FTB-COT Liaison
FTB-COT Liaison
California SOS numbers . However , there are certain cases where the California SOS number is not on the check and / or the voucher , or only the FEIN is written on the check ( i . e . initial estimate for newly registered entity or situation where the person submitting payment doesn ’ t understand that the California SOS number is something other than the FEIN ). The FTB did previously allow the use of FEINs but changed that unexpectedly in early 2022 . Would you please consider allowing use of FEINs again , and if not , can you help us understand why ?
FTB Response
We appreciate that this change may have created some confusion and difficulty in the greater taxpayer and practitioner communities . Due to some recent legislation , we had to make changes in our systems to enable proper processing of some types of tax returns . Part of this was the change from allowing the FEIN to be the primary ID number , to using the SOS or FTB issued number as the primary . However , we can certainly take this question back for further analysis . Please be aware however , that we would need to complete a detailed analysis of the effort required to revert back to determine what types of challenges we might face if we did consider doing this . At present , we do not have the resource capacity to do this work , but it can be examined for future potential .
Web Pay
Following up on a question from last year , we asked whether the FTB can expand Web Pay to allow trusts to make payments electronically . While we are aware that there is a workaround through Web Pay for Individuals that works in most cases , the FTB previously indicated they don ’ t openly share how trusts can use Web Pay due to the difficulty for trusts to know what information to enter . It was also previously shared that , as part of their EDR2 project , the FTB would look at opportunities to expand Web Pay to trusts . Can you provide an update ?
FTB Response
FTB removed the expansion of Web Pay to trusts as part of the EDR2 project . As mentioned previously , while Web Pay was not originally designed for trusts , if the trust knows the correct information to enter , they can access the application . While we have not previously published what trusts should use to access the application , we will add instructions to our website . The instructions may not work for all trusts but should for most trusts .
Updating Taxpayer Address It doesn ’ t seem that the FTB is updating taxpayers ’ addresses with SOS ’ s Statements of Information if the SOI is filed after the latest tax return . Many years ago , the Cal Society of EAs proposed filing the SOS Statement with the tax return . Ensuring that the FTB has an updated address was one of the reasons , but the biggest reason was so that entities would stop getting suspended / forfeited for failing to file it .
FTB Response
You are correct , FTB does not update the taxpayer ’ s address in our systems based on the address provided to SOS on the Statement of Information ( SOI ). This is because FTB cannot know if that ’ s the address the entity wants to use for its interactions with us regarding their tax matters .
Currently , there is no business need for FTB to accept an SOI with the tax return . Furthermore , even if we did get the SOI with the tax return , the address provided on the tax return would always take priority for our purposes .
Finally , the suspension / forfeiture process that is tied to the SOI is solely administered by SOS , not FTB , so FTB getting the SOI would not impact that SOS process .
Please note , our partners at SOS made filing the SOI very easy , via their website . For more information , go to sos . ca . gov .
Other Questions
Can the FTB share insights on its staffing level and stats on how many audits they are performing per year and the type of those audits ( high net worth individuals , business , etc .)? Can it comment on whether they are planning to hire more and whether they expect an increase in audits ? Also , it would be helpful to know if there are issues they are focusing attention on .
FTB Response
The FTB Audit Division has about 1,100 employees nationwide involved in a variety of audit workloads , supporting those workloads or criminal investigations . The majority of our resources are spent on professional audit workloads for individuals and businesses . We also have automated and semi-automated workloads that utilize information received from the IRS . The number of audits performed per year varies depending on the complexity of the audit issues , the number of tax years , taxpayers involved in each case and the volume of data we receive from the IRS . On average , we conduct 150,000 audits a year .
The audit issues addressed in our automated and semi-automated audit workloads have a wide range of topics since the majority derive from any IRS adjustments and adjustments on California Schedule CA . For our professional audit workloads , some of the common audit issues include :
• Sales of personal or real property , including like-kind exchanges ;
• Owner ’ s basis in a pass-through entity ;
• Sales of interests in a pass-through entity ;
• Multistate issues ( apportioning , allocation , unity , Public Law 86-272 , market-based sourcing rules );
• Tax sheltering activities ;
• California residency status ; and
• Credits ( e . g . Research , Other State Tax Credit ). We do not have plans to expand our audit workforce . The number of audits we perform should remain consistent unless we start to receive more data from the IRS .
Through its Committee on Taxation , CalCPA continues its strong relationship with the FTB and look to further and expand that partnership to benefit CalCPA members and their clients .
David Flamer , CPA is founder and principal of David R . Flamer , An Accountancy Corporation , and a member of the CalCPA Committee on Taxation . You can reach him at dflamer @ sbcglobal . net .
18 CALIFORNIA CPA JANUARY / FEBRUARY 2025 www . calcpa . org