California updates: Part 1

Audit Issues:  If you claim deductions for medical expenses, charitable contributions, and employee business expenses in Schedule A of your Federal Form 1040 do not be surprised if you received a letter. Starting January 1, 2018 California will be sending letters related to these deductions.

Beware of double dipping your deductions. Some taxpayers claim medical expenses for premiums paid with pretax dollars, donations made to non-qualified charities, and uniforms not required by the employer and profession.

Head of Household Issues: Attach fully completed FTB Form 3532 for Head of Household (HOH) Filing Status. You may be denied for HOH for failing to complete the Form and receive a notice from FTB.

Customer Service Dashboard Enhancements: If you want to know the time frame of your refund, how long payments are processed, the wait time to contact the FTB,  visit the FTB Customer Service Dashboard.

The “Customer Service Dashboard” was launched in March 1, 2017 with estimated time frames for your wait time. For more information go to:

Use of Schedule X to Amend: Starting January 2018, use new Schedule X to amend personal income tax return. You will no longer use Form 540X to amend your income tax return. You may also e-file amended income tax returns beginning tax years 2017 and later.

Electronic Payments through Electronic Fund Withdrawal (EFT): Starting January 2018, EFT is available for both estimate payments and extensions payments for both business entities and individual.

Delayed Form 1099G:  You will report the tax refund in the year you actually received it although you may received the Form 1099G at a later date.

Deductions for Taxes Paid or California Other State Tax Credit (OSTC) Legal Ruling 2017-01: California resident is allowed to OSTC for net income taxes paid to other state. California nonresident is allowed OSTC for net income taxes paid to taxpayer’s resident state that is also taxed in California if the resident state 1) does not tax income of California resident or 2) allows OSTC to California resident on income sourced within the state.

California Competes Tax Credit: The credit is an income or franchise tax credit, available to businesses that stay or expand in California. Applications for are accepted through from January 2, 2018 through January 22, 2018. For additional information go to the California Competes Tax Credit webpage at Go-Biz

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Disclaimer: Any accounting, business or tax advice contained in this communication is neither intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.

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Al-os & Associates  Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.  

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