Tax Season Toolkit: everything you need to navigate through the busy season.

After the bustle of the holiday season, CPAs will be launched headlong into tax season. With the rapid changes taking place in the economy and regulatory world in response to the financial crisis, there is much to be wary of this year when filing for your clients. But, never fear! CalCPA's annual Tax Season Toolkit is here to help. As you meet with clients, research what's new in the tax codes and update software to provide the best service you can, spring ahead and confidently meet the only season that's never too late or early--tax season.

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California Tax Tips

Net Operating Losses Suspended for 2008 and 2009

NOLs are suspended for both personal income and corporate taxpayers for 2008 and 2009. This applies to all California NOL provisions, including qualified small business and Enterprise Zone NOLs. An exception exists for taxpayers with less than $500,000 in business income for the taxable year.

Suspended NOLs for 2008 and 2009 will be allowed additional carryover periods of two years and one year, respectively. Additionally, the NOL carryover period has been extended to 20 years for NOLs incurred in 2008 and forward.

A two-year NOL carryback is allowed for NOLs attributable to tax year 2011 and following years. NOL carryback amounts are limited as follows:

* 2011 NOL: 50 percent of NOL incurred.

* 2012 NOL: 75 percent of NOL incurred.

* 2013 NOL: 100 percent of NOL incurred.

No NOL carryback prior to tax year 2009 is allowed. Furthermore, no NOL carryback for Real Estate Investment Trusts will be allowed, and NOLs are limited for corporations involved in corporate equity reduction transactions as provided under the IRC rules for such transactions.

Business Tax Credit Information

Business tax credit (including the Enterprise Zone and Research Credits) may only offset up to 50 percent of the net tax for years 2008 and 2009. An exception exists for taxpayers with less than $500,000 in business income for the taxable year.

Personal tax credits--including those for exemptions, status, renter's credit, adoption, dependent care and other state taxes paid--will not be limited and will be applied prior to any business credit limitation.

Up to two years will be added (depending on length of nonuse) to the carryover period of business tax credits that otherwise have a limited carryover period. Both the Enterprise Zone and Research Credit have an unlimited carryover life.

In 2010, members within the same combined reporting group can make an irrevocable election to assign business credits earned by one member to another member. The election must be made on an originally filed return in the year assigned. Limitations as to the use of credits apply to the assignee as applicable to the assignor (e.g., the Enterprise Zone Credit will be limited to the assignee's zone income, computed in the same manner as the original credit). An election to assign credits can be performed for tax years beginning on or after Jan. 1, 2010. No further assignments of the same credit may be made to another taxpayer.

Estimated Payments Frontloaded for Tax Year 2009 and On

For tax years beginning on or after Jan. 1, 2009, estimated personal income and corporate tax payments will require quarterly installments of 30 percent each for the first and second installments, and 20 percent each for the third and fourth installments. For example, calendar year taxpayers will be required to pay 60 percent of their estimated tax by June 15, 2009, for the 2009 tax year.

Minimum Tax Only Payers for First Quarter

If only minimum tax is due the first quarter, 40 percent of the estimated tax is due with the second installment and 30 percent for each of the next two installments.

No Safe Harbor to Avoid Estimated Tax Penalty for High Net Worth Individuals

The safe harbor to avoid an estimated tax underpayment penalty for individuals who pay 100 percent of their prior year tax liability will no longer be available for those with $1 million or more adjusted gross income for tax year 2009 and forward ($500,000 in the case of a married individual filing a separate return).

Individual Taxpayers Required to Remit Payments Electronically for Certain Amounts

All tax payments paid after Jan. 1, 2009 must be remitted electronically if an individual meets any of the following thresholds:

* Installment payment exceeds $20,000.

* Total tax liability exceeds $80,000 for years 2009 and forward.

A 1 percent penalty for noncompliance will be applied to the amount paid. An exception exists if reasonable cause and not willful neglect is established for the nonelectronic payment.

Exception to Personal Income Tax Underpayment Penalty

Tax due of less than S500 for married and single individuals ($250 for married filing separate) for tax years 2009 and forward are not subject to an estimated tax underpayment penalty.

Nonresident Group Filers Subject to Additional 1 Percent Tax

One or more nonresident partners, LLC members, S Corporation shareholders and directors can now elect to be included in a nonresident group return instead of filing their own individual nonresident tax return(s). They will be assessed a tax rate of 9.3 percent plus 1 percent on the portion of taxable income in excess of $1 million.

Statute of Limitations Extended for Refunds of Taxes Paid to Other States

After 2008, taxpayers may file claims for refund or credit for taxes paid to other states within one year from the date the tax is paid to the other state even if the standard four-year statute of limitations period has lapsed.

Partnerships Now Subject to Real Estate Witholding at Source

For real property sales occurring after 2008, partnerships are now subject to the withholding at source requirements for California real estate. Amounts paid to out-of-state partnerships will be subject to withholding at the rate of 3.5 percent of the proceeds from the sale, unless the alternative withholding rate of 9.3 percent of the gain from the sale is elected.

The S corp alternative withholding rate is increased from 1.5 percent to 10.8 percent of the gain.

LLC Fee Must be Fully Paid by the 15th of the Sixth...