California Tax Update: Part 1

California Tax Update: Part 1

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California Tax Update:

Part 1

Eva Rosenberg, M.B.A., EA

?2021, CCH Incorporated. All Rights Reserved.

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Table of Topics ? Part 1

? Introduction ? Legislation Overview ? Major Issue ? Health Care Mandate ? Filing Status ? Personal Exemptions ? Standard Deductions ? Tax Brackets ? Adjustments to Income ? Taxable Income Compared ? California Alimony ? IRA and Deferred Accounts Basis

? SECURE Act Summary ? Individuals ? SECURE Act Summary ? Employers ? Retirement Contributions ? Itemized Deductions ? Capital Gains ? Other Income, Loss and Differences ? IRS/CA ABLEs ? IRC 529 ? Tax Credits ? Household Employees ? California Disasters

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Introduction

? In December 2015 Congress passed a comprehensive set of laws - the PATH Act of 2015 - Protecting Americans

From Tax Hikes Act Of 2015 from-tax-hikes-path-act-of-2015

? In 2017, Congress gave us The Tax Cuts and Jobs Act which became law on 12/22/17.



? On February 2, 2018, Congress passed the Bipartisan Budget Act of 2018.



? On July 1, 2019, Congress passed the Taxpayer First Act -

bill/3151 ? this law primarily affects representation, not preparation of returns

? And then...on December 20, the President signed the SECURE Act, part of a much larger tax bill - the Setting

Every Community Up for Retirement Enhancement Act (SECURE Act) and the Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA) This includes extenders ? that affect 2018!

? Since then, in 2020, we have had several versions of the CARES Act and other COVID19 laws passed ? and still to

come.

The State of California conformed to some provisions and not others, as usual

This course will help you understand where California tax laws differ from the U.S. Internal Revenue Code in order to prepare your clients' 2019-2020 tax returns.

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Last Minute Legislation

Federal

The good news is ? we have new legislation ? some of which fixed our complaints about the CARES Act. The bad news is ? it wasn't signed until December 27th!

December 27, 2020 ? H.R.133 ? Consolidated Appropriations Act, 2021

(5,593 Pages)

For California ? we don't yet have definitive details about conformity ? except in laws that were passed earlier.

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Major California 2020 Law Changes

? A B 85 ? First-year exemption from $800 annual tax for LPs, LLPs, and LLCs for 2021?2023 tax years (see Part 2 of this classs)

NOL suspension for 2020?2022 tax years for businesses with income over specified levels Business credit cap for businesses with more than $5 million in credits for 2020?22 tax years An individual shared responsibility penalty cap for large families An extension of the sales and use tax exemption for diapers and feminine hygiene products

? AB 102 - Transfer CalSavers penalty collection responsibility from EDD to FTB ? A B 103 ? u n e m p l oy m e nt b e n ef i t s re l ate d to COVID-1 9 a re n o t c h a rge d a ga i n st e m p l oye r 's a c cou nt .

AB 276 ? Conforms to CARES Act for COVID-related retirement account loans S B 323 ? Updates the worker classification ABC test exemption for newspaper carriers AB 1525 ? Defines it is not a crime to provide public accounting services to cannabis businesses SB 1577 - Conforms to CARES Act cancellation of debt exclusion for Paycheck Protection Program

loans but prohibits deductions for expenses paid with forgiven loan amounts Note: Wait for CA Legislature to meet ? they may conform A B 1876 - Eligibility for Earned Income Tax Credit includes taxpayers and their families with ITINs A B 2247 ? Allows nonresident aliens unable to obtain a federal ITIN to provide alternative identifying information to qualify for the dependent exemption credit AB 1447 ? Authorizes up to a $1,000 credit per employee that can be applied to personal income tax, corporation franchise or income tax, or sales and use taxes to small businesses for specified increases in full-time equivalent employees (FTEs) (see Part 2 of this class)

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CARES Act and Beyond

2020

? Keep an eye on this page for updates

news/may-2020/californias-conformity-with-the-federal-cares-act.html (July 15, 2020)

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California and COVID19

Keep an eye on this page for updates

out-ftb/newsroom/covid- 19/index.html (nothing lately!)

And this page: Tax News

-ftb/newsroom/news- releases/index.html

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Major CA Issue

Health Care Mandate



While the IRS canceled the ACA penalties ? California reinstated them for 2020.

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2020 Information

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? At the end of 2020, the FTB released CA tax rate tables

2020/standard-deductions-exemption-amounts-and-tax-rates-for- 2020-tax-year.html

? We'll show them to you in a few minutes

? But the 2020 forms and instructions ---- not quite ready



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