CA Tax: Estimated Tax Payments, 1099s and More
California CPA magazine: January/February 2009
By Leonard W. Williams, CPA
The annual liaison meeting between the FTB and CalCPA Committee on Taxation cleared up a long-standing source of confusion among CPAs.
Under Rev. & Tax Code Sec. 23114, a corporation is not liable for taxes or fees if its year is less than 15 days and no business was conducted. A question posed at the meeting was: What date does the FTB use in determining the date of incorporation?
The answer: The date stamped on the Articles of Incorporation by the California Secretary of State creates a corporation, and that date is forwarded to the FTB. If there is a date stamp discrepancy, the corporation must contact the California Secretary of State to resolve the discrepancy.
New California Estimated Tax Payments and Withholding
At the Education Foundation’s annual Tax Planning and Update Conference in November, the FTB speaker was asked if California will require the withholding tables for employees’ California income taxes to be revised to track the new schedule of required estimated tax payments. The FTB speaker said he didn’t think that the board had thought of that one.
More Likely Than Not
While the federal government has reduced what had been the “more likely than not” (MLTN) standard for non-disclosed positions, California has had the MLTN since 2002, and still has it.
Another Independent Contractor Issue
A general contractor hired a subcontractor to do some work. The sub then hired an independent contractor to do the work. The independent contractor was injured on the job. Because he was not an employee, he was not covered by workers’ comp and sued the general contractor.
The trial court gave summary judgment for the contractor/defendant, but the independent contractor appealed. The appellate court sent it back to the trial court, saying that the independent contractor does have the right to sue the general contractor.
If the independent contractor wins, there’s a good chance that general contractors will begin to require workers of their subcontractors be employees, not independent contractors.
The case is Tverberg v. Fillner Construction, Inc. (12/5/08, First District, Div. Four. Cite as 2008 SOS 6557). For more, visit www.metnews.com/s0scgi?1208%2FA120050.
Filing 1099 Forms
Many clients are confused about the requirements for filing 1099 Misc. forms for independent contractors paid in connection with a business or rental properties.
Since both the IRS and FTB are disallowing deductions in excess of $599 when 1099 forms haven’t been filed, it’s imperative to get the message out to clients who should be filing them.
The biggest area of confusion seems to be the fact that 1099 forms don’t have to be filed for payments to corporations (except for legal and medical corporations). Clients seem to think that if the business has a business license, or is listed in the yellow pages, for example, then a 1099 form doesn’t have to be filed.
The FTB has the authority to disallow the deduction for 1099s that haven’t been timely filed (R&TC 24447).
Charitable Contributions
Although the stiffening of substantiation required for charitable contributions eliminated a lot of the abuse—often caused by mere confusion—misperceptions still abound among the general populace.
TaxTalk participants frequently post these questions, or variations of them, because their clients frequently ask them, and the CPAs who post the question just want to make sure that something hasn’t happened that they haven’t heard about. Assume the charitable organization is a qualifying 501(c) 3:
• Is it permissible to take a charitable contribution for one’s labor donated to a charitable organization?
• Suppose a business donates a service, is there a charitable deduction for that?
• If taxpayer allows a charity to use his or her vacation home rent-free, is there a deduction for that?
Nothing has changed, and the answer to all of the above questions remains no.
Thanks to the following CPAs for their contributions to this column: Jim Counts, Kip Dellinger, Rick Huey; Harlan Levinson; David R. Kelly; Steve Odem, and Ralph H. Weintraub.
Leonard W. Williams, CPA is a Sunnyvale-based sole practitioner. A member of CalCPA’s Committee on Taxation, the AICPA Tax Division and a former Peninsula Chapter president, you can reach him at williams@lwwilliamscpa.com.
