Authored by: Atherton & Associates LLP

Date: February 14, 2022


As we have seen over the past few years, the tax filing season has been more complex and stringent on every individual taxpayer, business owner, and of course, their tax preparers. At Atherton, we want to assure you that, even in this current environment, we continue to focus on our core values: Integrity, Commitment, Innovation, Teamwork and Excellence. With every tax season and with our short window of time to provide you with quality service, the Internal Revenue Service (IRS) and the California Franchise Tax Board (FTB) have continually made it more difficult to serve you in a timely manner.


On January 18, 2022, the IRS changed rules associated with the foreign reporting requirements of investors in partnerships and S corporations and we have yet to receive guidance on how these forms should be prepared. Through our interpretation, we have discovered that many of our clients will have an obligation to file even if the partnership or S corporation does not have any foreign activities or foreign investors. We also know that the required schedules are complex. At up to 20 pages per schedule, these new schedules increase not only the size but also the complexity of the tax return. The penalties for not filing the new schedules are at a maximum of $2,340 per partner plus additional penalties for any incomplete statements.


The FTB also introduced a new election in 2021 called the Pass-through entity (PTE) elective tax. You may find specific information on this election on our website at Although this election was introduced in July 2021, the rules on its calculation, applicable limitations, and reporting kept evolving for the rest of 2021 and most recently into the 2022 calendar year. On February 9, 2022, Governor Newsom expanded the PTE and released some of the restrictions by way of SB-113. With its passing, it opens more opportunity for tax savings. We are re-evaluating each tax situation for the potential savings and will be in contact with you soon to discuss. Currently, as in the case with IRS changes, we are being held up by the availability of the final calculation format and the reporting forms because the FTB has not completed them.


As a result of the last-minute changes, information requests, timing and fees may be affected and expanded by the additional filing requirements associated with the foreign and state changes. As a precaution, we will be extending all applicable partnership, S corporation and individual returns due to these recent changes by the IRS and FTB. Filing an extension does not mean that we are not working to complete returns before the original deadlines.


We have contested these tax-related matters with the office of Josh Harder and Jerry McNerney, and we encourage you to do the same. The information is below.


Office of Representative Josh Harder

209 Cannon House Office Building

Washington, DC 20515

Phone Number: 202-225-4540


Office of Representative Jerry McNerney

2265 Rayburn House Office Building

Washington, DC 20515

Phone Number: 202-225-1947


Heath Flora

California’s 12th District State Assemblyman

Phone Number: 209-599-2112


Adam Gray

California’s 21st District State Assemblyman

Phone Number: 209-726-5465


Carlos Villapudua

California’s 13th District State Assemblyman

Phone Number: 209-948-7479