The FTB has announced that they are experiencing technical difficulties with some of their online services, such as MyFTB and the Minimum Essential Coverage information reporting. The biggest issues for tax professionals as the June 16 deadline approaches for passthrough entity elective tax prepayments and LLC fee estimated payments are:

• They cannot access MyFTB and will not be able to make payments on behalf of their clients through MyFTB, although they can continue to make payments through WebPay and electronic fund withdrawals (EFW) through their software; and
• FTB phone staff may not be able to access needed information to provide to tax professionals.

According to the FTB, these technical difficulties should not impact the ability to e-file returns or to accept payments through Web Pay and EFW.

The FTB is working diligently to get these systems back up as soon as possible.

In addition, FTB’s Santa Ana and Los Angeles field offices are temporarily closed, and as such, walk-in payment services in these offices may not be available.

Sign up for Spidell’s 2025/26 Federal and California Tax Update and get the latest news on expected legislative changes resulting from expiring TCJA provisions. Click here and register today.

On June 12, 2025, California will begin offering grants of up to $20,000 to qualifying homeowners whose homes were destroyed or left uninhabitable in various fires, floods, and other disasters that have occurred from January 1, 2023, to January 8, 2025 (click here for a list of eligible disasters).

Under the CalAssist Mortgage Fund program, qualified homeowners can receive grants for three months of mortgage payments, up to a $20,000 maximum, that would be paid directly to participating mortgage servicers. These grants do not have to be repaid, and we believe they would qualify for the IRC §139 disaster relief exclusion on both the federal and California returns.

To qualify, a taxpayer’s primary residence must have been destroyed by a qualifying disaster and the taxpayer’s household income (essentially gross income for all persons on the mortgage or deed) must not exceed the program income limits, which are based on the county’s median income level.

The program is capped at $105 million and will be awarded on a first-come, first-served basis.

Additional information concerning the program is available at:

www.calassistmortgagefund.org/program-details#faq

Sign up for Spidell’s 2025/26 Federal and California Tax Update and get the latest news on expected legislative changes resulting from expiring TCJA provisions. Click here and register today.

The FTB is offering the following new self-service options for taxpayers. 

Personal Income Tax Self-Correct 

This new service allows taxpayers to respond online to Form FTB 5818, Notice of Tax Return Change when Form FTB 3514, California Earned Income Tax Credit, is missing. Taxpayers can respond through their MyFTB account with the unique URL provided on the notice received, or by mailing Form 3514 to the address indicated on the notice. 

MyFTB for Withholding Agent Representatives 

This new service allows withholding agent representatives to electronically file the following forms: 

• Form 592, Resident and Nonresident Withholding Statement 

• Form 592-PTE, Pass-Through Entity Annual Withholding Return 

• Form 592-F, Foreign Partner or Member Annual Return 

Withholding agents now have the option to file by mail, online through MyFTB for Withholding Agent Representatives, or by SWIFT. Users must file through SWIFT when there are 250 or more payees. 

Withholding agents also have the option to submit payments electronically when filing Form 592, Form 592-PTE, and Form 592-F. In a future enhancement to the service, withholding agents will be able to submit payments without submitting a withholding form. 

Withholding agents must register for a MyFTB account prior to submitting online. Once the withholding agent completes the authentication process and has a valid account, they can file nonresident withholding forms through MyFTB for Withholding Agent Representatives. 

It takes approximately five to seven business days to complete registration. 

Over the last two weeks we’ve heard from numerous tax practitioners that their clients have been receiving erroneous notices from the IRS and the FTB. These agencies have confirmed that some notices were sent in error.

According to the FTB, in late April, they were alerted to an issue impacting entities filing their first-year return receiving erroneous notices related to the $800 minimum franchise tax. The FTB corrected the problem on April 30, 2025. As of May 1, 2025, all first-year corporation returns are being processed correctly. The FTB is identifying those entities impacted and correcting the accounts. If an entity or their representative receives a bill related to this issue, they should call the telephone number listed on the notice or check MyFTB to see if the issue has been resolved.

Additionally, the IRS has confirmed that CP161, Request for Payment or Notice of Unpaid Balance, is being erroneously sent to trust taxpayers for underpayment of estimated taxes. The IRS stated that this is a programmer error that the IRS is working to correct and that adjustments to impacted taxpayers should be resolved within a month. Taxpayers and/or tax practitioners can proactively call the IRS to request penalty abatement.

Sign up for Spidell’s 2025/26 Federal and California Tax Update and get the latest news on expected legislative changes resulting from expiring TCJA provisions. Click here and register today.

The tax provisions of the One Big, Beautiful Bill Act (OBBBA; H.R. 1), which passed the House of Representatives on May 22, 2025, are largely the same as the version of the bill that was released on Monday, May 12, 2025. See Spidell’s Flash E-mail from May 12 for a summary of the bill’s major provisions.

Two significant changes that were made in the last-minute tax amendments to the OBBBA version that was passed by the House include:​​​​​

• An increase in the SALT itemized deduction limitation to $40,000 ($20,000 for married taxpayers filing separately) and an increase in the modified adjusted gross income phaseout threshold to $500,000 ($250,000 MFS); and
• Modifications to the excess business loss rules under IRC §461(l) that create a separate category of carryovers for excess business losses instead of treating them as net operating losses.

The bill passed by the House did not delete the modifications to the SALT limitation that effectively remove the benefits of state passthrough entity elective tax laws.

The final version of the bill, without the last-minute amendments, is available at:

www.congress.gov/bill/119th-congress/house-bill/1/text

And the supplemental amendments that were a part of the final bill are available at:

http://rules.house.gov/sites/evo-subsites/rules.house.gov/files/documents/rulesreport05212025_.pdf

This is just the next step in the evolution of this legislation, and we will continue to keep you posted as news develops on these pending provisions.

Sign up for Spidell’s 2025/26 Federal and California Tax Update and get the latest news on this act and other expected legislative changes resulting from expiring TCJA provisions. Click here and register today.

A unanimous Senate passed the No Tax on Tips Act (S. 129), which, if enacted, would allow taxpayers to claim an above-the-line deduction of up to $25,000 in qualified tips beginning with the 2025 taxable year for those tips reported to their employer for payroll tax purposes. Qualified tips would be defined as cash tips received by an individual in the course of their employment in an occupation that traditionally and customarily received tips prior to 2024. These occupations would be determined by the Secretary of the Treasury.

Taxpayers who were considered highly compensated employees in the prior year ($155,000 for 2024, $160,000 for 2025) would be ineligible to claim the deduction.​​​​​

The bill would also expand the Employer Tax Credit for FICA paid on tip income to apply to tips provided to beauty service workers. Beauty services would be defined as barbering and hair care, nail care, esthetics, and body and spa treatments.

The No Tax on Tips Act is similar to the no tax on tips provision contained in the House’s The One, Big, Beautiful Bill Act (OBBBA). However, unlike the OBBBA provision, there is a cap on the amount of the deduction and there is no Social Security number requirement or sunset clause contained in the Senate’s bill.

Sign up for Spidell’s 2025/26 Federal and California Tax Update and get the latest news on this act and other expected legislative changes resulting from expiring TCJA provisions. Click here and register today.

The 28-page draft bill originally released by the House Ways and Means committee has been expanded to a 389-page version officially titled The One, Big, Beautiful Bill. This expanded version makes changes to some of the provisions we originally announced, including:

• Increasing the IRC §199A deduction from 20% to 23% (previous version was 22%);
• A modified $30,000 cap on state and local tax deductions ($15,000 for married filing separately), with a phasedown for higher-income taxpayers (over $400,000/$200,000);
• Extending 100% bonus depreciation for qualifying property acquired January 20, 2025, through December 31, 2029;
• Reinstating immediate expensing of domestic research and experimental expenditures for tax years 2025 through 2029; and
• Reinstating a modified version of the overall limitation on itemized deductions.

This draft also introduces some new provisions, which include:

• Terminating all three clean vehicle credits (two in 2026 and one in 2027);
• Creating new “Money Account for Growth and Advancement” (MAGA) accounts, which are tax-advantaged savings accounts for children under age 8;
• New above-the-line deductions for qualified tips, qualified overtime compensation, and interest on passenger vehicle loans, through 2028;
• Reinstating the above-the-line deduction for cash charitable contributions ($150 for single filers and $300 for joint);
• Additional standard deductions of up to $4,000 for aged and/or blind with an AGI phaseout on this addition; and
• Increasing the 1099-K threshold to $20,000 and greater than 200 transactions, and the 1099-NEC/1099-MISC filing requirement from $600 to $2,000.​​​​​

There is still no mention of an increased exclusion or deduction for Social Security benefits, though many of these new provisions will only apply to taxpayers with a valid Social Security number.

This is still not a final bill, and we will continue to keep you updated as news develops on these provisions.

The full draft bill is available at:

www.caltax.com/files/2025/taxbilldraft2.pdf

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and get a breakdown of the provisions listed here, other provisions contained in the draft legislation, and breaking news as additional legislative provisions are released. Click here and register today.

Late in the evening on Friday, May 9, the House Ways and Means committee released a partial draft of the tax legislation we have all been waiting for. We expect the final bill to be much larger than this initial 28-page draft.

The three provisions containing the most important tax changes in the partial draft are:

1. Increasing the IRC §199A deduction from 20% to 22% of qualified business income and expanding the deduction to include certain investment income;
2. An increase in the Child Tax Credit from $2,000 per child to $2,500 per child for 2025 through 2028 (then reverting back to $2,000 with an annual inflation adjustment thereafter); and
3. Permanently increasing the uniform estate and gift tax exemption to $15 million per taxpayer, with annual inflation adjustments starting in 2026.

Other provisions contained in the partial draft legislation include permanent extensions of less controversial TCJA items scheduled to expire at the end of 2025, including:

• Tax rate schedules with the highest marginal rate remaining at 37%;
• The higher standard deduction (with an additional temporary bump for tax years 2025 through 2028 of $2,000 for married taxpayers filing jointly, $1,500 for head of household, and $1,000 for single filers);
• Elimination of the personal exemption deduction;
• Alternative minimum tax exemption and exemption phase-out thresholds;
• Limitation on the deduction for qualified residence interest;
• Limitation on casualty loss deductions;
• Elimination of 2% miscellaneous itemized deductions; and
• Elimination of the overall limitation on itemized deductions.​​​​​

This draft does not contain any provisions dealing with the state and local tax (SALT) provisions, which is expected to be a hotly contested issue, or any of the items promised by President Trump on the campaign trail, such as no tax on tips, overtime, or Social Security, among other provisions.

The 28-page partial draft bill is available at: www.caltax.com/files/2025/taxbilldraft.pdf

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and get a breakdown of the provisions listed here, other provisions contained in the partial draft legislation, and breaking news as additional legislative provisions are released. Click here and register today.

The California Secretary of State’s (SOS) office is now issuing 12-character identification numbers to newly registered corporations, LLCs, and limited partnerships. These new identification numbers will all start with the letter “B”. (SOS Customer Service Update, February 25, 2025)

Entities that were previously issued an entity number will continue to use the same number and will not be reissued a new 12-character identification number.

According to the SOS’s office:

• Entity numbers for general partnerships and limited liability partnerships will not change; and
• Entities that file a continuing conversion (e.g., corporation to LLC or LP) will keep their original number as well.

The FTB has stated that they will be able to accept the new and existing numbering formats. This means for completing forms and most FTB website interfaces, the entity will put in the complete identification number, including the letter “B”, but as before, would not put in the letter “B” when entering the entity ID for WebPay. This is consistent with prior practice, wherein corporations would not enter the letter “C” when entering the entity ID on WebPay.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

We are saddened to announce the passing of Robert Spidell, founder of Spidell Publishing, Inc., who died on April 26 at the age of 91.

In 1975, Bob and his wife, Janet, founded Spidell Publishing in a vacant 7-Eleven store in Anaheim, California. From those humble beginnings, Bob became a pioneering force in California tax education and was affectionately known throughout the industry as “Mr. California Tax.” His work transformed how professionals across the state understood and applied complex tax laws.

Bob’s legacy includes:

• Making complex tax law understandable. Through his California Taxletter^®, forms books, tax guides, and client letters, Bob had a unique gift for making the most complicated aspects of California tax law accessible and clear.
• Creating a vital tax education community. Spidell’s tax update seminars became the gold standard across the state, drawing thousands of tax professionals each fall to prepare for the new season and reconnect with colleagues.
• Fighting for fairness in taxation. A tireless advocate, Bob frequently met with state agencies and lawmakers. Among his most notable accomplishments was helping stop the Franchise Tax Board from taxing nonresident military personnel.

Bob was also a champion for women in the workplace. Under his leadership, Spidell Publishing was a place where talent and merit determined success. He promoted women to key roles, hired Gina Rodriquez as Sacramento Editor, sold the company to Lynn Freer, and mentored Renee Rodda, JD, now Senior Vice President of Tax and Accounting Education at CeriFi.

Bob and Janet believed strongly in giving back. Their generosity and civic engagement included:

• Investing in education. They established an endowment that helped create a state-of-the-art classroom/lab in the CSULB University Library, supporting hundreds of students with access to computers and resources. In recognition of their contributions, Bob and Janet were awarded honorary Doctor of Humane Letters degrees by the CSU Board of Trustees and Cal State Long Beach, where Bob earned his economics degree in 1965.
• Supporting local heritage. Bob and Janet volunteered at Mission San Juan Capistrano, where Bob served as a tour guide for fourth-grade students studying California history, and Janet, who died in 2016, cared for the mission’s iconic gardens.

We will miss Bob deeply — his humor, his passion, and his unwavering ability to make things happen. His legacy will continue to impact the tax profession and the lives of so many he inspired.

Today, the House agreed to the Senate’s budget resolution parameters. This means Congress can now turn to passing tax legislation, including TCJA extensions and other tax reform measures promoted by President Trump and congressional members. This will be done through the budget reconciliation process, which will allow both chambers of Congress to pass significant tax legislation by simple majority vote.

There is no set time period by which Congress must pass the budget reconciliation bill, but we will keep you posted as news develops.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

In an executive order, President Trump directed the U.S. Treasury Secretary to develop a plan over the next 180 days to phase out the use of paper checks. This would apply to both the IRS’s payments of tax refunds as well as taxpayers’ tax payments to the IRS.

According to the White House fact sheet accompanying the executive order’s release, effective September 30, 2025, the IRS will cease issuing paper check tax refunds. However, it is unclear when the mandate that all tax payments be made to the IRS electronically would go into effect. We will have to await further guidance from the IRS and the U.S. Department of Treasury as to when and how the electronic tax payment mandate will be implemented.

The executive order does authorize exceptions from the mandate in certain circumstances, such as when individuals do not have access to banking services or electronic payment services, or for certain emergency payments where electronic disbursement would cause undue hardship. The order also authorizes the Treasury Secretary to identify other circumstances in which exceptions would be allowed.

We will provide updates when additional guidance is issued.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

Beginning with the 2024 tax year, to claim either a New Clean Vehicle Credit or the Previously-Owned Clean Vehicle Credit, registered dealers must submit an IRS Form 15400, Clean Vehicle Seller’s Report, to the IRS on its Energy Credits Online portal within 72 hours of the sale of a qualifying vehicle. Both the taxpayer and the dealer must have a copy of this report to:

• Claim either of these credits on the taxpayer’s tax return; or
• Transfer either of the credits to the dealer at the time of sale (referred to as an advance credit).

Unfortunately, many dealers were not submitting this report to the IRS in a timely fashion (if at all), which resulted in the taxpayer being denied the credit and/or the dealer being denied the advance credit.

According to an alert issued by the National Automobile Dealers Association, the IRS has now reopened the portal for dealers to submit the 2024 Form 15400 and is waiving the 72-hour submission deadline. To date, we are not aware of a specific timeline by which these reports must be submitted.

Taxpayers who were unable to claim the credit previously for the 2024 tax year due to the lack of a Form 15400 should contact their automobile dealer now to obtain the report while the portal remains open for dealers to submit their 2024 seller reports.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

In updated FAQs, the IRS has announced a new procedure for taxpayers who receive an ERC refund related to wages paid in prior tax years, but have not filed an amended return to reduce their wage expenses for the year the wages were paid (2020 and/or 2021). (www.irs.gov/coronavirus/frequently-asked-questions-about-the-employee-retention-credit#incometax)

ERC refunds issued

For situations where the prior-year return is a closed year, taxpayers must include the overstated wage expense amount as gross income on their income tax return for the tax year the ERC refund was received. This means that if a taxpayer receives an ERC refund in 2024 related to 2021 wage expenses, they must include the 2021 overstated wage expenses as gross income on their 2024 tax return. The IRS also reiterates that taxpayers in this situation remain eligible for penalty relief. (IR-2022-89)

For open tax years, taxpayers may file an amended return, administrative adjustment request (AAR), or protective claim for refund to deduct their wage expense for the year in which the ERC was claimed. Alternatively, these taxpayers could elect to report the refund as income in the year it is received.

Many taxpayers were filing amended returns and paying associated taxes due for the closed tax year only to have the IRS return the tax payments because the tax year was closed. These taxpayers now know that they can cash these refund checks without repercussion and use these payments to pay the resultant taxes due when the wages are reported on the tax return for the year the ERC refund was received.

ERC credits disallowed

The IRS also provided guidance for taxpayers whose ERC was disallowed, who had previously reduced the wage expense on their return for the year the ERC was claimed. These taxpayers may, in the year the ERC claim disallowance is final, increase their wage expense on their income tax return by the same amount that it was reduced when they made their original ERC claim.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

The FTB began sending out corrected 1099-Gs on March 19, 2025.

As we previously reported, due to a calculation oversight, some of the Forms 1099-G, Certain Government Payments, issued by the FTB for the 2024 tax year contained incorrect information. According to the FTB, this issue was limited to taxpayers who itemized their deductions and transferred estimates from the 2023 tax year to the 2024 tax year. The transferred amount may not have been included in the 1099-G amount.

The FTB estimates that this impacted about 3% of the 1099-Gs, which according to our calculations comes to about 100,000 forms.

Tax professionals should verify that the information reported on previously received 1099-Gs is correct. If not, they should hold off filing until they receive the corrected 1099-Gs. Tax professionals can also check their client’s MyFTB account to see if the corrected 1099-G has been posted.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

The Federal Emergency Management Agency (FEMA) has extended the deadline for survivors of the Los Angeles County fires to register for federal aid. (Governor’s Press Release (March 7, 2025), available at: www.gov.ca.gov/2025/03/07/governor-newsom-announces-deadline-extension-to-apply-for-federal-assistance-for-los-angeles-fires) The deadline to apply for Disaster Unemployment Insurance with the EDD has also been extended.

FEMA assistance

Homeowners and renters who have incurred damage or losses from the Los Angeles County wildfires now have until Monday, March 31, 2025, to apply for FEMA Individual Assistance and Small Business Administration assistance. The previous deadline for registration for disaster aid was March 10, 2025.

Affected taxpayers can apply at:

www.disasterassistance.gov

EDD Disaster Unemployment Insurance

The deadline to apply for Disaster Unemployment Assistance has also been extended until March 31, 2025. Taxpayers can apply at:

www.edd.ca.gov/en/unemployment/Disaster_Unemployment_Assistance

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

The IRS will begin adding information return documents to taxpayers’ IRS Individual Online Account, which will consolidate important tax records in one place. (IR-2025-28) The first information returns to be added are: 

• Form W-2, Wage and Tax Statement; and
• Form 1095-A, Health Insurance Marketplace Statement.

These forms will be available for tax years 2023 and 2024 under the Records and Status tab in the taxpayer’s Online Account.   

Only information return documents issued in the taxpayer’s name will be available in their Online Account. The taxpayer’s spouse must log into their own Online Account to retrieve their information return documents. This is true whether the taxpayers file a joint or separate return.  

State and local tax information, including state and local tax information on Form W-2, will not be available on Individual Online Account.

On Sunday, March 2, 2025, FinCEN continued with its rollercoaster guidance by announcing that it will not enforce any penalties or fines associated with the beneficial ownership information (BOI) reporting rules under existing regulations. Additionally, FinCEN will not enforce any penalties or fines against U.S. citizens or domestic reporting companies, or their beneficial owners.

The reason for the relief is that the Department of the Treasury will propose new rulemaking that will narrow the scope of the beneficial owner reporting rules to apply to foreign reporting companies only. This means that domestic entities will not be required to file any BOI reports.

At this time there is no information on what, if anything, will need to be done for domestic entities that have already filed. We will continue to update you as information is released on this issue.

The full text of the Treasury press release is available at:

https://home.treasury.gov/news/press-releases/sb0038

As a result of this development, Spidell’s BOI Reporting Update webinar has been canceled. Customers who were registered for the March 25, 2025, webinar will receive an e-mail from us today with options to transfer to another webinar or request a refund.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

On February 27, 2025, FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports until a new interim BOI reporting final rule becomes effective, and the new relevant due dates in the interim final rule have passed.

FinCEN stated that it intends to issue an interim final rule no later than March 21, 2025, which will extend the BOI reporting deadlines.

FinCEN’s announcement is available here.

In light of this latest development, to ensure that our customers have the most current information, Spidell will postpone our BOI Reporting Update webinar originally scheduled for March 4, 2024, until March 25, 2025. Sign up for the webinar here.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

The Los Angeles City Council approved a business tax relief program for taxpayers with a business location that was destroyed by the wildfires, including home-based businesses. Under the program, a business destroyed by the wildfires is deemed to have terminated the business as of December 31, 2024. This means the taxpayer will not be required to renew their business license or pay the business license tax for the 2025 tax year. When the taxpayer reopens, they will need to reregister as if they were a newly established business.

Businesses whose property was not physically destroyed but that experienced severe economic disruption for at least 45 days can also qualify.

All eligible taxpayers must apply for relief by April 14, 2025, at:

http://finance.lacity.gov

Additional information is available at:

http://finance.lacity.gov/blog/business-tax-relief-people-and-businesses-directly-impacted-wildfires-faq

In addition, all business locations within ZIP codes 90049, 90272, and 90402 will automatically be granted an extension of the annual business tax renewal filing deadline to April 14, 2025. A taxpayer with a business located outside of these ZIP codes, but whose business was interrupted as a direct result of the fires, may be granted an extension as well. To qualify, the taxpayer must submit a written request, including reasonable proof of the interruption, to the Office of Finance before the February 28, 2025, renewal deadline at:

http://finance.lacity.gov/blog/wildfire-business-tax-filing-extension

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

We have heard from numerous tax professionals that the Forms 1099-G being sent by the FTB contain incorrect amounts. We reached out to the FTB, and they confirmed that there are some Forms 1099-G that need to be corrected. They are working on making these corrections and hope to release additional information shortly. In the interim, tax professionals should verify that the amounts reported on Form 1099-G are correct and, if not, should hold off preparing those returns until we receive guidance from the FTB.

We will send a follow-up Flash E-mail once we have additional information from the FTB.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

FinCEN announced that the beneficial ownership information (BOI) filing mandate is now back on, with a new filing due date of March 21, 2025. (FinCEN Notice FIN-2025-CTA1 (February 18, 2025)) The reinstatement was triggered by the U.S. District Court for the Eastern District of Texas’s February 18, 2025, decision to lift the preliminary injunction that it had issued in the Smith case. (Smith, et al. v. U.S. Department of the Treasury, et al.(February 18, 2025) U.S. Dist. Ct., E.D. Tex., Case No. 6:24-cv-00336)

The new March 21, 2025, due date applies to the vast majority of reporting companies to file an initial, updated, or corrected BOI report, including those entities formed prior to January 1, 2024. Entities formed in 2025 must file by the later of March 21, 2025, or 30 days from the date of formation.

FinCEN indicated that during the next 30 days it will “assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce the burden for lower-risk entities, including many U.S. small businesses.”

Additional information is available at:

www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Deadline-Extension-508FINAL.pdf

Spidell is offering a one-hour webinar to provide all the information you will need to meet this new March 21, 2025, deadline. To register, go to:

www.caltax.com/shop/webinars/live-upcoming-webinars/boi-reporting-update-webinar

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

The House has unanimously passed the Protect Small Businesses From Excessive Paperwork Act of 2025 (H.R. 736), which would delay the beneficial ownership information (BOI) mandatory reporting requirement due date to January 1, 2026, for entities formed prior to January 1, 2024. The bill has now been sent to the Senate.

The bill would not impact the reporting requirement for entities formed after 2023, which means that if the preliminary injunction issued in the Smith case is stayed, entities formed after 2023 would still be required to file their initial reports and any updates or corrections to these reports. (Smith vs. U.S. Treasury (January 7, 2025) U.S. Dist. Ct., E. Dist. of Texas, Case No. 6:24-cv-0036) However, it is important to note that FinCEN has indicated that if the injunction is lifted, it will postpone the filing deadline for 30 days, during which time period it will revise which entities may be required to file the reports. See our Flash E-mail from February 6, 2025, “Mandatory beneficial ownership reporting may soon be back in play,” for more details.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

On February 5, 2026, the Department of Justice (DOJ) filed an appeal with the Fifth Circuit Court of Appeals of the U.S. district court’s preliminary injunction in Smith v. U.S. Department of the Treasury, which blocked the enforcement of the beneficial ownership information (BOI) reporting requirement. (Smith et. al. v. U.S. Department of Treasury, et al. (January 7, 2025) U.S. Dist. Ct., E. Dist. of Texas, Case No. 6:24-cv-0036)

The DOJ asked that the injunction be put on hold while the appeal proceeds. Although it is not guaranteed, given that the U.S. Supreme Court reversed the Fifth Circuit’s reinstatement of the preliminary injunction in the Texas Top Cop Shop decision (McHenry v. Texas Top Cop Shop, Inc. (January 23, 2025) U.S. Supreme Court, Case No. 24A653), it is likely that the Fifth Circuit will grant the DOJ’s request for a stay of the injunction. This means the beneficial ownership reporting mandate may be reinstated shortly.

In an alert posted today, FinCEN stated that if the injunction is lifted by the Fifth Circuit, it will extend the filing deadlines for all reporting companies by 30 days. FinCEN also stated that during this 30-day period it “will assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.”

However, while the Smith court’s injunction remains in place, businesses are not currently required to file any initial reports or any updates or corrections, although they may do so voluntarily.

Sign up for Spidell’s 2025 Post-Tax Season Update and Review and prepare yourself to tackle extensions with confidence. Click here for details.

On February 4, 2025, Governor Newsom signed Executive Order N-17-25, which among other things:

• Extends the current property tax relief, which suspends until April 10, 2026, penalties, costs, or interest for failure to pay property taxes, to properties located in zip codes 91024, 91103, and 91367. It also postpones the filing deadline to file business personal property tax statements until April 1, 2026. Previously, this property tax relief was limited to properties located in 15 zip codes in Los Angeles County; and
• Provides a three-month extension for Los Angeles businesses to provide documentation to the CDTFA to support their application for penalty and interest relief for failure to timely and pay sales and use taxes due January 30, 2025. Previously, the Governor had provided an automatic three-month extension to file and pay the January 30 sales and use tax returns and payments but only for those businesses whose 2024 third quarter return was for less than $1 million in tax.

According to an alert posted on FinCEN’s beneficial ownership information (BOI) reporting webpage, BOI reporting is still voluntary for now despite the U.S. Supreme Court’s stay of the preliminary injunction issued by a federal district court in Texas Top Cop Shop Inc. v. McHenry. ((January 23, 2025) U.S. Supreme Court, Case No. 24A653)

This is because another judge in a separate case has also issued a nationwide injunction against the BOI reporting requirements. (Smith v. U.S. Department of Treasury (January 7, 2025) U.S. Dist. Court, Eastern Dist. of Texas, Case No. 6:24-CV-336)) To date, the Department of Justice has not filed an appeal in Smith. It is not known whether the new administration will appeal the case.

This means that, for now, businesses are not required to file BOI reports and cannot be penalized for failing to do so.

It is also important to note that two bills (HR 425 and S 100) have been introduced in Congress to repeal the Corporate Transparency Act, which created the BOI reporting mandate.

We will keep you apprised of any further developments as they occur.

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Today, the U.S. Supreme Court stayed the order from the Fifth Circuit Court of Appeals that reinstated the lower court’s nationwide injunction against the beneficial ownership information (BOI) reporting requirement. (McHenry v. Texas Top Cop Shop, Inc. (January 23, 2025) U.S. Supreme Court, Case No. 24A653)

FinCEN has yet to issue any additional guidance after the U.S. Supreme Court’s ruling, so it is unclear at this point whether businesses will be required to comply with the BOI reporting mandate. We anticipate we will hear more from FinCEN and/or Congress shortly and will keep you apprised of any further developments.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

As a result of an executive order issued by Governor Newsom today, taxpayers in the following zip codes may postpone their property tax payments until April 10, 2026, and business personal property tax statement filings until April 1, 2026, without being subject to penalties and interest:

However, the postponement relief does not apply to payments made through an impound account nor to any taxes on the property that were delinquent as of January 6, 2025.

In addition to the relief provided in the executive order, taxpayers may also seek relief from the Los Angeles County Assessor’s office to have damaged or destroyed property reassessed. Taxpayers may also seek further suspension of penalties and interest for up to four years by submitting a penalty cancellation request form with the Los Angeles County Treasurer and Tax Collector.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

To assist tax professionals working with disaster victims, including those assisting Los Angeles County wildfire victims and the hurricane and storm victims on the east coast, Spidell is offering two free disaster tax relief webinars. These webinars are:

• Tax Relief for Disaster Victims, which will address federal income tax relief generally; and
• Tax Relief for California Disaster Victims, which will cover both federal income and California income and property tax relief.

In the interim, tax professionals can also access additional resources for Los Angeles County wildfire victims from the FTB and the Los Angeles County Assessor’s Office.

The FTB has posted the following resources:

• Los Angeles County wildfire FAQs; and
• A chart outlining how disaster victims should make tax payments to ensure payments are processed accurately and timely.

In addition, the Los Angeles County Assessor has a disaster relief webpage.

The FTB has released the interest rates for the second half of 2025. For the period July 1, 2025, through December 31, 2025, the rates are: 

• Personal underpayment/overpayment and corporate underpayment: 7%; and 

• Corporate overpayment: 4%. 

You can access historical rates at www.caltax.com/research/ftb-interest-rates/.

Recently, the Department of Finance re-designated the census tracts, altering the Designated Geographic Area (DGA) in which employees must live in order for an employer to be eligible for the New Employment Credit. (FTB Tax News (January 2025)) Some census tracts previously eligible are no longer in the DGA. Other census tracts previously not within the DGA have been added and are now eligible. This new designation will be effective January 1, 2025.  

The New Employment Credit is a tax credit intended to encourage hiring of targeted populations (e.g., unemployed, persons, veterans, public benefit recipients) in specific areas of the state. To claim the credit, businesses must have employees working in an eligible area (aka, the DGA), which includes census tracts in the state with higher unemployment and poverty rates and excludes tracts with lower rates. The Department of Finance originally identified the census tracts in 2014 when the New Employment Credit went into effect. 

Additional information regarding eligibility for the New Employment Credit is available at: 

www.ftb.ca.gov/file/business/credits/new-employment-credit/index.html

Taxpayers planning to claim the credit should check the DGA map tool to determine if the area where their employees are working is within the updated DGA. Within the map tool, users can view both the new DGA and the previous DGA. Users can enter an address to determine if it’s within the DGA during a particular time period. 

The map is available at:

https://maps.gis.ca.gov/gobiz/dga/

For taxpayers affected by the Los Angeles wildfires, the Governor’s office announced that California will provide postponed income and franchise tax filing and payment deadlines in alignment with the filing postponement provided by the IRS. This means taxpayers in Los Angeles County will be granted a postponement to October 15, 2025, to file California tax returns on 2024 income and make any tax payments that would have been due January 7, 2025, through October 15, 2025. This applies to all taxpayers located in Los Angeles County, even if they were not directly impacted by the fires.

According to the Governor’s announcement, this includes relief from the following deadlines:

• Quarterly estimated tax payments normally due on January 15, April 15, June 15, and September 15, 2025;
• Passthrough entity elective tax payments normally due on March 15 and June 15, 2025;
• Business entity corporate or passthrough entity tax returns normally due on March 15 and April 15, 2025;
• Individual tax returns and payments normally due on April 15, 2025; and
• Tax-exempt organization returns normally due on May 15, 2025.

We confirmed that similar to the relief granted by the IRS, this relief will also apply to taxpayers outside Los Angeles County whose tax professionals are located in Los Angeles County.

In addition, the Governor’s office has announced that the CDTFA will provide an automatic three-month extension for tax filing deadlines for taxpayers within Los Angeles County for those Los Angeles County taxpayers whose 2024 third quarter return was for less than $1 million in tax. This means that the January 30 returns are now due April 30, 2025. The CDTFA will also provide Los Angeles County taxpayers relief from interest and penalties and create flexible payment plans for businesses.

The Governor’s announcements are available here and here.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

Taxpayers located in Los Angeles County have until October 15, 2025, to meet filing and payment deadlines that normally fall within the January 7, 2025, through October 15, 2025, time period. (IR-2025-10) This includes, but is not limited to:

• 2024 quarterly estimated income tax payments normally due on January 15, 2025, and estimated tax payments normally due on April 15, June 16, and September 15, 2025;
• Quarterly payroll and excise tax returns normally due on January 31, April 30, and July 31, 2025;
• Individual income tax returns and payments normally due on April 15, 2025;
• 2024 contributions to IRAs and health savings accounts for eligible taxpayers;
• Calendar-year partnership and S corporation returns normally due on March 17, 2025;
• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025; and
• Calendar-year tax-exempt organization returns normally due on May 15, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after January 7, 2025, and before January 22, 2025, will be abated as long as the deposits are made by January 22, 2025.

Ventura County is not currently listed in the FEMA disaster declaration, so the IRS cannot currently grant automatic postponement relief to taxpayers located in Ventura County. The IRS has indicated that the same relief will be provided to any other counties added later to the disaster area.

Taxpayers who have an address of record in Los Angeles County will automatically qualify for relief. Taxpayers who live outside of Los Angeles County whose records are located in Los Angeles County, such as taxpayers with tax preparers in Los Angeles County or who own businesses located in Los Angeles County, also qualify for relief, but must contact the IRS disaster hotline at (866) 562-5227 to obtain relief.

Disaster area tax preparers with clients located outside the disaster area can choose to file bulk requests. Information about bulk requests is available at:

www.irs.gov/tax-professionals/bulk-requests-from-practitioners-for-disaster-relief

To date, the California Department of Finance has not announced whether they will be providing similar relief for California income and franchise tax returns. We will continue to update you as news develops on this issue.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

Taxpayers directly affected by the Los Angeles and Ventura county wildfires qualify for relief for the upcoming sales and use tax and payroll tax deadlines, as follows:

• A 60-day extension to file with the EDD state payroll reports or deposit payroll taxes without penalties and interest. To qualify, taxpayers must make a written request within two months of an original payment or return due date; and
• An extension of up to three months to file and pay sales and use taxes or fees with the CDTFA.

We have confirmed with the EDD and CDTFA that a taxpayer will be considered “directly affected” if their tax preparer is directly affected by the wildfires (e.g., due to power outages, evacuation orders, or worse).

This relief is not automatic. Taxpayers must submit requests for relief. Details about how to apply are available from the EDD here and the CDTFA here.

We anticipate that the IRS and FTB will also be granting filing and payment deadline postponements for income and franchise taxes. We will send another Flash E-mail once they have announced the available relief.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

Today President Biden signed a major disaster declaration for the wildfires impacting various communities in Los Angeles County. This will enable affected individuals and businesses to access individual program assistance from FEMA to cover expenses such as temporary accommodations and financial assistance for destroyed property.

The IRS has not issued any announcements yet, but we anticipate that with a disaster this size they will soon be providing tax filing and payment postponement relief. We will send another Flash E-mail when this occurs.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

For the second application period of fiscal year 2024/2025, the Governor’s Office of Business and Economic Development will accept applications for the California Competes Tax Credit beginning January 6, 2025, through January 27, 2025. (FTB Tax News (January 2025)) The final application window will be February 24, 2025, through March 10, 2025. 

The second application period has $215 million available for allocation. Applications for the credit will be accepted at:  

www.calcompetes.ca.gov

The BOI reporting mandate roller coaster ride continues.

A new panel of the U.S. Fifth Circuit Court of Appeals is reviewing the lower court’s decision to enjoin the enforcement of the beneficial ownership information reporting requirement. (Texas Top Cop Shop, Inc. et al. v. Garland (December 26, 2024) U.S. Ct. of Appeals, Fifth Circuit, Case No. 24-40792) The review will be expedited, but in the interim the new panel reversed the previous panel’s decision to allow the BOI reporting mandate to continue pending the court of appeal’s review.

As the law stands today, penalties cannot be imposed against businesses who fail to file BOI reports with FinCEN.

However, as we have seen over this last month, this can change at any point. We recommend that you keep your clients informed of the latest developments, as the ultimate decision as to whether to file lies with them. FinCEN has not yet issued any updates on this latest development, but we assume that they will continue to allow businesses to voluntarily file.

Should your clients choose not to file until they are required to do so, we recommend that they continue to gather all necessary information to be ready to file should the reporting requirement be reinstated. As we saw this past week when the BOI reporting requirement was temporarily reinstated, FinCEN only gave businesses a short extension of the reporting deadlines.

The Court of Appeal’s latest order is available at:

www.ca5.uscourts.gov/opinions/unpub/24/24-40792..pdf

Attendees of Spidell’s 2024/25 Federal and California Tax Update will receive an updated client letter regarding these changes. Click here for details.

On December 23, 2025, the Fifth Circuit Court of Appeals stayed the lower court’s preliminary injunction against the beneficial ownership information reporting mandate. (FinCEN Alert) This means that the BOI reporting mandate will remain in effect while the lower court trial proceeds. However, FinCEN has announced a short delay in the deadlines for most businesses. The extended reporting deadlines are now as follows:

• Reporting companies that were created or registered prior to January 1, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025);
• Reporting companies created or registered on or after September 4, 2024, that had a filing deadline between December 3, 2024, and December 23, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN; and
• Reporting companies created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.

The deadline for those businesses formed after 2024 remains 30 days from the time of formation.

Attendees of Spidell’s 2024/25 Federal and California Tax Update will receive an updated client letter regarding these changes. Click here for details.

Beneficial ownership information (BOI) reporting: The continuing resolution that was enacted this weekend did not defer the January 1, 2025, BOI reports for reporting companies formed prior to 2024. However, the temporary restraining order issued by the U.S. District Court in East Texas remains in place, meaning that all BOI reporting deadlines are currently on hold. (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. of Texas, Case No. 4:24-CV-478)

Social Security Fairness Act sent to the president: Congress passed H.R. 82, the Social Security Fairness Act, which will retroactively increase the Social Security benefits paid to millions of individuals by eliminating the windfall elimination provision and government pension offset. This means these individuals will qualify for increased Social Security benefits, retroactive to January 1, 2024. President Biden is expected to sign the bill.

2021 Recovery Rebate Credits being sent out: The IRS announced that it will be issuing over one million 2021 Recovery Rebate Credits to eligible taxpayers who failed to claim the credit on their 2021 tax returns. (IR-2024-314) Eligible taxpayers should begin receiving these payments of up to $1,400 by late January.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

Beginning January 1, 2025, the standard mileage rates for the use of a car, van, pickup truck, or panel truck will be:

• 70 cents per mile driven for business use, up three cents from 2024;
• 21 cents per mile driven for medical purposes, unchanged from 2024;
• 21 cents per mile for moving purposes for qualified active-duty members of the Armed Forces, unchanged from 2024; and
• 14 cents per mile driven in service of charitable organizations, unchanged from 2024.
  (IRS Notice 2020-5)

The rates apply to fully electric and hybrid automobiles, as well as gasoline and diesel-powered vehicles.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

Tucked away in the proposed 1,500-page continuing resolution (CR) that Congress is hoping to pass this week is a one-year delay in the January 1, 2025, beneficial ownership information (BOI) reporting deadline for those entities subject to the BOI reporting mandate that were in existence prior to January 1, 2024. (CR Title V, Subtitle C, §122) It is unclear at this stage whether the CR will pass in its current form.

If this provision is enacted as currently proposed, it would not impact the requirement that entities subject to the mandate that are formed in 2024 file their initial report within 90 days of formation and those entities formed after 2024 file their reports within 30 days of formation. However, the preliminary injunction put in place by the U.S. District Court in East Texas has put these requirements on hold, at least for now. (Texas Top Cop Shop v. Garland (December 3, 2024) U.S. Dist. Ct., Eastern Dist. of Texas, Case No. 4:24-CV-478)

We will send another Flash E-mail with any further developments.

The text of the proposed continuing resolution is available at:

https://go.spidell.com/e/837113/billsthisweek-20241216-CR-pdf/5ywwz8/2361706954/h/NipYP-gAC36lbHc-j29GKOo-YzOsQkWr-0JzCz7kH2Q

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

President Biden has signed the Federal Disaster Tax Relief Act (H.R. 5863; P.L. 118-148). As we previously reported, the bill:

• Retroactively excludes from gross income qualified wildfire relief payments paid to individuals as compensation (other than insurance payments) for losses, expenses, or damages for any wildfire declared a federal disaster after December 31, 2014 (§3, H.R. 5863);
• Treats disaster relief payments to victims of the East Palestine, Ohio, train derailment as excludable IRC §139(b) payments (§3, H.R. 5863); and
• Allows individual victims with a net disaster loss from any taxable year to claim an enhanced personal casualty loss under IRC §165(h) for certain federally declared disasters that occurred after February 24, 2021. (§2, H.R. 5863)

We anticipate that the IRS will issue additional guidance shortly, and we will keep you posted as updates become available.

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.

Each transferor and transferee that is a party to a sale or exchange of an interest in a partnership (or portion thereof) involving unrealized receivables and inventory (§751 property) must receive IRS Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, from the partnership by the later of:

• January 31 of the year following the calendar year in which the transaction occurred; or
• 30 days after the partnership has received notice of the exchange.

Partnerships that fail to timely furnish Form 8308 to parties involved in the sale are subject to penalties under IRC §6722 for failure to furnish correct payee statements (up to $250 per statement).

Recent changes made to Form 8308 have raised concerns that partnerships may not be able to acquire all information necessary to properly report Form 8308 by January 31, 2025, for transactions occurring in 2024.

Due to these concerns, the IRS has announced that it will not charge penalties under IRC §6722 to partnerships that are required to furnish Form 8308 for transactions occurring in 2024 as long as the partnerships:

• File Form 8308 with Parts I, II, and III completed by the later of:
  • January 31, 2025; or
  • 30 days after the partnership has received notice of the exchange; and
• File Form 8308 with Part IV completed by the later of:
  • The due date of the partnership’s 2024 Form 1065 (including extensions); or
  • 30 days after the partnership has received notice of the exchange.
    ​​​​(IRS Notice 2025-2)

Sign up for Spidell’s 2024/25 Federal and California Tax Update and stay on top of late-breaking news. Click here for details.