Like any tax organization, the CA FTB has a very specific and clear line of ideas about what they expect to see from every taxable account. Therefore, when dealing with such a large variety and style of accounts, the CA FTB put out a wide range of different red flags that they look out for. If you are even committing a few of these, then you can expect a call – usually not a friendly one – from the FTB.
This is usually when you should get in touch with a local accountant who can get involved. A CPA can be the difference in managing your account safely, or finding yourself in major trouble.
So, what should you do then?
First off, you have to be aware of what may have caused these red flag warnings in the first place. We recommend that you consider any of the following as a potential reason;
* A failure to report all of your income. The authorities will receive access to all of your 1099s and W2s that you receive. Therefore, they can match all of your reportable items to the return that shows up here. If there is a mismatch, then the CA FTB will be in touch shortly to find out why. To avoid this problem, work with an accountant to make sure that every penny of your income has been reported.
* A common problem is also making too much money. That might sound a little strange, but it tends to be a pretty major consideration for the authorities. They will look at anyone with an income over $200,000. Anyone with an income over $5m will also see a greater chance of being audited, with it continuing to increase the more that you make.
* The reason being that the more you make, the more complex your tax returns wind up being. Therefore, you should be careful, when you are earning well, about how you report your income. They will take a keen interest the better you are doing.
* One that might not apply to all, but definitely applies to some, is having a foreign bank account. The CA FTB will be happy to take a look at anyone who may be working offshore and earning in that capacity. If you are in a tax haven like, say, Gibraltar then you can definitely expect some form of discussion about what your purposes are for this.
* If you do have a foreign bank account then you should definitely tell the CA FTB; they will be annoyed, but give reduced penalties for honesty. Don’t leave it until they find it as you can make yourself a top target as they really push quite heavily on foreign accounts.
With all of this in mind, you should make sure that you take care of all of your financial affairs with the help of a professional accountant. They can help you see any discrepancies before you file, making sure that you haven’t missed any vitals that could cause red flags.
