California Tax Disputes, From Audit to Appeal.
The Franchise Tax Board follows its own procedures, deadlines and rules, some of which differ from federal practice. We represent individuals and businesses in FTB audits, residency examinations, protests and appeals to the Office of Tax Appeals.
The California Process
Notice of Proposed Assessment
A taxpayer may file a written protest within 60 days after the notice is mailed (R&TC §19041). If no protest is filed, the assessment becomes final when that period ends.
Protest and Notice of Action
The FTB reconsiders the assessment, holds an oral hearing if one is requested, and issues a Notice of Action that affirms, revises or withdraws it.
Office of Tax Appeals
A Notice of Action can be appealed to the Office of Tax Appeals, which is independent of the FTB, within 30 days.
Burden of proof
In appeals before the Office of Tax Appeals, a proposed assessment with a sufficient factual foundation is generally presumed correct, and the taxpayer must show error by a preponderance of the evidence (Appeal of Bindley, 2019-OTA-179P; Cal. Code Regs., tit. 18, §30219(c)).
Residency Examinations
California taxes residents on all of their income and nonresidents on income from California sources. A resident includes an individual who is in California for other than a temporary or transitory purpose, and an individual domiciled in California who is outside the state for a temporary or transitory purpose (R&TC §17014). Spending more than nine months of a taxable year in California creates a presumption of residency (R&TC §17016).
Residency examinations focus on domicile and on the connections a person keeps with California, such as a home, family, business interests, licenses, accounts and time spent in the state. California’s only statutory safe harbor, the 546-day rule for certain employment-related absences, is narrower than many people assume.
Limitations and Collection
Time to assess
The FTB generally has four years from the date a return is filed to propose an assessment, longer in some cases, and no time limit if no return was filed.
Collection
The FTB can collect through liens, bank levies and earnings withholding orders. Payment plans and other options are available.
Received a Notice From the FTB?
Contact Advantage Tax Law for a confidential consultation before the protest deadline passes.