What's New for California

Mandatory e-file

Recent California legislation places an extra burden on tax professionals who prepare California Form 540 or 540-NR returns. Assembly Bill 1756 mandates that a preparer must e-file all eligible Form 540 and 540-NR returns in 2004 if he or she prepared more than 100 such returns in 2003. There's a $50 per return penalty for noncompliance, but there's an important exemption. As long as you offer e-file to all eligible clients, the bill exempts you from penalty for returns of taxpayers who choose not to have their returns e-filed. (You must verify that the client opted out of e-file through a new FTB form, and keep that form in your files with the client's return.)

If you determine from the above that you will have to e-file any California returns, you will want to use the professional e-file that is built into our new Standard and Premium Level updates. However, please note:

You need an EFIN, which you can get by applying for the IRS e-file program.
You need to sign up to activate the transmission software that comes on your Tax Preparer CD-ROM.
You may need to "Upgrade to Premium" if you ordered only the Standard Level update and expect to e-file any returns with a form shown in the below table.

Be sure to give us a call if you have any questions. We'll help you assess whether you need to be concerned about the new regulations and make complying as painless as possible.

The NEW Standard Level. The Standard Level now contains a great deal more than in former years. In addition to on-screen Tax Forms Guide, User's Guide, and on-screen FTB forms, instructions and publications, you now get:

FTB-approved graphic printouts for ALL forms included, not just Form 540.
Professional e-file built-in at no additional cost, plus e-file specials for lower transmissions fees.

That may be all you need, but read on for details on what the next level can do for you.

The Premium Level advantage. Designed for the power user, the Premium Level adds to the Standard Level

Diagnostic reports, to alert you to possible missing data or overlooked credits
Tax Preparer Control Panel, for easy access to on-screen IRS and HowardSoft documents and more helpful tools to come
Twice as many FTB forms, including the following frequently needed forms (all of which can be e-filed) so that you can file virtually any Form 540 return:

Newly added FTB form	Who needs it (the most common use)
Schedule G-1 Tax on Lump Sum Distributions	Those born before 1936 who withdraw entire balance of their pension
Form 3501 Employer Child Care Program/Contribution Credit	Employers with a child care program for their employees, whether on-site care or an allowance
Form 3504 Long-Term Care Credit	Long-term caregivers (self, spouse, dependents) up to $500 credit each
Form 3508 Solar Energy System Credit	Up to 15% credit for solar or wind energy system installed during the year
Form 3510 Credit for Prior Year AMT	Taxpayers who had AMT and deferral preferences in the prior year
Form 3521 Low-Income Housing Credit	Owners of a residential rental project that provides low-income housing
Form 3523 Research Credit	Business owners with increased technological research for new products
Form 3526 Investment Interest Expense	Those with deductible interest on loans for property held for investment
Form 3535 Manufacturers' Investment Credit	Business owners who placed in service property for manufacturing or R&D
Form 3548 Disabled Access Credit	Business who provide access to the disabled, up to $125 per year
Form 3553 Enterprise Zone Employee Credit	Employees who worked in targeted EZ areas, 5% of wages up to $525
Form 3801-CR Passive Activity Credit Limits	Anyone with credits associated with passive activities
Form 3805V NOL Computations and Limits	Suspended by the FTB for tax years 2002 and 2003
Form 3805Z Enterprise Zone Deduction/Credit	Suspended by the FTB for tax years 2002 and 2003
Form 3806 L. A. Revitalization Zone Deduction and Credit (LARZ)	Suspended by the FTB for tax years 2002 and 2003
Form 5870A Tax on Accumulation Distribution of Trusts	Beneficiaries of trusts that don't distribute all their income each year