Blog Archives - Page 38 of 52

Franchise Tax Board Protests – Part One

May 25, 2026August 24, 2014 by Brotman Law

Franchise Tax Board Protests – Requirements of a Valid Protest

The California Revenue and Taxation Code provides that a taxpayer who disagrees with additional tax assessment can file with the Franchise Tax Board a written protest against the proposed additional tax. Protest letter must be filed with FTB within 60 days after notice of additional tax was mailed by FTB to taxpayer. Please note that clock starts ticking from the date of the notice mailing, not when taxpayer receives it. This letter notice is called the Notice of Proposed Assessment (NPA), and it contains a description of procedures to file a protest.

Key Takeaways

The California Revenue and Taxation Code provides that a taxpayer who disagrees with additional tax assessment can file with the Franchise Tax Board a written protest against the proposed additional tax.
The letter must state the taxpayer’s name, account number, and tax year.
An FTB employee compares the date the protest was received at Franchise Tax Board with the date of the NPA to determine that the protest was timely filed. Franchise Tax Board protests must be filed within 60 days of the date of the NPA.

Employment Development Department Offer in Compromise – Part One

May 25, 2026August 24, 2014 by Brotman Law

California Employment Development Department (EDD), like FTB, offers its own Offer in Compromise Program. Article 8, Sections 1870-1875 of the California Unemployment Insurance Code (CUIC) governs the EDD’s Offer in Compromise program. This law permits the EDD to receive applications for Offers in Compromise that may enable a qualified tax debtor to eliminate an employment tax liability at less than full value.

Key Takeaways

California Employment Development Department (EDD), like FTB, offers its own Offer in Compromise Program. Article 8, Sections 1870-1875 of the California Unemployment Insurance Code (CUIC) governs the EDD’s Offer in Compromise program.
A business must be inactive and inoperative to qualify for EDD’s Offer in Compromise. An owner, partner or an individual assessed under Section 1735 of the CUIC may apply for offer in compromise.
Only non-disputed, final tax liabilities will be considered for compromise. Liabilities currently under petition or bankruptcy will not be considered by EDD.

Employment Development Department Offer in Compromise Part Two

May 25, 2026August 24, 2014 by Brotman Law

To fill out the form applicant will need social security number and EDD number. Applicant will need to provide reasonable offer and explain why offer should be accepted by EDD. Additionally, the form requires full financial disclosure, including information about community property. The application must be accompanied by cash, cashiers check or money order equal to amount offered. If applicant cannot pay the full amount at the time of offer, EDD may permit to pay the agreed amount in installments within no more than five-year period. When applicant submits payment with application, in the event an offer is not accepted, the amount will either be applied to the liability or refunded, at the discretion of the applicant submitting the offer. A determination by the EDD that it would not be in the best interest of the State to accept partial payment in satisfaction of a tax liability will not be subject to administrative appeal or judicial review. A separate application must be submitted for each EDD account to be compromised.

Key Takeaways

To fill out the form applicant will need social security number and EDD number. Applicant will need to provide reasonable offer and explain why offer should be accepted by EDD.
Once applicant-taxpayer satisfies the compromise agreement, EDD will notify him or her, in writing, that the terms of the compromise agreement have been fulfilled and all liens filed or recorded, or both, against the individual’s interests have been released.
Once the terms of the compromise agreement are fulfilled, including payment of the amount offered, the liability will be considered satisfied in full and all tax liens filed or recorded, or both, will be released.

California Payroll Tax Settlements

May 25, 2026August 24, 2014 by Brotman Law

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.

Key Takeaways

California EDD offers taxpayers tax settlement program, where EDD and taxpayer can settle a claim for less than the amount owed.
When reviewing an offer, the EDD will consider the risk of loss for the State and the cost of litigation balanced against the benefits of reaching a settlement agreement.
Upon approval of the settlement offer, the employer and the EDD will enter into a settlement agreement. All settlement agreements are subject to approval by an administrative law judge, and some require approval by the CUIAB and/or the Attorney General.

California Employment Development Department Notice of Levy

May 25, 2026August 23, 2014 by Brotman Law

Key Takeaways

The Unemployment Insurance Code (UIC) section §1755 directs that the Notice of Levy must be served on taxpayer in person or by certified mail not later than three years after the required payment o…
Please note that EDD will not automatically release a Notice when the taxpayer files bankruptcy after the Notice is served.
To release or modify Notice of Levy , EDD uses form DE 8016 .

The California Employment Development Department can issue a Notice of Levy to attach the credits or personal property of any delinquent account, either active or inactive.

The Notice of Levy may be made upon financial institutions, including banks, credit unions, trust companies, savings and loan institutions. For these institutions, the Notice requires that any funds held at the time of receipt of the Notice be remitted to the Employment Development Department.
Notice can be imposed on the third party accounts receivable. In such cases a third party is served with the Notice and must surrender assets within five days after the assets are payable to taxpayer.
Notice can be served on Credit card Processors and it will remain in force for one year, and can be renewed.

Correction of Franchise Tax Board Notices

May 25, 2026August 23, 2014 by 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.

Key Takeaways

Sometimes a Notice of Proposed Assessment may require corrections when new information is received from taxpayer.
If taxpayer does not protest the NPA, FTB must issue a Notice of Revision prior to the expiration of 60-day protest period or within the prescribed time if assessment is deferred, which can vary.
In the case when Notice of Proposed Assessment is protested by a taxpayer, and a Notice of Action has already been issued, FTB must mail a corrected Notice of Action within the 30-day appeal period.

California Interagency Offer in Compromise

May 25, 2026August 23, 2014 by Brotman Law

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.

Key Takeaways

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).
Generally, respective agency rules regarding offer in compromise program did not change significantly. However, some recent changes have been made.
Like before, three agencies will not initiate tax collection activity while offer is pending.

California Payroll Tax Settlements

May 25, 2026August 23, 2014 by Brotman Law

Key Takeaways

California EDD offers taxpayers tax settlement program, where EDD and taxpayer can settle a claim for less than the amount owed.
When reviewing an offer, the EDD will consider the risk of loss for the State and the cost of litigation balanced against the benefits of reaching a settlement agreement.
Upon approval of the settlement offer, the employer and the EDD will enter into a settlement agreement. All settlement agreements are subject to approval by an administrative law judge, and some require approval by the CUIAB and/or the Attorney General.

CDTFA Prior Audit Percentages of Error (PAPE) Program and Cut-Off Techniques

May 25, 2026August 23, 2014 by Brotman Law

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.

Key Takeaways

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.
CDTFA also uses cut-off techniques. “Cut-Off” is that point in the audit program where the auditor has accumulated sufficient data to support a reasonable conclusion or opinion based on acceptable audit standards.
The principle of whole dollar auditing (i.e., dropping cents) is used by CDTFA as a time-saving technique.

Board of Equalization Audits – Short Tests and Sampling – Part Two

May 25, 2026August 23, 2014 by Brotman Law

Key Takeaways

Topic: Board of Equalization Audits – Short Tests and Sampling – Part Two
In general, when auditing a business with good internal control, and a good accounting system, the test period may be a relatively small portion of the total audit period.
However, in an audit of a business with little or no internal control, the test period most likely will cover a larger proportion of the audit period.

In general, when auditing a business with good internal control, and a good accounting system, the test period may be a relatively small portion of the total audit period. However, in an audit of a business with little or no internal control, the test period most likely will cover a larger proportion of the audit period. If records are available, the periods selected for test will be spread over the entire audit period so that samples can be taken of all years and all seasons of the year. The size of each test period, in addition to the above considerations, will depend on the number of documents required to be examined. Usually the test periods consist of complete months or quarters, but periods of less than a month may be selected by auditor if daily or weekly controls can be established.