The deadline printed on that FTB letter controls everything that follows. Before you call the number on the notice, before you pull a single bank statement, and before you decide this’s something you can handle yourself, you need to know exactly what the notice is asking and how much time you actually have to respond.
California’s Franchise Tax Board operates under its own statutes, its own enforcement posture, and its own audit selection systems. It doesn’t defer to IRS outcomes. An audit resolved with the IRS can remain entirely open with the FTB, and the window the FTB gives you to respond at each stage isn’t generous. My work guiding California professionals through high-stakes regulatory proceedings has made one thing clear: procedural decisions made in the first two weeks of a state tax audit routinely determine what options remain available months later.
Identify What Type of FTB Notice You Have
Not every FTB letter is the same document, and the response each one requires is completely different. The three notices most taxpayers encounter carry distinct deadlines and trigger different parts of the administrative process.
- AUD 1515A (Information Document Request): A request for records related to specific items on your return. You have 30 days from the notice date to respond.
- Notice of Proposed Assessment (NPA): The FTB’s determination that additional tax is owed. You have 60 days from the NPA date to file a written protest before the assessment becomes final.
- Notice of Action (NOA): Issued after a protest. If you still disagree, you have 30 days to appeal to the California Office of Tax Appeals.
The FTB selects returns for audit using the Enterprise Data to Revenue Project, known as EDR2. It is an AI-driven system that pulls from DMV records, property tax data, employment records, and IRS reports to flag discrepancies. Knowing what likely triggered the notice shapes how the response should be framed. A residency audit looks nothing like a basis adjustment audit, and treating them as interchangeable is a common and costly mistake.
One rule that surprises many taxpayers: resolving a federal IRS audit doesn’t close the books with the FTB. Under California Revenue and Taxation Code Section 18622, you must independently report any federal audit adjustments to the FTB within six months. Miss that obligation, and the FTB’s statute of limitations stays open indefinitely.
Understand the Deadlines Before You Do Anything Else
FTB deadlines aren’t soft targets. Missing them forfeits rights that can’t be recovered. The 30-day window on an Information Document Request can be extended, but the extension request needs to go in by day 10, not day 29. An auditor who receives a last-minute request has less incentive to accommodate it and less flexibility to do so.
If you’ve received a Notice of Proposed Assessment, there’s a mechanism most taxpayers don’t know about. Filing Form FTB 3576 (the Pending Audit Tax Deposit Voucher) allows you to remit all or part of the proposed amount within 15 days of the NPA date and stop interest from accruing as of the notice date. This isn’t a concession. It’s a separate decision from whether you protest the assessment, and it can prevent interest from compounding through a protest that takes months to resolve.
For audits involving older returns, R&TC Section 19058 introduces a critical variable: if the FTB determines that more than 25% of your gross income was omitted from a return, the standard 4-year statute of limitations extends to 6 years. That’s not a theoretical risk for high-income earners with complex compensation structures. It’s a real one, and it’s a key reason early legal review matters when the FTB starts asking about years you thought were closed.
Control What You Produce & Protect the Audit’s Scope
One of the most consequential decisions in an FTB audit is deciding what not to send. Taxpayers are only obligated to produce records that are actually relevant to the items under audit. IDR language asking for “all business records” frequently exceeds the legal requirement, and producing everything in response to broad language is one of the most reliable ways to expand an audit that started narrow. When a taxpayer voluntarily hands over documents outside the stated audit scope, those documents can surface issues the auditor wasn’t originally examining. This is a documented pattern, not a theoretical risk.
If the FTB disagrees with a limitation on document production, it can issue a formal summons under R&TC Section 19504(b), enforceable in California Superior Court. That makes limiting production a deliberate legal choice that needs to be made with full awareness of the process, not a reflex.
Establish Representation Before the Audit Dialogue Begins
The single most effective step after receiving an FTB notice is filing Form FTB 3520-PIT, the California Power of Attorney form. Once that form is on file, all auditor communication routes through your representative. You don’t speak directly to the auditor. That matters because FTB auditors are trained to ask open-ended questions, and unguarded answers from taxpayers who think they’re being helpful routinely open new lines of inquiry the auditor wasn’t originally pursuing. With representation in place, you don’t need to be present at any stage of the audit. This includes IDR responses, auditor meetings, or protest proceedings.
There’s also a practical reason to choose a tax attorney over a CPA or enrolled agent for this step. Attorney-client privilege protects communications between you and your attorney. That protection doesn’t exist with a CPA or enrolled agent. If the audit develops in a direction that raises civil or criminal exposure, the distinction between privileged and non-privileged communications becomes significant very quickly.
What Happens If You Disagree with the Audit Outcome
An NPA isn’t a final bill. It’s a proposed assessment, and you have 60 days from the NPA date to file a written protest. A protest must identify the disputed issues, state your position on each, and include supporting documentation. A protest that simply says “I disagree” without analysis isn’t going to move the FTB.
If the protest results in a Notice of Action you still disagree with, you have 30 days to appeal to the California Office of Tax Appeals. OTA appeals are decided by a panel of three administrative law judges, and oral argument can be requested. This is a formal adjudicative proceeding, not a continuation of the audit conversation.
At any point during a protest or OTA appeal, the FTB Settlement Bureau offers a parallel path. Settlement resolves disputed liabilities based on litigation risk assessment. This is a different standard than an Offer in Compromise, which applies only to liabilities that aren’t in dispute but that the taxpayer genuinely can’t pay. Knowing which program fits your situation shapes the strategy from the start.
Marin County taxpayers, including those in Sausalito, face audit patterns that reflect the area’s economic profile. High-income earners with stock options, RSUs, and partnership income are disproportionately represented in FTB audit populations. Residents who have moved out of state but retained property or business connections in Marin County face aggressive FTB scrutiny of the departure date itself. These aren’t abstract audit categories. They’re the situations that come up repeatedly in this area.
Every stage of the FTB audit process has a window where the right decision preserves options and the wrong one forecloses them. From the initial IDR through protest and OTA appeal, procedural precision determines how much leverage you retain. If you’re holding an FTB notice and working through what to do next, Samuel C. Bellicini is available at (415) 298-7284 to walk through the situation with you.