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Become a CalCPA Officer, Education Foundation Trustee

October 6th, 2014

California CPAs are the driving force behind one of the world’s largest economies. Isn’t it time you put your leadership skills to use for the betterment of the CPA profession?

The CalCPA Council/AICPA Council 2015-16 application period is open, as is the application period for CalCPA Education Foundation trustees.

More information, including position descriptions, nomination criteria and nomination form can be found online.

Both CalCPA officer and Foundation trustees nominations are due Dec. 1.

Professional Issues Updates: Tailored Topics

October 6th, 2014

The Professional Issues Update roadshow fosters a greater sense of information sharing among CPAs in your area—with a group of experts coming to your chapter, providing a customized update based on geographic, industry and professional trends.

CPA professionals, including CalCPA leadership, will cover tax issues, legislative and political activities, trends related to risks and liabilities for CPAs, a review of the Affordable Healthcare Act’s impact on employers and employees, as well as additional topics that are also being identified.

Register for your chapter’s update.

CAMICO Tip of the Month: Late Estate Tax Returns and Penalties

October 6th, 2014

The irregular filing due date for estate tax returns (Form 706), nine months after the decedent’s date of death, is the primary reason for missed estate tax return filings. Late filing penalties exceed $300,000 in some cases. CAMICO recommends the following loss prevention steps:

  1. Implement a due date tracking system for estate tax returns. The system can be as simple as a calendar devoted solely to estate tax return due dates.
  2. Have at least one person in the office be primarily responsible for tracking estate tax return filing deadlines (rather than having each tax partner or tax manager, etc., tracking his or her own deadlines).
  3. Continually review the due date tracking system to ensure that the firm meets any impending due dates the system identifies.

For more information about CPA firm insurance issues, call CAMICO at (800) 652-1772 or go online.

IRS May Not Be Collecting All Delinquent Taxes

October 6th, 2014

According to a report released by the Treasury Insector General for Tax Administration (TIGTA), the IRS may be missing opportunities to collect delinquent taxes because it is not always completely researching cases before closing them as uncollectible. If an IRS employee is unable to contact or unable to locate (UTC/UTL) a delinquent taxpayer, the collection case may be closed as currently not collectible (CNC). In the 2012 fiscal year, the IRS closed 482,611 tax modules involving approximately $6.7 billion as CNC–UTC/UTL.

TIGTA initiated an audit to determine whether the IRS was adequately researching, documenting and approving these cases to ensure that all actions were taken to collect outstanding taxpayer liabilities. TIGTA found that IRS employees did not always complete required actions before closing cases as CNC–UTC/UTL. Of a stratified sample of 250 cases TIGTA reviewed, there was no evidence that employees completed all of the required research steps for 57 percent of the cases prior to their closure.

New California Form FTB 3840, ‘California Like-kind Exchanges’

October 6th, 2014

For exchanges of property that occur in taxable years beginning on or after Jan. 1, 2014, California Revenue and Taxation Code Sections 18032 and 24953 require taxpayers who defer gain or loss under IRC Sec. 1031 by exchanging California property and acquiring out-of-state like-kind property to file an annual information return to report the exchange to us.

The new California Form FTB 3840, California Like-kind Exchanges, will be available on FTB’s website around the end of October to allow for public comment. The form will help taxpayers keep track of their California source deferred gains and meet their new reporting requirement. Form FTB 3840 provides information about the relinquished California properties and the non-California replacement properties in the like-kind exchange. Form FTB 3840 must be filed in the year in which the like-kind exchange is completed and each subsequent year that the gain or loss is deferred, regardless of whether the seller/exchanger has any other California filing requirement.

Upcoming Foundation Events: International Tax Conference

October 6th, 2014

FTB Updates Pub. 985, Releases New Forms

September 16th, 2014

The FTB updated Publication 985, Audit/Protest/Appeals (The Process). This publication provides an overview of what it does before, during and after an audit. It also outlines the steps your clients can take to protest and appeal an audit.

The FTB also will be rolling out two new forms:

  • FTB 2917, Reasonable Cause—Individual and Fiduciary Claim for Refund
  • FTB 2924, Reasonable Cause—Business Entity Claim for Refund

Final Regs. Under IRC Sec. 3402(p)

September 16th, 2014

The final regulations under Sec. 3402(p) of the Internal Revenue Code (Code) relating to voluntary withholding agreements have been published. These final regulations allow the U.S. Treasury Secretary to issue guidance in the Internal Revenue Bulletin to describe payments for which the Secretary finds that income tax withholding under a voluntary withholding agreement would be appropriate. The regulations affect persons making and persons receiving payments for which the IRS issues subsequent guidance authorizing the parties to enter into voluntary withholding agreements.

Income Tax Statute of Limitations Ruling, Guidance

September 16th, 2014

A six-year statute of limitations applies for income taxes if the taxpayer omits from gross income an amount exceeding 25 percent of the gross income reported in the return.

Regs. Sec. 301.6501(e)-1(a)(1)(iii) provides that gross income generally means only the gains realized from the disposition of investment property. It further provides that, generally, an understated amount of gross income resulting from an overstatement of unrecovered cost or other basis constitutes an omission from gross income.

The Supreme Court invalidated this latter provision April 25, 2012, in Regs. Sec. 301.6501(e)-1(a)(1)(iii) (see the June 2012 California CPA, page 25.) However, on Aug. 28, 2014, the Tax Court held the remainder of this regulation to be valid (see Barkett, 143TC No. 6).

Therefore, to determine whether there is a 25 percent income omission, only gains are taken into account—not the total amounts realized from dispositions of investment properties.

—Stuart R. Josephs, CPA

FTB Guide: When the IRS Audits Your Client

September 16th, 2014

If the IRS audits your client, they have a requirement to notify the FTB of the outcome within six months of the final federal determination. You or your client are required to notify the FTB if the IRS adjusts or corrects gross income or deductions. Your notification should include any IRS assessed penalties, adjustments or corrections resulting from math errors, tax credit adjustments, other tax adjustments or supplemental income even if the IRS did not examine these adjustments. The final federal determination is the date each IRS examination adjustment or resolution is assessed as described in Internal Revenue Code Section 6203.

If the taxpayer or the IRS does not provide the FTB timely notification of the federal changes, the statute of limitations for assessment remains open, and therefore, we may issue an assessment at any time. Interest accrues from the original tax year due date until the tax liabilities and penalties are paid in full.

Get a more thorough explanation of what to do if the IRS audits your client from the FTB’s website.


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