transfer: A Win/Win
simplified workload management and a †
Situation” on page 4.

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