Tax & Accounting Blog

California Ruling Confirms Late-filing Penalties Apply to CA Form 592 Resident and Nonresident Withholding Statement

Blog, ONESOURCE April 17, 2013

Penalties which may be imposed by the California Franchise Tax Board (FTB) include penalties for failure to file information returns and failure to furnish correct payee statements.

Information about these penalties is sometimes difficult to locate in California FTB publications, but in a recent ruling, state Board of Equalization confirms that late-filing penalties apply to FTB Form 592, the Resident and Nonresident Withholding Statement due four times in each calendar year. The case was an appeal to the BOE by a taxpayer that requested “reasonable cause” abatement of Form 592 late-filing penalties.

When failure to file the information return by the due date is due to reasonable cause and not to willful neglect, California Code, Sec 19183, subdivision (d)(1), by conforming to IRC section 6724, except as otherwise provided, provides for abatement of the penalty. In this case the taxpayer lost the appeal, but the written ruling of the BOE provides confirmation that, “R&TC section 19183, subdivision (a)(1), provides that respondent shall impose a penalty for failure to file correct information returns, such as Form 592, as determined in accordance with Internal Revenue Code (IRC) section 6721.” [Cornerstone Real Estate Fund A, LLC, California State Board of Equalization, Case No. 574006, October 24, 2012 (released February 25, 2013)]

Note that California conforms with the Internal Revenue Code as of January 1, 2009 and has not yet adopted the federal higher information return penalties, so the Instructions to the 2013 version of FTB Form 592 describes California penalties of $50, $30 and $15 per payee, which were the federal rates before the federal action which doubled those penalty amounts.

Visit the COKALA Tax Information Reporting Services website for more information on how COKALA’s advisory services can help your organization meet obligations for tax withholding, payee documentation, and tax information reporting.

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