Oh, come on guys! This is Cauliyfornia, the original Lotus
Land. The FTB has for many years looked up onto that ceiling
that our clients get all their numbers from and found (ta
da!) the income they would like to bill them for.

Several years ago my itinerant client (she now lives in
Texas) got a bill from FTB for taxes on about $36000 of
income supposedly earned in CA while she was living in AZ.
It turned out that because of her professional engineering
license from CA she was being assessed on the average income
of an industrial engineer in CA. We finally got that one
straightened out when my deceased physical therapist client
got yet another bill for taxes on the average income of a PT
in CA 2 years after he died. I told them they could go
fishing in the waters off the coast of Hawaii to find him.

This year all my Mexican pilots have gotten tax bills from
CA, even the one from Miami who still lived in Mexico and
later moved to AZ. Those have since been straightened out.

Now I hear from my friend Sue that she got a tax bill for
her daughter at her own home when the daughter and her
husband and children have been living in Wisconsin for
years.

I thought I was kidding when I say that, when those guys on
the SuperBowl announce they are going to Disneyland, the FTB
is there taking names.

Ahnold is desperate.

Linda Dorfmont EA etc.

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glendale202-mtm[at]yahoo.com says...

- quote -

I have advised a number of California disability retired
peace officers who have received similar letters from FTB.
These retirees receive a 1099-R with all income tax free
(award in lieu of workers comp) and the FTB wants to know
what they live on and why they don't file. A copy of the
1099-R with zero taxable income suffices.

Cliff P
CA tax preparer

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A.G. Kalman wrote:

- quote -

I haven't heard of a case where California has imputed
income based on a mortgage, but I have handled a situation
10 years ago when the state imputed income for someone who
took out a business license but never actually opened a
business. (That taxpayer was hired as an employee instead).

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I will leave the CA tax question to the CA tax people. When
I have a client (new or older client) who does not need to
file (probably any more), I fill out a tax return and give
it to them and tell them to sit on it until someone asks for
a return and then send it in. I do not even charge for
doing this for them. I do it for the first year and I
usually do not hear from that client again. Works for me,
maybe it will work for others.

Missy Doyle

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An elderly couple who I had told had no Federal and State
tax filing requirement for 2003 a year ago, returned to have
their 2004 tax returns filed. They did not have any filing
requirement for 2004 either. They then produced two letters
from the CA FTB relating to 2003. The first one dated in
Jan. 2005 informed them that a 2003 tax return had not been
received and that the FTB records showed that they were
making mortgage interest payments to a lender. They had
their son write an explanation on the FTB provided form and
mail it to the FTB. It was mailed after the Feb 2005
mailing deadline on the first letter. They then received a
second letter in early March that stated that because a
response had not been received, the FTB had computed their
income and taxes for them. Their income was estimated at
$120,000 with a huge tax bill.

After more discussion with the couple I learned that the
wife had purchased a home and taken out a mortgage for her
son. The son could not buy the home because he could not
qualify for a mortgage. The son was making the mortgage
payments, property tax payments, etc. directly.

The CA FTB was using Form 1098 mortgage interest data to
impute what I suppose was rental income for the couple. All
of this done in less than one year from the 2003 filing
deadline.

I had never seen something like this. Is this something new
for the FTB because the state is hard up for revenue or has
it been going on for some time?

P.S.
We filed a 2003 tax return in response to the second letter.

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