Tax News

CCH (cch.taxgroup.com) reports:

In regard to California sales and use, personal income, and corporate income taxes, the State Board of Equalization, the Franchise Tax Bureau, and the Employment Development Department could take a number of short-term and long-term steps to improve information and data collection and exchange, according to the Legislative Analyst's Office (LAO). Under the terms of the Supplemental Report of the 2005 Budget , the LAO was directed to report to the Legislature regarding the characteristics and various issues associated with the state's existing tax information and data systems.
Roughly over the past 20 years, several reports regarding the three agencies primarily have concerned themselves with two aspects of tax collection and administration, specifically (1) transparency and accessibility to taxpayers and (2) fiscal and budgetary impacts. Unlike those reports, the focus of this report is related to the compliance and enforcement advantages of increased cooperation and information sharing among the agencies.
According to the LAO, compliance and enforcement issues recently have become of increasing concern to California, as well as to other states and the federal government. The concerns have arisen due to a number of trends and factors, including
-- "abusive" tax shelters, which have led to increased underreporting of income for tax purposes;
-- the growth of the Internet and other forms of remote sales, which has led to noncompliance with the state's use tax; and
-- the growth in nonwage income, which has led to less withholding and a greater reliance on third-party reporting.
Coupled with other features of today's economy --such as new and different business ownership structures, information transactions, and the large cash economy --these factors have led to increased concern about the "tax gap," which is the difference between taxes legally owed and taxes actually paid to the state. The collection, sharing, and accessibility of tax-related information among the agencies are primary methods of dealing with the tax gap, the LAO said.