The Internal Revenue Service, also better known as the IRS, administers penalties and tax laws at the federal level. And, the Franchise Tax Board (FTB) is the equitant of the IRS at the state level in California. It is in charge of collecting and reviewing the tax returns of individuals and businesses. In addition, the FTB also does audits routinely to ensure that individuals and businesses are properly reporting the income they are making. As well as, complying with the state’s tax laws, and paying any tax debts.
Like you can with the IRS, you can also challenge/appeal the FTB audit results. However, a lot of people may not know a lot about the appeal process. Therefore, we are here to teach you how to appeal an FTB audit.
What is the FTB Audit Process?
Once the FTB completes the audit, they will mail you an NPA (Notice of Proposed Assessment). But only if they conclude that you owe additional:
If you think that their assessment of your finances is wrong, you can appeal to FTB.
How to Appeal an FTB Audit?
They also call the appeal “the protest letter.” Either you or your lawyer can submit the letter online through the MyFTB platform. You can also file a hand-written protest letter. You need to make sure to adhere to the protest date on the NPA. Because they do not recognize any letters submitted after the given date. In such cases, they approve the assessment as final. And the FTB will bill you according to the taxes, interest, and penalties you owe.
Filing a Protest Letter to the FTB
The protest letter needs to be clear in terms of what you are protesting against in the NPA. So either mail it with a postmark date, submitted online, or submit it by fax according to the protest date in the NPA.
All protest letters need to include the details below:
- Full name
- Your address
- Your social security, business entity number, or taxpayer identification number.
- The years and the amounts outlined that you are protesting.
- A statement with facts.
- An explanation of why the assessment is incorrect.
- Any documentation/evidence that can substantiate your position.
- Your signature or the signature of the authorized representative.
- Your phone number or the name, phone number, and mailing address of your authorized representative.
- A copy of the Notice of Proposed Assessment you received.
- Complete and attach the FTB3520 PIT, Individual or Fiduciary Power of Attorney Declaration or FTB 3520 BE, Business Entity or Group Nonresident Power of Attorney Declaration if you want someone to represent you in the protest appeal. You can click here to get more detailed instructions on how to fill out and file the Declaration.
- A request for an oral hearing, if you want one.
You will need to register with the MyFTB platform to submit the protest letter online. If your authorized representative has a POA Declaration or has registered with the MyFTB, they will also be able to submit your protest letter through their own MyFTB.
If you are sending the letter through the mail, you can send it to:
Protest Section MS F340 Franchise Tax Board
PO Box 1286
Rancho Cordova CA 95741-1286
For fax, the number for FTB is (916) 364-2754.
The Process of Protesting an FTB Audit
The process of protest letters is informal. It is only the first step in the judicial and administrative process where you are disputing the audit assessments. The protest letter is an opportunity where you will be able to discuss any concerns you have with FTB staff that are assigned to you. This staff member is known as the hearing officer and is in charge of resolving the protest. You have to give them any additional information or documents that can help substantiate the protest.
The hearing officer has to review the position and information you are outlined to make sure that the assessment in the audit was actually correct and compliant with local laws.
The FTB sends back a confirmation receipt to you after they receive the letter. This can take around a month after the protest letter date. The hearing officer will be making a decision on the correct amounts based on the law and the information you have provided. There is no negotiation in this entire process when it comes to the settlement amount. Legal Division’s Settlement Bureau has been created for settling the amount of interest, penalties, and taxes.
Every person has the right to an oral hearing for the protest letter. However, you can only get one if you request it; otherwise, it is not a requirement. If you do wish to have, you need to include this detail in the protest letter. You or the authorized representative can use the oral hearing to present the position you have maintained on the audit assessment. You can also use this chance to provide any supporting tax laws or additional documentation.
The hearings are usually held at FTB’s field office that is nearest to you. The FTB is flexible when it comes to a convenient time and date for both parties. You can also choose to have the hearing over video conferences or by phone.
The FTB will make a final decision after considering your protest carefully. A Notice of Action will be sent to you that documents any decisions to revise, affirm, or withdraw the assessment sent to your previously. If you agree with the changes made to the assessment on the NOA, you can pay through various means.
We hope you have now learned how to appeal an FTB audit. Because the process sure seems simple when it’s laid out like that, doesn’t it? Now go ahead and file your own appeal with FTB.