FIB updates: Franchise Tax Board Booby Traps and EDD News.

• Author: Williams, Len
• Position: CA Tax

For those who may have missed it, the April 2014 issue of "Tax News" from the FTB includes a list of FTB audit issues for individuals, pass-throtigh entities (partnerships, S corps and trusts) and C corps.

This type of information is useful for those who are called upon to give tax presentations to their service clubs, local groups of real estate sales people and others. Usually the first question during the Q&A portion of these types of programs is: "What are the IRS and FIB emphasizing in their audits?"

Use Tax Paid on an FTB Return

Dave Flamer is the new chair of the CalCPA Committee on Taxation. At the committee's May meeting, he informed us of a booby trap paving one's use tax via an FTB tax return. This also was explained in greater detail in an article on Page 53 of the May I issue of Spidell's California Taxletter.

The booby trap goes like this: lithe taxpayer owes a prior FTB liability, the FTB will apply he amount designated as a use tax payment against the FTB balance due from a prior year and reduce the payment to the Board of Equalization for use tax by the amount taken for the FTB prior year balance.

The FIB will notify the taxpayer via a Return Information Notice of what has been done, and advise the taxpayer to remit the revised balance due to the BOE by the due date of' We FTB return. If that's done, no penalty will be assessed. However. if the taxpayer does nothing, three to six months later, he or she will receive an assessment for that shortfall--including a 10 percent penalty, plus interest.

Relief from that penalty may be requested at www/boe.ca.gov/elecsrv/esvcont.htm#eRelief.

Employment Development Department News

California's Small Business Employer Advisory Committee met May 8 with various EDD managerial personnel. CalCPA member Jim Count was there in his capacity as CalCPA's liaison to the EDD and complied these items:

* The Field Audit and Compliance division has about 130 field auditors, and about 55 percent of their audits result from "obstructed" claims. Obstructed claims are those involving people treated as independent contractors, but the worker had filed for unemployment when the work ended.

* There is a widespread misperception among both small employers and their workers that it's smart to be categorized as an independent contractor rather than as an employee when, in fact, it usually isn't.

* EDD has around 10,000 employees: and the tax branch has 1,500...