• Phillip Bruce Chute EA

California Franchise Tax Board (FTB)


California is foremost in the nation for tax collections and devices to extract more money from businesses. After all, we sent our best people, Boxer, Waxman, Pelosi, and Feinstein to Washington to prove it.


One result of this forethought is to call a Corporate or Limited Liability business a franchise, then they can collect a minimum of $800 annually to conduct business even if it loses money and would normally owe no income taxes.


In other words, they "franchise you to conduct business". There are several other items worth noting, such as the "Presumed Income" theory that if you have any kind of professional license you must have income.


If you fail to file a tax return they will automatically presume you forgot to file and they will bill you for the taxes on the average net income of the typical professional. For insurance agents, this net income was once S35,000.


As a result, unless you really need to file, you will need to respond for the non-filing billing letter with, "l have retired, gone out of business, or died" so they will take you off the books.


Another problem this past year is the mysterious disappearing $10,000 + withholding taxes. Several clients have received notices asking for the large amount withheld from their W-2 wages.


In other words, they tried to collect the amount actually withheld, as not received. Because the payroll taxes were paid electronically by the different employers, the money was certainly remitted.


A copy of the W-2 form mailed back cured the problem. There must have been thousands of letters, resulting in many people without competent counsel, and people terrified of the taxing authorities who paid the double tax.


These are problems from a bankrupt government. The FTB audits by matching documents in their computers but leave much of the basic work, such as matching Social Security numbers from filers and dependents, to the IRS.


They do reciprocate with the IRS in tax matters when they find more income from various sources and the IRS sends them audit results as well.


* Phillip B Chute is an Enrolled Agent, tested, licensed and appointed by the IRS directly. He has prepared or supervised over 25,000 tax returns over 30 years.

 

(951) 302-4491

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