turbotax icon
turbotax icon
turbotax icon
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

TLeT
Level 2

Assessment from CA Franchise Tax Board from 2016!

I received a notice of proposed assessment from the state of CA Franchise Tax Board for the 2016 tax year for a misfiling of about 6k. 

I spoke with a representative from the state of CA franchise tax board regarding this matter and they said this is an error, in their opinion, but we should speak with my "tax filing institution." Since we followed the proper guidance from Turbo, I need to speak with someone to help resolve this misfiling. Can someone help? Many thanks!

Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

6 Replies
BillM223
Employee Tax Expert

Assessment from CA Franchise Tax Board from 2016!

What was this 6K about? Was it paid family leave?

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
TLeT
Level 2

Assessment from CA Franchise Tax Board from 2016!

It's unclear, but it was the year that I was on maternity leave. We filed according to the W2 statements and Turbox Tax guidance, so we need to understand where the error took place in the filing process. We need to talk to someone live, as suggested by the Franchise Tax Board rep. Who can we reach out to?  (There may be too much detail to muddle through for a community board chat, as helpful as this platform can be).

TLeT
Level 2

Assessment from CA Franchise Tax Board from 2016!

@BillM223  Can you or someone help??!!

BillM223
Employee Tax Expert

Assessment from CA Franchise Tax Board from 2016!

PFL that is taxable on the federal return is excludable in California if it is paid by either the state's Employment Development Department (EDD) and appears on a 1099-G form, or is paid by an insurance company under a Voluntary Plan for Disability Insurance (VPDI) and reported on a W-2. It is not included in your employer's regular W-2 but on a separate W-2 from the insurer.

 

Your PFL appears to have been included on your regular W-2 from your employer, not on a 1099-G or a separate W-2 from an insurer. In this case, it is both taxable federally and to the State of California.

 

When a W-2 is marked in TurboTax as PFL, a page about PFL is shown in the CA section of the interview. The amount of wages on the W-2 marked as PFL is displayed so you don't have to look it up, but you are asked to verify or adjust the amount that was paid by an insurance company.

 

As the TurboTax onscreen instructions point out, "Don't include PFL income that was paid directly by your employer. This type of income is normal taxable wages." Any amount reported by your employer in box 16 of a W-2 is considered by CA as compensation for services or taxable fringe benefits.

 

It appears that people (like HR personnel) in California use the term "PFL" rather loosely, so that what they call PFL is actually an employer benefit. It may be that you received short-term disability pay rather than officially PFL under a Voluntary Plan for Disability Insurance (VPDI). Generally, excludable PFL kicks in after all of your employer-paid benefits (vacation, sick leave, short-term disability) have been exhausted.

 

Simply put, if your employer paid the $6K amount instead of the EDD or an insurance company, then the amount is taxable in California, no matter what it is called. Please ask your employer for the source of the $6K.

 

If you were assessed a penalty, you may be able to appeal CA's penalty under the "first-time penalty abatement" law passed by CA in 2014. While this regulation (Section 19132.5) isn't easily spotted on the Franchise Tax Board's website, it requires the FTB upon request of a taxpayer to abate a failure-to-pay timeliness penalty when the taxpayer has paid all tax currently due and has not had a similar penalty in the prior 4 years. File a Form FTB 2917, Reasonable Cause -Individual and Fiduciary Claim for Refund, available at https://www.ftb.ca.gov/forms/misc/2917.pdf

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
TLeT
Level 2

Assessment from CA Franchise Tax Board from 2016!

Thank you so much for your comprehensive response. This is incredibly helpful. 
 
What do you recommend as the reasonable cause for this matter?
BillM223
Employee Tax Expert

Assessment from CA Franchise Tax Board from 2016!

Cause? You mean why did you make the entry that you did that your spouse's W-2 was PFL?

 

Well, two issues: (1) as I noted, the term "Paid Family Leave" is used rather loosely in California. Some of what people call PFL is taxable and some is not, but since people use the same term for both, it's easy to get confused about which PFL is non-taxable in CA.

 

(2) As I noted above, on the input screen, you were asked to enter the amount from the W-2 that was paid by the insurance company. Because TurboTax is usually Do-It-Yourself software, the taxpayer is responsible for all the data entries.

 

If you see an instruction like "enter only the amount paid by the insurance company" and you are not sure what that means, then you need to ask before you file the return. I assume that in this case, the State of California believes that the $6k was paid by your spouse's employer, not an insurance company. Was it?

 

I said "TurboTax is usually Do-It-Yourself software" because TurboTax does offer some services wherein a credentialed tax professional goes through your return with you line by line, and in this case, the tax professional signs your return as the tax preparer of record. In this case, the onus for tax errors would be on TurboTax. But for most users, then onus is on the taxpayer asking questions before the return is submitted.

 

I don't mean to be hard, but DIY means just that: do it yourself. 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Manage cookies