CA help: Joan or Sandy, anyone in CA

[DTS]

I was going to call the FTB hotline tomorrow, but thought I would check with you both first, as you gals deal with the state so much. Anyone else who’s dealt successfully with this can jump in, as well.

A client of mine passed in ’08. In late 2009, CA put a lien on the estate for unpaid taxes going back to ’04 through ’07 (returns were not filed for those years at the time) amounting to almost $20K. The lien was filed under her SS. When the estate sold off some property in 2010, the lien was paid, but paid under the EIN of the estate. The eventual debt was just a fraction of the amount the state requested and was paid.

What is the best course to take to show the payment and recover this refund? Do I show this on the 541 we’ll file for 2010, show this payment and make a note the estate paid her personal state lien for the years in question or amend her last 540 filed for ’08 and show the payment on it?

Thanks so much!

[S T]

Franchise Tax board

So if I am understanding the scenario, somehow, FTB found out the EIN# of the Estate/Trust and entered a Lien, Levy, notice, etc. for multiple years on the decedent's past due personal tax returns?
As assessed according to FTB records or income (which we know is not accurate) was paid in either 2009 or 2010 through estate/trust monies?

And know that the delinquent decedents personal 540 returns are being completed and filed, the tax liability is less than what FTB assessed and was paid for?

I would also guess that in the FTB assessment, there were a lot of penalties and interest for each of the tax years delinquent?

Do you have copies of the lien assessment or other notices broken down by year of each 540 due which would include the tax that FTB is assessing, along with the associated penalties and interest? This could be important as the penalties and interest FTB assessed are on the amount of the tax FTB calculated, and if the tax is less, then the penalties and interest should also be reduced - my experience is you have to request FTB to revisit and re-calculate, and usually to the taxpayer advantage to "map it out"

Associated issue is that FTB received the monies from the EIN# of Trust, so I am not sure how to deal with that on the delinquent personal return filings under the decedent's SSN#, and where to report the payment and how much to report on each of the delinquent tax decedent's returns.

I think you are going to have a very long explanation, by year, to present in writing.

Maybe Joan or someone else , will chime in and have a method for this.

Sandy

[DTS]

Hi Sandy

Some answers to your questions are below:

So if I am understanding the scenario, somehow, FTB found out the EIN# of the Estate/Trust and entered a Lien, Levy, notice, etc. for multiple years on the decedent's past due personal tax returns? No, they assessed under the SS# of the t/p for each year.
As assessed according to FTB records or income (which we know is not accurate) was paid in either 2009 or 2010 through estate/trust monies? Correct, and under the trust EIN.

And now that the delinquent decedents personal 540 returns are being completed and filed, the tax liability is less than what FTB assessed and was paid for? Correct, way less.

I would also guess that in the FTB assessment, there were a lot of penalties and interest for each of the tax years delinquent? Correct.

Do you have copies of the lien assessment or other notices broken down by year of each 540 due which would include the tax that FTB is assessing, along with the associated penalties and interest? No, but I can easily get them. What I have is a paper showing the total dollar amount that was sent to the escrow officer when the property was sold. This could be important as the penalties and interest FTB assessed are on the amount of the tax FTB calculated, and if the tax is less, then the penalties and interest should also be reduced - my experience is you have to request FTB to revisit and re-calculate, and usually to the taxpayer advantage to "map it out" I can do that. There will be some late file, underpayment penalties on a couple years, where there was a balance due, but nowhere close to what the state assessed. Half the years that were prepared had no balance due.

Associated issue is that FTB received the monies from the EIN# of Trust, so I am not sure how to deal with that on the delinquent personal return filings under the decedent's SSN#, and where to report the payment and how much to report on each of the delinquent tax decedent's returns. I'm not sure how to handle either, but like you suggested below, maybe it should be in writing a letter addressing each year.

I think you are going to have a very long explanation, by year, to present in writing.

Sandy, thanks for your input.