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JULY 1 9 9 9

Payment Made Simple


Streamlined Process Under this criteria, less than 10 percent of Inside. . .
debtors are required to complete the more
Spares Most from extensive financial statement in order to
enter into an installment agreement with Offer In Compromise
Lengthy Paperwork FTB. page 2
In order to qualify, eligible taxpayers must
Qualifying taxpayers can make installment complete form FTB 3567, “Installment
payments on their California taxes without Agreement Request.” The one-page form Law and Legislation
completing a financial statement. contains an EFT authorization. page 4
To qualify, the taxpayer must: Since its introduction last year, the
• Owe no more than $10,000, simplified form FTB 3567 has streamlined the
installment agreement application process
• Agree to pay his or her liability by E-file
and the EFT feature has made making
electronic fund transfer within payments easier and more economical for page 6
three years; and, taxpayers.
• Have already filed all the tax returns Taxpayers no longer have to write checks or
required by the Franchise Tax Board. pay postage. And, the payments are always Return Processing News
on time. page 6
CONTINUED ON PAGE 2

Customer Service News


page 7

The Franchise Tax Board’s e-file program has grown steadily since its introduction in
1994. Go to page six to see why.
Page 2

Volume 99-4 July 1999

TAX NEWS is a bimonthly


Offer in Compromise
publication of the Communications
Services Bureau, California Franchise Telephone Calls Help Boost Approval Rates
Tax Board. Its primary objective is
to provide information to income tax
You can’t always tell a book by its cover. have in the foreseeable future, the income,
professionals about state income tax assets or means to pay their tax liability. It
laws, regulations, policies and So when it comes to evaluating offer in
procedures. compromise applications (form FTB allows a taxpayer to offer a lesser amount
4905), the Franchise Tax Board contacts for payment of a non-disputed final tax
Members of the Board: liability.
each applicant (or the applicant’s
Kathleen Connell, Chair representative) by telephone before FTB also revised form FTB 4905, “Offer in
State Controller
making a decision. Compromise Booklet and Application,” by
Johan Klehs
Since adopting this approach in 1997, adding a checklist of the items needed to
Chair, State Board of Equalization ensure expeditious processing and a
approval rates for offers in compromise
B. Timothy Gage have steadily increased. Currently, 44 section containing frequently asked
Director, Department of Finance
percent of the applications accepted for questions about the program.
————————
processing (and not subsequently To learn more about the Offer in
Executive Officer: withdrawn by the taxpayer) have been Compromise Program, go to the FTB
Gerald H. Goldberg
approved. website at www.ftb.ca.gov and click on the
Editor:
The personal contact generally results in Bills and Notices button. The application
Marvin Meek can also be downloaded from the
a more complete explanation of the
To update or correct your address or personal, medical or financial Miscellaneous section of the FTB Forms
to subscribe to TAX NEWS (send $12
circumstances involved, and it generally and Publications webpage, also located on
for a one-year subscription), write: the FTB website.
TAX NEWS results in a more equitable resolution for
PO Box 2708 the taxpayer, according to Offer in If you are interested in a complete
Rancho Cordova, CA 95741-2708
Compromise Program staff. overview of the program, contact
or call: (916) 845-7070. the program staff at (916) 845-4787
To view TAX NEWS on the Internet or The Offer in Compromise Program is for and ask to schedule a presentation for
to request an electronic mail taxpayers who do not have, and will not your group.
subscription, contact FTB on the
Internet:
www.ftb.ca.gov
Installments: Employers Also Benefit
For information about a client’s
account, contact:
Tax Practitioner Support Unit EFT Feature Removes If you have clients who are interested in
applying for an FTB installment
(916) 845-7057 (phone)
(916) 845-6377 (fax)
Administrative Burden agreement, the first step is to obtain a
Continued From Page 1 form FTB 3567. There are several ways to
For recorded answers to questions on
California taxes, to order forms or get the form:
check on a refund, call: Installment agreements without EFT had
F.A.S.T. (800) 338-0505 default rates as high as 40 percent. • Download the form. Go to the
From outside U.S. (916) 845-6600
Installment agreements using EFT have FTB website at www.ftb.ca.gov and
maintained a default rate of less than click on the Tax Forms button.
To send a facsimile about a client’s
account, transmit to: three percent. • Call the toll free automated
Electronic Correspondence telephone service. The number is
(916) 845-6377 The improved FTB installment agreement
—————————— (800) 338-0505.
is good news for employers as well.
Information Center:
(800) 852-5711 Taxpayers receiving a wage garnishment • Mail a request for the form to:
From outside U.S. (916) 845-6500 may convert to an installment agreement
Tax Forms Request
if they meet FTB’s criteria. The
Hearing Impaired: Franchise Tax Board
TDD (800) 822-6268 administrative burden is removed from
P O Box 307
—————————— the employer. And, the taxpayer’s
FTB on the Internet Rancho Cordova, CA 95741-0307
monthly payment may be smaller than
www.ftb.ca.gov
Printed on recycled what would have been withheld from his
paper. or her paycheck.

July 1999
Page 3

How Does FTB Define “Fair Offer?”


The Offer in Compromise Program offers a remedy for certain tax liabilities for
Form 911
eligible taxpayers, but the program is not for everyone. Here are the answers to
frequently asked questions about the program that can help you decide if an offer in Helps with
compromise is right for your client.
Hardships
Q. What does the Franchise Tax Board Q. Can prior payments be applied to
consider a fair offer in relation to the the offered amount? hard·ship \härd-’ship’\:
amount due? A. No. Prior payments are not accepted something that causes or
A. Generally, FTB accepts an offer towards the offered amount. entails suffering or
when the amount offered is more than However, prior payments and the privation.
FTB can expect to collect within a offered amount compared to the total
reasonable period of time. liability are taken into consideration There are many types of
when evaluating an offer. hardship. If one of your
Q. How long will it take to get a decision clients has a hardship, there
on an offer in compromise? Q. My client’s Internal Revenue Service is a way to provide him or
A. Generally, if FTB accepts the offer offer in compromise has been her some relief.
for processing, FTB will have a accepted. Will FTB automatically The form FTB 911, “Request
decision for your client within 90 days approve the offer? for Relief From Hardship,”
after receiving the offer. If your client’s A. No, the FTB offer will be evaluated enables you to obtain
account is more complex, it may take separately from the IRS offer. immediate relief for your
longer than 90 days. Generally, if the amount of the offer client when they experience
represents the most that FTB can hardship as a result of
Q. What is a collateral agreement? expect to collect within a reasonable collection action taken by
A. A collateral agreement is a contractual period of time, FTB will accept your FTB. The new form can be
agreement between your client and client’s offer. downloaded from the FTB
FTB. By signing the agreement, your website at www.ftb.ca.gov.
client agrees to pledge to FTB a Q. If FTB determines that my client’s
The form is for tax
percentage of his or her income that offer is not acceptable, will my client
practitioner use only. When
exceeds an amount agreed upon by the be contacted?
you submit the form, be
taxpayer and FTB. Generally, the A. In most cases, FTB will contact the
sure to include a completed
collateral agreement period is taxpayer to discuss the account and
form FTB 3520, “Power of
five years. to determine the most appropriate
Attorney.”
resolution.
Q. If an offer is approved, will my client FTB also provides, for tax
have to sign a collateral agreement? Q. My client is single now. If he practitioners only, a
A. If your client is on a fixed income or marries while the collateral agreement Collections Fax Help Line.
has limited potential for increased is in effect how will this affect the Use the help line to get a
earnings, a collateral agreement agreement? fast resolution to personal
generally will not be required. A. If your client marries while the income tax collection issues.
collateral agreement is in effect, FTB The fax line number,
Q. Will state tax liens be released if my will review any joint tax returns he is (916) 845-0494, is available
client’s offer is accepted? required to file. Generally, FTB 24 hours a day, seven days
A. Generally, FTB releases state tax liens considers the joint annual income in a week. In most cases, a
upon final approval of the offer in the collateral agreement. If your client response is provided to the
compromise. is married and filing a separate income practitioner within 48 hours.
tax return, the evaluation will be
Q. Can my client make payments on the based on the separate income of the
offered amount? taxpayer with the agreement.
A. No. FTB requires full payment of the
offered amount at the time the offer is CONTINUED ON PAGE 9
submitted for approval.
Page 4

returns as a regular corporation, and the


Auto Club should not be taxed as a
News From the cooperative association, but as a regular
corporation.
State Board of Appeal of Barbara Godek, 98-SBE-006,
Equalization November 19, 1998. For purposes of
determining whether a married taxpayer may
be considered unmarried, the rule stated by
the State Board of Equalization in Appeal of
Legislative William Tierney, 97-SBE-006-A,
September 10, 1997, applies. That is,
Here are annotations of recent State Board one-half of the time during which the
Analyses of Equalization appeals. taxpayer, the taxpayer’s spouse and the
taxpayer’s child lived in the taxpayer’s home
on the Internet Appeal of Alpha Therapeutic Corporation, may be included in determining if the
98-SBE-004, July 30, 1998. In a published taxpayer’s home was the principal place of
Would you like to know more decision, the State Board of Equalization abode of the taxpayer’s child for more than
about a legislative measure upheld the position of the Franchise Tax one-half the year.
you read about in Tax News? Board that Revenue and Taxation Code
The Franchise Tax Board posts Section 33 does not exempt a corporation Appeal of Patrick R. Lobo, 99-SBE-001,
its analyses of legislation on from paying the California Franchise Tax as January 7, 1999. Although the appellant
its website. measured by that corporation’s net income. was entitled to a personal exemption credit
Section 33 specifically exempts blood and for an unrelated adult who was the
Go to www.ftb.ca.gov and click
blood products from taxation. Alpha taxpayer’s dependent and who lived with the
on the Law and Legislation
Therapeutics, a business dealing in blood taxpayer in the taxpayer’s home for the entire
button. These provide a
and blood products, argued that the year, in this case the State Board of
preview of proposed tax law
franchise tax as applied to them was, in Equalization held that the adult did not
changes and how they might
effect, a tax on blood products in violation qualify the taxpayer for head of household
affect your clients if the
of Section 33. The Board rejected this filing status because the “foster”
legislation becomes law.
argument stating that the franchise tax is a relationship between the taxpayer and the
FTB also posts proposed and tax on the privilege of doing business and adult did not begin while the adult was a
final regulations, legal notices may be measured by net income, even minor.
and rulings, links to the where that net income is derived from the
Revenue and Tax Law and the sale of otherwise tax exempt property. Appeal of San Francisco Police Credit
California Code of Regulations, Union, 99-SBE-002, January 7, 1999.
and a directory of Appeal of the Automobile Club of Southern The State Board of Equalization modified
FTB Legal staff. California, 98-SBE-005, November 19, FTB’s partial disallowance of a credit
You can also find legislative 1998. The State Board of Equalization union’s deduction of income based on
measures at rejected the Franchise Tax Board’s argument Surplus Member Savings Capital (SMSC),
www.leginfo.ca.gov, which is that the holding of California State and directed the FTB to apply the formula
the Official California Automobile Association (CSAA) v. set forth in FTB Notice 92-7, as clarified by
Legislation Information Franchise Tax Board, (1987) 191 Cal. App.3d the Board.
website. 1253, (where the court found that CSAA
was properly taxed as a cooperative Appeal of Daniel Q. and Janice R. Callister,
association) also required the appellant to 99-SBE-003, February 25, 1999. Maryland
be taxed as a cooperative association. The residents were allowed a credit for taxes paid
appellant had consistently filed franchise to the State of Maryland for county
tax returns as a regular corporation. The “surcharge” taxes paid to Maryland in an
State Board of Equalization determined that amount not to exceed the 20 percent
the CSAA case was not controlling, the “surcharge” mandated by the state. The
Auto Club properly filed franchise tax balance of the “surcharge” paid, if any, is
treated as a local tax not available for credit.
July 1999
Page 5

Credit Card Program Broadens FTB Calendar


to Accept Estimate Payments
which serves as the taxpayer’s July
Encouraged by strong taxpayer interest,
the Franchise Tax Board is expanding its receipt. • Requests for tax returns are
credit card payment pilot to include 3. The taxpayer will be charged a mailed to individuals who have
personal income tax estimated tax convenience fee by the vendor for not filed their 1997 personal
payments and current year tax returns. use of the automated credit card income tax return.
Beginning mid-August, taxpayers will be service. • Notices of Proposed
able to use their Discover/NOVUS, 4. The payment appears on the Assessment are mailed to
MasterCard or American Express credit taxpayer’s credit card statement as individuals who have not filed
card to make third quarter estimated tax a payment to FTB. their 1997 tax returns.
payments. And beginning in the year With credit card payments, the date the 20 Previous month nonresident
2000, taxpayers who file a balance due taxpayer completes the credit card withholding payments are due
personal income tax return may pay by transaction is the effective date of the if total withholding exceeded
credit card. payment. That means that interest $2,500.
The credit card option will be available to charges stop on that date, although August
taxpayers who e-file, use TeleFile or file FTB may not actually post the payment • Requests for tax returns are
paper returns. to the taxpayer’s account until three to mailed to individuals who have
FTB launched a six-month credit card pilot five days after the transaction. not filed their 1997 personal
in January 1999. Within those six months, Important: Making tax payments by income tax return.
FTB received more than 4,670 payments credit card is confidential and safe. • Notices of Proposed
totaling nearly $3,660,000. The credit card processor does not Assessment are mailed to
Here’s how the program works: disclose the taxpayer’s credit card individuals who have not filed
number to FTB at any time during or their 1997 tax returns.
1. The taxpayer calls a toll-free number after the transaction. Please remind
to access an interactive voice your clients to remove their credit card • Notices of Proposed
response system operated by an numbers from any correspondence to Assesment are mailed to
FTB-approved credit card processing FTB regarding their credit card corporations who have not
vendor. payment. FTB can trace their credit filed their 1997 corporate tax
card payment using their taxpayer returns
2. Once the taxpayer has provided the
required information, the IVR gives identification number, the payment 20 See July 20.
the taxpayer a confirmation number, amount, date of the payment and the 31 Last day to file Homeowner and
confirmation number. Renter Assistance claims.
September
• Requests for tax returns are
New Payment Option Pays Off mailed to individuals who have
not filed their 1997 personal
Here are some program statistics for the Franchise Tax Board’s credit income tax return.
card pilot program. The numbers are from January through
June 30, 1999: • Notices of Proposed
Assessment are mailed to
• Credit card project implemented: January 7, 1999 individuals who have not filed
• First credit card payment: January 8, 1999 at 10:34 a.m., $117 their 1997 tax returns.
• Smallest payment to date: $1.50 15 1999 personal income tax
• Largest single payment to date: $18,511 estimate payments are due.
• Total credit card payments to date: 6,713 20 See July 20.
• Total amount received to date: $5,034,000
• Average payment to date: $750
Page 6

Pilot in ‘94, e-file Flying High


Five years ago, the Franchise Tax Board
implemented a limited pilot called
electronic filing. A few savvy
Filing Season Statistics
practitioners took notice and FTB took in The 1999 filing season featured increases
several hundred tax returns electronically in the number of personal income tax
in 1994. returns filed, e-file returns processed and
Today that pilot is known as e-file and this number of personal income tax refunds
year it accounted for more than 1.5 million issued. There was also an encouraging
returns (1,314,131 e-file and on-line returns, decrease in the number of paper returns
Need and 263,669 Telefile returns). Here is why received. Here is a summary of how the
1999 personal income tax filing season
more and more of your clients are asking
e-Filing for e-file: compared to 1998:
Assistance? Increased marketing Returns Received
FTB increased its e-file marketing efforts • Current-year returns -- 12,494,121
If you need assistance or have for the 1999 filing season. This year’s (Up 3.2 %).
questions about FTB’s e-file or campaign included radio advertising,
e-pay programs, you can get the appearances on public service television
• Paper returns -- 10,914,260
information you need either by (Down 10 %).
and links to e-file from professional and
phone or on the Internet. government organizations webpages on • e-file returns -- 1,314,131
To talk to someone at the the Internet. (Up 58%).
e-file Help Desk, call Direct deposit • Telefile returns -- 263,669
(916) 845-0353. Or visit the FTB
Taxpayers like direct deposit. In 1999 FTB (Down 12%).
website at
processed 462,000 direct deposit requests, Refunds
www.ftb.ca.gov/elecserv.
an increase of 170 percent over 1998.
Direct Deposit allows taxpayers to have
• Amount refunded (current year
returns) -- $ 3,284,471,175
their tax refunds deposited directly into
(up 34 %).
their bank accounts and is only available
with e-file. With direct deposit, the tax • Number of refunds issued (current
refund will normally be deposited in the year returns) --7,305,871
(up 12.6 %)
CONTINUED ON PAGE 12

More Returns to File? e-file Open Until Oct


received their returns before the
Did you know that you can file your
October 15 deadline;
clients’ returns electronically through
October 15, 1999? • Faster refunds. If your client is getting
If you have clients who will be filing under a refund, he or she can have it
FTB’s automatic paperless extension electronically deposited into their bank
program and you have been thinking about accounts. Direct deposit is only
joining the e-file program, now would be a available with e-file.
good time. You can see how the program • Electronic debit (e-pay). e-filers with a
works without the stress of the April 15 balance due may authorize FTB to debit
deadline and your clients can take their bank accounts on a specified
advantage of the benefits of e-file: date for the amount due.
• Acknowledgment of receipt. You and See the difference e-file can make in your
your clients won’t have to worry about business. Contact the e-file Help Desk at
whether the Franchise Tax Board has (916) 845-0353.

July 1999
Page 7

Bookmark
FTB Meets Customer Service Demands
For the 1999 filing season the Franchise Tax Board made it easier than ever for tax FTB
practitioners (and taxpayers) to get assistance filing their state tax returns. For the 1999
filing season the department increased its hours of operation, upgraded its telephone Website
systems and made improvements to its website.
The extra effort paid off. FTB increased the number of calls into its interactive voice The Franchise Tax Board’s
response system, visitors to its website and the number of tax forms downloaded Homepage is an Internet
from the website. reference worth book marking.
Tax Practitioner Help Available The homepage features short
articles with links to current
The FTB Tax Practitioner Support Unit, which provides on-line and written assistance
information such as the most
solely to qualified tax practitioners, attorneys, enrolled agents and certified public
common filing errors and how
accountants is available to assist tax practitioners Monday through Friday,
to avoid them, and recent
8 a.m. to 5 p.m.
policy/procedure changes
There are several ways to reach the Tax Practitioner Support Unit. If you have questions such as tax relief options for
about account resolution problems or questions about tax law, call (916) 845-7057 or send members of the armed forces
the unit a fax with your question to (916) 845-6377. and support personnel who are
Typically, the unit responds to questions received by fax within three working days. The serving in Kosovo.
maximum wait for a response by fax is seven working days. Stay informed. Bookmark the
If you have questions concerning the collection of personal income taxes, send a fax with FTB Homepage located at
your question to (916) 845-0494. The fax line number is available 24 hours a day, seven www.ftb.ca.gov.
days a week. In most cases, a response is provided to the practitioner within 48 hours.

Get Forms 24-Hours a Day


The Franchise Tax Board’s F.A.S.T. (Fast Answers About State Taxes) service provides
recorded answers to more than 160 frequently-asked questions about state income taxes.
The answers are available 24 hours a day, seven days a week.
F.A.S.T. has been expanded to allow callers to order personal income tax forms, obtain
information about personal income tax refund status and payment and balance due
information 24 hours a day as well (except from 10 p.m. Sunday through 5 a.m. Monday).
Callers can also obtain corporation tax forms from 6 a.m. to 8 p.m. Monday through Friday.
The toll-free number to call from within the United States is 800-338-0505. If calling from
outside the United States, the number to call is (916)845-6600. This number is not toll-free.
Page 8

Better Information Leads to


Better Customer Service
information it receives from outside sources
such as banks, financial institutions and the
Internal Revenue Service.
Once implemented, INC will identify
nonfilers by accurately associating income
information with individuals and business
entities that have not filed state tax returns
Tax Forms, and information reporters who have failed to
meet their filing requirements.
Publications INC gives FTB the tools necessary to
eliminate unnecessary taxpayer contacts as
Available well as improve customer service to all
taxpayers. Other benefits of the new system
Online include:
Most tax forms and An unfortunate by-product of the • The identification of more than 90,000
publications, from 1994 Franchise Tax Board’s efforts to contact new nonfilers, resulting in a net revenue
through the current year, can people who have not filed their tax return is increase of $36 million per year.
be viewed and printed the estimated 55,000 contacts with
through the Franchise Tax taxpayers who either do not have a filing • Notices that are timely, tailored, clear,
Board website at requirement or have already filed their customer friendly and concise.
www.ftb.ca.gov. return.
• Increased compliance with both current
The most common are fillable Several of FTB’s modernization projects and future filing requirements to ensure
online. You can also use an show promise for eliminating unnecessary that everyone pays their fair share of
automatic email feature to mail contacts. One of those projects is the state taxes.
current year forms to yourself. Integrated Nonfiler Compliance Project.
FTB is developing the INC Project with its
The email feature is especially The INC Project’s primary goal is to business partner IBM. It is scheduled to be
useful for larger publications improve the way the department uses the implemented by late 2000.
which may be time consuming
or difficult to download when
the Internet is busy.
Five Reasons to File Schedules K-1 Electronically
Partnerships with many partners now The fifth reason is TestWare, a free
have five good reasons to stop filing software program for editing the
paper Schedules K-1. The first four schedules. The TestWare program
reasons for eliminating paper allows partnerships to edit K-1 files on
Schedules K-1 are : diskettes before sending them to FTB.
To obtain the free software, download it
• CD-ROMS, from FTB’s www.ftb.ca.gov website.
• Diskettes, Click on “Electronic Services” and then
on “Businesses - Filing/Payments.” Or
• Magnetic tape and call the electronic filing Help Desk at
• Tape cartridges. (916) 845-0353 between
8 a.m. and 5 p.m.

July 1999
Page 9

Client Moving? Let FTB Know


Moving from one address to another is To find more current addresses for
a very common occurrence. Nearly 20 taxpayers, FTB uses a variety of sources
million Americans do it each year. such as other governmental agencies,
Unfortunately, not all of the people taxpayer employers and credit bureau
who move notify their taxing agency of reporting services.
the new address.
FTB is now utilizing the best source for
Because of this, quite a few billing finding a new address -- the taxpayers Keep
notices, requests for information and themselves. Until recently, FTB didn’t
even refunds end up coming back from
the post office as undeliverable.
have an official “Change of Address” Tax News
form. However, taxpayers can now use a
The Franchise Tax Board is included in form FTB 3533 to inform FTB of their new Coming
the list of agencies affected by all this address when they move.
movement. Is your Tax News subscription
Form FTB 3533 is available at FTB’s
about to expire?
For example, the FTB nonfiler program www.ftb.ca.gov Internet address, or you
sends over 600,000 notices to can write to: If so, the Franchise Tax Board
individuals who appear to have a will send you a renewal form by
Tax Forms Request
requirement to file a California tax mail. Be sure to return the form
Franchise Tax Board
return but have failed to do so. immediately so that you will not
P O Box 307
Approximately 80,000 of these are miss any upcoming issues.
Rancho Cordova, CA 95741-0307
returned by the post office each year Remember: Tax News is also
as undeliverable (due to the taxpayer If you are a representative filing for the
available by e-mail at no charge
moving). Historically, the nonfiler taxpayer, attach a copy of your power of
and it can be viewed on FTB’s
program was only able to find better attorney to the change of address form.
website at www.ftb.ca.gov.
addresses for about 25 percent of these
If you have any questions
individuals. However, in the last
about your Tax News
couple of years this number has
subscription, call
increased to close to 75 percent.
(916) 845-7070.

Before You Make an Offer in Compromise...


Continued From Page 3
• The taxpayer’s present and future
expenses.
Generally, the Franchise Tax Board approves
an offer in compromise when the amount
• The potential for changed
circumstances.
offered represents the most FTB can expect
to collect within a reasonable period of time. FTB will only process your client’s offer in
compromise application if all of the
Although each case is evaluated based on
following are done:
its own unique set of facts and
circumstances, FTB gives the following • Your client has filed all of the required
factors strong consideration in the tax returns. If there is no filing
evaluation: requirement, note it on the application.
• The taxpayer’s ability to pay. • Your client has fully completed the
offer in compromise application, and
• The amount of equity in the taxpayer’s
provided all supporting documentation.
assets.
• Your client agrees with FTB on the
• The taxpayer’s present and future amount of tax owed.
income.
Page 10

Out of State Leasing Companies


Notices Sent to Non- franchise tax imposed on corporations doing
California Corporations business in California.

with Income From Leases The state in which the lease contract was
executed has no bearing in determining the
In June, the Franchise Tax Board mailed taxability of the leased income.
approximately 30,000 notices to If your client receives a notice requesting a
corporations requesting they file a
General California corporate tax return or complete a
California corporation tax return, the
corporation should respond within the
Tax Reports questionnaire to help the FTB determine if
the corporation has a California filing
30-day period by filing the tax return FTB is
requesting or completing the questionnaire.
Available on requirement.
FTB will review the completed questionnaire
Many of these notices were mailed to out-
Internet of-state corporations or non-California
and notify the corporation of its final filing
determination. Corporations that fail to file a
corporations deriving income from leases. return or complete the questionnaire will
Many general publications can
Income from leased property located in receive a Notice of Proposed Assessment.
be viewed on the Franchise Tax
Board’s website. California is considered California sourced If you would like additional information
income. regarding franchise tax and income tax,
Examples include FTB’s Annual
Out-of-state corporations deriving please see FTB Publication 1063. This
Report and the Deductible
California source income from leases are publication can be downloaded from FTB’s
Dividend Report.
subject to California income tax, not the Internet site at www.ftb.ca.gov.
The latter report has a search
feature that allows viewers to
access the deductible dividend e-filers Get Break on Head of Household Form
(percentage of dividends
deductible under B&CTL Section Head of Household If FTB needs more information to determine
24402(a)) for specific if a taxpayer qualifies for the head of
Workshops Also Available household filing status, FTB will send the
corporations.
This filing season, the Franchise Tax Board taxpayer a letter requesting additional
FTB’s website address is tried something new with its head of information to verify his or her eligibility.
www.ftb.ca.gov. household and e-file programs. To help educate practitioners about the
Taxpayers who used e-file and claimed the head of household filing status, FTB is
head of household filing status were offered continuing its Head of Household
the option of voluntarily completing a head Workshop Program that began in 1998.
of household questionnaire and including it The workshops are geared towards helping
with their e-file return. practitioners better understand the head of
Once FTB received the tax return, it was household filing status.
immediately processed and the refund was Topics include a program overview, an
issued. explanation of the qualification criteria for
FTB also examined the head of household using the head of household filing status
e-file questionnaire and, if the information and a discussion about important questions
provided indicated that the taxpayer was that practitioners should ask their clients
qualified, the head of household filing who file head of household.
status was allowed and the taxpayer was For additional information or to schedule a
not issued a head of household audit letter. head of household workshop in your area,
If any of your e-file clients completed the contact FTB’s Head of Household Unit at
head of household questionnaire, remind (916) 845-6870 or (916) 845-6265.
them that submitting the questionnaire does
not guarantee that they will not be
contacted by FTB about their filing status.

July 1999
Page11

Tax Business No Place for Fraud


The good news: Improved information • Register with the California Tax
sharing by the Franchise Tax Board, the Education Council (CTEC).
Employment Development Department and CTEC is a non-profit organization
California’s employers has drastically responsible for the administration of tax
reduced the occurrence of Form W-2 fraud practitioner education requirements. Tax Agencies
carried out by individual taxpayers. Each year CTEC issues education Offer
Now the bad news: Fraud itself has not completion certificates to practitioners
disappeared. It just changed its appearance. who meet their annual education Educational
“The challenge of fraud discovery has not
requirements. Opportunities
disappeared. Fraud has changed in Attorneys, certified public accountants,
enrolled agents and designated bank The Franchise Tax Board, along
appearance from individuals perpetrating
officials have their own industry with the State Board of
fraud on their own behalf to tax practitioners
regulations and are exempt from these Equalization, Internal Revenue
who file returns for large groups of clients,”
requirements. Service, Employment
said David Hill, a certified fraud examiner
Development Department and
at FTB. California hopes to put tax fraud on a other state, local and federal
downward spiral by educating taxpayers organizations, routinely offer
and tax professionals on how to spot the free seminars for business
“Each year more than six warning signs for fraud. Every year, state owners and individual
tax officials advise consumers to be wary taxpayers.
million California taxpayers of individuals who represent themselves
For information about FTB’s
pay a tax professional to as tax practitioners but who do not meet
participation in these events,
state-mandated tax education
complete their federal and requirements and refuse to identify contact Alvaro Hernandez, FTB
state income tax returns.” themselves as tax practitioners on tax Small Business Tax Education
returns they have prepared. Coordinator, at
(916) 845-5257.
California is a bull market for tax Legitimate tax professionals must
provide the client, in writing, their name, Also visit the BOE Web site at
professionals. Each year more than six www.boe.ca.gov and click on
million California taxpayers pay a tax address, telephone number and evidence
that they have a current tax practitioner “Taxpayer Education.”
professional to complete their federal and
state income tax returns. surety bond.

According to the FTB Fraud Prevention and The FTB Fraud Prevention and Detection
Detection Group, unregistered tax Program staff works with CTEC and the
practitioners are responsible for most of the Internal Revenue Service to educate tax
fraudulent activity in the tax practitioner practitioners of the state’s requirements
industry. for preparing tax returns.

California law (Sections 22250-22259 of the When a non-registered practitioner is


California Business and Professions Code) identified, he or she is given a CTEC
states that registered tax practitioners must: registration application, an explanation of
CTEC, a copy of Sections 22250-22259 of
• Be a minimum of 18 years of age with a the California Business and Professions
high school diploma. Code and instructions on how to comply
with the state’s requirements.
• Post a $5,000 surety bond.
For more information about CTEC or
• Complete an initial 60 hours of basic fraud prevention and detection, contact
personal income tax instruction. the Tax Practitioner Support Unit at (916)
• Maintain 20 hours per year of 845-7057 or send them a fax at
continuing income tax education. (916) 845-6377.
Page 12

Electronic Filing, Direct Deposit Flying High


Continued From Page 6

taxpayer’s bank account within 5-7 banking Taxpayers that elect to e-pay have the
days from the date FTB acknowledges option of choosing the date to have FTB
receipt of the e-file return. deduct their payment from their
Direct deposit is available to nearly all bank account.
taxpayers who use e-file, including For the 1998 tax year, taxpayers can select
first-time filers. any day between January 15 and October 15,
e-pay 1999.
Since it’s inception, nearly 20,000 taxpayers Tax Practitioner Support
have opted to pay their balance due taxes Once practitioners join the e-file program,
with e-pay. FTB’s e-pay program gives they have access to FTB’s e-file Helpdesk.
taxpayers the option of having their The helpdesk, which only serves
payment debited directly from their bank practitioners who e-file, is available 8 a m.
account instead of them mailing the until 5 p.m., Monday through Friday.
department a paper check. Contact the helpdesk at (916) 845-0353.

Presorted
First-Class Mail
U.S. Postage Paid
Sacramento, CA
P.O. Box 520 Permit No. 312
Rancho Cordova, CA 95741-0520

Address Service Requested