A Notice of Proposed Assessment (NPA) is how the Franchise Tax Board (FTB) tells a taxpayer that it intends to assess additional tax, penalties, or both. The notice is a proposal, not a final bill, and California law gives the taxpayer a set period to dispute it.
What an NPA Is
For individuals, the NPA is form FTB 5830. The FTB’s guide to its letters explains that the notice follows audit adjustments for the tax year shown and informs the taxpayer of the FTB’s intention to assess additional tax and/or penalty. The notice identifies the adjustments and the proposed amounts.
The FTB also issues NPAs when it has no record of a required return. In that situation the FTB may estimate income from available information and propose an assessment of tax, interest, and penalties (Revenue and Taxation Code (R&TC) section 19087). The same protest rights apply.
The 60-Day Protest Deadline
A taxpayer may file a written protest with the FTB within 60 days after the NPA is mailed, specifying the grounds for the protest (R&TC § 19041). The NPA shows the last day to protest. If no protest is filed, the proposed assessment becomes final when the 60-day period ends (R&TC § 19042), and, as the FTB’s guidance puts it, the NPA becomes final and billable.
Calendar the protest date printed on the NPA. Missing it does not end every option, but it narrows them: after the deadline, the FTB’s guidance is to pay the balance in full and file a claim for refund.
How to File a Protest
The FTB accepts protests online through MyFTB or in writing. Its protest guidance asks that a written protest include a copy of the NPA; the taxpayer’s name, address, and phone number; the taxpayer identification number; the amounts and tax years being protested; an explanation of why the taxpayer disagrees; supporting documents; and the signature of the taxpayer or an authorized representative.
An effective protest addresses each adjustment separately, states the relevant facts with supporting records, and explains why the law supports a different result. If the NPA proposes penalties, the protest should address them too, including any facts showing reasonable cause.
What Happens During the Protest
Once a protest is filed, the FTB must reconsider the assessment and, if the taxpayer asked for one in the protest, grant an oral hearing (R&TC § 19044). The FTB’s Audit/Protest/Appeals guide (FTB 985) describes the protest as an informal process in which a hearing officer reviews the taxpayer’s position and information to determine whether the audit changes were correct. The FTB may request additional information while the protest is pending.
The FTB then issues a Notice of Action, which affirms, revises, or withdraws the proposed assessment.
Appeal to the Office of Tax Appeals
A taxpayer who disagrees with the Notice of Action may appeal to the Office of Tax Appeals (OTA), an agency independent of the FTB. The FTB’s guidance states that the appeal must be filed within 30 days of the date printed on the Notice of Action, and under R&TC section 19045 the FTB’s action becomes final if no timely appeal is filed.
Interest and Payment During a Protest
Filing a protest does not stop interest from accruing. A taxpayer can pay the protested amount and still continue the dispute: if the tax is paid before the FTB acts on the protest, the FTB treats the protest as a claim for refund (R&TC § 19335).
Settlement
The protest process does not include negotiating a settlement. FTB 985 explains that the FTB Legal Division’s Settlement Bureau is responsible for settling tax, penalties, and interest when a case enters its Settlement Program, and the FTB’s protest guidance refers taxpayers to FTB Notice 2020-03 for settlement consideration.
If the Protest Deadline Has Passed
After the protest period ends, the usual route is to pay the balance and file a claim for refund. If the FTB denies the claim, the taxpayer generally has 90 days from the mailing of the denial to appeal to OTA (R&TC § 19324). If the FTB does not act on a refund claim within six months, FTB 985 explains that the taxpayer may treat the claim as denied and appeal to OTA.
The Bottom Line
An NPA starts a 60-day clock. A timely, well-documented protest preserves the right to an FTB hearing and, after that, to an appeal before OTA. Reading the notice closely and calendaring its deadline are the first steps.
Received a Notice of Proposed Assessment?
Tax attorney Cassra Minai, Esq. can review the notice and your response options in a confidential consultation.