California currently has a four-year statute of limitations on income taxes, but no statute of limitations on collections of tax monies. As we previously noted, the Franchise Tax Board earlier this year sent out notices to taxpayers—asking for payments on returns as old as from the 1960s. I prepared a 1974 tax return for a client just to show the FTB that there was no money due to the FTB.
Needless to say, the people complained to their legislators. In an usual display of bipartisanship (especially in Sacramento), the legislature passed a law that goes into effect on January 1, 2006 limiting collection efforts by the FTB to 20 years. (The IRS is limited to 10 years.)
So, can you, on January 1, 2006, finally shred your 1980 tax returns?
No.
Unfortunately, nothing prevents the FTB from saying you never filed your return and still go after you. If you haven’t filed, there is no statute of limitations. But, you say, I did file back in [fill in the date]. The FTB says prove it. In order to do so, you’ll need either your electronic receipt (if you filed electronically), or your return receipt (if you filed using certified mail, return receipt requested).
Isn’t this ridiculous, you ask, because there’s no way the FTB would stoop so low as this?
I’m sorry, I do not trust the FTB on this issue. The bureaucrats within the FTB are not exactly known for their benevolance when it comes to collections. The FTB is the same agency that went dumpster diving (and was rebuked by the US Supreme Court) to prove that an ex-Californian didn’t really move to Nevada (he did). The only thing that works in dealing with the FTB is evidential proof. Until the culture of the FTB changes, save your returns forever.
Tags: FTB