California extension for certain counties

Technical topics regarding tax preparation.
#1
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There has been confusions over the California extension due to multiple announcements, I believe the final result is:

- Both "the time to file" and "time to pay" have been extended to 10/16/2023
- The extension applies to both federal and state
- All the names mentioned are counties, not a small area within the county

Here are the announcements:

- https://www.irs.gov/newsroom/irs-califo ... -to-may-15 ("Updated 2/24/23: May 15 tax deadline extended to Oct. 16")
- https://www.ftb.ca.gov/file/when-to-fil ... elief.html

Please let me know if this is correct. Thanks.
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#2
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puravidatpt wrote:- https://www.irs.gov/newsroom/irs-califo ... -to-may-15 ("Updated 2/24/23: May 15 tax deadline extended to Oct. 16")
- https://www.ftb.ca.gov/file/when-to-fil ... elief.html

I have read the information regarding the tax deadline extensions multiple times, but due to the serious consequences of being wrong, I would appreciate it if someone could confirm if both the filing and payment deadlines for taxes are extended. For example, if someone in the affected county owes $20,000, will they avoid penalties and interest if they file and pay their taxes before October 16, 2023?
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#3
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It's right at the top of both announcements:

WASHINGTON — California storm victims now have until May 15, 2023, to file various federal individual and business tax returns and make tax payments, the Internal Revenue Service announced today.
Updated 2/24/23: May 15 tax deadline extended to Oct. 16

As announced by Governor Newsom, California individuals and businesses impacted by 2022-23 winter storms qualify for an extension to file and pay taxes until October 16, 2023.
 

#4
Wiles  
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#5
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I don't have many clients in CA so I'd like to confirm.

Client is an expat, lives abroad, but uses a CA mailing address on his return and files as a CA resident each year. Client owns rental real estate in Los Angeles county, as well as outside CA within the US.

Client has until Oct 16th to pay the remainder of his federal and CA tax liability without penalty and interest? It is substantial this year.
 

#6
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“Affected taxpayers” include “individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the covered disaster area.” Los Angeles county is in the covered disaster area.

https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-severe-winter-storms-flooding-landslides-and-mudslides-in-california

As a result, it appears that whether your client is entitled to the postponement to pay his Federal and CA tax liabilities depends upon whether his rentals in Los Angeles county are considered businesses, and whether Los Angeles county is the principal place of those businesses. If your client’s rentals are considered investments, or if Los Angeles county is not the principal place of business of his rentals, then it appears that your client would not be entitled the postponement.
 

#7
JAD  
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I think you have an angle in the ownership of real estate in an impacted county. But my recollection is that the guidance says that if the taxpayer has a trade/business in an impacted county, he is eligible for the extension. If so, then we get into the issue of whether the rental is a trade/business that qualifies for relief, as mentioned by NoCal, who posted while I was typing.

The fact that he uses a CA address I don't think is determinative. If you file with a CA address, you are not eligible. But...the chances of getting caught are very low, considering that he files a resident return. But you should not advise him that the CA address secures relief.

What might be of interest to you is that this whole issue has been discussed quite extensively on a list-serve that I think is affiliated with the Cal Soc of CPAs, so there are many CA practitioners. People are not excited by this whole thing. The consensus is that we are expecting to have to deal with many notices where IRS or FTB computers are not properly programmed. Interest is being assessed at 7% for underpayments? That is going to cause clients with large balances heart attacks. If there is an underpayment from Q1 - Q3, there is disagreement as to whether interest continues to accrue during this period of forgiveness.

Many practitioners are not even telling their clients about this. I have taken the other approach because I don't want my clients to hear about it elsewhere and wonder why I did not tell them. I am telling them that this extension of filing and payment is available, but no one expects it to go smoothly. That unlike the Covid extensions, this is not country-wide. That it will take time, and therefore money (our fees), to sort out any assessments that are automatically generated by computers that were not properly programmed, and that unless they expect to earn substantially more on their money during the deferral period than what it will cost to pay me, they should just pay according to the regular schedule. Many of us are filing extensions even though not required to avoid dealing with potential notices regarding late filing.

I have a client with about $4M due 4/18. I explained all of this to them. People who have that kind of balance due have so much money that what we think is a huge amount of earnings potential is not that significant to them. They are going to pay on schedule because they just don't want any headache.
 

#8
EZTAX  
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We are respnding as JAD is doing. Letting folks know about it but also telling them that if they do not file on time or pay us to file an extension, they can respond to any letters or will have to pay us to do so.

It has been so hard to resolve issues with the FTB and IRS lately that this is not making us feel lucky to be in this situation. Not to mention the fear of the potenital of having to respond to the many phone calls that might result.

One IRS announcement said that if any penalties were issued, just call them to resolve. Yeah right.
 

#9
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The IRS announcement (https://www.irs.gov/newsroom/irs-provid ... california) says:

The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who ...

If an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date that falls within the postponement period, the taxpayer should call the telephone number on the notice to have the IRS abate the penalty.

The IRS only mentions "late filing or late payment penalty", but I cannot conclude that the IRS does not charge interest from the original filing date from the announcement itself. Anyone can determine this from reading the announcement, or from other sources?

Same with California announcement (https://www.ftb.ca.gov/file/when-to-fil ... elief.html), no interest charge mentioned.
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#10
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Interest is also postponed to 10/16/2023.

The postponement of the filing and payment due dates to 10/16/2023 is based on sec. 7508A. The IRS cites this section in its disaster relief announcements. Sec. 7508A(a) says this:

(a) In general.---In the case of a taxpayer determined by the Secretary to be affected by a federally declared disaster (as defined by section 165(i)(5)(A))A)), a significant fire, or a terroristic or military action (as defined in section 692(c)(2)), the Secretary may specify a period of up to 1 year that may be disregarded in determining, under the internal revenue laws, in respect of any tax liability of such taxpayer---
    (1) whether any of the acts described in paragraph (1) of section 7508(a) were performed within the time prescribed therefor (determined without regard to extension under any other provision of this subtitle for periods after the date (determined by the Secretary) of such disaster, fire, or action),
    (2) the amount of any interest, penalty, additional amount, or addition to the tax for periods after such date, and
    (3) the amount of any credit or refund.
 

#11
irc162  
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NoCalCPA85 wrote:Interest is also postponed to 10/16/2023.

The postponement of the filing and payment due dates to 10/16/2023 is based on sec. 7508A. The IRS cites this section in its disaster relief announcements. Sec. 7508A(a) says this:

(a) In general.---In the case of a taxpayer determined by the Secretary to be affected by a federally declared disaster (as defined by section 165(i)(5)(A))A)), a significant fire, or a terroristic or military action (as defined in section 692(c)(2)), the Secretary may specify a period of up to 1 year that may be disregarded in determining, under the internal revenue laws, in respect of any tax liability of such taxpayer---
    (1) whether any of the acts described in paragraph (1) of section 7508(a) were performed within the time prescribed therefor (determined without regard to extension under any other provision of this subtitle for periods after the date (determined by the Secretary) of such disaster, fire, or action),
    (2) the amount of any interest, penalty, additional amount, or addition to the tax for periods after such date, and
    (3) the amount of any credit or refund.


Section 7508A(a) says the Secretary may disregard the deadline for penalties and interest. The word "may" is not the same as the word "will". "May" implies an option. In addition, I am not sure this code section precludes a pick and choose option. The Secretary may disregard penalties, but that doesn't mean they must necessarily disregard interest as well.

My personal opinion is the the IRS may have not yet determined whether or not interest will be charged. We may not have an answer to that one until the notices start rolling out.
 

#12
JAD  
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Wiles pointed this out for me:

https://www.irs.gov/irm/part20/irm_20-0 ... 9599929760

If the link doesn't take you directly there, scroll down to 20.2.7.13.1
 

#13
JAD  
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My post #7 - client just called and said that they are now very comfortable with this whole thing. They will provide info as convenient, we will not worry about extension, and they will pay the $4M + 2023 estimates in October. Oh joy.

What do you think has the least chance of generating notices....

File extension that shows balance due, unpaid

or

Just file and pay in Oct?
 

#14
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I'm going to be filing extensions for my few affected clients. I'll leave it up to them whether or not they pay in on 4/18. My reasoning is that I'd rather be fighting FTP penalty and interest rather than those two plus FTF penalty.
 

#15
LMJ  
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Has anyone actually called the IRS and FTB and asked?
 

#16
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LMJ wrote:Has anyone actually called the IRS and FTB and asked?

I do not think calling them will get more accurate information that the announcement in writing. When you call, you get a random person who will tell you things based on her knowledge and understanding. Often times when I call the IRS, they told me one thing and when I call the second time they tell me another.
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#17
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anyone know if New York returns also extended for certain countys - IRS extended New York for certain countys but see nothing from New York
 

#18
LMJ  
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puravidatpt wrote:
LMJ wrote:Has anyone actually called the IRS and FTB and asked?

I do not think calling them will get more accurate information that the announcement in writing. When you call, you get a random person who will tell you things based on her knowledge and understanding. Often times when I call the IRS, they told me one thing and when I call the second time they tell me another.

I did contact the CA FTB via chat and got some answers which I posted on a seperate thread.
 

#19
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LMJ wrote:I did contact the CA FTB via chat and got some answers which I posted on a separate thread.

Can you please kindly provide the link to the separate thread? Thanks.
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#20
LMJ  
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puravidatpt wrote:
LMJ wrote:I did contact the CA FTB via chat and got some answers which I posted on a separate thread.

Can you please kindly provide the link to the separate thread? Thanks.

Its near this one. You cant see it? OR just look it up by name?
 


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