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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4477
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Franchise Tax Board applied my clien't tax refund from 2014

Customer Question

Franchise Tax Board applied my clien't tax refund from 2014 to his 1990 balance.
This was my first year dealing with the client, so when we called Franchise Tax Board, we found out that in 1990 he did not file tax returns, yet Franchise Tax Board received assessment tax from City of Vernon (California) for 107,000 dollars. So based on that assessed value they came up with 30K (including penalties and interest) and have been applying all of his returns since then to that year. Two questions: FTB is asking to file a return for 1990 (if I do that, should I do the return for IRS as well, or will that open up a new can of worms...).
Second question: what is the statue of Limitation? According to ftb agent it is 20 years from their last collection effort (but they just collected another $1k from 2014 return... , so the 20 year limitation never ran out?).
Client does not have too much information from 1990, but he is positibe that he did not even work 30K in that year... what is the best way to go here? Take the 107K and move on from there or take what my client is stating (however, he has no paperworks whatsoever, because he was under impression that he should keep his taxes/files for 10 years and he shredded all).
Submitted: 1 year ago.
Category: Finance
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

This is little tricky. If they are asking to file the 1990 return, quietly file it and settle it once and for all. No need to go to IRS as it never concerned a federal tax issue. In my best opinion, it is better to take 107k and move on. Not worth putting efforts to dig out papers dating as back as this.

I am sure this would help. I wish you good luck.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 1 year ago.
but what is the statue of limitation? Do they have the right to apply 2014 tax refund to 1990 balance?
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Friend,

From what I understand from your question, the year pertaining is 2014 which is anyway within the limitation period. Yes, they CAN refund to 1990 balance.

Again, as I say, it is any in interest of the Client as he never made even 30k in that year. So, take it peacefully and moving on is proper in my opinion.

I am sure this would help. I wish you good luck.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 1 year ago.
how can 1990 be in within limitation period... 20 year limitation would finish on 2010... yet they are still goin on... I am still going to move on with the suggestion, but my problem is that they already applied more than 5K from 2011, 2012, 2013 and 2014 refunds to 1990 and I want those money to be refunded or applied to the current balance that he has from 2007
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Friend,

Hello again.

From what I understand from your question, you do not have a demand for tax but a refund.

Anyways, so far a statute of limitation goes, it IS 20 years. However, it is important to know WHEN this period starts. SOL -- Statute of Limitation Period -- The time period begins to run on the assessment date, commonly called the statutory lien date (SLD). Collection stays suspend or extend the 20-year SOL.

Law provides that if a tax liability is not paid at the time that it becomes “due and payable;” a perfected and enforceable state tax lien is created for the amount of the tax liability. This point in time is called the assessment date or the SLD. If more than one liability is “due and payable” for a particular taxable year, the later date is used. For example, a taxpayer files a return with a balance due on April 15, 1999, and we later audit the year and issue a Notice of Proposed Assessment that becomes due and payable on April 15, 2001, the SLD is April 15, 2001.

Coming to the core point again, if you are / your client is NOT facing any major losses, he should accept the refund and move on.

I am sure this would help. I wish you good luck.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,