Why did your client receive a filing enforcement notice? June 2018 Tax News
We use active licensing information from California occupational and professional licensing boards as an indicator that a taxpayer may be engaged in an income generating activity. In practice, we estimate the income of a taxpayer who holds a license by averaging the income from all other license holders from the same Licensing Board who filed a federal tax return with a California address.
When an occupational license (OL) case is created in our Integrated Nonfiler Compliance (INC) system, your client will either receive a Request for Tax Return or a Demand for Tax Return notice. If your client received a Notice of Proposed Assessment (NPA) within the last four years, they will receive a Demand for Tax Return notice. If not, they will receive a Request for Tax Return notice. Corporations always receive a Demand for Tax Return notice.
If a Request or Demand for Tax Return notice is mailed, your client has 30 days to respond. We evaluate all responses to determine if your client has a filing requirement.
- If we determine that your client does not have a filing requirement due to not deriving income from their licenses, there are procedures in place to contact your client less frequently because they have established why they do not file with California for the tax year in question. We will close the case and send a confirmation letter to inform your client no further action will be taken.
- If it is determined that your client has a filing requirement, then a determination letter will be mailed. Your client will have 30 days from the date on the letter to respond.
If your client does not respond to the Request or Demand for Tax Return notice within 30 days an NPA will be issued.
We understand not every individual with an active OL derives income from it. We continually look for ways to improve our practices in order to improve the quality of contacts with taxpayers.