state income tax procedures overview to various processes and issues
TRANSCRIPT
State Income Tax Procedures
Overview to various processes and issues
Tax Agencies in CA
Three agencies Franchise Tax Board Board of Equalization Employment Development Department
Most states have 1 June 2009 – Governor Schwarzenegger proposed
merging the 3 (not the first time someone has suggested this) Economies of scale Coordinated technology and info sharing Easier for taxpayers
Statute of Limitations
Many states follow federal rule California – 4 years rather than 3 Longer if no return filed, such as because
company did not think it had nexus in the state
Amnesty
Some states and cities have amnesty programs as way to get more revenues Usually very limited time period Specific guidelines as to who and what time
periods are covered + type of tax If previously used an amnesty period, might not
be eligible If could have used amnesty but did not, might be
an add’l penalty imposed by auditors
Tools for finding taxpayers
Info sharing and audit report sharing with IRS Many states + IRS sharing info on tax shelters via MTC and FTA
arrangement http://www.mtc.gov/uploadedFiles/Multistate_Tax_Commission/Events/Annu
al_Conference/1993FTAUnifromExchangeofInformationAgreement.pdf
MTC Uniform Exchange of Information Agreement among signing states
Info sharing within the state, such as among state agencies. EX - CA AB 3079 (Chap 306, 9/08) – authorizes the Industrial Relations Dept
to let BOE know if it becomes aware of a retailer not registered for sales tax (“information available in the department’s records that indicates a retail establishment is operating without a seller’s permit required by the State Board of Equalization, to assist the State Board of Equalization in determining compliance with the Sales and Use Tax Law)”
Information sharing
Per IRC §6103(d), the IRS shares tax return information with all 50 states and comparable state statutes allows the states to share tax info with the IRS http://www.irs.gov/govt/liaisons/article/0,,id=13308
7,00.html
What to do if IRS makes adjustments to federal return?
2008 CA Personal Income Tax Booklet
CA appeals
Next goes to informal process with hearing officer at FTB
Next
If disagree with hearing officer determination, get final notice of findings
If disagree, have 30 days to appeal to BOE Brief should be detailed as hearing is short
See FTB Pubs 81 and 985
Next – BOE ruling
Adjudication of state tax disputes In some states, including California, the tax agency acts as
auditor and adjudicator Possible solution - Model State Administrative Tax Tribunal Act
Endorsed by the ABA Article on the Act: “The Model Act would guarantee that every
taxpayer who receives a state tax assessment gets a de novo hearing of record, before paying the tax, from a tax expert that is completely independent from the tax collector. An admittedly cheesy acronym—“BRIE”—may help you remember the Act’s four main goals, i.e., “B(efore payment),” a taxpayer who receive a tax assessment must be able to make his “R(ecord)” before an “I(ndependent body)” that has “E(xpertise in tax matters).”” From: The State and Local Tax Lawyer, Vol. 10, 2005, p. 83
http://meetings.abanet.org/webupload/commupload/TX331000/otherlinks_files/taxlawyerart.pdf
Tax court in CA?
Final report (12/03) of the CA Commission on Tax Policy in the New Economy recommended a state tax court: “Recommendation (unanimous): State Tax Court:
California should establish a state administrative body to operate like the U.S. tax court. This body would resolve all tax disputes, including personal income tax, corporate income tax, sales and use tax, property taxes, payroll taxes, and excise taxes” http://www.library.ca.gov/crb/catax/Docs/2003-12_FinalReport
In CA, must pay first before get to superior court