CA Proposition 39-Out of State preparers doing CA taxes

[DMICPA]

I recently read that CA will subject out of state tax preparers that prepare CA tax returns or do any service for a CA address. Even thinking about a client in CA could cause the Franchise Tax Board to tax you no matter where you are located.

If a preparer lives in Nebraska for example and prepares tax returns or does any service for the client with a CA address, CA will tax that income even though the preparer never set foot in CA. The CA Franchise Tax Board has determined that the CA client received a "benefit" in CA and therefore, the preparer is taxable. CA no longer allows the three factor allocation (Sales, Payroll, Location) and just uses the sales factor.

I am certain that many of us have a few CA clients and this could trigger a bill from the Franchise Tax Board.

Does anyone have further information on this??

Bob

[JohnH]

I'd be interested in knowing about this as well if anyone can enlighten us.
This might cause me to have a referral for my one CA client.
Anyone on this forum located near Walnut Creek, CA?

[ChEAr$]

John, see separate email for name.

[JohnH]

Thanks Harlan.
I replied to the email.
Appreciate the help

[AZ-Tax]

Rental in CA but residence in AZ

I have a client with a rental in CA but clients residence is AZ. Based on past clients, the only time I had to file a CA return with a CA address is when someone relocated to AZ in the tax year. I would think this new law may help CA preparer's. Got to had it to CA for thinking of new ways to generate revenue. This morning I read an article that NY is going to suspend driver licenses of NY licensed drivers that owe more then $10K in NY state income tax.

[Uncle Sam]

CA Proposition 39

How can CA possibly track this?

I have a NY resident whose ONLY relation to California is an interest in rental property that he never visits because he has
a CA resident partner managing the property.

I also have an IN resident who owns not even a 1% interest in a California limited partnership - never steps foot in CA.
That partnership shows passive losses each year.

California plans to now tax me on the tax prep fee for those CA returns? I don't break down my bill by state.

[ATSMAN]

Too Cumbersome

I think CA will adopt a policy similar to NY that if you prepare 10 or more CA returns and you are a non resident tax preparer you have to register and pay a fee.

It is going to be very difficult to actually charge a state income tax to a non resident preparer who does all business by mail or e-mail. Can you imagine the administrative nightmare for CA if they start going after all non resident taxpreparers even if they prepare just 1 CA return. How do you breakdown the fee between CA and Fed return? What is the formula?

Lot's of unanswered questions?

[Gary2]

It's not clear from the base note whether they're saying that any CA return is taxable, regardless of where the parties are located, or merely that doing a return (for any jurisdiction) on behalf of a CA resident constitutes doing business in CA (because the end product is delivered to a CA resident) and is subject to CA tax. The latter wouldn't affect returns for people who don't live in CA but file because they get CA-sourced partnership or rental income (i.e., if it's the latter, most of us wouldn't be affected).

[FEDUKE404]

Who IS running the asylum?

This idea is absolutely ridiculous, but typical of the Left Coast mindset!

An immediate family member now lives in CA.

Are the wackos in Sacramento going to force me to pay a fee (or whatever) to prepare the tax returns of that family member? (It might be cheaper to use something like purchasing the cheapest TurboTax software and use "self-prepared" instead?? I could prepare a very nice "worksheet" for necessary guidance. )

BTW: I also saw the reference to the NY ruling that will enable them to grab a driver's license for past due NY taxes. I did find it amusing that such only applies when the amount owed exceeds $10k.

FE

[ChEAr$]

What? You charge a fee to immediate family members?

[FEDUKE404]

Fee confusion

What? You charge a fee to immediate family members?

Exactly where did I ever say that ?????

(Bad choice of words...perhaps "might be simpler" would have passed analytical muster.)

That would loosely translate from having a CA return done at no cost by me to having a CA return not done by me plus whatever costs it would then take to get the CA return done by some different method. Choice then would be a "real" CA preparer or the use of "least expensive" TTax software.

FE

[WhiteOleander]

This idea is absolutely ridiculous, but typical of the Left Coast mindset!

An immediate family member now lives in CA.

Are the wackos in Sacramento going to force me to pay a fee (or whatever) to prepare the tax returns of that family member? (It might be cheaper to use something like purchasing the cheapest TurboTax software and use "self-prepared" instead?? I could prepare a very nice "worksheet" for necessary guidance. )

BTW: I also saw the reference to the NY ruling that will enable them to grab a driver's license for past due NY taxes. I did find it amusing that such only applies when the amount owed exceeds $10k.

FE

What I find amusing is the thought that suspending their driver's license will stop them from driving. It sure doesn't stop anyone else. They just keep right on driving even without a license.

[S T]

I recently read that CA will subject out of state tax preparers that prepare CA tax returns or do any service for a CA address. Even thinking about a client in CA could cause the Franchise Tax Board to tax you no matter where you are located.

If a preparer lives in Nebraska for example and prepares tax returns or does any service for the client with a CA address, CA will tax that income even though the preparer never set foot in CA. The CA Franchise Tax Board has determined that the CA client received a "benefit" in CA and therefore, the preparer is taxable. CA no longer allows the three factor allocation (Sales, Payroll, Location) and just uses the sales factor.

I am certain that many of us have a few CA clients and this could trigger a bill from the Franchise Tax Board.

Does anyone have further information on this??

Bob

Can you provide a source/link to where you read this information?

Thanks

Sandy

[DMICPA]

Prop 39

I saw this in an article written by Spidell's California Tax letter, the August 1 issue.

Bob

[MAMalody]

I have about 40 clients in CA and have not seen this. Is there an Internet source where I can see this? I could not find it with a quick search of the FTB site (I probably missed it).