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Sacramento Tax Law Blog

IRS Announces 2018 Tax Rate Schedules and Retirement Plan Limitations

The Internal Revenue Service (IRS) released its annual inflation adjustments for many tax benefits applicable for tax year 2018 (returns filed in 2019). The standard deduction for taxpayers who are married filing jointly will increase slightly to $13,000; for single and separately filing married taxpayers, the standard deduction will also increase slightly, to $6,500. For tax year 2018, the foreign earned income exclusion is $104,100, up from $102,100 for tax year 2017. The annual exclusion for gifts increased to $15,000, an increase of $1,000 from the exclusion for tax year 2017.

California Shareholder in Prison for Filing False Returns

On October 6, 2017, Shiv D. Kumar, the sole shareholder of a California transportation company that serves disabled individuals, was sentenced to 30 months in prison for filing false corporate returns. The Department of Justice found that Kumar provided his accountant with false books and records, leading to the underreporting of the business' income to the IRS by over $2 million per year in 2009 and 2010.

Victims of the California Wildfires Must File with County for Property Tax Relief; May Qualify for State and Federal Tax Relief

California counties will not automatically reassess homes due to the recent fires, because the law requires that the counties first receive an application from the homeowner.  Those who lost property will need to file the appropriate county casualty abatement form for the 2016-2017 year.

What Does a San Jose Priest Have in Common with Al Capone? Prison!

No one is beyond the certainty of taxes, as a priest for the Roman Catholic Diocese of San Jose, California, discovered last week. Hien Minh Nguyen was sentenced to 36 months in prison for taking cash and checks donated to the Diocese by parishioners and depositing them into his personal bank account to pay for personal expenses. The court found that the priest embezzled a total of $1.4 million from the Catholic Church and, by concealing the embezzlement from his return preparer, evaded over $500,000 in income taxes owed to the IRS.

IRS Resumes Issuing Private-Letter Rulings Concerning Tax-Free Spin-Offs

Pursuant to IRS Revenue Procedure 2017-52, the IRS has introduced a pilot program to resume offering private letter rulings on the tax consequences of certain distributions of stock or securities of a controlled corporation under I.R.C. Sec. 355. From September 21, 2017, through March 21, 2019, taxpayers may request a transactional ruling concerning plans to create tax-free spin-offs. For more information, click here.

President Trump Proposes Federal Tax Reforms

President Trump and several key members of Congress have released their proposal for federal tax reform. Their main goals are to simplify the tax code, lower tax rates, increase the competitiveness of American businesses in the international arena, and repatriate dollars currently held in offshore accounts.

Out-of-State Trusts Can Now Participate in California Voluntary Disclosure Program

On September 25, 2017, Governor Brown signed S.B. 813 into law, which, effective January 1, 2018, expands the existing California state voluntary disclosure program to include out-of-state trusts with California beneficiaries and non-resident partners. Such taxpayers will now be eligible to use the voluntary disclosure program to bring non-California trusts into compliance with California state tax laws. In addition, the Franchise Tax Board (FTB) may waive late-filing penalties for certain types of entities and returns under the program.

Gov. Brown Signs Historic State Bar Fee Bill Into Law

On October 2, 2017, California Governor Jerry Brown signed SB 36, the fee bill for the State Bar of California, into law. This year's annual attorney licensing fee bill includes major reforms for the agency, including the separation of voluntary sections into a new, private non-profit entity. The Board of Trustees will transition to being composed entirely of trustees appointed by the California Supreme Court, Legislature, and Governor. Attorneys will no longer elect any of the trustees. The Supreme Court will appoint the Board's Chair and Vice Chair.

Californians Can e-File Amended Returns Starting in 2018

According to the October 2017 newsletter of the California Franchise Tax Board, beginning in January 2018, California taxpayers will be able to e-file amended individual returns for tax year 2017 and later on a new Schedule X, California Explanation of Amended Return Changes. The Form 540X will be eliminated going forward, but you will still need to paper file Forms 540X to amend returns for prior tax years.

Unfiled Returns? Possibly Good News as the IRS Suspends the Automated Substitute for Return (SFR) Program

Sometimes when a taxpayer does not file a tax return, the IRS will estimate the amount owed and prepare a Substitute for Return (SFR). More specifically, IRS computers prepare the SFRs based on information the IRS receives from third parties, such as Forms W-2 and 1099. The IRS would then issue a letter to the taxpayer regarding the proposed deficiency with penalties added for late filing and late payment. Taxpayers could respond with information about deductions, credits, or errors and discuss the proposed deficiency with an IRS employee.

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