MINIMUM Wage –Minimum wage increases to $9 per hour effective July 1, 2014.
Medical and Dental Expense Deduction – Federal law made it tougher to deduct medical expenses by raising the floor from 7.5 percent to 10 percent. This means that you can only deduct expenses that exceed 10 percent of your federal adjusted gross income (AGI). You lose the first 10 percent. California did not change. It stuck with the old tax-friendly floor of 7 .5 percent of federal AGI. In other words, you get to deduct more medical expenses on your California return.
Mortgage Forgiveness Debt Relief – California does not conform to federal law regarding the discharge of indebtedness from the disposition of your principal residence occurring on or after January 1, 2013. Ouch!
Voluntary Contributions – You may contribute to the following new funds:
-Protect Our Coast and Oceans Fund.
-Keep Arts in Schools Fund.
-American Red Cross, California Chapters Fund.
Direct Deposit Refund – You can request a direct deposit refund on your tax return whether you e-file or paper file. Fill in the routing and account numbers carefully and double-check the numbers for accuracy; otherwise, there could be one lucky dude looking at a mysterious deposit from your refund.
Mandatory Electronic Payments – You are required to remit all your payments electronically once you make an:
-Estimate or extension payment exceeding $20,000, or
-File an original tax return with a total tax liability over $80,000.
Once you meet this threshold, you have to keep paying electronically even if tax payments fall below these thresholds. This means that all subsequent payments regardless of amount, tax type, or taxable year must be remitted electronically. Note that the first payment that would trigger the mandatory e-pay requirement does not have to be made electronically. If you don’t follow these rules, you will be subject to a 1 percent noncompliance penalty. However, you can request a waiver from mandatory e-pay if one or more of the following applies:
-You have not paid an estimate or extension in excess of $20,000 during the current or previous taxable year.
-Your total tax liability reported for the previous taxable year did not exceed $80,000.
-The amount you paid is not representative of your total tax liability.
Registered Domestic Partners (RDP) –California law requires RDPs to file their California income tax return using either married/RDP filing jointly or married/RDP filing separately (but not single filing status). RDPs have the same legal benefits, protections, and responsibilities as married couples. If you entered into a same sex legal union in another state, other than a marriage, and that union has been determined to be substantially equivalent to a California registered domestic partnership, you are required to file a California income tax return using either the married/RDP filing jointly or married/RDP filing separately filing status. For purposes of California taxation, references to spouse, husband, or wife also refer to California RDP.
Net Operating Loss (NOL) Carryback – NOLs incurred in taxable years beginning on or after January 1, 2013, shall be carried back to each of the preceding two taxable years. The allowable NOL carryback percentage varies. For an NOL incurred in a taxable year beginning on or after:
• January 1, 2013, the carryback amount shall not exceed 50 percent of the NOL.
• January 1, 2014, the carryback amount shall not exceed 75 percent of the NOL.
• January 1, 2015, the carryback amount shall be 100 percent of the NOL.
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Victor Santos Sy, CPA, MBA, provides professional services in accounting and tax controversy including IRS audit defense and offers in compromise. He also advises clients on choices of entity including corporations for small businesses and LLCs for rentals. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation at 704 Mira Monte Place, Pasadena, CA 91101. The firm celebrates its 35th anniversary this year. You may email tax questions to Vic at [email protected]. You are welcome to visit our website for more than 300 tax tips at www.victorsycpa.com.
