FTB meets COT: summary of the annual Q&A session.

• Author: Simon, Stuart
• Position: CA Tax

FTB members recently met in Sacramento with the CalCPA Committee on Taxation to discuss issues of concern, new developments and answer practitioners' questions. The following a summary of some of the key points from the meeting.

Ask A Legal Expert Resource for Practitioners

On the ITU website, under Tax Practitioner Resource, is "Ask a Legal Expert." The service provides answers to baste and medium questions regarding business entity tax law, general tax law, multistate tax law, tax administration and procedures, and technical resources tax law. In 2015 and 2016, more than 1,000 questions have been answered through Ask A Legal Expert.

Identity Theft and State Tax Refund Reporting

Practitioners noted that some clients were the victims of identity theft where fraudulent returns were filed and unfortunately, the FTB issued 1099-Gs for the fraudulent state tax refund amounts. The FTB has taken steps to prevent the issuance of incorrect 1099-Gs. However, should an erroneous 1099-G be issued, the practitioner or taxpayer should contact the FTB identity theft hotline at (916)845-7088.

Apportionment (Schedule R) Included in Nonresident Return Instructions

A practitioner raised a question regarding reporting business activity from single-member LLCs that report business activity on nonresident individual returns and the inclusion of Schedule R to apportion income.

The FTB confirmed that Schedule R is an acceptable schedule that may be submitted with an Individual Form 540 or 540NR e-filed return. Because Schedule R is a low usage farm in the individual e-file program, some software providers may choose not to support the electronic Schedule R. Instead, they allow the form to be attached to the e-filed return as a PDF. The list of acceptable individual forms and schedules that may be e-filed with the FTB and the maximum number of each type of form or schedule allowed per return it online, www.ftb.ea.gov/professionals/pitxmlefile/Acceptableforms.pdf.

Filing Requirements for Non-California Registered LLCs

Practitioners raised three questions regarding filing requirements for non-California registered LLCs:

1. If a non-California registered LLC received a zero activity K-1 from a California LLC, is there technically a filing requirement for the non-California registered LLC? Would it essentially file a no activity return, but still pay the $800 fee?

2. If all your activity is in California, are you required to apportion/allocate income using Schedule R...