Following the FTB: plenty of happenings CPAs should know about.

• Author: Williams, Leonard W.
• Position: California tax - Franchise Tax Board

This isn't an official summary of the CalCPA Committee on Taxation's annual liaison meeting with the FTB, but these are a few developments that should be brought to everyone's attention.

1. In response to a query about a rumor, the FTB said that it will charge $20 for an installment agreement to pay one's taxes.

2. The FTB also will charge $100 for rush and walk-through filings.

3. Although the IRS will be able to process e-filed business returns, the FTB isn't ready to do that yet.

4. When dissolving a partnership, two forms must be filed: an LP-3 and an LP-4/7. And also note that the LP-4/7 has to be counter-signed and returned.

5. If a taxpayer received a notice from the FTB requesting a return that has not been filed, it is possible to go online, www.ftb.ca.gov/inc, and request an additional 30 days to respond.

6. There have been significant changes to pass-through entity, exempt, credit and withholding forms. Among them:

* Form 565, Partnerships--a new question has been added for tax shelters.

* Form 568, LLCs--a new question has been added for tax shelters and questions N and R have been deleted.

* Form 3500, Exemption Application--increased from six pages to eight pages.

* Form 3505, Teacher Retention Credit--suspended for two years.

* The instructions for forms 592, 592-A and 592-B--all of which pertain to nonresident withholding--previously were combined as one package. Now the instructions for each form will be attached to each respective form.

You can read more about the meeting in the December 2004 issue of California CPA, or by visiting www.calcpa.org/californiacpa/articles/2004/1208.htm.

When all else fails, read the instructions (Example No. MMMDDDCCLLLVII).

In the case of an installment sale, common wisdom is that the 3 1/3 percent withholding of state income tax only will be applied to the down payment.

But FTB Publication 1016, Question 56, states that only is true if the buyer agrees to withhold 3 1/3 percent of each principal payment.

The likelihood of a buyer agreeing to do that is probably remote, so the seller should evaluate the required down payment in that light, otherwise the down payment may be inadequate to pay the required withholding.

"Average Income" Assessments

For those who don't know what an "average income" assessment is, the FTB has been cross-checking the lists of professionals who have been licensed by California against the list of income tax returns filed.

If a licensed professional has not filed an...