FAQ
Frequently Asked Tax Questions
California Franchise Tax Board FAQ: http://www.ftb.ca.gov/individuals/faq/index.html
1. What happens if I do not file my taxes?
If you owe taxes and don't file, the IRS can assess penalties and interest and seize U.S. bank assets for repayment. Fines and penalties can often amount to more than the original tax debt.
There can also be immigration consequences for failing to file taxes. Applicants for permanent residency "green cards" are frequently asked to show proof of tax filing for previous years in the U.S.
2. What is “California Mandatory e-file”?
California law requires tax practitioners who prepare more than 100 California individual income tax returns annually and prepare one or more using tax preparation software to e-file all personal income tax returns. This measure reduces tax return processing costs for the State.
3. Does a sole proprietor need to have a tax ID number?
As long as a sole proprietor does not have any employees, and does not file excise or pension plan tax returns, the sole proprietor does not need to have a tax ID number.
4. What is a tax deductible business expense under federal income tax law?
Basically, any business related ordinary, necessary, and reasonable expense may be deductible. However, the law does prohibit certain expenses. To be sure, check the Code and/or talk to your legal counsel.
5. Can I deduct business expenses if I work out of my home?
Certain criteria must be met in order to deduct business expenses if you work out of your home. For example, to deduct business expenses for the part of your home in which you work, you must use that part regularly and exclusively for business purposes. In addition, the part of your home must be your principal place of business, a place where you meet with clients or customers in the regular course of business, or a separate structure that is not attached to your home but is used in connection with your business.
6. Are hobby expenses deductible under federal income tax law?
A hobby is a leisure time activity that is not carried on with the principal purpose of making a profit. Hobby expenses are deductible only to the extent of hobby income.
7. Can I deduct amounts for business gifts?
If you give a business gift in the course of your business or trade, you may deduct the cost as longs as you meet certain requirements under IRS rules. Generally, according to the IRS, you can deduct no more than $25 for business gifts.
8. Which form do I use for my tax return?
The form you use depends on the way in which your business is organized. For example, a corporation files a form 1120 or 1120-A, partnerships file a form 1065, sole proprietorships file a form 1040, and S corporations file a form 1120S.
9. What is an audit?
An audit is a government investigation to determine whether the information you provided in your tax filings are accurate and truthful. An audit attempts to determine whether or not a business paid the proper amount of tax.
10. Do I need to file a tax return if my company had no income?
A partnership must file an income tax form unless it neither receives gross income, nor pays or incurs any deduction or credit for federal tax purposes. A corporation must file a form even if there is no income.
DISCLAIMER: This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.
