Once a week I receive the Leonard Letter. Bill Leonard, a member of California’s Board of Equalization, each week states his views on what’s going on in the tax world in California. It’s essential reading for anyone in California concerned about their taxes. You can subscribe here.
On April 25th Bill Leonard reported on a case that almost was argued in front of the Board. In California, a taxpayer appealing a decision of the Franchise Tax Board first must move through that agency. If he can’t get a satisfactory result through that appeals process, he then can appeal to the Board of Equalization. After that, a taxpayer can then take their case to the courts.
You can find the case in question from Bill Leonard’s blog entry of April 25th. A taxpayer hadn’t filed his return in some time, and the FTB estimated his income and then added his W-2 to it. But the W-2 was all of his income, so they double-counted his income. He went through the FTB and got nowhere, so he appealed to the BOE. Amazingly enough, on the morning of the appeal the FTB “…changed their story and returned the gentleman his money.”
There are many good people at the FTB, but this case spotlights some of the bureaucratic shortcomings that I have seen. Bill Leonard (rightly) noted, “Had this situation not been presented in public before the Board I am doubtful this taxpayer would have received justice.” Unfortunately, that’s the problem.
Yes, the taxpayer didn’t file returns, and that was a cause of the problem. But it shouldn’t take an appeal to the BOE for the FTB to realize there’s a problem with double counting of income.
There’s a moral here—actually two morals. First, if you’re a Californian, file your tax returns. Second, the Franchise Tax Board can become adversarial instead of working to resolve problems.