California State Tax Filing Season Is Officially Open – Part II

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The Franchise Tax Board (FTB) announced it is now accepting 2013 state tax returns. Also, the FTB provides the following updates on law changes and filing services brought to you in this blog series – Part II.

2013 Short Sellers Get State Tax Relief – According to an IRS Information Letter dated September 19, 2013, the IRS has determined that California taxpayers who sell their principal residences where the lender agrees to a short sale for less than what is owed on the home are relieved of incurring cancellation of indebtedness income, which may have been taxable. Instead, the amount of cancelled debt is included in the amount realized in determining gain on the sale of that residence.

The IRS guidance is limited to California short sales only. The IRS guidance did not specifically address other types of real estate transactions such as non-judicial foreclosures and mortgage loan modifications.

FTB’s website will have updated information and FAQs soon. For more details, please visit ftb.ca.gov and search for Mortgage Forgiveness Debt Relief.

California Affordable Care Act – Although this is not a new law, FTB gets questions about how the federal Affordable Care Act affects California taxes. California tax code conforms to the 2010 federal income tax rules, which excludes the value of the medical coverage provided to nondependent adult children from California gross income and allows a deduction to self-employed individuals for health insurance premiums for nondependent adult children under age 27. For more information, please visit ftb.ca.gov and search for Affordable Care Act.

Source: FTB Public Affairs Office

In accordance with Circular 230 Disclosure

Betty Williams has a broad range of experience handling civil and criminal tax controversy matters including income tax, employment tax, sales and use tax, property tax and IRS, FTB, and SBE audits, protests, and appeals. She has represented clients before the U.S. Tax Court and the U.S. District Courts in California. Betty has obtained penalty abatement for numerous clients ranging from a few thousand to more than $2 million in late filing and late payment penalties. She has assisted numerous clients in the United States and abroad in the 2009, 2011 and 2012 IRS and FTB voluntary disclosure initiatives. She also represents foreign financial institutions regarding Foreign Account Tax Compliance Act (FATCA) compliance. She has experience defending criminal tax matters and negotiating plea agreements in areas such as structuring, tax evasion, and the failure to file a tax return.

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1 comment on “California State Tax Filing Season Is Officially Open – Part II”

  • James Kronenberg EA CPA MBA

    Betty – a great “heads up” for CA residents who had “short sales” of principal residences – wondering if this ruling applies only to 2013 “short sales” or this ruling can be applied to prior years still open under CA statute of limitations (believe FTB permits amendments going back 4 years under CA tax code). Thanks for any feedback you have on this ! Happy New Year !

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