Questions Answered: FTB-COT Liaison Meeting Summary.

• Author: Simon, Stuart
• Position: California taxation

he following are highlights of the Q&A session held during the CalCPA Committee on Taxation and FTB liaison meeting, where the FTB answered questions posed by the committee. For the full Q&As, visit wvvw.calcpa.org members/committees-sections/taxation.

Mental Health Services Tax and Annualization

Q: The Form 5805 annualization calculation annualizes income tax for penalty purposes, but spreads the Mental Health Services Tax evenly among all four quarters. For taxpayers who would otherwise not be subject to the Mental Health Services Tax, but receive a windfall in the fourth quarter, penalties are assessed as if the windfall was received evenly throughout the year. This is unfair and likely not the FTB's intent. Would the FTB please look at this apparent error in penalty calculation?

A: RTC Sec. 17043 imposes the Mental Health Services Tax (MHST) as an additional tax at the rate of 1 percent on the portion of a taxpayer's taxable income in excess of $I million. RTC Sec. 19136 and IRC Sec. 6654 allow a taxpayer who recognized income at an uneven rate during the taxable year to use an annualized income installment method to determine required installments.

The instructions for the 2017 form 1TB 5805, under Part Ill Annualized Income Installment Method, state you should "Complete line 1 through line 16 to figure your current year tax, per quarter, based on your income as you earned it." Therefore, when completing Bart Ill, line 14b, figure and enter the MHST in each column based on the annualized taxable income for that period.

We will clarify Form 5805, Part Ill, line 14b, instructions in a similar manner to equivalent federal Form 2210 instructions.

Concurrent Voluntary Disclosure With CDTFA and FTB Q: When a business applies for voluntary disclosure with CDTFA, a requirement is that the business registers for sales tax remittance simultaneously. When the business registers for sales tax remittance, they can also become registered with the Secretary of State (SOS) as part of that process. Generally; an SOS registration disqualifies a business from participating in a voluntary disclosure program (VDP) with the FTB and creates an issue for businesses who are also concurrently or later attempting to apply for voluntary disclosure with the FTB.

Would the SOS registration as part of a sales tax voluntary disclosure with CDTFA impede or inhibit the taxpayer's ability to participate in a voluntary disclosure program with the FTB if the SOS...