Certain CA Service Providers Must File Use Tax Return

The California State Board of Equalization (BOE) is notifying approximately 300,000 service business owners that they may owe use tax. Businesses that meet the statutory definition of a "qualified purchaser" are required to register with the BOE, file returns by April 15 (April 18 in 2011) of each year, and report all purchases subject to use tax from the previous calendar year. A "qualified purchaser" is a business that receives at least $100,000 in gross receipts per year from business operations, is not required to hold a seller's permit with the BOE, is not a holder of a use tax direct payment permit, is not required to be registered with the BOE, and is not otherwise registered with the BOE to report use tax. Businesses that do not meet the $100,000 gross receipts threshold are still required to report and pay use tax, but are not required to register with the BOE for that purpose. Persons that have multiple businesses with the same ownership must register if the aggregate gross receipts of those businesses meet or exceed the $100,000 threshold. New applicants have been automatically registered to eFile their returns for 2010. If a taxpayer is not a retailer or service business currently required to register with the BOE, the easiest way to report and pay use tax is on the California state income tax return.

Relief Provided for CA Winter Storm Victims

The Franchise Tax Board (FTB) has announced that special tax relief is available for California corporate and individual income taxpayers affected by the recent winter storms that occurred in California from December 17, 2010, through January 4, 2011. The storms were declared a federal disaster in 10 counties on January 26, 2011. The counties declared major disaster areas include Inyo, Kern, Kings, Orange, Riverside, San Bernardino, San Diego, San Luis Obispo, Santa Barbara, and Tulare. Affected taxpayers may claim their disaster losses in the current or the prior tax year. Claiming the loss on a previously filed tax return allows the FTB to issue refunds quickly. Taxpayers claiming the disaster loss should write "California Winter Storms 2010" in red ink at the top of their tax return to alert the FTB to expedite the refund. If taxpayers are e-filing, they should follow the software instructions to enter the disaster information. Taxpayers can get forms for an amended 2009 tax return or an original 2010 tax return on the FTB's website at http://ftb.ca.gov/. Taxpayers needing copies of lost or damaged state returns should complete Form FTB 3516, Request for Copy of Tax Return, available online. Disaster victims can receive copies of their tax returns for free. They should print "California Winter Storms 2010" in red ink at the top of their requests. More information about disaster losses is available in FTB Publication 1034, Disaster Loss, IRS Publication 547, Casualties, Disasters, and Thefts. Taxpayers who have questions about their accounts can call the FTB toll-free at (800) 852.-5711, Monday through Friday, from 7 a.m. to 5 p.m.

Textbooks are Eligible for an IRS Tax Credit

The National Association of College Stores (NACS) is urging students and their families to take advantage of the American Opportunity Tax Credit, which applies to textbooks and other course materials in 2009 through 2012. The credit covers textbooks and other course material expenses—as well as tuition and fees not covered by scholarships or grants up to $2,500 each year for the first four years of college. Forty percent of the credit is refundable. The NACS has created a Web site, www.textbookaid.org, to provide information about how to best take advantage of the program, according to NACS director of government relations Rich Hershman. The association has also developed brochures and a Facebook page in partnership with the Internal Revenue Service. It includes a summary of the AOTC, explanatory examples, answers to frequently asked questions about the credit, and direct links for further information from the IRS. According to an October 2010 study by the Treasury Department, AOTC recipients in 2009 received an average tax credit of more than $1,700. In addition, 4.5 million students and families received a tax refund from the AOTC in 2009 with an average value of $800.

AFRs for April 2011

The Applicable Federal Rates (AFRs) for the month of April are as follows:

	Annual	Semiannual	Quarterly	Monthly
Short-term (≤ 3 years)	0.55%	0.55%	0.55%	0.55%
Mid-term (>3 years but ≤9 years)	2.49%	2.47%	2.46%	2.46%
Long-term (> 9 years)	4.25%	4.21%	4.19%	4.17%

CA Mandatory e-Pay Penalty Reminder

Just a reminder that beginning January 1, 2011 the California Franchise Tax Board began enforcing the mandatory e-pay penalty. The penalty applies to personal income taxpayers whose tax liability is greater than $80,000, or who make an estimated tax or extension payment that exceeds $20,000 for taxable years beginning on or after January 1, 2009. Once either of these conditions is met, all payments regardless of the type, amount, or tax year must be remitted electronically. Electronic payment methods include Electronic Funds Withdrawal (EFW), Web Pay, or credit card. There is a one percent penalty of the amount paid unless the failure to pay electronically was for reasonable cause and not willful neglect. For those that are not required to e-pay you can voluntarily pay your taxes electronically but you must first complete and submit an application to the FTB to get approval.