File that power of attorney: and other ways to keep California Tax practitioners busy - California Tax - Brief Article

California CPA, Sept, 2002 by Leonard W. Williams

According to several listserve participants, since July 1, the FTB has required a power of attorney to be on file before talking with a taxpayer representative.

According to the FTB, www.ftb.ca.gov/other/poa/index.html, taypayers must submit a power of attorney if they want to authorize you to receive their confidential tax information or represent them in matters involving the FTB.

Write or Phone?

In a recent round of TaxTalk listserve postings, a member asked if CPAs find calling or writing to be more efficient for dealing with tax agencies.

Of course, much depends on an individual's talents; some people can fire off a succinct memo in five or 10 minutes, but will postpone a phone call for days. Others will pick up a phone instantly, but will waste half a day writing and rewriting a 15-line memo.

Big picture? Most CPAs will write to the IRS because they burn up too much time on IRS phone trees, trying to find the right person. However, members find that calling the FTB can be quick and efficient.

Sending the Wrong Check to The Wrong Tax Agency

Everyone has seen it at somepoint. Somes clients mail their IRS check to the FTB or vice versa. What happens? Both agencies will endorse and deposit whatever they receive, regardless of how, or to whom, the check is made out.

Accordingly, take corrective action immediately to send additional funds to the tax agency that was shortchanged. Then, if there are estimates involved, revise subsequent estimates to the agency the client overpaid.

A listserve member shared the tale of an attorney client who mailed his checks in the wrong envelopes. The client decided to slug it out with the tax agencies. It took a year to unravel, but there were no penalties and the agencies corrected the payments.

Clients Paying Wages Under the Table? Deter Them

All CPAs contend with new clients who think that it's smart to pay their employee wages under the table. This usually means paying them in cash and not recording it, or else paying with a check and disguising the payment as something else.

The EDD offers a brochure on its website aimed specifically at these recalcitrant employers. You can download the brochure, "Paying Cash Wages 'Under the Table'--Is it Really Worth the Risk?" (DE 573CA), at www.edd.ca.gov/taxfrm/htm.> Delinquent Sales Tax Remittances--Is a Payment Plan Possible?

Payment plans are possible for delinquent sales tax remittances. One CPA's client was behind $33,000 for prior quarters though Dec. 31, 2001. The client was behind an additional $20,000 for the quarter ending March 31, 2002.

Listserve members with BOE experience told the CPA to "Go for it," and a $6,000 per quarter payment plan was agreed to.

A wizened TaxTalk participant shared the importance of keeping in contact with the BOE representative who negotiated the agreement, to be certain that all payments arrive on time, and that the BOE knows of any new delinquencies incurred after the original agreement.

Delinquent payments on current obligations after the agreement usually void the agreement. But if the BOE representative is kept abreast, adjustments can be made.

FTB vs. IRS Corporate Audits

How do FTB corporate audits compare to those of the IRS? One member had a large corporate client who the FTB was about to audit, and he wanted to know if he had anything unusual to fear, since he had never heard of an FTB audit.

Other listserve members assured him that FTB audits are quite common. The consensus was that FTB auditors often are more directed in their approach than IRS auditors.

At a CalCPA-FTB liaison meeting some years ago, an FTB official said that a reason the FTB does its own audits is because there are so many entities to be audited that it is difficult for the IRS to audit a statistically significant number.

Since corporate audits usually result in significant dollar assessments, there is a financial incentive for the FTB. And, as everyone should know, FTB audit results are turned over to the IRS, just as IRS results are turned over to the FTB.

Entity Choice

Whenever the subject of entity choice is broached, it results in lively and erudite listserve exchanges. Summaries of recent go-arounds on the subject appeared in the June 2001 and November 2001 issues of California CPA's California Tax column.

The California CPA Education Foundation offers several courses that cover choice of entity. These courses are listed on Pages 58-64 of the Foundation's 2002-03 catalogue.

If the times of the course offerings are inconvenient, you can always purchase the course manuals online at www.educationfoundation.org.

Thanks to the following CalCPA members who participated in these TaxTalk listerve discussions: Terry Seiberlich, CPA; Johanna Sweeney Salt CPA, Ed Melia, CPA; Dale Isaacs, CPA; Jim Counts, CPA; John Levy, CPA; and Bill West, CPA.

Leonard W. Williams, CPA, is a Sunnyvale-based sole practitioner. He is a member of CalCPA's Committee on Taxation, an AICPA Thx Division member and a former Peninsula Chapter president. Williams can be reached at williams@lwwilliamscpa.com.