For many California residents, the complexity and length of the federal tax code make it more akin to a foreign language than to a comprehensible set of rules and regulations. That may help explain why so many people make mistakes when filing their tax returns. However, while it is certainly easy to make a mistake, facing allegations of tax crimes is nevertheless a serious matter. A conviction for tax evasion could lead to hefty fines and years behind bars.
As tax season approaches, many California residents may believe that their chance of facing an IRS audit is relatively small. Yet while audits are certainly not commonplace, they are not necessarily rare either. Moreover, the IRS is increasingly turning to so-called "unreal" audits that target far more taxpayers as the agency attempts to enforce the tax code.
Many California residents have or will inherit an individual retirement account. Currently, the law allows the holder of an IRA to receive taxable distributions over the course of his or her anticipated lifetime. However, that may change if a law proposed in the U.S. Senate gets passed, and Californians and others throughout the country may have to make new plans to ensure tax compliance.
Wealthy Californians have for a long time taken advantage of a range of tax loopholes that lower tax liability. For example, celebrities like Kim Kardashian, who recently made headlines for paying fewer state taxes in California than many people expected, almost certainly has a savvy tax consultant who helps ensure that she pays a lower tax rate each year.
California already has a free ReadyReturn option for taxpayers. The option involves the government's use of tax information from the previous year's return and combining it with information from the individual's W-2 form to prepare that person's taxes. The tax return is then sent by the state to the taxpayer, who then only has to review the return and sign it.
Individuals and businesses in California can likely look forward to continued uncertainty with regard to taxes. Congress has continued to postpone any in-depth discussion of tax law and will likely do so until after the presidential and state elections in November. As a result, California residents are probably asking a slew of tax-related questions with regard to 2012 and 2013.
The IRS is using California law as a model for new education requirements for tax preparers. The new requirements will go into effect in 2012, their purpose being to prevent tax fraud and protect taxpayers from bad decisions on the part of preparers.
Think you've got a great idea for simplifying California's tax laws? Give your idea directly to the Franchise Tax Board on Thursday, December 1st at the annual Taxpayer Bill of Rights Hearing, where industry representatives and individual taxpayers may present to the Board their proposals on changes to California's tax laws.
If your out-of-state corporation conducts any business in California, your corporation may have an obligation to file and pay taxes in California. Additionally, California residents are taxed on world-wide income.
Therefore, California residents, who receive income from out-of-state corporations, regardless of whether the corporation conducts business in California, are taxed on the income. The Law Office of Williams & Associates can assist your corporation and /or you in resolving your California compliance obligations.