Franchise Tax Board Auditing Head Of Household Returns

Sacramento - The Franchise Tax Board (FTB) announced mailing more than 135,000 review letters to taxpayers who claimed the “Head of Household” filing status on their 2009 state tax return.

Taxpayers who do not qualify will have their tax reassessed at either a single or married-filing-separate filing status. Nearly 29,000 taxpayers who used this status last year did not meet its requirements and were issued more than $31 million in tax assessments.

Each year FTB reviews tax returns of taxpayers who claim the Head of Household filing status because the qualifications are commonly misunderstood. The status generally results in lower tax liabilities for unmarried taxpayers who care for a dependent. To qualify, the taxpayer must provide care for more than one-half of the year and pay more than one-half the cost of maintaining their home. The qualifying person must be related to the taxpayer and meet the requirements to be a qualifying child or relative. More than 2 million California taxpayers use this filing status each year.

FTB advises taxpayers who receive an audit letter to respond promptly by completing the enclosed questionnaire. Failure to respond could result in a tax assessment and penalty. Questionnaires can be submitted by any of these methods:

• Respond electronically at ftb.ca.gov. Use HOH Audit Letter Web Response page.
• Respond by fax at 866.223.8195.
• Respond by mail using the pre-addressed envelope provided with the audit letter.

FTB provides the following tools on its website to assist taxpayers:

• Head of Household “self-test.”
• Answers to frequently asked questions.
• Publication 1540, “CA Head of Household Filing Status,” in English and Spanish.

San Bruno Explosion Employer Payroll Tax Extension

Tax relief extended to Employers Affected by San Bruno Explosion and Fire

Employers in San Mateo County, California, that have been directly affected by the explosion and fire that occurred in that county in September 2010 may request up to a 60-day extension of time from the California Employment Development Department (EDD) to file their state payroll reports and/or deposit state payroll taxes without penalty or interest. Written requests for extension must be received within 60 days from the original delinquent date of the payment or return to file/pay. Related information is available on the EDD Web site at http://www.edd.ca.gov/Payroll_Taxes/.

Source:

http://www.edd.ca.gov/Payroll_Taxes/Emergency_and_Disaster_Assistance_for_Employers.htm#sanmateoseptember

Health Care Tax Credit

Millions of small businesses have begun receiving postcards from the IRS alerting them to the new Small Business Health Care Tax Credit and encourage them to check their eligibility. The IRS provides a fact sheet to determine whether a business qualifies. The IRS also provides answers to Frequently Asked Questions. Key provisions of the credit are as follows: Eligibility Rules

• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000.
• Both taxable (for profit) and tax-exempt firms qualify.

Amount of Credit

• Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
• Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

FTB Notices sent to Head of Household Taxpayers

Last week, the Franchise Tax Board (FTB) sent more than 140,000 audit letters to pre-selected individuals who used the “Head of Household” (HOH) filing status on their 2008 state tax returns.

The HOH filing status generally provides a lower tax assessment for unmarried taxpayers who cared for a dependent for over half the year and paid more than half the cost of maintaining their home. Taxpayers who do not qualify will have their tax reassessed at either a single or married-filing-separate filing status. More than 2 million California taxpayers use the HOH filing status each year.

FTB advises taxpayers who received an audit letter to promptly submit a completed questionnaire by using any of these methods:

• Go to FTB’s website ftb.ca.gov and use the HOH Audit Letter Web Response page. Taxpayers will need their Social Security number and the “FTB ID number” listed at the top of the questionnaire letter.
• Fax pages 3 and 4, and any supporting information to 866.223.8195.
• Mail the questionnaire using the pre-addressed envelope provided with the audit letter.

Failure to respond could result in a penalty. FTB provides an HOH “self-test,” answers to many frequently asked questions, and Publication 1540, “CA Head of Household Filing Status,” in English and Spanish on its Website at ftb.ca.gov. Feel free to contact us for additional information.