The word "taxes" is a very general one. In practice, there are many different types of taxes. In part, this is because there are so many levels of government: not only federal, but also state and local. It therefore isn't only the decisions of the IRS that can loom large over taxpayers. In California, the decisions of the Franchise Tax Board can do so as well.
For years, California residents have used online shopping for its ease, convenience and lack of sales taxes. While purchasers can still reap the benefits of having goods shipped directly to their home or office, they can no longer avoid paying sales taxes on items bought from larger retailers.
Twice every year, the California Franchise Tax Board publishes a list of the 500 state residents who owe the greatest amount in income taxes. The state Board of Equalization has a parallel list, published every quarter, which tracks debts owed on sales and other taxes.
Selecting the correct filing status on one's state or federal tax return is important. Certain statuses, such as married or head of household, provide benefits not available to those who file singly. Of course, taxpayers must meet certain criteria in order to qualify for these statuses. But each year, either deliberately or by mistake, tens of thousands of California residents wrongly choose their status.
When filing a federal or a California income tax return, people are always on the hunt for deductions and credits that can reduce their tax liability. While deductions are useful, credits are even more valuable because they reduce a person's tax owed dollar for dollar. Some credits are even refundable, meaning the taxpayer will get money back if the credits exceed a person's tax liability. California and the federal government offer a wide variety of credits designed to create incentives for certain taxpayer behavior while others are meant to help lower-income individuals.
We have blogged extensively about the IRS's plans to offer amnesty to the holders of off-shore bank accounts who have not previously disclosed the accounts to the IRS. The IRS has made several recent attempts to bring offshore bank account holders within the fold, with incentives for disclosing offshore bank accounts to avoid higher tax penalties. The IRS has counted nearly 18,000 more offshore bank accounts as a result of its efforts. Because of this success, the IRS is contemplating another voluntary disclosure program, although with less advantageous terms than the first voluntary disclosure programs.
California taxpayers are beginning work on their 2010 state tax returns. But the California Franchise Tax Board (FTB) isn't through with 2009's taxes just yet. The FTB announced this week that it will be getting in touch with over 900,000 people to ask them why they did not file a 2009 California income tax return.