Short definitions of the terms that come up when you work with a CPA in California. Where a term has its own answer on this site, the definition links to it.
A
- Annual tax (LLC)
- The $800 tax every LLC organized or doing business in California pays to the Franchise Tax Board each year, due even if the LLC does no business, until it is cancelled. See What Does a California LLC Owe Each Year?.
- Attest engagement
- Work in which a CPA gives an opinion or conclusion on financial statements, such as an audit or review. On the CBA License Lookup, an A under Experience Completed means the CPA may sign attest reports; a G means they may not.
C
- CBA
- The California Board of Accountancy, the state agency that licenses and disciplines CPAs and accounting firms in California.
- CDTFA
- The California Department of Tax and Fee Administration, which runs sales and use tax and issues seller’s permits.
- CPA
- Certified public accountant: a professional licensed by a state board of accountancy after passing the Uniform CPA Examination and meeting education and experience requirements.
- CTEC
- The California Tax Education Council. Paid tax preparers in California who are not CPAs, enrolled agents or California attorneys must register with it.
E
- Engagement letter
- A written agreement at the start of the work that states what the CPA will and will not do, who will do it, the client’s responsibilities, the cost and the timing.
- Enrolled agent
- A tax professional licensed by the IRS after passing a three-part exam, with unlimited rights to represent taxpayers before the IRS.
- Estimated tax
- Tax paid during the year on income that has no withholding, such as self-employment or farm income. Federal and California schedules differ.
F
- Form 568
- The return a California LLC classified as a partnership or disregarded entity files with the Franchise Tax Board.
- Form 943
- The annual federal employment tax return that agricultural employers file for their farmworkers.
- FTB
- The Franchise Tax Board, California’s income tax agency for individuals and businesses.
- FUTA
- Federal unemployment tax, paid by employers only. Farm employers become subject to it through a separate farmworker test.
L
- LLC fee
- A California fee on top of the $800 annual tax for LLCs with total California income of $250,000 or more, set in tiers.
P
- Peer review
- A review of a CPA firm’s accounting and auditing work by an unaffiliated CPA. It covers compilations, reviews and audits, not tax practice.
- PTIN
- Preparer tax identification number. Anyone paid to prepare federal returns must have one and enter it on the return.
Q
- Qualified farmer
- For federal estimated tax, a person with at least two-thirds of gross income from farming in the current or prior year. Special payment rules apply. See When Do Farmers Pay Estimated Tax?.
R
- Representation rights
- Permission to deal with the IRS on a client’s behalf. CPAs, enrolled agents and attorneys have unlimited rights; other preparers have limited or none.
S
- Schedule C
- The part of a federal individual return used to report profit or loss from a business other than farming.
- Schedule F
- The part of a federal individual return used to report profit or loss from farming.
- Schedule SE
- The form used to figure self-employment tax on net earnings of $400 or more.
- Self-employment tax
- Social security and Medicare tax for people who work for themselves, 15.3% of net earnings with part of it deductible. See How Does Self-Employment Tax Work?.
- Seller’s permit
- A free permit from the CDTFA that most people selling or leasing tangible goods in California need. See Do I Need a Seller’s Permit in California?.
- Statement of Information
- A filing with the California Secretary of State that keeps an LLC or corporation in good standing.