California Appeals Office Affirms FTB’s Accuracy-Related Penalty for Substantial Understatement of Individual Income Tax

The California Office of Tax Appeals (OTA) April 29 sustained the Franchise Tax Board’s (FTB) accuracy-related penalty for a substantial understatement of individual income tax. Taxpayers filed an amended California return and self-assessed a deficiency in their California income tax that was attributable to the unreported income determined by the Internal Revenue Service (IRS). The FTB found Taxpayers didn’t self-assess an accuracy-related penalty and issued notices. Taxpayers protested, arguing that they voluntarily amended their return to report the federal change prior to being contacted by the FTB and the penalty was excessive. The OTA noted: 1) Taxpayer’s amended return wasn’t ...