Cali FTB says withold this...

Small-business Withholding

If you pay California source income to a California nonresident, generally, you must withhold on all payments that exceed $1,500 in a calendar year.

If you backup withhold for the IRS, you must also backup withhold for us on California source income.

Backup withholding applies to California residents and nonresidents who do not provide a taxpayer identification number or do not certify exemption from backup withholding when required.

sacramento cpa and auburn cpa: islip + company, tax preparation experts with offices in sacramento and auburn california, watching out for our clients and you...  the well informed make better decisions...

Cali FTB - top audit issue...

1031 Exchanges Among Top Audit Issues

The FTB disclosed that one of its top audit issues continues to be like-kind exchanges, also known as 1031 exchanges. Under IRC Sec. 1031 and conforming California laws

taxpayers may defer gain from the sale of property, either in part or full—if certain conditions are met. There are three general requirements:

There must be an exchange, as opposed to a separate sale and reinvestment, by the same taxpayer. 

The relinquished property and replacement property must be "like kind."

Both the property given up and the replacement property must be held for investment or for productive use in a trade or business. Property held for personal use or primarily for sale is generally not eligible for nonrecognition treatment.

 Both the property given up and the replacement property must be held for investment in a held for personal use

If at any time during the exchange, the taxpayer or agent has receipt or control of any portion of the sales proceeds, this will generally result in gain recognition.

Along similar lines, if the taxpayer does not reinvest the full amount of proceeds into eligible replacement property, or obtains other property in the exchange (referred to as "boot"), this may also result in gain recognition.

sacramento cpa and auburn cpa: islip + company, tax preparation experts with offices in sacramento and auburn california, watching out for our clients and you.  the well informed make better decisions...

California Self-Employment – Social Security Tax Deduction 

Q: For the 2011 and 2012 taxable years, does California conform to the temporary federal amounts of self-employment tax (relating to the Old Age, Survivors and Disability Insurance tax – (OASDI /Social Security)) that may be deducted in computing adjusted gross income? 

A: No. Revenue and Taxation Code section 17024.5(a)(2)(A) provides that California only incorporates those uncodified federal tax law provisions that were enacted on or before January 1, 2009.

As the increased self-employment OASDI tax deduction was enacted after January 1, 2009, California does not incorporate that change, and the deductible amount remains at 50%. In uncodified language, section 601(b)(2) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act) (P.L. 111-312) provided that the Internal Revenue Code section 164(f) income tax deduction allowed for tax years beginning in 2011 is computed at the rate of 59.6% of the OASDI tax.  

In February 2012, the Middle Class Tax Relief and Job Creation Act of 2012 (the 2012 Act) (P.L. 112-96), which continued the federal deduction amount of 59.6% for tax years beginning in 2012, was enacted. Because California law does not incorporate the changes to the federal deduction percentage that were made in section 601 of the 2010 Tax Relief Act, or the 2012 Act, any difference between the allowable amount under California law and the new temporary federal deduction percentage is a Schedule CA adjustment for California tax purposes.  

To the extent that a self-employed taxpayer has already filed a 2011 California personal income tax return, any return filed using the higher federal rate should be amended prior to the due date of the return.

islip + company, cpas tax preparation experts with offices in sacramento and auburn california, watching out for our clients and you.  the well informed make better decisions...