The Franchise Tax Board (FTB) has announced that it is mailing more than 83,000 letters to taxpayers asking them to justify the Head of Household (HOH) filing status claimed on their 2014 tax returns as part of an annual FTB filing status review. HOH filing status is for unmarried taxpayers who care for a child or other relative for more than half of a year and cover more than half of the household’s annual expenses. There are strict rules for determining whether a taxpayer qualifies for HOH filing status (for which the FTB provides an online guide and eligibility test), and taxpayers who are found not to qualify may owe additional taxes. Taxpayers receiving an FTB letter can respond by filling out […]
As a result of new legislation (the “Trade Preferences Extension Act of 2015,” passed by congress and signed by President Obama into law on June 29, 2015), penalties for failure to file information returns or to provide payee statements have been increased significantly. The new penalties are effective for 2015 forms that are due in early 2016.
Under Internal Revenue Code (IRC) Sections 6721 and 6722, the penalty applies to both failing to timely file a correct information return with the IRS (IRC Section 6721), and failing to furnish the payee a statement (IRC Section 6722). A penalty can be abated, however, if such failure is due to reasonable cause and not to willful neglect under the IRC Section 6724.
The most commonly used information returns […]