This article is reproduced with permission from Spidell Publishing, Inc.
The FTB has an active audit program. The top five issues are as follows:
- Capital gains and losses: Audits check whether gains and losses were reported correctly for a variety of audit issues, including sale of stock, business property, casualty losses, and amounts flowing through from passthrough entities.
- Like-kind exchanges: Issues include erroneous boot calculations, improper property identifications, and failure to meet other deferral requirements.
- Head of household filing status: Common errors include the qualifying individual’s income exceeding the gross income test and taxpayers who do not meet the requirements to be considered married or considered not a registered domestic partner (RDP).
- Employee business expenses: The FTB may ask taxpayers claiming unreimbursed employee business expenses to provide documentation to substantiate their employer’s reimbursement policy to determine whether their expense is allowable.
- Shareholder/partner/owner’s basis in a passthrough entity: Audits check the correct reporting of flow-through items and amounts reported on the sales of interests in passthrough entities.
There are a number of other programs, including residency. There are also other issues on which the tax-payers have been receiving correspondence/audit notices, such as other state tax credits, apportionment, and enterprise zone tax credits, to name a few.
For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).