All it takes is one individual—like you—and less than one day to make a difference at CPA Day at the Capitol.

Meet with California legislators to discuss issues that impact you, the public and the profession, such as preventing sales tax on services and promoting financial literacy. Once you register, we’ll handle the logistics of scheduling the appointments and providing you with talking points.

Make your voice—and the voice of the profession—heard at CPA Day at the Capitol.

CAMICO Tip of the Month: Conflicts of Interest

Potential or actual conflicts of interest may affect the way your objectivity or independence is perceived by clients and third parties, now or in the future—even if you are not engaged to do attestation work. Consider the client’s perspective as well as those of other stakeholders such as owners, investors, partners, beneficiaries and spouses.

Scenarios that often cause problems include partnership break-ups, failed investments, bankruptcies, trusts, mergers, divorces, family-office services or anything else that can create opposing or disappointed factions. Advising two parties to a transaction (e.g., a buy-sell agreement), helping parties resolve a dispute or participating in business deals with clients are problematic in some cases.

If things go downhill for one of parties, the CPA then appears to have favored one party over the other or may appear to no longer have the client’s best interests at heart, leading juries to sympathize with the aggrieved party. The benefit of hindsight and the facts laid out by a skilled attorney can make things even harder on the CPA.

For more information and guidance about CPA firm insurance issues, visit CAMICO online.

State Committees: Taking Applications

Want to use your talents at the statewide level? Your opportunity awaits—the application period is open through Jan. 19 to serve on our statewide committees for 2018-19. From estate planning to technology, and from personal financial planning to taxation, there’s a committee meeting your interests and expertise.

Please note: If you serve on a state committee and would like to continue, reapplication is necessary.

Committee appointments will be made in March/April 2018 and the committee term is May 1–April 30.

Apply today.

New Head of Household Requirements for 2017

If taxpayers electronically file (e-file) their 2017 return and do not complete form FTB 3532, the FTB will reject their return and contact them with:

  • HOH Demand letters: These letters request the taxpayers to complete and return form FTB 3532. Taxpayers are usually given 30 days to respond to this notice.
  • Notice of Proposed Assessments: These notices inform the taxpayer that they did not qualify for the HOH filing status. They may protest the notice within 60 days of the date on the notice if they do not agree.
  • HOH Education letter: These letters remind taxpayers of their requirement to attach form FTB 3532 when filing their 2017 return if they are claiming the HOH filing status.

If your clients receive an HOH Demand letter they will need to respond by the due date on the letter to avoid incurring a penalty for failure to furnish information. If taxpayers determine they do not qualify for the HOH filing status, they should mark the “I do not qualify for head of household” box on the top of the HOH demand letter.

IRS Council Report Analyzes Tax Administration Issues

The Internal Revenue Service Advisory Council (IRSAC) issued its annual report for 2017, including numerous recommendations to the IRS on new and continuing issues in tax administration.

  • Report recommendations cover numerous topics including:
  • Adequate Funding for the IRS
  • W-2 Verification Codes
  • The Private Debt Collection Program
  • The Large Business & International Examination Process
  • Establishment of Minimum Standards of Competence for All Tax Practitioners and Tax Return Preparers, and
  • Third-Party Application Programming Interfaces

FTB Guide to California’s Throwback Rule

When determining the Taxpayer’s California Sales Factor, an out-bound (out-of-state) sale may be included in the Taxpayer’s numerator (treated as a California sale). Every taxpayer (corporation, limited liability company, and limited partnership) that’s organized in California, registered with the Secretary of State to do business in California, or “doing business” in California within the meaning of RTC Sec. 23101 has a filing requirement in California (what form and the type of tax and fee depends on the entity type). The requirement to file a return and pay the taxes owed is imposed on each entity, including corporate taxpayers that are members of a combined reporting group, and multi-tiered pass-through business entities.

If a corporation has income from sources both within and outside California, it’s required to allocate and apportion its income as provided in Chapter 17, Part II of the RTC. For taxable years beginning on or after Jan. 1, 2013, RTC Sec. 25128.7 requires all business income of an apportioning trade or business, other than an apportioning trade or business under RTC Sec. 25128(b), to apportion its business income to California using the single-sales factor formula.

When determining how much of the receipts from sales are assigned to the California sales factor numerator, California’s throwback rule (see R&TC Sections 25135 and 25122) needs to be considered.