If you earned income in California in 2013 but didn’t file a state income tax return for the year, expect to receive a filing enforcement (FE) letter from the Franchise Tax Board (FTB) in the coming months. The deadline to file a 2013 state tax return was October 15, 2014.
FE notifications are sent throughout the year, starting in January. Last year, FTB collected more than $715 million in underreported taxes through FEs. FTB detects taxpayers who earned income but did not file a return through sources such as occupational licenses and mortgage interest payments. The board also receives records from banks, employers, governments, the IRS, and other third parties, matching these records against its database of tax returns.
What to Do If You Are Contacted
FTB gives nonfilers 30 days to file a tax return or show why one is not required. Individuals that disregard the 30-day letter will get a tax assessment based on income and other information reported to FTB. The tax assessment includes interest, fees, and penalties, which could themselves amount to as much as 50 percent of your tax due.
Of course, some taxpayers might not have filed a California income tax return because they earned too little. But these taxpayers also may want to file returns, since they could have had too much withheld from their wages or overpaid their estimated taxes. If this is the case, filing a return is the only way to get a refund. State tax law allows taxpayers four years to claim a refund. For 2010 returns, that window generally closes on April 15, 2015.
If you have received a 30-day FE letter, consult with a tax professional who has experience in California state and local tax controversy to help you discern whether a filing requirement does exist, to what extent it exists, and how to properly respond.
FTB provides additional information for those who receive an FE letter on its Web site, ftb.ca.gov. By using FTB’s Web site to respond to an FE letter, you can request more time to reply, retrieve information that can help you file a tax return, request tax forms, learn about payment options, sign up to receive an email reminder to file, and access other services. You can also call FTB at (866) 204-7902.
We're Here to Help
For help responding to an FE letter, or to learn whether you may be required to file a tax return in California, contact a member of our California state and local tax controversy and disputes team at statetax@mossadams.com.