California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

California taxpayers need to be aware of a raft of changes in tax laws that
could impact the upcoming filing season and how much money they get to keep.
The Franchise Tax Board has provided a succinct overview.

• Temporary increase in personal income tax rates – A new tax law raises
  California’s personal income tax rates by .25 percent for 2009 and 2010
• Standard deduction – The standard deduction for single or filing separately
  decreased from $3,692 to $3,637. For joint, surviving spouse, or head of
  household filers, it changed from $7,384 to $7,274
• Personal exemption credit – The personal exemption amount for single, filing
  separately, and head of household filers is reduced from $99 to $98. For joint
  or surviving spouses, it decreased from $198 to $196. The dependent exemption
  credit decreased from $309 to $98 per dependent
• New estimated tax payment percentages – Effective Jan. 1, the quarterly estimated
  payment schedule percentages are changed for both corporate and personal income
  taxes to 30 percent, 40 percent, zero, and 30 percent for the first through the
  fourth quarter installments, respectively
• New backup withholding requirements – Effective Jan. 1, generally payers that are
  required to withhold and send backup withholding to the IRS are also required to
  withhold and send 7 percent to FTB except for payment of interest and dividends
  and any release of loan funds made by a financial institution in the normal course
  of business
• Small business new jobs tax credit – For 2009 new hires, provides a $3,000 tax
  credit for each additional qualified full-time employee hired by a qualified small
  business employer. Qualified employers need to act fast as the credit funding is
  limited to $400 million. The credit must be claimed on a timely-filed original
  (not amended) 2009 return received before the $400 million limit is reached. This
  credit is not subject to the 50 percent limitation for business credits in 2009
  Generally speaking, employers qualify for the credit if they employed 20 or fewer
  employees on the last day of the preceding taxable year (for calendar taxpayers
  this would be December 31, 2008). And, they have a net increase in qualified full
  -time employees in 2009 compared to the number of full-time employees employed in
  the preceding taxable year
• Net operating losses suspended – For 2009, net operating losses from prior years
  cannot be deducted by taxpayers whose net business income is $500,000 or more.
  Instead, they will need to carry them forward. The time limit to carry forward net
  operating losses increases from 10 to 20 years. New with 2011 net operating losses,
  taxpayers can carry back those losses for two years. Taxpayers with net business
  income of less than $500,000 or with disaster loss carryovers are not affected by
  the net operating loss suspension rules
• Business tax credit limitations – For 2009, tax credits are limited to 50 percent
  of the net tax for taxpayers with net business income of $500,000 or more. Be sure
  to review tax forms instructions for more details.

I am Tim Johnson and this has been the California Business Minute.