The FTEs needs: notifying the FIB post-audit, prop 13 & controversy.

• Author: Williams, Len
• Position: Full Time Equivalent - Family Income Benefit

This is a reminder that the conclusions or IRS audits. CP-2000 adjustments. amended returns or other changes must be reported to the FT B they will have a tax impact. Failure to clo will have a negative impel on clients' perceptions or their CPAs when die other shoe drops and they get an unexpected notice/bill from the FTB rot. the California impact or what has transpired.

There is an incentive to report the change to the There's a six-month period for the taxpayer to notify FTB of the change and if either the taxpayer or the IRS notifies the FIB, then the FTB is given two years to issue a notice of proposed deficiency adjustment

If, however. the FIB hasn't been informed of the change within that six-month period, then the FIB is auuborized to send a deficiency notice at any time.

If the taxpayer or the IRS notifies the FIB of the change outside of that six-month window, then the 1.1B is allowed four years to issue a deficiency notice.

A state Board of Equalization (BOE), summary decision from earlier this year illustrates the harsh consequences a taxpayer Sufrered for failing to adhere to the above rules. In Barry Rossum. NO. 69590'3 (March 25. 2014) the BOE allowed the FIB LO proceed with an assessment against a taxpayer 11 years alter the original state return k' as filed. which is many years beyond the normal four-year California Statute of limitations for individual income tax matters.

The taxpayer alleged that he had tiled an amended California return. hut could not produce either a copy amended return. or a cancelled check showing payment Noy. 20. 2014 issus Lexology) .

The late Steve Kramer had a very efficient way of handling the required notification: Fled send a copy of the IRS report to the FTB with a cover memo saying that this was its notification and Cor it to recalculate the California lax accordingly. Then he'd simply review what the FTB calculated.

How Long Do I Have to Keep This Tax Stuff?

As a minimum. taxpayers should keep the file copies of their income tax returns permanently and. with thy advent of electronic filing. Aso keep the acknowledgement that the taxing authority received the return. A1though such acknowledgoment come from the software

Take this story as in illustration:

A client of mine always sent in his tax return via certified mail with return receipts required. A few years ago. he got a notice from the FTB that he hadn't filled tax returns for 1997 1998 and 1999 Although he received the notice long after...