Since 1990, the California Employment Development Department (EDD) has retained the statutory authority to issue penalties for failure to file Forms W-2 and/or 1099. Until this year, effective January 1, 2018, taxpayers assessed the steepest of those penalties, Unemployment Insurance Code section 13052.5, did not have a right to petition the assessment. However, since enactment of Assembly Bill 1695 on July 24, 2017, and effective January 1, 2018, Section 13052.5 is now petitionable before the California Unemployment Insurance Appeals Board.
The California Franchise Tax Board (FTB) released highlights from the 2017 filing season in its most recent newsletter. The number of personal income tax returns filed has increased 1 percent since the last filing year, and business entity returns filed has increased by 3.4 percent. The FTB issued over 12 million personal refunds for the 2017 season, totaling $12.6 billion, and over 165,000 business refunds, totaling $837 million.
The California Franchise Tax Board (FTB) issued Chief Counsel Ruling 2017-01 on August 2, 2017, regarding market-based sourcing rules for performance of "non-marketing" services. Where a subcontractor performed administrative or non-marketing business services for a health plan client, the members or sponsors of the health plan are not considered the direct customers of that subcontractor, but rather only the health plan entity.
In January, 2015, the California Supreme Court granted review of Dynamex Operations West, Inc. v. Superior Court (Lee) (2014) 230 Cal.App.4th 718.
We experienced an original success this month, trying a new approach to a very old problem. Businesses that register with the California Office of the Secretary of State (SOS) must, among other things, file annual income tax returns with the California Franchise Tax Board (FTB) and pay either the appropriate amount of income tax due based on the business' California net income, or pay a minimum $800 franchise tax, whichever is larger. Frequently, a taxpayer may set up a business but ultimately abandon the idea before ever operating the business. Or, sometimes a business ceases to operate, but the requisite documents are not correctly filed with the SOS, leaving the FTB to believe the business is still active. Many years may pass before the would-be business owner realizes an annual $800 franchise fee has been assessed against the business, along with additional penalties and interest.