The California Franchise Tax Board Seldom Do Their Own Audits
They can, and do, but they don’t do it very often. However, when you are a California resident and the state discovers that the IRS is auditing you anyway, they go ahead and use the results from that audit to determine your state tax liability as well. The California state government looks to cut corners wherever it can, so it rides piggyback on IRS audits.
California FTB Audits the majority of the time are based on an IRS audit. In the case where the IRS audit found that you have to pay additional taxes, California mirrors the results and prorates it for the amount in California taxes as well.
You Will Be Notified If a California Audit Showed You Owe
You then get a notice from the California FTB. This notice is called a Notice of Proposed Assessment. This will happen if you owe any of taxes, penalties, or interest. Starting from the date of receiving the notice, you have 60 days to file a response. From the date of receiving the notice, you can either agree to pay or file a protest within 60 days of receiving the notice.
Note that filing a protest will not stop the accrual of interest! The interest stays “turned on” and will be retroactively charged if your protest was ineffective and the state says you still owe. The only way to stop interest accrual is to pay within 15 days of receiving the notice.
The California FTB Can Issue a Levy Even If You Live Out of State
California is notorious for being a tenacious state to deal with when you owe them money. It is possible for them to attach a levy to your bank account even if you no longer reside in the state.
For instance, you might have a professional license in California or a business license in California, while not residing there. California will estimate your income based on the industry average for whatever business or contracting situation you have with that state, then figure your taxes based on that. Then attach a levy to you if you don’t pay that.
Talk To Your Tax Preparer To Set Up Income Reporting
Due to the huge size and population of California, its state government may not always be accurate in matters pertaining to tax assessment. You may get these notices even if you were not a resident and had no California-based income at the time. The onus is still on you to prove that you have no tax liability.
Need Help With the California FTB or IRS?
If you are facing an audit and need help, give us a call at (888) 515-4829 or click here and fill out our intake form.