The California Standard Deduction
The California standard deduction is markedly less than what’s offered by the IRS. As of the 2020 tax yearthe return you’d file in 2021the state-level standard deductions are:
- $4,601 for single taxpayers, as well as married and registered domestic partner taxpayers who file separate returns
- $9,202 for married and RDP taxpayers who file jointly, as well as heads of household and qualifying widows
The 2020 standard deductions at the federal level are $12,400 for single taxpayers and married taxpayers filing separately, $18,650 for heads of household, and $24,800 for married taxpayers filing joint returns and qualifying widows.
Small Business Accountants Serving Roseville And Sacramento Ca
Even if your small California business did not earn income this year, you might still be required to file a tax return. However, the rules differ depending on where your business operates, whether you are claiming credits or deductions, and whether your business is structured as an LLC, partnership, corporation, or sole proprietorship.
Regardless of its size, structure, or place of incorporation, it is critical to ensure that your business complies with the pertinent reporting requirements. Failure to file tax returns, or to meet other standards established by the Internal Revenue Code, can result in the imposition of financially debilitating civil penalties. In cases where violations are determined to be willful or deliberate, a criminal investigation could even result.
However, you can avoid these issues by consulting the experienced Sacramento tax preparers of Cook CPA Group. Our knowledgeable CPAs and tax consultants have over 20 years of experience providing business tax preparation and tax planning services across a wide array of industries, including agriculture, construction, hospitality, manufacturing, and more. For a free consultation about the bookkeeping, tax, and business planning services we offer in the Sacramento region, contact Cook CPA Group at 432-2218.
Can You Owe Taxes In More Than One State
If you performed work in a state and tax was withheld from your income, you may owe or be due a refund from that state. If taxes were not withheld and you received a Form 1099 listing your earnings, you are not required to file in that state. However, your 1099 income is subject to taxation by your state of operation or residence.
If you lived in more than one state during the tax year, you must file a state income tax return for each state to determine your refund status. It does not matter how long you resided in that state.
If you worked in or earned income from more than one state, you may need to file a return even if you did not live in that state. For example, if you are a resident of California who contracted out to a company in New York and met one of these conditions, you need to determine refund status for both New York and California:
- You briefly traveled to New York for work or
- You worked remotely from your home state
- They get you coming and going.
Do you have questions about why you may owe California state taxes? Request a free 60 min strategy session with our senior legal team today to find out your options.
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Paying State Business Taxes In California: A Summary
Hereâs a summary of which California state taxes apply to which business entity type.
Keep in mind this table doesnât include the income taxes that sole proprietors, general partners and pass-through entity owners must pay on their share of business income, which weâll cover in the next section.
|What kind of business do you have?||Did it report a net income ?||What state taxes do you have to pay?|
|AMT , $800 Franchise Tax|
|LLC taxed like a corporation||Y|
|LLC taxed like a corporation||N||AMT , $800 Franchise Tax|
|No business taxes|
Tax Requirements For Independent Contractors In California
Learn about tax requirements for independent contractors in California. The Sacramento and Roseville tax accountants at Cook CPA Group explain how to file taxes as an independent contractor in California.
Some workers are employees, while others are considered independent contractors. While both receive compensation to perform labor or provide services, contractors and employees have very different filing responsibilities when tax time comes around. If you are an independent contractor, it is critical for you to understand the unique state and federal tax requirements that might affect you. Read on to learn more about federal and California tax requirements for independent contractors, and find out how the laws have recently changed. If you need help filing taxes as an independent contractor, ask Cook CPA Group for a free consultation about our tax preparation services in Roseville and Sacramento, CA.
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How To Avoid Paying California Taxes As An American Living Abroad
To avoid paying taxes in California after moving overseas, youll need to prove that you are no longer a resident.
Remember, the burden of proof is on you. Your tax records should include evidence that you severed enough of your strongest California ties on this list to prove you are a non-resident of California.
If you have not severed all your California ties, be prepared to defend your position. They may want to use any of your California connections to require you to file a return as a California resident, subjecting you to California tax on your worldwide income.
Need Help With Your State And Federal Expatriate Tax Return
Not sure if you need to file CA State or Federal Tax Returns? Not to worry. Our team of expat-expert CPAs and IRS Enrolled Agents are here to help! Get started now to be matched with an accountant who will review your individual situation today and confirm what you need to file. With your Greenback tax hero by your side, our expat taxes will be simpler than you imagined possible!
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Can Expats Who Pay Foreign Taxes Avoid Californian Taxes
Unfortunately, expats cant apply the IRS Foreign Tax Credit or Foreign Earned Income Exclusion to their Californian state tax bill.
This means that former residents of the Golden State who qualify to pay foreign taxes in their new country of residence may find themselves unfortunately and unavoidably subject to double taxation.
To avoid this scenario, some expats choose to move states before they move abroad. While not always possible, moving residence and ties to a zero tax state such as Florida before moving abroad could mean a significant tax saving in the long run, especially if the move abroad is going to be long term.
Should You File A Tax Return If You Are Not Required To File
Just because you dont meet the gross income requirements to file does not mean you should not file. You may be eligible to receive a refund or cash back tax credits. For instance, low-income families may qualify for the Earned Income Tax Credit federally, and the California EITC on their state tax return. This can pay anywhere from $243 to $6,728.
Additionally, the Golden State Stimulus can only be claimed by filing your 2020 tax return. If you earned less than $30,000 and qualify for the CalEITC, you can get a $600 payment from the Golden State Stimulus along with any other cash from tax credits you are eligible to claim.
It is a good idea to talk with a tax professional to determine your filing status and whether you are required to file or could benefit from doing so anyway. Orange County United Ways OC Free Tax Prep helps qualifying households in Orange County file taxes for free and maximize their returns. Tax volunteers help educate families on available tax credits and refunds they may be eligible for and assist with accurately preparing and filing tax documents. The tax refunds received help residents save for the future, pay down debt, and afford basic necessities. Learn more by visiting ocfreetaxprep.com.
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Filing A State Income Tax Return
The State of California requires an annual report of income, and assesses tax on the same type of income that is taxed by the federal government. However, unlike the federal government, California does not require an annual tax report from those who made less than the minimum filing requirement or had no income at all. Individuals who earned less than the minimum filing requirement do not have to file. Visit the Filing Requirements section of the California Franchise Tax Board for more information.
If you do not have a filing requirement but had state taxes withheld from your income, you will need to file a California tax return in order to receive any refund.
If you made income in another state and would like to know about that state’s filing requirements, please click here.
Do I Have To File A California State Tax Return If I Live Abroad
In California, as in most states, residents are taxed on all income no matter where it was earned or where the property is located. Expats living abroad who are considered residents of California will have to file California state taxes.
You may also have to file California state taxes if any of your income-producing assets are located in California. Even as a non-resident of California, you may have to file a California state return to report your California-sourced income. For example, you would need to report rental income from a property located in California on your state taxes.
If you have to file a California state tax return while living overseas, this will be in addition to your Federal Tax Return each year.
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Californias Safe Harbor Rule For Us Expats
For those leaving California under employment-related contracts, it is possible to break tax residency even if you are still considered domiciled in California .
To do this, you would need to be outside of California under an employment-related contract for an uninterrupted period of at least 546 days . It is possible to visit the state during this time however, no more than 45 days per calendar year can be spent in California without triggering your tax residency. Once more than 45 days are spent in California, you would be required to file resident returns again, reporting your worldwide income.
Which Expats Have To Pay California State Taxes
There are many reasons why California may still consider a former resident living abroad to be a resident for tax purposes, and they are not all clearly defined. The California Franchise Tax Board looks at each case individually.
The two most common instances when expats who previously lived in California are required to continue paying California state taxes are firstly, if they still have income sourced in California or, secondly, expats who are former residents of California who maintain ties in the state.
Ties might include owning property, retaining bank or investment accounts , returning to California periodically, driving and voter registration, dependents, professional licenses, and retaining the ongoing services of registered professionals in California.
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Glacier Tax Prep Software For Federal Tax
Bechtel International Center, in cooperation with the Controllers Office, provides a free online tax software package Glacier Tax Prep to all international students and scholars in F or J status at Stanford University who are considered non-residents for tax purposes. This software provides you with guidance on filing your taxes and has tax experts available via email for individual tax questions.
Glacier Tax Prep can be used to determine your resident status for tax purposes and prepare your federal income tax forms. However, it does not file the tax return electronically. You must print, sign, and mail the tax returns/forms generated by Glacier Tax Prep.
You are not obligated to use this software. You can complete the tax forms on your own or use the services of a professional tax firm. Stanford does not accept any responsibility for the accuracy of your tax return.
Regardless of how you choose to complete your tax forms, you should keep all copies of your tax returns. You may need them when applying for future immigration benefits.
If you will be receiving a 1042 form from Stanford payroll, please wait till you receive it before using the software.
The Open Secret About California Taxes
Californias tax system, which relies heavily on the wealthy for state income, is prone to boom-and-bust cycles. While it delivers big returns from the rich whenever Wall Street goes on a bull run, it forces state and local governments to cut services, raise taxes or borrow money in a downturn. During the Great Recession, the capital-gains taxes that sustained the state in good times plummeted. School districts handed out 30,000 pink slips to teachers, and the state was so cash-strapped it gave out IOUs when it couldnt pay some of its bills.
California is now enjoying one of the longest economic expansions in state history, but the good times cant last forever. With an inevitable recession lurking in our future, Gov. Jerry Brown has warned, state and local governments are more vulnerable than ever to teacher and police layoffs, park and library closures and cuts in health and welfare services for the poor.
Past bipartisan efforts to reduce volatility without raising taxes on the poor and working class have had limited success. The overall tax structure hasnt been updated, leaving parts of the economy taxed at some of the nations highest rates while other sectors, such as serviceswhich many other states do taxarent taxed in California. Politicians like to talk about the problem, explaining how Proposition 13, the famous 1978 measure that limited property taxes, has created unequal tax burdens. Yet few have been willing to initiate change.
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Income Taxation Of Trusts In California
A recent court case rejects the California Franchise Tax Boards long-standing approach to taxing trusts.
For years, the California Franchise Tax Board has taken the position that trusts are subject to California state income tax on all of their California-source income, and that non-California-source income is apportioned pro rata according to the number of California fiduciaries and noncontingent beneficiaries .
Recently, in a closely watched case, the California Superior Court in San Francisco rejected the FTB’s approach to the taxation of trusts and determined that all income, including California-source income, is subject to the apportionment formula set forth in California Revenue & Taxation Code Section 17743, et seq. ). Should this decision be upheld, tax on California-source income could be deferred for years .
Paula Trust case
Paula Trust involves a trust created by Raymond Syufy, founder of Century Theatres and a pioneer in the movie theater industry, for the benefit of his daughter Paula. In 1971, Mr. Syufy transferred a portion of his business interests to the Paula Trust. The trust agreement provided that the trustees had sole and absolute discretion to make distributions of income and principal to the beneficiary.
Superior Court decision
The court agreed with the taxpayer and determined that the trust properly apportioned its California taxable income in accordance with Rev. & Tax. Code Section 17743. The court reasoned as follows:
Do Businesses With No Income Need To File Taxes In California
Do businesses with no income need to file taxes in California? Even if your business has no income, you may have to file a tax return. Sacramento CPAs explain filing requirements for LLCs, corporations, and more.
There are many reasons a business might not receive income. For example, if the business recently launched, the owner may still be in the process of finding clients or purchasing equipment. In other cases, no income is generated because the business is inactive, even if formal dissolution has not taken place. Whatever the reason may be, its important for business owners to understand their tax filing requirements, which differ depending on how the business is structured. If youre a small business owner in California, and your company had no income this year, continue reading to learn whether you are required to file a tax return. Then, contact our Sacramento tax accountants for assistance with all of your bookkeeping, business planning, and tax preparation needs.
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California State Taxes For Americans Living Abroad A Guide For Expats
Americans living abroad who previously lived in California may still be liable to pay California state income taxes.
California is among the states with the most stringent income tax regimes, and similarly to the Hotel California lyric, you can check out any time you like, , it can be hard to actually leave!
Common Reasons For Increased State Taxes
When it comes tax time, there are several ways to find yourself owing more than you expected.
You may not have had enough withholding or deductions. This leaves more income to be taxed resulting in a lower refund or the need to pay additional taxes with your return. If you had unemployment, that is also taxable.
If you have previously been eligible for the Earned Income Tax Credit and your income increased, your EITC may be reduced or eliminated entirely. Since the EITC is a direct deduction from your tax liability, the elimination of the deduction will increase what you owe.
Did you take an additional job or did your spouse start working? Again, if you didnt adjust withholding, you may come up short at tax time.
Other money eligible for income tax includes:
- Gambling winnings
- Social Security, if this was your first year receiving benefits
- You did not contribute to an IRA, increasing your taxable income
Finally, whether we like it or not, income taxes do go up every year. If you did not change your withholdings in response, you might not have enough withholding by the end of the year. You may owe taxes or receive a lower than expected refund.
More reasons for increased taxes:
- Change in filing status
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