TAX NEWS - August 2009

taxpayer Advocate:
Systemic Issue Management System (SIMS) at Work

This month, I share the efforts we are taking by discussing an issue that was submitted to us and our response:

FTB receives 1099 information about IRA distributions for individuals, but if a rollover contribution is timely made there is no such equally offsetting information received by the FTB. The result is phantom and supposed taxable income to the taxpayer resulting in false information that then causes replies that are required and very burdensome, confusing, and expensive in both time and money for most retired seniors inside and outside California.

After researching this issue with our filing division, we found that our Integrated Nonfiler Compliance (INC) system has measures in place to determine the taxability of a 1099R. If the reporting institution inputs the correct code for box 7; in this case it would be G - (non taxable) Direct Rollover to an IRA or H - (non taxable) Direct Rollover to another qualified plan; the income is excluded with the account. INC is always at the mercy of reporting institutions and agencies as to the accuracy of the documents or information provided.

I will continue to post the progress and changes your suggestions and comments have given us. If you would like to report a systemic issue, go to ftb.ca.gov and search for systemic. Thank you for your support.

Steve Sims, EA
Taxpayers' Rights Advocate