FTB tell-all: tax gap, filing procedures and legislative updates fill liaison meeting.

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

The annual CalCPA-FTB liaison meeting was held Oct. 25, providing the opportunity for candid inquiry and exchange between FTB staff and CalCPA members.

The New Executive Officer

Selvi Stanislaus, the new FTB executive officer, welcomed Committee on Taxation members and asserted her commitment to an open relationship with taxpayers.

She emphasized that the FTB is an open organization, interested in problem solving, and said that the 2006 filing season went smoothly, which was good news for preparers and FTB personnel.

Paper Returns Still Around

In spite of compulsory e-filing for preparers who prepare more than 100 personal income tax returns, and a greater awareness of e-filing by the general public, 6.5 million out of the 14.7 million personal tax returns processed were paper returns.

Of the 8.2 million electronically filed returns, 83 percent were filed by preparers and 17 percent by taxpayers.

The Tax Gap

Raphael Ixta, manager of the personal income tax audit section and chair of the Tax Gap Action Committee, presented a breakdown of tax gap sources: non-filers (11 percent); underpayment (12 percent); and under-reporting income or over-stating deductions (77 percent).

During the exchange that followed, many Committee on Taxation members expressed concern that much of the tax gap problem stems from the increasing lack of conformity between federal and state tax codes.

Though many FTB staff members agreed, they stated the matter is out of their hands as only the three-person FTB--director of the California Department of Finance, the state controller and the chair of the State Board of Equalization--may make recommendations to the Legislature. It was noted that if the board decided to recommend measures to increase conformity, FTB staff would to support such efforts.

FTB personnel added that they will publish more specific and useful information on the tax gap in FTB's "Tax News." Suggestions for tackling the tax gap should be addressed to Raphael Ixta at raphael.ixta@ftb.ca.gov.

CalCPA members also expressed concern that tax preparers who promote fraudulent schemes as well as taxpayers who commit fraud are contributors to the tax gap.

If you are aware of such activities, the FTB hotline to report fraudulent prepares is (800) 540-3453.

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