Anthony Sykes & Company

              Until recently the Internal Revenue Service ( IRS ) had been encouraging many taxpayers to hold off on filing their tax returns. This is not because of a technical flaw, but there was a question that needed to be answered. Would state tax payments over the past year be taxable at the federal level? California is one of 21 states to provide such payments.           After discussion, it was determined that these payments would not need to be reported as income, and therefore not taxable. They will be viewed as payments for general welfare and disaster relief. This was a complex situation that had many questions for the IRS . One determining factor is that since the federal pandemic disaster declaration is ending in May 2023, there is no need to make an issue of these payments made in 2022. With that issue settled, please be sure to gather your important documents and prepare to file your t...

                 With the Internal Revenue Service ( IRS ) ready to accept tax returns, you may be wondering how to take advantage of an early start date. The best thing to do is use your time wisely. How can you do that?  The first thing you should do is to gather all of your necessary information. This is the time of year that tax information is arriving, so keep it organized and make copies to give to your Qualified Tax Professional . The earlier you start this process, the easier it will be. As a bonus, you will be less likely to be in a rush and have missing details that will prevent you from filing your tax return. If you are choosing a new Qualified Tax Professional , make appointments early to meet them and discuss your needs. The longer you wait, the less availability they will have. The best way to prepare for tax season is to gather your information and get your questions answered early.

             The tax season for this year has been established. As announced by the Internal Revenue Service ( IRS ), the first day tax returns will be accepted is January 23 . The deadline to file is April 18 . However, in light of the recent devastating storms, many counties in California were declared federal disaster areas. How does this designation change things for the affected taxpayers?           As is often stated, this allows for federal funding to care for the practical needs of disaster victims. This also makes the way for federal agencies like the ( IRS ) to have the ability to adjust deadlines as circumstances dictate. In this case, the taxpayers that live in California counties that have been declared federal disaster areas, will have until May 15 to file federal individual and business tax returns. This also postpones any estimated tax payments. This allows for time to focus on what is needed now.

               For those who requested an extension to file their 2021 tax return, the deadline is Monday, October 17 . The Franchise Tax Board ( FTB ) follows the lead of the Internal Revenue Service ( IRS ) in this area. The time to file is now. However, there is no need to wait until the last minute of the last day. If you are ready before October 17, get your return filed then. When you have your information, there is no need to wait. If something unexpectedly comes up, and you file after the deadline, there will be a late filing penalty.           In some cases, there are some who are given extra time. Members of the military serving in a combat zone have extra time. They usually have up to 6 months after they leave the combat zone to file. Taxpayers who live in a declared disaster area will have extra time. In these situations, the filing date can continue to change, so those affected need ...

                 The Franchise Tax Board ( FTB ) has announced state tax relief for individuals and businesses impacted by Hurricane Ian. This means that there is a postponement for required payments and an automatic extension given to file a return. The FTB automatically follows the Internal Revenue Service ( IRS ) lead when it comes to postponement periods for presidentially declared disasters.           This means that for those who have been affected by the hurricane, the October 17 tax filing deadline has been moved to February 15, 2023. Taxpayers can also deduct a loss related to a disaster. Instructions must be closely followed in this process.

          The tactics of criminals and scam artists continue to adjust over time. To stay safe, we need to continue to learn about them. We may be familiar with the concept of phishing. This is when a message or email that seems to be from a legitimate source is sent out to hook as many as possible and get them to share confidential information. The activity of spearphishing targets a particular group. With tax season well under way, criminals are turning some of their attention to Tax Professionals and others who use tax software. Many are receiving emails that demand action be taken. They claim that online accounts have been frozen. However, clicking on any of the official icons or links will send you to a page that requires account information to be provided. At that point, the account is compromised.           Instead of clicking on links, go to the actual website. You can also call the support hotline for the governmen...

                 With a new Tax Season set to begin, we need to remember to take steps to protect ourselves from scam artists and criminals. For a certainty, they are adjusting and preparing to attempt to capture your personal information. We need to be aware of their current tactics and remain vigilant. Here are some basic points to keep in mind.           One common trick that they use is to make a phone call and impersonate a Franchise Tax Board ( FTB ) or Internal Revenue Service ( IRS ) employee demanding a tax payment. If these agencies need to confirm details with you, the first step is always a letter mailed through the United States Postal Service. If a call is necessary, the employee will identify themselves, be courteous, and never demand immediate payment. They will never threaten to call the police, ask for gift cards, or try to find out your banking information. These are th...

             It is now official that the Internal Revenue Service ( IRS ) will begin to accept and process tax returns on January 24, 2022 . To make this tax season go as smoothly as possible, it is strongly recommended that Taxpayers have all of their documents gathered ahead of time. This will allow them to file a complete return the first time and avoid processing delays.           Your Qualified Tax Professional can help you determine what documents are needed. With the stimulus and child credit payments in 2021, there is a greater need for keeping good records than before. Another important note is that the deadline for filing an individual tax return is April 18,  2022,  because Emancipation Day is observed in Washington D.C.

             The last day to file a California state personal income tax return on an extension is Friday, October 15. Anything after that will be considered late by the Franchise Tax Board ( FTB ). Filing on time will avoid penalties, and potentially allow you to qualify for Golden State Stimulus ( GSS ) payments. If you do not file income taxes for 2020, you cannot qualify.           If you have income of less than $75,000 for 2020, you can qualify for a GSS payment. In addition, the taxpayer cannot be claimed as a dependent and must be a resident of California when the payment is issued. They also must have spent at least half of 2020 in the state of California. If you have provided bank account information to the FTB , you can expect an electronic deposit. Otherwise, the payment will be sent by mail. It is estimated that half a million tax returns still need to be filed. If you have not done so a...

          Just like last year, the Tax Deadline for 2021 will be pushed back. This year it will now fall on Monday, May 17 . There have been calls for this action for some time. The reasons the Internal Revenue Service ( IRS ) took this action are many, but here are a few.           The Tax Season this year started two weeks later than normal. This was to accommodate law changes that were passed in December 2020 and make sure that IRS computers were updated. The newly enacted 2021 American Rescue Plan Act also makes some significant changes to existing tax law, including allowing a certain amount of unemployment benefits from 2020 to be untaxed. With this recent news, some may take additional time to file, but the IRS does not want anyone to file an amended Tax Return at this time. If you look at this time last year, there have been about 18% fewer Tax Returns filed . It’s clear that people needed more time....

            Many filed for Unemployment Benefits for the first time last year and received those payments during a very difficult time. Now as we file our taxes, it is thought that less than half of those who had Unemployment income had their taxes withheld. This can lead to a great shock when those Federal Tax Returns are filed. All of that income is taxable, including the enhanced federal payments that were available most of the year. This can lead to tens of thousands of dollars in taxes owed this year.           If you are still collecting Unemployment Benefits, check your withholding. There should be a simple option that allows you to voluntarily withhold the necessary amount to avoid any unwanted surprises next year. If you are unsure of what your status is, you can always check with your Qualified Tax Professional .

     Millions of Taxpayers have, or are currently, receiving unemployment funds. Many are doing so for the first time due to the COVID-19 pandemic. Those who are taking part in this compensation need to know that it is taxable income. These benefits will be reported to the Internal Revenue Service ( IRS ) and must be stated on your Federal Income Tax Return for the year it was received. This would include the extra compensation provided by the Coronavirus Aid, Relief, and Economic Security ( CARES ) Act.      To avoid surprises next year, Taxpayers can choose to have tax withholdings applied right now. Usually the agency has their own form for this use. If you do not choose voluntary withholding, estimated quarterly payments can be made. Either way, for those who have received any unemployment compensation this year can expect a Form 1099-G next January. It will list the amount of unemployment income for this year and the amount of tax that was withheld...

     The Franchise Tax Board ( FTB ) is reminding Taxpayers that the time to pay is now upon us. Any individual Income Tax payment must be made by Wednesday July 15 . There has also been adjustment for those who make Quarterly tax payments. Two Quarterly estimates must be made as one , and that is also due on July 15. The individual and Quarterly tax payments must not be combined.      Those who do not owe or who are not required to file a Tax Return may benefit from filing. It is not too late to file and claim credits you may qualify for. It’s always best to seek out the help of a Qualified Tax Professional in this matter.

     With so many staying home due to the COVID-19 pandemic, there is a steep rise in demand for food delivery services. Different companies are available in most major markets, but all of them are seeing a boom in business. For some restaurants, it is the only way they can try to stay afloat. When any industry sees major growth, state tax agencies are always ready to take a close look at their accounting practices.      One focus of many agencies will be taxes related to marketing, delivery, and processing fees. Are they being collected and paid? Since almost every state and most cities have different laws, this is a concern that must be addressed. This is similar to the situation that Online Marketplaces found themselves in 5 years ago when the US Supreme Court ruled that they must collect and pay Sales Tax wherever their items are bought, even if they do not have a physical presence in that state. Food delivery services may begin to have each transa...

        An ever-present threat that we must all deal with is Identity Theft . Despite our best efforts, we may become a victim to one of these schemes. Going through this ordeal is challenging and stressful, however immediate action is necessary. Contact the Franchise Tax Board ( FTB ) and Internal Revenue Service ( IRS ) to stop the use of your personal information in fraudulent tax returns. But you must live your life, which includes continuing to file tax returns. How does this event change the way a Taxpayer files their taxes?           Moving forward, the FTB will manually review your tax returns. This is to confirm the tax return is valid and will continue for years after the report of Identity Theft. A situation like this can delay a tax refund from the FTB up to 60 days. If a fraudulent tax return is filed before a valid one, the taxpayer will have to use paper forms and submit them to the FTB for process...

         When it comes to filing a Tax Return in the state of California, there will be a major change in how Taxpayers will interact with the Franchise Tax Board ( FTB ). In the past, if the FTB wanted to disqualify a Taxpayer from claiming Head of Household status, they would send a “ Notice of Proposed Assessment ”. This would allow the Taxpayer 60 days to respond. If they object, and the FTB did not change the proposition, there would be an appeals process that would move to the Office of Tax Appeals ( OTA ). What starts in January 2020 will be very different.           The process described above normally takes months to initiate and try to resolve. In January, the FTB will send out “ Tax Return Change ” notices instead. This adjustment will speed up the time when the FTB contacts Taxpayers. However, if they dispute the change, and the FTB upholds its decision, they will be forced to pay the tax and fi...

          A Health Reimbursement Arrangement ( HRA ) is a plan set up by an employer. It covers medical expenses related to the care of employees and their dependents. This type of fund can be claimed as a deduction by the business and is usually tax free for the employee. This is often an attractive option for businesses because they determine how much will be in the fund. Any expenses over that amount will be covered by the employee.           This is not an account that can have withdrawals as necessary. The expense must be made, then it will be reimbursed. Since the HRA belongs to the company, if the employee leaves, they will lose the benefit. Starting in January 2020, HRA ’s will undergo a massive change. Our next post will detail why that is.

Starting in January of 2020 , California will require all residents to have basic health insurance. The bill passed in the California Assembly is called the California Health Care Coverage Shared Responsibility Act. This “Individual Mandate” is like what was seen in the Affordable Care Act. There will be a fine for individuals who do not secure health coverage. This can be applied based on the number of months, or the size of the household. One big difference with this requirement is that the Franchise Tax Board ( FTB ) will not fine employers who do not offer health care to their employees. The fines that are collected will help to create subsidies for those who have difficulties paying for the insurance. These individuals must meet certain specific criteria. Members of Native American tribes and those who receive certificates of exemption will not be required to be a part of this program. The FTB will administer the program and any penalty will be reported on, and paid with,...