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"When the Advocate’s report went to press in mid-December 2022, the IRS had reduced those backlogs to 1 million original individual returns, 1.5 million original business returns, and 1.5 million amended returns. By Dec. 23, the IRS had further reduced its unprocessed paper backlog of original individual returns to about 400,000 and original business returns to about 1 million." According to Nina Olson, the former Taxpayer Advocate, the overall situation isn't quite as positive because there are Millions more returns in Suspense waiting for a live person to resolve processing problems.

This is from Spidell Tax seminar I took last week. It is pretty clear. A Tennessee sole proprietor who provided consulting services to a California insurance agency had California-source income that was taxable by California, even though the sole proprietor performed all his services in Tennessee and was never physically present in California. (Appeal of Bass, 2022-OTA-145) All of the trainings and consulting services conducted by the sole proprietor for his California customer and its employees were conducted from Tennessee via Skype or personal phone calls, or physically in Tennessee. Under the OTA’s precedential decision in Appeal of Bindley, 2019-OTA-179P, physical presence is not required to tax the income received by a nonresident sole proprietor if their customer receives the benefit of the services in California. In addition, California’s nonresident sourcing regulation (18 Cal. Code Regs. §17951-4) incorporates California’s corporate apportionment rules (R&TC §25120 et seq.), including the market-based sourcing rules (R&TC §21536; 18 Cal. Code Regs. §25136-2) if a nonresident sole proprietor conducts a unitary business both inside and outside California. Under the reasoning adopted by the OTA in Bindley, a sole proprietor conducts a unitary business if they are in a single line of business, in this case “consulting.” Furthermore, because the taxpayer operated in Tennessee but had customers in California, he was conducting business both inside and outside California and therefore was subject to California’s corporate apportionment rules. Tom Longview, TX

I believe nexus determines taxability of services. @Abby NormalDoes your friend hired an employee to provide services to client in CA. If the answer is yes then business should file 100S, Sch R & individual owner 540NR (if it's an a S corporation)

I responded to a CP 2000 13 months ago. I have received 2 letters from the IRS saying they needed more time. Still waiting. Another accountant here in Oregon mailed a reply back in May 2021. Her correspondence was opened and recorded in November 2021. So far she has received 4 letters from the IRS saying they needed more time. Don't even know what to say.