The Franchise Tax Board (FTB) believes that more than one million people were required to file a state income tax return for tax year 2013, but failed to do so. Are you one of them? The FTB is specifically investigating 21,084 people living in Sacramento County, which includes 11,447 people in the City of Sacramento, for failing to file their California state income tax return last year.
The FTB recently announced that it has begun the investigation and forced tax assessment process for those people it believes were required to file a tax return last year. What this means is that the FTB has sent demand for tax return letters to the million plus people it believes were required to file a 2013 tax return but failed to do so by the tax extension due date of October 15, 2014.
This is the first step in the force filing procedure taken annually by the FTB. After the tax season and tax extension season is over, and all the tax returns received are processed, the FTB’s computers begin identifying social security numbers wherein a tax return was not received. Of those social security numbers, the computer further identifies those social security numbers that have associated with it some income record, occupational license, or mortgage. The FTB receives this information from banks, employers, local governments, the IRS, and other third parties. Last year the FTB collected more than $715 million through its force filing investigation and assessment efforts.
If you did not file a 2013 tax return and had some type of reported transaction, income, occupational license, or processional license; you likely received one of the referenced letters recently sent by the FTB. The worst thing someone can do when they receive this type of letter is ignore it. However, ignoring the letter is the most common thing that I see people do.
Just because you may have received a demand for tax return letter doesn’t necessarily mean that you have a requirement to file a tax return. The FTB does make mistakes. Those people contacted by the FTB have 30 days to file a state tax return or prove why one is not required. So there is a need to act quickly if you truly do not have a tax filing requirement.
While it is likely that most of the people contacted by the FTB do actually need to file a tax return, the more difficult case is the case where a tax return is actually not required. Depending on the circumstances and the FTB’s basis for initially believing that a tax return was required, it’s usually an uphill battle to prove the negative fact – that a tax return is not required.
For those people contacted who do not respond to the demand for tax return letter, the FTB will estimate a tax bill based on income records or “other factors”, ignoring any tax credits and most deductions. The FTB tax assessment includes interest, fees, and penalties that can total as much as 50 percent of the estimated tax due. Additionally, once assessed, the FTB will be able to take enforced collection actions against you to collect the debt. This includes levies, garnishments, liens and seizures. Additionally, because a tax return was never filed, there is no statute of limitations on the amount of time that the FTB can collect the money from you.
Therefore, if you’re one of the 21,084 people from Sacramento County that still need to file your 2013 tax return, prepare and file your tax return, or find a Sacramento tax professional to help you. Filing you tax return late, even if you owe a tax debt, is still better than not filing a tax return at all.
This article is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.