1099 Tax Software Blog

It’s really easy to setup an account with the Franchise Tax Board (FTB) in California and electronically file Form 592 online through the FTB SWIFT System.

The first step is to send an email to wscs.swift@ftb.ca.gov requesting a login and passcode for the FTB SWIFT System.  You want to provide your company name, address, primary contact name and phone number.

You then wait.  Within a few days, you will receive two emails from the FTB that will contain a login name and temporary password.

With the login name and temporary password, you are ready to access SWIFT via this link:

https://swift.ftb.ca.gov

Use the temporary password and login to access the SWIFT System. You then will be prompted to create your own personal password which must be at least 6 characters in length, contain at least one numeric character, and cannot include any special characters like comma, period, question mark and so forth.  Just upper and lowercase letters and numbers.  Your password must be changed annually but you can change it at any time by using the Password Change feature within the SWIFT System.

You can have an account setup and be ready to electronically file Form 592 within a week.  Once you login, you will see 2 subscription folders.  One is called “ToFTB” and is where you uploaded files intended for the Franchise Tax Board to process.  The other is called “FromFTB” and is where FTB will place files for you to retrieve.

You want to prepare a csv file following 1023S format and upload that to the FTB.

There is one area of confusion and that is a button that says “Set ASCII” or “Set Binary”.  If “Set Binary” is displayed, then SWIFT is expecting an ASCII file.  If you click on “Set Binary”, then SWIFT is expecting a binary file and the button will display “Set ASCII”. A txt or csv file are ASCII files. They are simple notepad files that use ASCII characters.  If you zip a txt or csv file and generate a zip file, then the zip file is a binary file format. The SWIFT system can handle large files so zipping is really not necessary.

Preparing and filing information returns can be stressful. 1099FIRE can help eliminate the stress of filing information returns by providing complete, secure outsourcing solutions for California Form 592. Stay compliant, reduce administrative costs and know that the job will get done right.

You want to electronically file California Form 592 to the Franchise Tax Board (FTB).  Smart thinking.  Electronic filing is:

1. Quick and easy to set up.  It takes about 2-5 days to get a login and passcode.

2. Easy to transmit secure, confidential data.

3. Gives you the opportunity to validate the file before transmitting and correct errors.

4. Gives you a receipt or acknowledgment that the FTB received your file.

To efile, the data must be in 1023S format which is just a comma delimited notepad file where the data is spaced out perfectly.  Each field of the csv file is discussed below.

Payee number (5 numeric characters)

Enter a sequential number of the payee beginning with “1”.  This field can be at most 5 characters in length which means than 99999 is the largest file that can be submitted.

Tax Year (4 numeric characters)

Enter the 4-digit year in which this withholding was taken place.  You can’t combine 2 or more tax years in a file.  If you are filing separate years, then create a separate file for each tax year.

TIN Number (9 numeric characters)

The withholding agent should obtain TINs for each payee.  Each TIN is 9 digits in length with no dashes or spaces.  If a TIN is unknown, this field should be left blank.

TIN Type (6 alpha characters)

There are 5 options here: SSN, CaCorp, FEIN, ITIN, or TPID.

First Name (11 alpha characters), MI (1 alpha character) and Last Name (17 alpha characters)

These fields only apply if the payee is an individual or grantor trust.

If the payee is an individual, then enter the first and last name and middle initial.  If the payee is not an individual, then these fields should be left blank.

There are several common but obvious errors.  One is length of each field.  If the first or last name exceeds 11 or 17 characters in length respectively, then submit the first 11 or 17 respective characters. Exclude Dr or Attorney or Mr or Mrs or M.D. or other titles from the name.

Other Name Line 1 (35 alpha or numeric characters), Other Name Line 2 (35 alpha or numeric characters)

The other name fields are used when the payee is not an individual.  Enter the name of the corporation, S corporation, partnership, trust, etc.  Do not enter the name of an individual contact person or trustee.

Address Line 1 (30 alpha or numeric characters), Address Line 2 (30 alpha or numeric characters), City (17 alpha or numeric characters), State (2 alpha characters), ZIP 5 (5 numeric characters), ZIP 4 (4 numeric characters), Country (22 alpha or numeric characters)

The address, city, state and zip fields pertain to the individual (first name, mi, last name) that you filed out or the non-individual (other name line 1, line 2).

Slash (/), hyphen (-), period (.), comma (,) and number (#) are the only special characters the FTB allows in Address Line 1 and Address Line 2.

If the payee is a US resident, then show USA in the country field.  Otherwise, leave the state field and zip codes blank and spell out the names of the foreign country up to 22 characters in length.  No special characters are allowed for the city field.

Domestic Quarter (1 numeric character)

Form 592 is filed quarterly.  Enter either 1, 2, 3, or 4 to represent when the withholding was completed.

Income Type (22 alpha characters)

Enter one of the following to characterize the type of California source income the payee received:

Independent Contractor, Entertainment, Rent or Royalty, Estate Trust, Foreign Partner, Domestic Partner, Backup Withholding, Foreign Partner Domestic Partner

Income Subject to Withholding (13 digits where 10 digits are to the left of the decimal, then the decimal point, then 2 digits to the right of the decimal)

Enter the amount of California source income subject to withholding.  Do not use the $ sign or comma and use 0.00 to show no amount.

Amount Withheld (13 digits)

Enter the amount of California tax withheld.

Amount Withheld by Another Entity (13 digits)

Enter the amount prevoiusly witheld by another entity and allocated to the payees listed.

Prior Payments (13 digits)

Enter the prior payments for the taxable yaer that were sent using Form 592-A or any prior payments as a result of amended Forms 592 for a prior period.

Foreign Prior Year Credit (13 digits) Foreign Balance Due (13 digits) Foreign Overpayment (13 digits) Foreign Credit to next Year (13 digits) Foreign Refund (13 digits)

Enter 0.00 to show no amount.

Foreign Tax Year End (10 numeric characters)

This date is formatted as mm/dd/yyyy and includes the slashes.

When do you apply backup withholding?

A payer typically withholds 28% on any payments if the payee fails to furnish a correct taxpayer identification number (TIN) to the payer. The state of California, unlike other states, requires an additional 7% backup withholding if the payer is already required to withhold 28% by the IRS and if the total payment of California source income for the calendar year exceeds $1,500.

The California Franchise Tax Board (FTB) created Form 592 which is known as the “Resident and Nonresident Witholding Statement“.  Any individual or entity who makes payments of $1,500 or more of California Source Income to a person, corporation, partnership, fiduciary, partner, beneficiary, shareholder, member or vendor who is a non-resident of California and who does not have a permanent place of business in California, must remit Form 592 quarterly either by paper or electronically to the FTB.

There are 3-forms: 592, 592-B and 592-V.  Form 592 is the statement the withholding agent fills out, signs, dates and submits to the FTB.

Form 592-B is one page form that is sent to the payees and shows how much money was withheld.

Form 592-V is a voucher payment form. The payer sends any payment due with Forms 592 and 592-V to the Franchise Tax Board.

The payer or withholding agent should retain Form 592 for at least 4 years.  You can easily print a copy to PDF and retain that PDF file.

Electronic Delivery of 592-B

A payer or agent who withholds 7% to the payee can print Form 592-B and mail to the payee.

592-B has to be furnished to each payee typically by the end of each quarter.  592-B can printed on plain paper with black ink. Many withholding agents, from large to small, balk at the idea of printing and mailing 592-B to payees.  Postage, envelopes, addressing, stuffing and sealing all cost time and money increasing the overall cost of mailing to 78 cents to $1 or more per mailing.

The cost of mailing can be reduced by electronically delivering the information returns to the payees.

There is one catch.  And that is the payee must consent to receiving Form 592-B in an electronic format.  The withholding agent can put together a simple form that instructions when and how the payee will receive Form 592-B in electronic format and have the payee sign that consent form.

The payee has the option to withdraw consent.  Also, if the withholding agent correct a payee’s Form 592-B, then agent must furnish the corrected form within 30 business days.

There are many services for bulk electronically delivering 592-B to payees.  E-mail can be tracked to see who opens their email and who never opened the sent email with the information return.

By going completely paperless, you can save as much as 50% on priting and mailing 592-B tax forms.