In California, the state income tax obligation is administered by the California Franchise Tax Board (FTB). Essentially, the California FTB is the state-based counterpart to the IRS. While the IRS handles your federal income tax and other tax obligations, the California FTB handles similar responsibilities at the state level. The failure to satisfy either state or federal tax obligations can result in selection for an audit, fines, penalties, and even criminal tax prosecution. Furthermore, when one agency detects a problem or impropriety, it is not uncommon for it to inform its sister agency. Thus, taxpayers who have made mistakes or failed to file often face enforcement by both the IRS and FTB.
Unfortunately for individuals who have made tax errors, the likelihood of detection of tax mistakes by the California FTB has increased dramatically. Part of the reason behind the increased risk of detection faced by those who have failed to file taxes misstated income or expenses or mischaracterized income is recent technological upgrades at the FTB. The implementation of new systems and technologies means that the FTB can not only capture and collect more data but it can also process this information to identify individuals who have failed to satisfy all of their tax obligations. If you have tax concerns and wish to speak with an attorney, contact a California tax attorney of the NewPoint Law Group, LLP.
FTB Works with Tech Leaders to Develop a New System to Process Taxes
The California Franchise Tax Board worked with an array of vendors to update its tax systems and provide greater data accessibility. According to a recent article published on GCN.com, FTB worked with leading tech companies including IBM and Oracle.
IBM provided the FTB with a solution known as Initiate. The program allows the FTB to better organize data so that its agents are presented with a comprehensive look at a taxpayer rather than isolated data points. Previously, taxpayer data was scattered across multiple agency systems. In some cases, certain taxpayer data was simply unavailable. While this new approach may prove to be a benefit for taxpayer’s facing legitimately extenuating circumstances, it may also result in other taxpayer’s mistakes and improprieties being detected more readily. For example, a more comprehensive picture of a taxpayer’s finances may assist an agent from the FTB is detecting mischaracterized income, unreported income, and other tax mistakes.
Additional new systems implementations also include Pega’s BPM tool and Oracle’s security stack software. Pega’s BPM tool allows the FTB to better organize and respond to taxpayer correspondence and other communications. The software provided by Oracle will help protect confidential taxpayer data. Additional software provided by IBM is also equipped with fraud models to assist the agency in detecting likely instances of fraud.
What Are the Potential Impacts of FTB’s New Tax Systems?
According to one representative who spoke on behalf of the FTB, implementing the new systems helped the FTB bring at least 350 new tax rules into effect. The implementation of these new tax rules coupled with the new systems allowed the agencies to increase revenue because they were able to detect errors in tax return filings that had been missed in previous years.
However, the effects of the new systems will not only be felt through increased tax error detection rates. The new systems are also already increasing the FTB’s ability to collect on tax judgments. Cathy Cleek, the CIO for California FTB, stated that the improved agency systems allowed the FTB to gather taxpayer data from other government agencies. This generally means that the agency has been able to locate taxpayers who owe back taxes, penalties, and interest that it has been unable to contact in years past.
Contact a Sacramento Tax Attorney if You Have Tax Concerns in California
If you suspect that past tax filings may have misstated income, expenses or other aspects or your finances, the risk of detection by the California FTB has never been higher. However, generally speaking, taxpayers who come forward and voluntarily fix their tax errors are typically able to mitigate the penalties and consequences they face. Failure to take timely action may result in an audit or, where signs of willfulness are present, a criminal tax prosecution.
The Sacramento tax lawyers at NewPoint Law Group, LLP can help you address tax concerns before they grow into major tax problems or tax litigation. To schedule a confidential consultation minutes from Sacramento at our Folsom or Roseville tax law offices, please call 800-358-0305 today or contact us online.