The FTB has stated that they will not be creating any new forms or certifications for taxpayers to demonstrate that they meet the 25% drop in gross receipts test for purposes of deducting expenses paid with forgiven PPP debt. They will be updating form instructions, though we do not know when to expect those updates.
The FTB has also confirmed that most taxpayers who have already filed returns, but now qualify to take deductions, will be required to file amended returns to claim the deductions. However, the FTB will follow Rev. Proc. 2021-20, which allows fiscal-year taxpayers who filed returns prior to December 27, 2020, to claim the deductions on their returns for the next taxable year.
The FTB has also confirmed that they will follow SBA guidance regarding the gross receipts calculations and measuring periods. To view that guidance, go to:
Clarification on UI adjustments for California
The FTB has clarified that it will only automatically adjust California returns for taxpayers who received UI benefits and qualify for the Earned Income Tax Credit (EITC), to reflect the reduced AGI as a result of the $10,200 UI exclusion on the federal return. The reduced federal AGI may impact a taxpayer’s eligibility for the EITC, Young Child Tax Credit, and the $600 Golden State Stimulus Payment. The FTB will not automatically adjust other amounts on the California return that are limited by federal AGI.
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