California Tax News 2026: What Small Businesses Need to Know Now
Happy New Year, everyone! Can you believe it’s already 2026? 🎉 As we settle into the new year, it’s time to put on our serious faces for a moment and talk about taxes. I know, I know—it’s not the most exciting way to start January, but staying ahead of the game can save you a lot of headaches (and money!) later on.
The California Franchise Tax Board (FTB) just released their January newsletter, and it is packed with crucial updates. Whether you were affected by the recent fires in LA, you run a small business, or you’re a tax pro trying to keep up with the latest “One, Big, Beautiful Bill” changes, I’ve got you covered. Let’s dive into the details so you don’t miss any important deadlines! 😊
Los Angeles County Disaster Relief Assistance 🚒
First and foremost, our hearts go out to everyone impacted by the fires in Los Angeles County. The FTB has announced specific relief measures to help ease the burden during this recovery period. If your principal residence or business is in LA County, you need to know about these extensions.
Specifically, for the fires that began on January 7, 2025, the deadline to file and pay taxes has been significantly extended. This applies to income tax filings and payments that would have been due between January 7, 2025, and October 15, 2025.
The new deadline for eligible taxpayers is October 15, 2025. This postponement is automatic if you are in the covered disaster area.
What if you live outside LA County but your tax preparer or records are located there? You might still qualify! If you receive a penalty notice but believe you qualify for this relief, you should contact the FTB immediately. They have set up a dedicated email address specifically for this disaster to resolve matters quickly.
Mandatory E-Filing: Avoid the Penalties 💻
We are living in a digital world, and the FTB is reminding us that paper returns are becoming a thing of the past. There are strict mandatory electronic filing requirements for both individuals and businesses this year. Failing to comply can result in some pesky penalties.
For Tax Professionals and Individuals
If a tax preparer files more than 100 individual state income tax returns annually and uses tax preparation software, they must e-file all returns. This applies even if the preparer is located outside of California.
For Business Entities
Business entities using tax prep software are generally required to e-file. There is also a specific “Business Entity E-File Waiver” available if you absolutely cannot e-file, but it must be approved annually.
The penalties for non-compliance are real:
1. Individuals: $50 per paper return.
2. Businesses: $100 for the first failure, and $500 for each subsequent failure.
🔢 Non-Compliance Penalty Calculator
Estimate your potential penalty if you fail to e-file when required.
Small Business & Withholding Updates 📊
If you are running a business in California, there are two major updates you shouldn't miss this month regarding credits and payment methods.
California Competes Tax Credit (CCTC)
Looking for some extra capital? The application period for the California Competes Tax Credit is opening soon! There is over $308 million available for allocation. This is a huge opportunity if you are looking to grow your business in the Golden State.
- Application Window: January 5, 2026 – January 26, 2026.
- Where to Apply: Visit the official calcompetes.ca.gov website.
Web Pay Tips for Small Businesses
When paying your taxes online, choosing the right portal is key to avoiding processing delays. The FTB clarified the distinction for small business owners:
| Business Type | Correct Web Pay Portal |
|---|---|
| Corporations, LLCs, Partnerships | Web Pay for Business |
| Sole Proprietorships | Web Pay for Personal |
Additionally, if you deal with real estate, there are new educational resources available. A new video on "Real Estate Withholding for Foreign Sellers" is now up on YouTube, covering exemptions, remitter responsibilities, and how to submit Form 593 properly.
IRS Updates & The "One, Big, Beautiful Bill" 🏛️
The FTB also partners with the IRS to share federal updates. Several changes are coming down the pipeline, largely stemming from recent legislation referred to as the "One, Big, Beautiful Bill." Here is a quick snapshot of what’s changing at the federal level:
- Business Interest Expense: Updates to the deduction limitation (Section 163(j)).
- Dyed Fuel: A new method for recovering federal excise tax paid is being established.
- Carbon Capture Credit: A safe harbor is provided for taxpayers claiming this credit for carbon oxide captured in 2025.
- Trump Accounts: Guidance is being issued for these new individual retirement accounts for eligible children.
It's definitely a year of change, so keep an eye on these federal regulations as they will likely impact your overall tax strategy.
Key Takeaways: January 2026 Recap 📝
January Tax Updates at a Glance
Frequently Asked Questions ❓
Navigating tax season can feel overwhelming, but keeping up with these updates makes a world of difference. Whether you need to mark your calendar for the CCTC application or double-check your e-filing software compliance, taking action now is key.
If you have any specific questions about the LA County relief or need help finding the right forms, don't hesitate to reach out to a tax professional. Let's make 2026 a smooth tax year! Do you have any questions about these new changes? Let me know in the comments below! 😊
