Tax Flash: California Taxpayer Entitled to Abatement of Demand Penalty

A California personal income taxpayer was entitled to an abatement of a demand penalty because the penalty was not properly imposed. Generally, the Franchise Tax Board (FTB) may impose a penalty when a taxpayer does not timely respond to a Demand for Tax Return. Further, the FTB is only allowed to impose a demand penalty if the taxpayer also failed to timely respond to a Request or a Demand for Tax Return for a prior year, and that failure resulted in FTB issuing a Notice of Proposed Assessment (NPA) at any time during the four taxable years preceding the year for which the current Demand is being issued. In this matter, the demand penalty at issue was for the 2014 tax year. However, it was noted that the FTB did not issue an NPA to the taxpayer during 2010, 2011, 2012, or 2013 tax years. Therefore, the requirements under the applicable regulation were not met. Accordingly, the demand penalty was not properly imposed.

Giordano, California Office of Tax Appeals, No. 18053180, June 3, 2020, released August 2020

Wilson Tax Law Group, APLC (www.wilsontaxlaw.com) is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group is exclusively comprised of former IRS litigators and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division and Criminal Division.

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