Tax Audit Protest and Appeal — California

Tax Audit Protest and Appeal (CALIFORNIA)

Quick-Reference Summary

Part A — Informal Conference Request Letter (FTB Protest of NPA)

Letterhead

[FIRM OR TAXPAYER NAME]
[________________________________]
[Street address]
[City, CA ZIP]
Telephone: [____]
Email: [________________________________]

Date

[__/__/____]

Recipient

Protest Section MS F340
Franchise Tax Board
PO Box 1286
Rancho Cordova, CA 95741-1286

Subject

Re: Protest of Notice of Proposed Assessment — Request for Informal Hearing

I. Taxpayer Information

Taxpayer is [an individual / a California [C-corporation / S-corporation / LLC / partnership]] with principal residence/office at the address above. The undersigned [is the taxpayer / is the taxpayer's authorized representative pursuant to FTB Form 3520-PIT or FTB 3520-BE, attached].

II. Notice Being Protested

Taxpayer received the Notice of Proposed Assessment identified above (a copy of which is attached as Exhibit A), dated [__/__/____], assessing additional [income tax / franchise tax] of $[____], penalties of $[____], and interest of $[____] for tax year(s) [____].

III. Request for Informal Conference

Pursuant to California Revenue and Taxation Code § 19041, Taxpayer timely protests the NPA and requests:

☐ Oral hearing requested; coordinate format and location with the assigned FTB contact
☐ No oral hearing requested at this time

IV. Brief Statement of Disputed Issues

1. [________________________________]
2. [________________________________]
3. [________________________________]

V. Authorization

Authorized representative: [________________________________], CPA / EA / Attorney (CA Bar No. [____]). Power of Attorney (FTB 3520-PIT for individuals; FTB 3520-BE for business entities) is filed and on record / attached as Exhibit B.

VI. Tax Deposit Election (Optional)

☐ Taxpayer has remitted a Pending Audit Tax Deposit under R&TC § 19041.5 in the amount of $[____] using the current taxpayer-type form and payment designation to limit the accrual of interest while protest is pending.
☐ Taxpayer has not made a deposit and elects to allow interest to continue accruing pending resolution.

Signature Block

Respectfully submitted,

_______________________________
[Name of taxpayer or authorized representative]
[Title]
Date: [__/__/____]

Attachments: (A) Copy of NPA; (B) Quick Resolution Worksheet, if enclosed with or required by this NPA; (C) Power of Attorney; (D) Supporting documents.

Filing method: ☐ MyFTB online protest ☐ U.S. Mail ☐ Fax to the number on the NPA or, if none differs, the current FTB-listed 916-364-2754

Part B — Formal Protest / Petition (Detailed Submission)

Caption

NPA No.: [________________________________]
Tax Year(s): [____]
Protest By Date: [__/__/____]

I. Jurisdiction and Timeliness

This protest is filed pursuant to California Revenue and Taxation Code § 19041. The Notice of Proposed Assessment was mailed on [__/__/____]. This protest is filed within 60 days of the NPA mailing date and is therefore timely.

II. Statement of Facts

1. Taxpayer filed Form [540 / 100 / 100S / 565 / 568] for tax year [____] on [__/__/____], reporting California taxable income of $[____] and California tax of $[____].
2. On [__/__/____], FTB issued a [Position Letter / Information Document Request] proposing the following adjustments: [________________________________].
3. On [__/__/____], FTB issued the NPA at issue, reflecting [list adjustments].
4. [________________________________].
5. [________________________________].

III. Errors of Law

Error No. 1. FTB erroneously applied R&TC § [____] in disallowing [________________________________]. The correct application is governed by [R&TC § ____ / IRC § ____ as incorporated by R&TC § ____]. See [Case citation]; OTA Opinion Matter of [____], OTA Case No. [________________________________].

Error No. 2. [________________________________].

Error No. 3. [________________________________].

IV. Errors of Fact

Error No. 1. FTB's NPA states that [________________________________]. In fact, [________________________________], as documented in Exhibits [____].

Error No. 2. [________________________________].

V. Requested Relief

Taxpayer respectfully requests that FTB:

1. Withdraw the NPA in its entirety; or in the alternative,
2. Recompute the proposed assessment to reduce tax to $[____], penalties to $[____], and interest accordingly;
3. Abate the [accuracy-related / late-filing / late-payment] penalty under R&TC § [____] for reasonable cause; and
4. Issue a No Change Letter or revised Notice of Action consistent with the foregoing.

VI. Burden of Proof and Standard of Review

Taxpayer acknowledges that FTB's determinations are presumed correct and that Taxpayer bears the burden of proving the assessment is erroneous by a preponderance of the evidence. Appeal of Magidow, 82-SBE-274 (1982); Appeal of Khorsand, 2021-OTA-122P. Taxpayer has met that burden, as demonstrated by the facts, law, and evidence set forth herein and in the accompanying exhibits.

VII. Evidence Offered

VIII. Request for Hearing

☐ Oral hearing requested; coordinate format and location with the assigned FTB contact
☐ No oral hearing requested at this time

IX. Settlement Authority

Taxpayer reserves the right to pursue:

• FTB Settlement Bureau under R&TC § 19442 (available after protest is filed and prior to OTA appeal final disposition).
• OTA Settlement Program under Cal. Code Regs. tit. 18, § 30209.
• Voluntary Disclosure Program under R&TC § 19191 (if eligible).

Signature Block

Signed on [__/__/____]. Do not add a penalty-of-perjury declaration unless the actual notice, current form, or applicable law requires it for this submission.

_______________________________
[Taxpayer signature or authorized representative]
[Printed name and title]
CA Bar No. / CTEC No. / CPA No.: [____]

Part C — Appeal Cover Letter to Office of Tax Appeals (OTA)

Letterhead

[FIRM NAME]
[________________________________]

Date

[__/__/____]

Recipient

Office of Tax Appeals
PO Box 989880
West Sacramento, CA 95798-9880
Phone: 916-206-4355
Fax: 916-492-2089
Online: appeal.ota.ca.gov

Re: Appeal from FTB Notice of Action dated [__/__/____]

I. Parties

II. Decision Being Appealed

Notice of Action issued by FTB on [__/__/____], affirming in whole or in part NPA No. [____] for tax year(s) [____], assessing $[____] in tax, $[____] in penalties, and $[____] in interest.

III. Timeliness Statement

This appeal is filed within 30 days of the mailing date of the Notice of Action as required by R&TC § 19045 and Cal. Code Regs. tit. 18, § 30201. A copy of the Notice of Action and certified mailing envelope are attached.

IV. Statement of Issues

1. Whether FTB erroneously [________________________________].
2. Whether the [accuracy-related / late-filing] penalty should be abated for reasonable cause under R&TC § [____].
3. [________________________________].

V. Standard of Review

OTA reviews the matter de novo. Appeal of Sanmina-SCI Corp., 2018-OTA-138P. Taxpayer bears the burden of proving each issue by a preponderance of the evidence. Appeal of Khorsand, 2021-OTA-122P.

VI. Relief Requested

Appellant requests that OTA:

1. Reverse the FTB Notice of Action;
2. Cancel the proposed assessment in full;
3. Alternatively, reduce the assessment to $[____]; and
4. Award such other relief as the panel deems just.

VII. Hearing Preference

☐ Oral hearing requested (in-person or by video)
☐ Submit on briefs (no oral hearing)

Signature Block

Respectfully submitted,

_______________________________
[Authorized representative]
[Bar/CTEC/CPA No.]
Counsel for Appellant
Date: [__/__/____]

Required attachments: Copy of Notice of Action; copy of NPA; copy of protest letter and any FTB correspondence; Power of Attorney; filing fee (no fee required for FTB appeals).

Part D — Pre-Filing Checklist

Notice and calendaring
☐ Notice (NPA / NOD / NOA) received date diaried: [__/__/____]
☐ Protest deadline calendared with 7-day buffer: [__/__/____]
☐ OTA appeal deadline (if needed) calendared: [__/__/____]
☐ Copy of notice retained with certified mail envelope

Authority and authorization
☐ Power of Attorney (FTB 3520-PIT or 3520-BE / CDTFA-392) signed and filed
☐ Authorized representative's CA Bar / CTEC / CPA license verified
☐ Conflict check completed

Records gathering
☐ MyFTB / CDTFA online account transcripts pulled for all years at issue
☐ Auditor's workpapers and Position Letter obtained
☐ Federal return, RAR, and any related federal Tax Court / Appeals correspondence collected
☐ Taxpayer source documents (1099s, K-1s, bank statements, contracts) assembled

Legal analysis
☐ R&TC and conforming IRC provisions identified
☐ OTA precedential opinions (designated "P") and Board of Equalization precedent reviewed
☐ Reasonable-cause penalty defense analyzed
☐ Settlement-program eligibility evaluated (FTB Settlement Bureau / OTA Settlement / VDP)

Tax deposit
☐ Pending Audit Tax Deposit (FTB 3576) considered to halt interest accrual
☐ Client advised in writing of pros/cons of deposit

Filing mechanics
☐ Protest sent via certified mail RRR or filed through MyFTB
☐ Fax transmission confirmation retained (if faxed)
☐ Email read receipt / portal confirmation saved
☐ Calendar entry for FTB acknowledgment letter (typically 60–90 days)

Sources and References

• FTB Publication 5821, Protest Procedures: https://www.ftb.ca.gov/forms/misc/5821.html
• FTB Publication 7275, Personal Income Tax NPA: https://www.ftb.ca.gov/forms/misc/7275.html
• FTB Manual of Audit Procedures (MAP) Chapter 15 — Protest: https://www.ftb.ca.gov/tax-pros/procedures/manual-of-audit-procedures/chapter-15.pdf
• Office of Tax Appeals — Rules for Tax Appeals, Cal. Code Regs. tit. 18, §§ 30000 et seq.: https://ota.ca.gov
• OTA Precedential Opinions database: https://ota.ca.gov/opinions
• CDTFA Publication 17, Appeals Procedures: https://www.cdtfa.ca.gov/formspubs/pub17.pdf
• R&TC §§ 19041, 19041.5, 19042, 19045, 19057, 19058, 19087, 19442
• FTB Form 3520-PIT (Individual POA) / 3520-BE (Business Entity POA)
• FTB Form 3576 (Pending Audit Tax Deposit Voucher)