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Nonrefundable Child and Dependent Care (CDC) Expenses Credit

Purpose of Bulletin

To inform staff that beginning October 1, 2012, Fraud and Discovery Section (FADS) implemented the nonrefundable CDC pilot program.

Background

Beginning with the 2011 tax year, the CDC credit is a nonrefundable credit. After returns have been processed, FADS reviews accounts that have claimed the CDC credit to determine if it is correct. If it was not claimed correctly, FADS may adjust or disallow the credit.

For tax years 2011 and after, FADS will issue a Notice of Proposed Assessment (NPA) when they adjust or disallow a CDC claim.

New Process

Before an NPA is issued, FADS will do one or all of the following:

  • Send the Child and Dependent Care Expenses Credit Verification letter to request additional documentation. The taxpayer must respond within 60 days, or FADS will send an NPA.
  • Send a Request for Child and Dependent Care Provider Information letter directly to the care provider. If the care provider indicates they did not provide care as the taxpayer claimed, FADS will send an NPA to the taxpayer.

Additional Information

On September 28, 2012, FADS sent the Request for Child and Dependent Care Provider Information letters to over six hundred care providers to verify CDC claims.

All accounts will be worked by FADS and flagged with the REFUND VER status in TI and will include one or all of the following comments:

  • XXXXXXX 11TY NONREFUNDABLE CDC
  • 11TY FTB 733 SENT TO PROVIDER TO VERIFY CDC CLAIM
  • 11TY FTB 649 SENT TO TP TO VERIFY CDC CLAIM

Taxpayer Inquiries

Advise taxpayers to:

  • Call 916.845.7088 weekdays between 7 a.m. and 4 p.m., except state holidays.
  • Send a letter to: Franchise Tax Board, MS F141, P.O. Box 2952, Sacramento, CA 95812-2952
  • Fax documentation to 916.845.0716 (notarized letters must be mailed).