FTB Tax Audit Lawyer
The California Franchise Tax Board (FTB) is California’s primary tax authority, responsible for functions such as collecting and reviewing state tax returns, issuing tax refunds, assessing tax liabilities, and, where financial errors or suspicious activities are detected, conducting audits of businesses and individual taxpayers. The FTB collaborates with the Office of Tax Appeals (OTA), which was created by the Taxpayer Transparency and Fairness Act of 2017 to hear taxpayer appeals pertaining to sales and use taxes, corporate income taxes, and California personal income taxes. If you disagree with the results of an FTB audit, you may challenge or “protest” the outcome. However, due to the great complexity of this process – and the potential for debilitating penalties – it is crucial that you are represented by an experienced FTB audit appeals lawyer.
At the Tax Law Offices of David W. Klasing, we are nationally recognized, award-winning tax attorneys who bring over 20 years of combined experience to each appeal and protest we handle. We are well-versed in FTB and OTA appeal and protest procedures under the updated California tax laws, and can protect your best interests while working efficiently to resolve the controversy. We have four objectives in each case we handle: holding your tax liabilities to a minimum, providing you with the information you need to make informed and strategic decisions, protecting your liberty by minimizing the risk of prosecution for California tax crimes. and helping you comply with the law. If you have any questions about protesting an FTB decision, contact our California FTB audit attorneys online, or call the Tax Law Offices of David W. Klasing at (800) 681-1295 for a reduced-rate consultation or schedule online today.
Can I Dispute the Results of a Franchise Tax Board (FTB) Audit?
Just as the Internal Revenue Service (IRS) audits taxpayers and businesses at the federal level, the FTB audits California taxpayers to ensure compliance with state tax laws governing personal income tax, corporate income tax, excise tax, and other types of tax requirements. If a taxpayer submits information that appears to be outdated, incomplete, inaccurate, or indicative of criminal activity such as tax evasion, often involving non-filing, the FTB may initiate a desk audit or field audit to determine whether the taxpayer is complying properly with the law.
The audit may result in one of several outcomes, depending on the taxpayer’s unique situation. While some audits verify that no errors were made by the taxpayer, or even result in the issuance of a tax refund, most audits reach a more damaging conclusion. For example, the FTB auditor might determine that the taxpayer is ineligible for the tax refund he or she previously claimed.
In a worst-case scenario, the FTB will issue a form called a “Notice of Proposed Assessment,” or NPA, after conducting the audit. NPAs are issued in cases where the auditor determines that the taxpayer owes additional tax payments. NPAs may be issued to businesses using FTB Form 5830C, or individuals using FTB Form 7275. S corporations, C corporations, limited liability companies (LLCs), limited partnerships (LPs), limited liability partnerships (LLPs), and other types of business entities may all be audited.
It is never prudent to ignore an FTB notice, even if you disagree with its findings, or are unsure precisely what the notice is in reference to. Contrary to being forgotten, interest on any unpaid tax debts will simply continue accruing until your debt is satisfied.
The good news is that the taxpayer may dispute the outcome of an FTB audit, provided he or she follows certain rules and requirements. If the taxpayer is successful, this process could culminate in the FTB reaching different, more favorable findings: in short, a lower tax bill. A knowledgeable FTB tax appeals, and where necessary litigation, attorney can facilitate this process by providing financial and legal guidance while walking you through the criteria for filing an appeal.
Requirements for Appealing an FTB Decision
As with any tax matter, strict adherence to deadlines is of critical importance if the taxpayer hopes to prevail. Taxpayers generally have 60 days in which to protest a Notice of Proposed Assessment. The FTB will provide the taxpayer with the specific date by which the NPA must be protested. This date is called the “protest by date” and is displayed on the front page of the NPA.
Taxpayers must follow certain guidelines for making a written protest. First, the protest must be either (1) faxed or (2) postmarked by the indicated protest by date. Additionally, you must be sure to include each of the following with your FTB protest letter:
- Your name and address.
- Your Social Security Number (SSN) or Taxpayer Identification Number (TIN).
- Which amounts, in which tax years, you would like to protest.
- A statement providing a factual overview of the situation.
- A detailed explanation outlining why the FTB’s proposed assessment is incorrect.
- Facts, information, and evidence that supports your argument, such as statutes, IRS regulations, or precedents set by prior cases.
- A copy of the NPA you received.
- If you plan to appoint a tax attorney as your representative, a completed Form FTB 3520 (Individual or Fiduciary Power of Attorney Declaration).
- Your signature (or that of your attorney).
- Your phone number (or that of your attorney).
A hearing may then be held, if requested by the taxpayer. Otherwise, the FTB will notify you of its decision using a Notice of Action (NOA). If you agree with the NOA, you may comply with its terms with assistance from a California tax lawyer. If you disagree with the NOA, you may file an appeal with the OTA within 30 days of the date indicated on the NOA.
To avoid confusion, taxpayers should be made aware that appeals are no longer handled by the California Board of Equalization (BOE) as they were prior to the Taxpayer Transparency and Fairness Act of 2017. In accordance with the Act, appeals are now conducted by the OTA.
California FTB Tax Audit Attorney Handling Appeals and Protest Letters
Do not panic if the FTB has notified you of a greater tax liability than you were originally anticipating. It is possible that the FTB auditor made an error and reached an inappropriate conclusion regarding your liability. You may owe considerably less than the FTB plans to bill you for. It is worth exploring the possibility of filing a written protest, or, if the FTB has already issued a Notice of Action, appealing to the Office of Tax Appeals.
It is easy to become lost in California’s complicated tax appeal system. If you have any questions or concerns about a notice from the FTB, EDD, CDTFA, (formerly BOE), IRS, or other tax authorities, the best course of action is to promptly consult with a knowledgeable Attorney-CPA who is licensed to practice in the state of California. For a reduced-rate tax consultation concerning an FTB audit, an FTB protest letter, CDTFA or OTA procedures, or tax relief options, contact the Tax Law Offices of David W. Klasing online, or call us today at (800) 681-1295.
Helpful Q and A libraries: