Every business pays a variety of taxes to the federal government and the state of California. The type of tax, the structure of the business, and the amount of money received or earned dictates the amount of the tax.
The following post outlines the various taxes collected by the state and federal governments, the tax rates, and how often the taxes must be paid. The information is provided by business structure since that is the main dividing point for finding tax information.
The Board of Equalization (BOE) administers the tax program for both business and property taxes for the State of California. Business taxes include:
Business taxpayers may take up their concerns directly with the main office of the BOE while property tax concerns are addressed by the local county office.
When you deal with the tax agencies of California, you may feel like you do not have any rights. These agencies can be aggressive and overwhelming to most individuals unused to dealing with them.
When you sign a joint tax return with your spouse, you are signing a legal document that holds both signatories in “joint and several liability” for the information on the return. In other words, each of you can be held liable for the entire tax amount, including penalties and interest if you underpay or do not pay at all.
But what if your spouse underpaid your joint taxes without your knowledge? What if, when your spouse prepared the tax return, he or she did not report one or more items, used the wrong tax basis, or did something else that caused your joint taxes to be underpaid?
Sometimes your financial fortunes take a turn for the worse, and you find yourself owing back taxes to the Franchise Tax Board. You don’t even have two coins to rub together, much less make installment payments, yet you are looking for an alternative to filing for bankruptcy. An Offer in Compromise is also off the table; you just don’t have the money.
If you have a tax liability, you have several options for paying it. The IRS provides relatively straightforward instructions on the various types of payment methods and other ways to discharge the liability.
In California, you can also deal with the Franchise Tax Board, the Board of Equalization, and the Employment Development Division.
Payment options:
Let’s take a look at each.
When the IRS knocks on your door, it is enough to make you shake in your shoes. A visit from a revenue agent (auditor) or revenue officer (collection) who claims to have detected possible fraud means you are already in hot water.
The steps from suspicion to criminal tax investigation have already taken place, and that IS agent already has enough information to prosecute.
It is also possible that you expected this visit if you or your business have been audited recently by the IRS and you have gleaned from your interaction with the service that they may have found something fishy in the handling of your taxes.
The California Board of Equalization has audited you and found potential underpayment of taxes, fees, or additional amounts the BOE determines you owe.
Your next step is to meet with the BOE supervisor and then the District Principal Auditor. If you do not convince them that the results are in error, you can file an appeal.
The California Employment Development Department can legally withhold money owed to you by the state for repayment of debt. In other words, either through error or willful action, you owe a monetary debt to the State of California.
The EDD is within its legal rights to withhold money from a variety of programs and tax refunds if you do not pay up. It works with the California Franchise Tax Board, the State Lottery, and the State Controller to collect the outstanding debt.
A state may create legislation requiring a seller with nexus in that state to pay tax on sales of tangible property within the state.
What is nexus and how does it affect your business?
It is that most un-wonderful time of year: tax time. April 15 may be a bit far away, but as a small business owner, you need to get your documentation for 2016 together as soon as possible. Your tax professional will thank you.
By the way, one of the changes for next year includes moving a filing deadline from April 15 to March 15 if your business structure is a pass-through. More on that later. First, here is a rundown of the documents you need to gather for your accountant.