California State Tax Filing Season Officially Opens

See below for an important message from the California Franchise Tax Board:

The Franchise Tax Board (FTB) today announced it is now accepting 2013 state tax returns. Also, the FTB provides the following updates on law changes and filing services.

What’s New for Individuals

Standard deduction– The standard deduction for single or filing separately tax statuses increased to $3,906. For joint, surviving spouse, or head of household filers, it increased to $7,812.

Exemption credit increases– The dependent exemption credit increased to $326 per dependent. The personal exemption amount for single, filing separately, and head of household filers increased to $106. For joint or surviving spouses, it increased to $212.

540A discontinued- For taxpayers who file paper returns, FTB eliminated this form due to decreased use. Tax preparation software or e-filing will automatically select the appropriate tax form for the taxpayer. FTB continues to offer two types of personal income tax forms:

• Form 540 (Long Form) that can be used by all tax filers
• Form 540 2EZ that can be used for tax filers with simple tax filing situations such as those who typically report income wages, interest, dividends, and pensions; and take the standard deduction.

Voluntary Contribution Fund– Taxpayers can contribute to one or more charitable causes directly from the state tax form. New on the 2013 tax return are the:

• American Red Cross Fund
• Protect Our Coast and Oceans Fund
• Keep Arts in School Fund

Please see FTB’s tax forms for a complete listing of available charities. For more information visit ftb.ca.gov and search for Voluntary Contributions.

2013 Short Sellers Get State Tax Relief– According to an IRS Information Letter dated September 19, 2013, the IRS has determined that California taxpayers who sell their principal residences where the lender agrees to a short sale for less than what is owed on the home are relieved of incurring cancellation of indebtedness income, which may have been taxable. Instead, the amount of cancelled debt is included in the amount realized in determining gain on the sale of that residence.

The IRS guidance is limited to California short sales only. The IRS guidance did not specifically address other types of real estate transactions such as non-judicial foreclosures and mortgage loan modifications.

FTB’s website will have updated information and FAQs soon. For more details, please visit ftb.ca.gov and search for Mortgage Forgiveness Debt Relief.

California Affordable Care Act– Although this is not a new law, FTB gets questions about how the federal Affordable Care Act affects California taxes. California tax code conforms to the 2010 federal income tax rules, which excludes the value of the medical coverage provided to nondependent adult children from California gross income and allows a deduction to self-employed individuals for health insurance premiums for nondependent adult children under age 27. For more information, please visit ftb.ca.gov and search for Affordable Care Act.

Filing Information

Free Do-it-Yourself Services– FTB encourages taxpayers and practitioners to explore its many self-service applications available through FTB’s website:

• CalFile makes filing easier– CalFile is one of FTB’s free, easy-to-use e-file options available to more than 6.4 million taxpayers. CalFile accepts taxpayers with income of up to $345,235, itemized deductions, and some tax credits.

CalFile guides taxpayers through a simple question and answer process. It takes about 15-30 minutes to complete. CalFile offers convenient features to make it easier to use including: getting an email confirmation verifying the return was filed, and having the ability to save information and come back later to finish the return. Taxpayers can also file the current year 2013 tax year return as well as the previous year, 2012.

Visit FTB’s website at ftb.ca.gov to access CalFile.

• Free online filing in minutes- FTB’s other free e-file program; ReadyReturn is for taxpayers who file simple returns. FTB uses information it already has to complete a ReadyReturn for selected taxpayers. Taxpayers who used the single or head of household filing status in the prior year, had one employer, claimed no more than five dependents, and took the standard deduction qualify for ReadyReturn.Taxpayers can visit FTB’s website ftb.ca.gov to see if a ReadyReturn is completed and waiting for them.
• MyFTB Account– Use this service to change a mailing address and get information about: wages, California withholding, estimated tax payments, balances due, or FTB-issued 1099 forms. Taxpayers and tax professionals must complete a one-time registration process.
• Estimated tax payment schedule- For taxpayers who need to make quarterly estimate payments, the California schedule differs from federal. To avoid an estimate penalty, taxpayers must pay:
• First quarter (April 15) 30 percent
• Second quarter (June 15) 40 percent
• Third quarter (September 15) 0 percent
• Fourth quarter (January 15) 30 percent
• Check Your Refund Status– After filing their 2013 tax return, taxpayers can use this service to see where their refund is. Generally, e-filed returns with refunds and requests for direct deposit are issued within 7-10 days and mailed refund checks are sent within two weeks. Paper-filed returns take longer, up to 6-8 weeks depending on the time of year the return is filed. This service is also available in Spanish.
• Pay Taxes Online– For taxpayers who owe, try Web Pay to pay a tax return balance due or make an extension or estimate payment. Taxpayers can schedule estimated tax payments for the year, sign up for free email reminders, save their bank account number for future use, and much more. For a fee, taxpayers can pay their taxes with their American Express, Discover/NOVUS, MasterCard, and Visa cards.
• Request a Monthly Payment Plan– FTB offers monthly installment payment plans to taxpayers experiencing a financial hardship. Taxpayers who owe $25,000 or less and can repay their balance owed within five years generally qualify. For qualifications and to sign up, go to ftb.ca.gov and select installment agreement. Taxpayers can also apply by phone using our Interactive Voice Response (IVR) system .
• Get Answers to Frequently Asked Questions– Find answers to questions about various tax topics such as return filing requirements, tax credits, and the eligibility requirements for the Head of Household filing status online at ftb.ca.gov.
• Try Live Chat– Live Chat lets taxpayers ask an FTB representative general tax questions and get help with FTB’s website.
• Phone Service– FTB provides automated toll-free phone service. To speak with a customer service representative, FTB staffs its general toll-free phone line from 7 a.m. to 5 p.m., weekdays excluding state holidays.
• Field Offices– FTB has six regional field offices that provide walk-in service from 8 a.m. to 5 p.m., weekdays in Los Angeles, Oakland, Sacramento, San Diego, San Francisco, and Santa Ana. For directions, go to ftb.ca.gov and click on the Contact Us tab.
• Services Available in Spanish– FTB offers many services in Spanish including forms, publications, refund status, and answers to frequently asked questions.

Tax Tips

• Volunteer Income Tax Assistance– Starting in February, free tax help is available through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly Programs (VITA/TCE). Trained volunteers at more than 1,000 sites throughout California provide free help to complete tax forms for low-income, senior, disabled, and non-English speaking persons who need to file simple federal and state tax returns.

Many military bases provide this service for the U.S. Armed Forces. For information on locations throughout California, go to ftb.ca.gov and click on the free filing assistance link.

• Use tax – Taxpayers may owe use tax on purchases made from out-of-state or Internet sellers. Use tax can be reported on the California income tax return instead of filing a use tax return with the State Board of Equalization. Taxpayers can use a “look-up” table to report their use tax obligations. The estimated amount of use tax due is based on the person’s adjusted gross income. For more details, visit the BOE’s website at boe.ca.gov.
• Federal Earned Income Tax Credit (EITC)– This is a federal incentive for low-to-moderate income individuals and families. Taxpayers earning less than $51,567 can qualify for a “refundable” credit that can total up to $6,044. “Refundable” means that taxpayers do not have to have a tax liability to get a refund check from the federal government. Taxpayers can check if they qualify by visiting the IRS website at irs.gov and searching for EITC Assistant. California has no comparable state credit.

Changes for Businesses Filers

Geographically Targeted Economic Development Area (G-TEDA) Tax Incentives Repealed – The Governor’s 2013 Economic Development Initiative [Assembly Bill (AB) 93] repealed and made changes to all of the G-TEDA Tax Incentives. Enterprise Zones (EZ) and Local Agency Area Military Base Recovery Areas (LAMBRA) were repealed on January 1, 2014. The Targeted Tax Areas (TTA) and Manufacturing Enhancement Areas (MEA) both expired on December 31, 2012. AB 93 changed the credit carryover period to 10 years for any taxable year beginning on or after January 1, 2014. In addition, the EZ Employee Credit and the New Jobs Credit are also repealed as of January 1, 2014.

More information on the Repeal of the G-TEDA tax incentives can be found on FTB’s Website.FTB’s website.

AB 93 replaces the G-TEDA tax incentives with the New Employment Credit (NEC), the California Competes Credit, and statewide partial sales and use tax exemption for certain manufacturing and research and development equipment.

The New Employment Credit (NEC) is a California income tax credit available to employers for taxable years beginning on or after January 1, 2014, and before January 1, 2021. To obtain a credit a qualified taxpayer must hire a qualified full-time employee on or after January 1, 2014, and pay qualified wages attributable to work performed by the employee in census tracts with the highest unemployment and poverty in the state, or in former EZs (except for census tracts with the lowest unemployment and poverty), or former Local Area Military Base Recovery Areas (LAMBRAs). For simplicity these are referred to as the designated geographic area (DGA).

Employers can determine whether a location is part of the DGA by using the DGA Mapping Tool.

The credit is based on 35 percent of qualified wages (wages between 150 percent and 350 percent of minimum wage).In order to generate an allowable credit, the qualified taxpayer must have a net increase in its total number of full-time employees working in California, when compared to its base year both based on annual full-time equivalents.

In addition, the taxpayer must receive a Tentative Credit Reservation (TCR) from the Franchise Tax Board (within 30 days of complying with the EDD new hire reporting requirement) for the qualified full-time employee. Employers can get a credit reservation by going here.

More information about the requirements for the New Employment Credit can be found here.

The California Competes Tax Credit is an income tax credit available to businesses that want to come to California or stay and grow in California. Tax credit agreements will be negotiated by the Governor’s Office of Business and Economic Development(GO-Biz) approved by a newly created “California Competes Tax Credit Committee.”

More information on the California Competes Credit can be found on GO-BIZ and FTB’s website.

Source: FTB Public Affairs Office