What do I do when I get a CA Demand for Taxes notice?

What is a CA Demand for Taxes?

This is a notice that the CA Franchise Tax Board sends when they believe that an individual/business may be living/operating in the state of CA but did not file a CA tax.  CA Franchise Tax Board (FTB) is seeking the missing returns or verification that these individuals have no tax filing requirements.

Why did I receive a CA Demand for Taxes?

The reason why you may receive CA Demand for Taxes can vary.  From our experience, the most likely reason you may get this notice is when you use your VPM mailbox to file your 1040 federal taxes with the IRS.

Owning a mailbox address or receiving mail in the State of CA is not enough of a reason to pay state taxes. If you haven't set foot in the state of CA for over 6 months (Safe Harbor Rule) or do not generate any income in the State of CA, then you can safely assume that you do not have to pay any CA State tax.  Of course, it's important that you consult with your CPA or tax advisor to obtain accurate answers.

What should I do if I receive one?

Once you receive this letter, normally you have 30 days to file a CA state tax return or prove that you do not qualify for CA State taxes. If you do not respond to this letter, CA will assume that you do owe taxes and will calculate your taxes based on your IRS federal tax return.

Am I required to respond to the letter?

YES! Should you ever receive this letter, do not ignore it.  You must respond to it or the State of CA will simply file your taxes based on your Federal Tax info.

For additional information about this form, once you receive it, you can plug in your information on the CA FTB website and even get an extension if you notify them soon enough. 

If you need to respond to the letter ASAP, you can always have these items scanned so you can print out the PDF and fill it out. Once you fill it out, you can email us the forms and we can mail it on your behalf. 

Another alternative is to create an account online on the California FTB website and then respond to the letter online.

How can I prevent myself from getting this notice?

So far, the best way we know in preventing yourself from getting a Demand for Tax notice from State of CA is to not file your IRS 1040 taxes using your VPM mailbox address.  Instead, use an address that's in your original state, use your CPA's address, or use your business registered agent address.  Most registered agents will accept mailings and forward those mail to you.