Spidell's Tax Season Tribune

In real news: Did your client get Form 4734D instead of a refund?

When the FTB receives a tax return for processing it is analyzed via the new return analysis system, and if the return looks suspicious it is put on hold and the FTB contacts the taxpayer by mail. The FTB sends Form FTB 4734D, Request for Tax Information and Documents, when there is a question as to the taxpayer's identity. If, however, the FTB highly suspects identity theft, Form FTB 3904, Request to Confirm Tax Return Filing, is sent.

Form FTB 4734D requests copies of:

The taxpayer's Social Security card(s);
W-2 and 1099-R forms; and
Paycheck stubs.

According to the FTB, the best way to answer the notice is to fax the requested information to the number on the notice. Instead, we suggest you call the number on the notice. If you call, have a copy of the client's current and prior-year returns and W-2 information. In many cases, the FTB may be able to continue processing the return without the need to send additional documentation.

Do not call the practitioner hotline, or the toll free number, because it is the employees in the 4734D unit who can help you. With a few questions, the FTB may be able to determine that the tax return belongs to your client.

Note: Verify the address on the notice by going to the FTB's website (www.ftb.ca.gov/Bills_and_Notices/notices.shtml) to ensure that the notice your client received was actually sent by the FTB.

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Bizarre tax rules from around the world

Diane Fuller
Contributing Editor

In a 2016 assessment of the world's top countries to live in,¹ the U.S. ranked #24 ... ouch! Ranking above the U.S. were France, New Zealand, the United Kingdom, and Costa Rica, just to name a few. The top-ranked country, based on criteria such as a happiness, education, work-life balance, health, and environmental performance, was Denmark.

But before packing up and making Denmark your new home, consider the downsides — like the cow flatulence tax. It's real. Cows cause excessive methane build-up, which negatively affects air quality. So don't buy a cow if you go to Denmark, where you'll be taxed $110 per cow.

Try Sweden instead. Sweden was ranked #2 on the list. But if you decide to have a child in Sweden, you're required to have the Swedish taxing agency approve of the child's name before he or she turns age 5.² Failure to get approval will result in a fine of approximately $770. The taxing agency is supposedly protecting children from offensive or perplexing names. "Ikea," "Allah," and "Brfxxccxxmnpccclllmmnprxvclmnckssqlbb1116" (not a typo) have been rejected, but "Google" and "Lego" were just fine. I'd probably try for "Byter."

Ireland also beats out the U.S. and comes in at #12 for quality of life. It's a good choice for the artistically inclined, who may not be taxed on their writing, composing, sculpting, or painting if the Revenue Commissioners determine that the work has cultural or artistic merit. So agents must be good with numbers AND have good taste. The maximum exemption is €40,000.³

Personally, I plan on staying in the U.S. ... maybe in Kansas, where hot air balloons tethered to the ground get a tax break because their occupants aren't going anywhere.

China didn't make the list of top countries to live in, but they've assessed a tax that's worth mentioning: Light up or pay up. In order to boost revenues, back in 2009, citizens of the Hubei province were under quotas to increase the sale of cigarettes to "encourage financial prosperity for China's local cigarette makers."⁴ In China's Gongan County, those on the local government's payroll had a target of 230,000 cigarettes to smoke in a year.⁵ Underachievers would face a fine. The order was eventually revoked, but the World Health Organization estimates that currently one out of every three cigarettes in the world is smoked in China.

¹ https://lifestyle9.org/worlds-best-country-to-live-in-2013/4/
² www.csmonitor.com/Business/2014/0214/Top-12-weirdest-tax-rules-around-the-world/Sweden-Baby-names-need-tax-agency-approval
³ www.csmonitor.com/Business/2014/0214/Top-12-weirdest-tax-rules-around-the-world/Ireland-artist-exemption
⁴ www.csmonitor.com/Business/2014/0214/Top-12-weirdest-tax-rules-around-the-world/China-pro-cigarette-smoking-tax-revenue
⁵ http://billschannel.com/?p=133

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Boot gets the boot

By Kathryn Zdan, EA
Editorial Director

For years, Hollywood has been chipping away at my childhood memories with CG-heavy reboots of classic '80s movies, but the most recent blow has come from the board game industry.

Hasbro recently announced that they're ditching three of the original Monopoly game pieces: the thimble, the boot, and the wheelbarrow.¹ These will be replaced with new pieces that more adequately represent the modern times we live in: a T-rex, a penguin, and a rubber ducky. Rejected options for the new pieces included smiley face emojis, a cell phone, and aviator glasses.

Monopoly actually has its roots in tax. It was created by anti-monopolist Elizabeth J. Magie Phillips in 1903, as a way to explain the single tax theory of Henry George,² who believed the economic value derived from land and its natural resources should belong equally to all members of society.³ The game was created as an educational tool to illustrate the negative aspects of concentrating land in private monopolies.

And what better way to depict this theory than with a T-rex.

¹ www.huffingtonpost.com/entry/new-monopoly-token-pieces_us_58cad9a3e4b0ec9d29d9eca0?section=us_weird-news
² https://en.wikipedia.org/wiki/Monopoly_(game)
³ https://en.wikipedia.org/wiki/Henry_George

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Let's get QuizziCAL: Lottery

By Diane Fuller
Contributing Editor

Here's a stumper for you … click below to reveal the answer.

Your client Andromeda, a Big Sur resident, has just returned from Ten Thousand Waves in Santa Fe, New Mexico, where she described her spa experience as one of powerful healing and renewal after bathing in their hot pools of highly mineralized water from a 900-foot deep well (and passed through a sanitation system every 20 minutes), while surrounded by the mountainous beauty of Santa Fe.

On her drive home, feeling at one with the universe, Andromeda bought a Hot Lotto ticket in New Mexico and a SuperLotto Plus ticket in Winterhaven, California. The following Wednesday, as if to affirm that her spa experience was truly transformative, Andromeda won $2 million on the Hot Lotto drawing and $100 million from SuperLotto Plus. As a California resident, how will Andromeda's winnings be taxed by the state?

How'd you do? Click here to find out.

Answer:

Andromeda will not be taxed on her SuperLotto winnings in California, where the SuperLotto is tax-exempt whether the winner is a California resident or nonresident. She may not deduct the cost of the lotto ticket on Schedule A. However, the Hot Lotto ticket from New Mexico is taxable for California purposes as ordinary income, but she may include the cost of the lotto ticket in her gambling losses on Schedule A.

See ¶21-113 of Spidell's Analysis & Explanation of California Taxes^® — If a California resident wins another state's lottery, those winnings are taxable for California purposes whether those winnings are taxable or tax-exempt to that other state.

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A few fun facts about this week's writers:

Kathryn Zdan, EA, is not only director of the editorial department, she also "rocks the house" as a regular in curling bonspiels around the country. She also enjoys foreign and avant-garde film, baking, and the Investigation Discovery channel.

Diane Fuller is a woman of many talents which include writing children's poetry, taking unwitting challengers to town in poker, and whipping up Michelin-worthy dishes from scratch. Find her laughing with her two grandkids.

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