First Time Taxpayer FAQs

At Cook CPA Group, we are frequently contacted by taxpayers who are new to the filing process and aren’t sure quite where to start. If you’re in the same position, don’t worry – just keep reading our short and simple California tax guide, which our accountants have prepared to help answer some frequently asked California tax questions.

Whether you’ve recently moved to California, you’re planning a move here from out-of-state, or you simply need a refresher on California taxes 101, our easy-to-understand guide has you covered. For help filing a California income tax return, preparing for a tax audit, or resolving other state tax issues.

California Tax Basics Explained for Beginners

Below, you’ll find succinct answers to commonly asked questions about some important tax basics in California, such as:

• Who must file a California income tax return?
• What are the penalties for filing or paying state taxes late?
• How do you get a tax filing extension in California?

Who Handles State Taxes in California?

You are already familiar with the IRS, or Internal Revenue Service, which administers federal tax laws and processes federal tax returns. California has several tax agencies of its own, which function similarly to the IRS, but deal only with tax issues specific to California. These agencies are:

• The California Department of Tax and Fee Administration (CDTFA)
• The California State Board of Equalization (BOE)
• The Employment Development Department (EDD)
• The Franchise Tax Board (FTB)
• The Office of Tax Appeals (OTA)

Do I Have to File a California State Tax Return?

For most adult California residents, the answer to this question is yes. However, exceptions sometimes arise, because there are several factors that determine whether you are required to file a California return. These factors include:

• Whether you are (1) a California resident, (2) a California non-resident, or (3) a part-year California resident
• Whether you have California source income
• Whether your income exceeds certain thresholds

The standard version of the California tax return is Form 540, which is for state residents. There are also several other versions of Form 540, such as Form 540 2EZ and Short Form 540NR. We can help you determine which form is right for you.

What Happens if I File or Pay California Taxes Late?

If you file a delinquent (late) state tax return, or if you fail to pay your state taxes on time, you risk incurring expensive penalties. It’s important to understand that there are separate penalties for filing late and paying late.

The California late filing penalty, which is also called a “delinquent penalty,” is 5% of the unpaid tax amount due. You will receive the 5% penalty for each month or even partial month your return goes unfiled, subject to certain caps.

The penalty for paying taxes late in California, or “underpayment penalty,” is also 5% of the unpaid amount – plus an additional 0.5% per month. Again, this penalty is applied toward each month the tax continues to go unpaid.

Do I Need to File an Extension for California State Taxes?

The FTB automatically grants a six-month filing extension to California taxpayers, pushing the April 15 due date back to October 15. However, there are some important caveats to keep in mind if you think you will need a California tax extension:

• The extension only covers the filing deadline – not the payment deadline.
• In addition to late payment penalties, you will also be charged interest.

For these reasons, it is wise to file your California tax return as soon as possible. However, it is also important to be thorough and careful, checking over each detail without rushing through any parts of the process.

Our experienced California tax return preparers can help you file and pay your taxes on time, minimizing the potential penalties. If you need assistance paying your taxes, we may be able to help you explore options like FTB payment plans or offers in compromise (OIC), which can greatly alleviate the financial burden on eligible taxpayers.

Does California Audit Taxpayers?

Unfortunately for Californians, the answer to this question is yes. While most people probably imagine the IRS when they think about tax audits, the reality is that various state agencies, including the FTB, EDD, and CDTFA, can also audit California taxpayers.

Any of these agencies may conduct audits in California, depending on what the tax audit involves. For example, the FTB’s Audit Division is responsible for income tax audits in California, whereas payroll tax audits or employment tax audits are conducted by the EDD.

Like the IRS, California tax agencies generally allow taxpayers to challenge (“appeal”) the results of an audit if the taxpayer feels those results stemmed from a mistake or oversight on the auditor’s part. However, if you intend to appeal, you must follow strict guidelines about the information and documents you need to provide. In California, appeals are handled by the Office of Tax Appeals, or OTA.

California Tax Preparation Services in Sacramento and Roseville

Unfortunately, tax laws aren’t known for their simplicity. That’s especially true here in California, which follows one of the nation’s most detailed and rigorous tax codes. Not only does this create stress and anxiety for taxpayers in California – it can also result in needless financial losses, whether in the form of penalties, interest charges, or missed opportunities to claim credits and deductions.

Don’t pay more than you have to this tax season. Get dependable, professional tax filing help from the Roseville and Sacramento tax accountants of Cook CPA Group, who have decades of experience helping taxpayers safely navigate California’s tax laws.