FTB focus on OIC: plus, sales taxes on food and software.

• Author: Williams, Leonard W.
• Position: Californiatax

CalCPA member Jim Counts recently attended a meeting of the State Bar Tax Procedure Committee with Kurt Arico, manager of the Franchise Tax Board's Offer in Compromise program.

Any CPA or attorney with OIC issues should contact Arico, who's aiming to make the FTB's OIC program more workable. You can contact him at: Kurt Arico; manager, SCCU, Specialized Collection Section MS A454; P.O. Box 1468; Sacramento, CA; 95812-1268; or phone, (916)845-6151; or Kurt.Arico@ftb.ca.gov.

At the meeting, Arico mentioned that forms for the OIC program--including Form 4905 PIT for personal income tax and Form 4905 BCT for business entities--can be obtained from www.ftb.ca.gov.

Other interesting facts gleaned from the meeting:

* 360 offers were accepted last year;

* 40 percent of the offers cover accounts that were previously deemed uncollectible;

* Average offer is 21 percent of the tax liability;

* 85 percent of the offers' funds came from sources beyond the taxpayer, such as gifts from relatives or friends, or a loan from someone; and

* Average time to collect the offers is seven years.

You can contact the OIC program unit at (916)845-4787 or www.ftb.ca.gov/individuals/bills/OIC.html.

Live-and-Learn Department

A TaxTalk participant asked, regarding appealing a proposed FTB assessment, whether the Hearing Officer may raise new issues.

The answer is yes. Just as with the IRS, new issues may be raised at any point in the administrative process.

Sales Taxes: A Whole Other World From Income Taxes

A newspaper reporter's inquiry regarding the Board of Equalization was recently posted on the TaxTalk listserve. The reporter asked about the propriety of the BOE statistically sampling a takeout food business to see how much is consumed on-site, and hence subject to sales tax. The answer is that the BOE may do so.

In response, a participant posted the following war story which illustrates why CPAs must keep abreast of their clients' activities.

The owners of a small take-out deli were exempt from sales taxes because there is no sales tax on food that can't be consumed on the premises.

Without consulting their CPA, the deli owners put several small tables in front of the deli so customers could go outside, sit down and eat. They still didn't collect sales taxes because they "were only selling food for take-out." When the CPA found out, he told them that they should be collecting sales taxes. The deli owners were slow to implement this change.

It wasn't long until a...