Disaster! Had $7,000 refund due from CA, but they penalized me 95%! I got a check today for $300 instead. I filed my CA 2012 tax return late on 4/15/14. I had filed an extension on 4/15/2013. I had received a letter from CA Franchise tax board and even spoke to them on the phone somewhere around 1/15/14. I told them I'd be filing soon, as I was still gathering the data, but a refund would be due. How can this be? I've filed late previously when large refunds were due, and never had a penalty.
Tax Professional Answers
When it comes to the California FTB, the rule is, even when you have a refund coming, the FTB penalizes you on the tax liability, not the balance due.
It doesn't matter how many times you call them to tell them that, sooner or later you're going to get around to filing.
See page 15 of the Form 540 instructions - www.ftb.ca.gov/forms/2013/13_540ins.pdf
Late Filing of Tax Return. If you do not file your tax return by
October 15, 2014, you will incur a late filing penalty plus interest from the
original due date of the tax return. The maximum total penalty is 25% of the
tax not paid if the tax return is filed after October 15, 2014. The minimum
penalty for filing a tax return more than 60 days late is $135 or 100% of the
balance due, whichever is less.
The only way to avoid this hit is - FILE THE TAX RETURN ON TIME, including extensions.
If you're still missing information, include a statement to that effect and tell them what numbers you're estimating.
Then, once you have the numbers, file an amended return and correct your estimates.
You mention that you've done this before and not been hit with penalties?
Count yourself lucky.
You have now established a pattern of filing late - so you'll have a hard time getting them to waive these penalties. You can try. There's no harm in asking.
But I doubt you will succeed.
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