For the IRS, the official tax-filing season doesnt start for three more weeks. But in California, state tax officials are already accepting 2013 returns.
To get a jump on some of the changes for taxpayers this year, we talked with state Franchise Tax Board spokesman Daniel Tahara. Heres an excerpt:
California launched its tax-filing season well ahead of the IRS. How are returns piling in?
We are officially open for business and have already received about 1,157 e-filed tax returns. Typically the early birds are the people who are getting a nice refund they hurry up to file to get that money in their pockets.
The FTB says its discontinued one type of paper return, the 540a. How come?
More than 80 percent of people are e-filing, so only a small number of people were using it. Taxes are confusing enough, so to have three ways to file just added to the confusion. There are now only two options for filing personal income taxes: the Form 540 (Long Form) that can be used by all tax filers and the Form 540 2EZ for those with simple tax situations (such as only reporting wages/interest/dividend income and not itemizing deductions).
How many taxpayers are now filing their returns electronically?
Last year, 83 percent filed electronically. There are a lot of e-file options out there. On our website, you can find links to other software providers that will let you file for free. Our hope is that eventually everyone will file green (and eliminate paper returns) Some folks are skeptical about how safe their returns are when filed electronically. Our security folks say its like an onion: layer upon layers of protection. We have firewalls, security features in place and everything is encrypted.
What happened taxwise for Californians who had a short sale last year?
The exemption for forgiven debt expired for California residents last year. But in September, the IRS announced that California taxpayers who sell their principal residence in a short sale for less than what is owed on the mortgage can exclude any canceled or forgiven debt from their taxable income ... If you owed $250,000 on your mortgage but sold it in a short sale for $200,000, you have forgiven debt of $50,000. Due to the IRS determination, California residents wont be taxed on that amount.
Whats the New Employment Credit (NEC) all about?
The NEC is a California income-tax credit available to employers who hire a qualified full-time employee on or after Jan. 1, 2014. The credit is 35 percent of qualified wages. The tricky part is there are very technical requirements, based on geography and areas with high rates of unemployment and poverty. The FTB website walks you through how to qualify.
What new charities are available for taxpayers who can make a check-off donation contribution on their return?
Theres a total of 18 charities. The new additions are the American Red Cross, Keep Arts in Schools and Protect our Coast and Oceans funds. Taxpayers can give as little or as much as they want. Theres no limit. In tax year 2011 (the last year of available data), Californians made about 94,400 donations totaling about $4.78 million (roughly $50 a person). Its easy; you dont have to write a separate check or make any calls. You can donate and take a deduction right on the spot. Its sort of last-minute tax planning.
We hear theres some confusion on whether the Affordable Care Act affects California taxes? Is there any connection?
Its weird. I dont know if its an assumption or a rumor, but weve been getting calls because people heard something or a friend told them that if their adult children are getting insurance coverage (through age 26) from their employer, that those premiums would be included in their taxable income. Its not true. Theres no impact on California taxes. No adjustments necessary.
Also, there are no tax penalties on California taxes if you dont meet the (March 31) federal deadline to sign up for healthcare coverage.
With our Live Chat and our phone service, youre talking with a live FTB person. LiveChat is good for basic information. If youre filling out your tax form, you can go on your computer, click on the icon and say, Hey, Im stuck on Line 42. What do I do? Its really fast and easy. Ive tried, and the longest Ive ever waited is 50 seconds to a minute. If its a general question, they can help you right there. If you have more specific questions about your account, you need to call in by phone (800) 852-5711. (Both Live Chat and the phone line are open weekdays.) Theres also our website ( www.ftb.ca.gov) and six field offices statewide (including 3321 Power Inn Road, Suite 250, in Sacramento).
Taxes are scary and sometimes stressful, but if you go to our website, there are some great, free online services thatll help make tax season a little less stressful.
Call The Bees Claudia Buck, (916) 321-1968. Read her Personal Finance columns, www.sacbee.com/claudiabuck.