Brotman Law

Sometimes a Notice of Proposed Assessment may require corrections when new information is received from taxpayer. After a Notice of Proposed Assessment has been issued, and the taxpayer submits supplemental information leading to correction of the assessment, the FTB makes the correction. Depending on the circumstances, the assessment may be corrected by a second Notice of Action or a Notice of Revision; it may be withdrawn and a new NPA (Notice of Proposed Assessment) issued; or in the case of protested NPAs, it may be restored to protest status.

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California streamlined offer in compromise process where now a single application can be used for three different agencies The Board of Equalization (BOE), Employment Development Department (EDD) and Franchise Tax Board (FTB). The application is located at https://www.edd.ca.gov/pdf_pub_ctr/de999ca.pdf. Just like before, taxpayers can apply for offer in compromise program when they are unable to pay their full tax liabilities to the state. The program allows taxpayers to negotiate a reduced amount of their non-disputed tax liabilities. The state will consider an Offer In Compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. However, previously California taxpayers had to submit a separate form to each of the three agencies. Now, they can submit a single interagency application with the state, and all three agencies will coordinate offer in compromise process among themselves. The form is available online at the California Tax Service Center (www.taxes.ca.gov), as well as at each of the three tax departments’ Website’s (BOE www.boe.ca.gov, EDD www.edd.ca.gov, FTB www.ftb.ca.gov). The individual agencies must still negotiate each Offer in Compromise separately for their respective taxes. For example, FTB will negotiate with taxpayer a state income tax liability and Board of Equalization will negotiate a sales or use tax liability.

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California EDD offers taxpayers tax settlement program, where EDD and taxpayer can settle a claim for less than the amount owed. EDD can settle if it evaluates costs and risks associated with the litigation of the case and determines that it is better and less expensive for EDD to settle for lower amount than to litigate in court. The Settlements Program allows an employer the opportunity to enter into a settlement agreement to also avoid the cost of prolonged litigation associated with resolving a disputed employment tax matter.

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The prior audit percentages of error (PAPE) program involves the use, under certain circumstances, of a percentage of error developed in a prior audit for the sales or accounts payable portion of a current audit. It can be a valuable tool in streamlining the audit process. It is designed to reduce the time it takes to complete an audit and minimize the burden on taxpayers. When planning the audit, CDTFA supervisors and auditors evaluate whether the taxpayer is eligible for the use of a PAPE. This evaluation is conducted whether or not the taxpayer has already requested the use of a PAPE. If the taxpayer is eligible for the use of a PAPE, the auditor discusses the PAPE with the taxpayer as soon as possible rather than wait for the taxpayer to request using a PAPE. To qualify for the PAPE, the taxpayer must have at least one prior audit and must meet the number of conditions. One of the conditions is consistency of business operations during prior audit and current audit. Minor changes are generally ignored. It is important to remember that the use of a PAPE is limited to the current audit period as a PAPE cannot be used in two subsequent audits.

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An audit made on a taxable measure basis generally places emphasis on the verification or accumulation of taxable differences as compared to an audit performed on a total sales and claimed deduction basis using individual lead schedules. Auditor will verify that all sources of revenue and deductions have been examined.

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