[quote=bearishgurl]I just thought of a potential quagmire affecting the deductibility of MR those affected CA taxpayers’ Federal return. All of the figures from the Federal Return are reported to the the FTB in an electronic tax return filing, incl line 6 of Schedule A (used to report property taxes for a principal residence).
If the FTB’s software can flag both (electronically-filed) returns, it would be reasonable to believe that the CA taxpayer would not be able to report a different property tax amount on line 6 of Schedule A than they do on line 73 of their Form 540, without getting flagged.
Again, FTB workers would have to be available to go thru paper tax return filings which include a copy of the taxpayers Federal return to determine the property tax amount reported to the IRS on their Schedule “A” filed with their Federal return. These “human scanners” could actually be their lowest-paid clerical workers or even temporary contract help.
It would be worth it for the FTB to go thru all this for its “debut tax year (2012)” this because the prevention of present and future deductibility of MR is for the life of the taxpayer’s ownership of that parcel if that ownership period does not exceed the life of the bonds . . . a potentially long-overlooked HUGE income tax revenue stream to the State![/quote]
You’re thinking way too hard.
It’s called electronic copy of and photoshop. How does the state plan to go about verifying the submitted paperwork’s numbers are real? Not saying people are going to do this. But this system is flawed. For it to work, state needs to be able to tap into the countys’ systems. Or the counties need to be able to send a form to the state directly.
And guess what? State ain’t gonna have money to put a system like this in place in the forseeable future.
A random audit *might* expose a tax cheat, but otherwise a photoshopped bill it’s not going to trigger any computer system flag because a computer isn’t going to be able to tell a real form from a fake…
Anytime you depend on the filer to fill “forms” as proof of information, that’s a flawed design. That’s exactly why 1099’s need to be sent from banks/financial institutions directly to the IRS/FTB.
Otherwise, counting on a taxpayer to send in the paperwork is just plain stupid.
This is just one of many ways I can think of that folks can rig the system… This is the most bold (arguably most stupid way of doing it, because it only bypasses the electronic “eyes”, but not the human eye in case of a random audit). There are a bunch other ways I can think of how it can be gamed from that angle.
I’m not condoling anything illegal. I just like pointing out flawed systems, and it is a very flawed system. But to most people’s point out here, most people probably aren’t going to go that extreme and send in doctored statements…
