Taxpayers who have been relying upon Section 530 to provide relief with respect to their classification of service providers as independent contractors rather than employees should take note of the fact that Section 530 is now under attack from Congress and the Obama Administration.
The California Franchise Tax Board (FTB) has recently issued a Legal Notice generally providing that taxpayers who previously filed incomplete IRS Forms 8886 or failed to file Forms 8886 with FTB will avoid penalties by filing completed forms within 60 days. Taxpayers that may have concerns regarding Form 8886 FTB compliance issues should take this opportunity to review and correct any prior errors or omissions.
The remainder of this article can be accessed in the August 2007 edition of Thomson Reuters’ Practical U.S./Domestic Tax Strategies.
The statutory requirements for filing a claim for refund are set for in Cal. Rev. & Tax. Code 19322. The statute requires the claim to be (1) in writing; (2) signed by an authorized person; and (3) must state the “specific grounds” for the refund claim.
The regulatory provisions and case law offer additional guidance for filing a valid claim for refund.
(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)
For purposes of the California sales and use tax law, a “sale” and “purchase” do not include the design, development, writing, translation, fabrication, lease or transfer for a consideration of title or possession of a custom computer program. An issue that often arises with respect to a custom computer program is whether such program is deemed a performance of service, versus a sale or purchase of tangible personal property. In addition, it is often difficult to determine how much “customization” is necessary to constitute a custom computer program.
(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)
Pursuant to Cal. Rev. & Tax. Code Section 19306(a) a claim for refund typically must be filed within for years from the date the return was filed, four years from the last day prescribed for filing the return (determined without regard to any extension of time for filing the return), or one year from the date of the overpayment, whichever expired later. If six months elapses without any action upon a filed refund claim, the taxpayer generally may consider the claim disallowed or “deemed denied” and either appeal the claim to the State Board of Equalization (SBE) or file a suit for refund in court.
(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)
Taxpayers intending to change their residency for California personal income tax purposes should be aware that intent alone is insufficient to establish new residency. Moreover, intent coupled with physical acts of starting to move or transition to another state is also insufficient to establish new residency. The California courts have held if one is a resident of California, that person cannot be in California for “a temporary or transitory purpose” until that person’s acts as well as his or her intent show that he or she has moved out of California. That one may intend to move from California at some time in the future does not make that person someone who is in California for a temporary or transitory purpose. One is a resident for tax purposes until there are sufficient indicia of an actual change of such residence.
(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)
Pursuant to Cal. Rev. & Tax. Code Section 17041, a California resident is taxed on all income, from whatever sources derived. In contrast, Cal. Rev. & Tax. Code Sections 17041(b) and 17951 state that nonresidents and part-year residents of California are only taxable on income from sources within California. Exactly what income has a California “source” is the subject of much debate and legislative action.
(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)
Pursuant to Cal. Rev. & Tax. Code Section 17014(a), a resident is an individual who (1) is in California for “other than a temporary or transitory purpose” or (2) is “domiciled” in California but is outside California for “a temporary or transitory purpose.” Presence within California for more than nine months of a taxable year creates a rebuttable presumption of California residence under Cal. Rev. & Tax. Code Section 17016. However, no presumption of nonresidency arises when an individual spends less than nine months of the year in California.
(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)
In situations where the taxpayer has not paid the tax in full but has otherwise filed a valid claim for refund, Cal. Rev. & Tax. Code Section 19322.1 allows a taxpayer to file an informal claim for refund tolling (delaying the expiration of) the statute of limitations. Practitioners should be aware of some of the common pitfalls associated with filing an informal refund claim, including situations involving taxpayers making payments under an installment agreement, the effective date of the statute and the Franchise Tax Board’s (FTB) Notice interpreting the statute.
(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)
Cal. Rev. & Tax. Code Section 19043.5 was added by the California Legislature during the 2001-2002 legislative session. Under the prior law, if an adjustment proposed by the Franchise Tax Board (FTB) did not result in additional tax due, but only affected the amount of a tax credit that may be carried over to the next year, the FTB could issue a zero-balance notice of proposed assessment under Cal. Rev. & Tax. Code Section 19043. However, the taxpayer’s right to appeal a zero-balance notice of proposed assessment was not clear, because there was no dispute over the amount of tax due. Section 19043.5 was adopted to specifically address this issue.
(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)
