CA Penalty Abatement - no reasonable cause

[BulldogTom]

I am looking for some way to get the Failure to File and Failure to Pay penalties abated for my client. This is the guy who has not filed in 20 years. The penalty is very steep for 2004, tax due is $108, penalties and interest push it up to $381. Client has filed the 4 years they asked for, and I think there will be more auto generated penalties as they work these returns through the system.

Client makes $12 per hour and gets 40 hrs per week. Does not have a lot of money to make the rent and car payments.

There really isn't a reasonable cause, but I was looking for something along the lines of effective administration of the tax laws to try and get some relief. Any suggestions?

CA taxpayer advocate is my last resort. I would prefer to try and work this out with FTB.

Thanks in Advance

Tom

Lodi, CA

[joelgilb]

Don't know about CA, but you could try blaming the accountant! Often works for Federal with no adverse issues to the accountant. I always use the Generic and just say "... that the taxpayer sought professional advice from a CPA and thought he was in full compliance and would not or did not owe any tax...". This works most of the time with IRS and is one of the reasonable cause exceptions. Warn your client that it may not work though.

When in doubt, blame the account(ant - rhymes better this way). Isn't that what our clients do anyway.

[BulldogTom]

I know that one (or a variation of it) normally works at the federal level, but CA uses the reliance on a professional example specifically as a cause that will not be granted abatement.

I also know that the IRS will sometimes allow the "I'm stupid and scared" excuse that goes something along the lines of, "Taxpayer was unable to file his 198X tax return due to a family situation and was so afraid of the enforcement powers of the IRS that he could not bring himself to correct the error. Upon retention of competent professional assistance, taxpayer has filed the originally delinquent return all subsequent returns. Please abate the penalty in the interest of effective administration of the tax laws of the United States."

That is the tack I would like to take, because it is fairly accurate in most cases, and in this one specifically. Unfortunately, I can find nothing in the CA Revenue and Taxation code that will support it.

Tom

Lodi, CA

[Bart]

I know that one (or a variation of it) normally works at the federal level, but CA uses the reliance on a professional example specifically as a cause that will not be granted abatement.

I also know that the IRS will sometimes allow the "I'm stupid and scared" excuse that goes something along the lines of, "Taxpayer was unable to file his 198X tax return due to a family situation and was so afraid of the enforcement powers of the IRS that he could not bring himself to correct the error. Upon retention of competent professional assistance, taxpayer has filed the originally delinquent return all subsequent returns. Please abate the penalty in the interest of effective administration of the tax laws of the United States."

That is the tack I would like to take, because it is fairly accurate in most cases, and in this one specifically. Unfortunately, I can find nothing in the CA Revenue and Taxation code that will support it.

Tom

Lodi, CA

Beg for forgivness and point out that the taxpayer is trying very hard to get current and will never be a bad taxpayer again.

[jainen]

>>The penalty is very steep for 2004, tax due is $108, penalties and interest push it up to $381<<

The penalties total $127. The rest is interest or collection fees that FTB won't waive. Maybe FTB will let the $127 go if your client pays the balance in full. Otherwise, it's 25 a month and move on to the next pro bono client.

[BulldogTom]

Not pro bono on this client. I have been paid up front for the tax returns. That is why he can't pay the penalties.

Tom

Lodi, Ca

[zeke]

wayta go Tom!!! my kinda guy. :lol:

[joelgilb]

I know that one (or a variation of it) normally works at the federal level, but CA uses the reliance on a professional example specifically as a cause that will not be granted abatement.

I also know that the IRS will sometimes allow the "I'm stupid and scared" excuse that goes something along the lines of, "Taxpayer was unable to file his 198X tax return due to a family situation and was so afraid of the enforcement powers of the IRS that he could not bring himself to correct the error. Upon retention of competent professional assistance, taxpayer has filed the originally delinquent return all subsequent returns. Please abate the penalty in the interest of effective administration of the tax laws of the United States."

That is the tack I would like to take, because it is fairly accurate in most cases, and in this one specifically. Unfortunately, I can find nothing in the CA Revenue and Taxation code that will support it.

Tom

Lodi, CA

Sorry Tom, since you are in CA I am sure you are right and know CA law better than I could possibly guess. Looks like he is stuck. And as Jainen said, the penalty amount is small. If he can't pay it all at once, you might have more "Billable" work in negotiating a payment plan though.

[MAMalody]

Tom, go ahead and use your "scared to death" reason. You might even use a newspaper case or two in CA as examples of why he was scared. Ultimately, CA just wants the tax. My experience in CA, although a few years ago, was FTB seemed to be more reasonable that the advocate was or the IRS for that matter. You won't win on the interest in any event. Get him on a payment agreement, if necessary, and he can probably have it paid off by years end and be done with it. Out of your hair and his at that point, for collection purposes. You should easily keep the client for getting his mess straightened out and everybody is home free.

[BulldogTom]

Tom, go ahead and use your "scared to death" reason. You might even use a newspaper case or two in CA as examples of why he was scared. Ultimately, CA just wants the tax. My experience in CA, although a few years ago, was FTB seemed to be more reasonable that the advocate was or the IRS for that matter. You won't win on the interest in any event. Get him on a payment agreement, if necessary, and he can probably have it paid off by years end and be done with it. Out of your hair and his at that point, for collection purposes. You should easily keep the client for getting his mess straightened out and everybody is home free.

I spoke to the FTB last night and tried the scared routine. Lady was very nice in telling me that it was most likely not a valid excuse, but a doctor's note usually works. "Send in your letter, but don't get your hopes up." However, she said the Advocate would be more willing to listen if there was a hardship involved and the letter to the advocate included a detailed financial position.

I think I will try both (same letter, two addresses) and see if I can get either one to bite.

Tom

Lodi, CA

[jainen]

>>the letter to the advocate included a detailed financial position.<<

Did you explain that you figured he would have to pay one way or the other, so you decided to bump your own fee and use that to justify the hardship claim?