Not every tax letter you receive will be sent to you by the IRS. States also have tax agencies that they use to ensure taxes are paid in full. One of these types of notices is called a Notice of Proposed Assessment (“NPA”), which is issued by the California Franchise Tax Board (“FTB”) to propose additional tax and/or penalties due for a specific tax year.
Generally, a Notice of Proposed Assessment is issued at the end of an FTB audit. However, you may also receive an NPA from the FTB after the IRS audits you. This might seem odd, but the IRS sends the results of its audits to the FTB to ensure they’re paid what they’re owed in full. Another common situation is that the FTB will send you an NPA if you did not file a state tax return. The FTB will use third-party information, such as the Form W-2 filed by your employer, to calculate the amount you owe.
If you’ve received a Notice of Proposed Assessment, here’s what to do.
After You Receive Your Notice
After you receive your notice, you’ll want to compare it to your tax return to see what changes are being proposed. Then, gather all of your tax records (including bank statements) in one place. Go over them and find the ones that explain why the Notice of Proposed Assessment is incorrect. Once you have this information (or if you have trouble figuring it out), make an appointment with a tax attorney so you can discuss filing your appeal.
How to Prepare for the Appeals Process
Check for the date on your Notice of Proposed Assessment. You only have 60 days to file your appeal. It must be in writing and include the records you found that prove the changes proposed in the NPA are incorrect. Before you send your appeal, consult with your tax attorney to ensure the argument is sound and that every piece of information needed is included and correct.
To protest your NPA, you must include the following information
- Name, most current address, and phone number.
- Your social security or TIN (taxpayer identification number).
- Amounts and tax years you’re protesting.
- Statement of facts: think of this as your side of the story.
- Evidence and documents that prove your position, including legal authorities.
- Your signature (or one of an authorized representative).
Paying Your NPA
If you decide to file an appeal, you don’t have to pay the full amount listed. However, interest and penalties will accrue on any amount that you may ultimately owe while the appeal is pending. Make a tax deposit while your appeal is pending to prevent interest from accruing. If you decide not to file an appeal and want to pay the tax in full, the FTB will assess the amount listed in the NPA and send you a bill for the amount due.
Once you receive the bill, you can pay the amount in full or set up a payment plan with the FTB. When paying your Notice of Proposed Assessment, make sure you include:
- Your full or business name
- Your tax identification number (TIN)
- The applicable tax year for your payment
During any step in the process of paying your NPA, a small mistake could cause delays and cause more interest to accrue. Consult a tax attorney if you want to make a tax deposit to ensure the process is done correctly and you don’t end up owing any more than you already do.
For Help With Your NPA, Contact Mindy Meigs
If you handle your Notice of Proposed Assessment incorrectly, it can cause delays and you’ll end up owing more at the end of the process in interest. Do it right the first time with professional tax attorney Mindy Meigs. Contact us to learn more about how she can help you through the process today.