What to Do When Your Company Has Been Under Federal Audit
If the IRS has completed an examination of your corporate tax return and issued a revenue agent report (RAR), the corporation is required to notify us within 6 months of each final federal determination. You must report all changes or corrections to gross income or deductions, even if the changes or corrections do not result in an increase in tax payable to the Franchise Tax Board (FTB) for any income year.
Who must notify us
The requirement to notify FTB applies to:
- Any corporation that generates income from sources within California and is required to file a California corporate tax return, whether headquartered inside or outside of California.
- Partnerships with corporate partners and limited liability companies (LLCs) treated as a corporate entity.
For partnerships and LLCs treated as a partnership with individual partners who are required to file a California personal income tax return, see What to do when the IRS has examined and changed your federal tax return.
How to notify us
You can notify us of your corporation’s final federal determination (FFD) by either:
- Filing Form 100X, Amended Corporation Franchise or Income Tax Return
- Sending a letter of notification with a copy of the FFD and all underlying data and schedules that explain or support the federal adjustments.
Fax the information to 916.843.2269 or mail to:
Corporation RAR MS F310
Franchise Tax Board
PO BOX 942857
Sacramento CA 94257-0501
Be aware that most penalties assessed by the IRS also apply under California law.
For more information, contact us at 800.852.5711 or see FTB Publication 1008, Federal Tax Adjustments and Your Notification Responsibilities to California.
If your corporation is currently under examination by FTB
Provide a copy of the federal RAR to the FTB auditor who is assigned to audit your corporation. We will work with you to process the federal RAR.
When federal changes result in an increased California tax liability
If the federal changes increase your California tax liability, the corporation must notify us within 6 months of the FFD.
- If we are notified within 6 months of the FFD, we may issue an assessment within 2 years from the date of the FFD or the normal statute of limitations, whichever is later.
- If we are notified after 6 months from the date of the FFD, we have up to 4 years from the date we are notified to issue an assessment.
- If we are not notified, the statute of limitations is open, and we have an indefinite period of time to issue an assessment.
When federal changes result in a decreased California tax liability
If the federal changes result in a California tax refund, you must file a claim for refund within 2 years of the FFD.