January 2025

Complying with California’s CalSavers Mandate

By Office Staff|2025-01-30T14:57:47-08:00January 30, 2025|Categories: Business Advice|Tags: CalSavers, Roth IRA|2 Comments

If you are a small-business owner in California, you already have a lot on your plate. From managing employees to tracking expenses and keeping up on your federal, state, and local estimated tax payments, the last thing you need is another complex regulation.

The good news is this: If you have at least one employee, other than yourself or your spouse, California’s CalSavers mandate is a regulation you can’t afford to overlook. This state-run retirement savings program is designed to help your employees save for their future without imposing an extra financial burden on you or your business. But, as you’re already well aware, compliance alone can be a burden.

In this post, we try to ease that burden by bringing you up to speed on CalSavers and guiding you through the steps to achieve compliance. Whether you’re new to the program or simply need a refresher, we have you covered!

CalSavers Fundamentals

CalSavers is a retirement savings plan for workers whose employers don’t offer a workplace retirement plan, and for self-employed individuals and others who want to save extra toward retirement. Employees contribute to a Roth IRA (individual retirement account) that belongs to them but is administered by the state.

Designed to be easy for employers and simple for employees, CalSavers is professionally managed by private sector financial firms with oversight from a public board, chaired by the State Treasurer. There are no fees for employers, and employees manage their accounts directly with CalSavers.

Determining Whether the Mandate Applies to You

Initially, the CalSavers mandate applied only to employers with five or more California W-2 employees who did not offer retirement plans to their employees. Beginning in 2025, the threshold dropped to employers with Continue reading… Continue reading… Continue reading…

Avoid Costly Mistakes with Pass-Through Entity Tax Payments

By Office Staff|2025-01-23T12:18:32-08:00January 23, 2025|Categories: Business Taxes|Tags: California Assembly Bill 150, California Franchise Tax Board, Pass-Through Entity, Tax Cuts and Jobs Act|0 Comments

If you use the State of California’s Franchise Tax Board (FTB) website to make an electronic payment for an elective pass-through entity, you should know ahead of time that it’s easy to make a mistake and get mixed up over personal and business payments.

Here at SWC, a San Diego-based tax planning and financial strategy firm for entrepreneurs and small business owners, real estate investors, and high-net-worth individuals, we see this happening all too often. And that’s why in this post, we explain how California’s version of the elective pass-through entity tax works and provide guidance on how to avoid making costly mistakes when paying your elective tax.

To start us off, if you’re unfamiliar with the elective pass-through entity tax, here’s what we want you to know.

Understanding the Elective Pass-Through Entity Tax

The Tax Cuts and Jobs Act (TCJA), which some have described as “the most sweeping tax overhaul in decades,” was signed into law on Dec. 22, 2017, just 50 days after it was first introduced in the U.S. House of Representative. Once enacted on Jan. 1, 2018, the TCJA limited the amount of state and local taxes (income taxes, sales taxes, and property taxes) that taxpayers are allowed to deduct when filing their federal income tax returns. This resulted in the cap being $10,000 for married couples and $5,000 for individuals (or married individuals who choose to file separately).

For example, suppose you’re a married couple living in California, and you paid $7,000 in state income taxes and $6,000 in property taxes. That’s $13,000 total. Under the TCJA, when you’re filing your federal income tax return, you would be able to deduct only $10,000 from your taxable income, not the full $13,000.

Understanding that this cap could be especially burdensome for taxpayers in states with high income taxes and/or high property taxes, some states, such as California, enacted an elective pass-through entity tax as a workaround. In California, this workaround is detailed in California Assembly Bill 150 — the Sales and Use Tax Law: Personal Income Tax Law: Corporation Tax Law: Budget Act of 2021.

A pass-through entity (PTE) is a legal business structure wherein income flows through to the business entity’s owners and investors, rendering the income of the entity as the income of the owners or investors. Pass-through entities include sole-proprietorships, limited liability companies (LLCs), partnerships, and S-corporations.

How California Elective Pass-Through Entity (PTE) Tax Works

California’s elective pass-through entity (PTE) tax isn’t very complicated, and here’s how it works: Continue reading… Continue reading… Continue reading…

10 New California Laws That Could Impact Your Taxes in 2025

By Office Staff|2025-01-15T16:10:34-08:00January 15, 2025|Categories: Legislation|Tags: Bank Fees, Freelancers, Paid Family Leave|0 Comments

As we enter 2025, a host of new laws are taking effect in California, many that could directly influence your tax planning and finances. From reforms in banking and food delivery to freelancer protections and new insurance mandates, these changes could play a role in how you approach your tax planning.

Here’s what you need to know:

Ban on Certain Bank Fees

California Assembly Bill (AB) 2017 prohibits state-chartered banks and credit unions from charging fees for declined ATM withdrawals due to insufficient funds. Effective Jan. 1, 2025, this new law could save you from unexpected penalties.

Tax Planning Impact: Reduced banking fees mean fewer deductions for penalty-related costs. While this may not affect you, it’s a healthy reminder to evaluate other areas of tax planning where savings or reduced deductions might come into play.

Paid Family Leave Expansion

Starting Jan. 1, AB 2123 (Changes in Managing Employee Leave under Paid Family Leave Act) ensures that employers can no longer require workers to use accrued vacation time before accessing the state’s Paid Family Leave Program.

Tax Planning Impact for Individuals: If you plan to take Paid Family Leave, remember that benefits from the state program may be taxable. Here at SWC, we recommend that you consider setting aside funds for potential tax liabilities to adjust your withholding or estimated tax payments.
Tax Planning Guidance for Business Owners: We recommend that you review your policies and payroll processes to ensure compliance with the new rule. Consider how this change may affect your labor costs or employee coverage needs and ask us for help in updating your tax strategy accordingly, if you’re unsure what to do.

Freelancer Protections Against Late Payments

Under California Senate Bill (SB) 988 (Freelance Worker Protection Act), effective Jan. 1, companies must pay independent contractors by the date specified in their contracts — or within Continue reading… Continue reading… Continue reading…