New Law Provides One-Time Penalty Abatement for California Taxpayers

 Posted on September 07, 2022 in Taxation Law

While nearly everyone is required to pay taxes and file annual tax returns, there are a variety of reasons why some people may fail to do so. In many cases, these issues occur because of financial difficulties, and unfortunately, these difficulties may be compounded by the penalties that will apply for failure to file tax returns or failure to pay taxes. Fortunately, penalty abatement programs are available in certain situations. The IRS offers first-time penalty abatement for some federal income tax penalties, and the state of California recently passed a law that will provide similar abatement options for taxpayers who are facing penalties related to state income taxes.

One-Time Penalty Abatement Options Under AB 194

Assembly Bill 194, which was signed into law by Governor Gavin Newsom on June 30, 2022, gives the California Franchise Tax Board (FTB) the authority to grant abatement to taxpayers facing timeliness penalties. These include failure-to-file penalties that apply when a taxpayer does not file a state income tax return by the annual deadline and failure-to-pay penalties that apply when taxes that are owed are not paid when required.

Under the new law, taxpayers can receive a once-in-a-lifetime abatement of these penalties for tax years beginning on or after January 1, 2022. This form of abatement is only available for individuals who are required to pay personal income taxes, and business entities will not be eligible for one-time abatement.

To qualify for one-time abatement, a person must not have previously been granted abatement under this law, or they must not have previously been required to file a California state income tax return. A taxpayer must also be compliant with all tax filing requirements, meaning that all tax returns or other tax documents must have been filed properly. They must also have paid or made arrangements to pay taxes that are owed, as well as any applicable interest, fees, or penalties other than the penalties they are seeking relief from. If an abatement request is approved, the taxpayer will no longer be required to pay the applicable failure-to-file or failure-to-pay penalty. When making a one-time abatement request, a taxpayer may choose to forego any reviews that will address whether they had reasonable cause for their failure to file a tax return or failure to pay taxes owed.

The FTB is currently working to establish a process for requesting one-time penalty abatement. Since one-time abatement will apply to taxes and tax returns for the 2022 tax year or later, taxpayers can avoid the need for abatement by ensuring that they meet all their requirements regarding California state income taxes.

Contact Our San Jose, CA State Income Tax Penalty Abatement Lawyer

If you are facing tax penalties in California, contact our experienced San Jose tax law attorney to discuss your situation and find out if you qualify for a one-time penalty abatement. We can help you understand the process for requesting abatement, and we will ensure that your request is completed properly. We can advise you of your options for abatement of both state and federal tax penalties. Call us today at 408-866-1810 to arrange a consultation.

Sources:

https://www.ftb.ca.gov/about-ftb/newsroom/tax-news/index.html#article7

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB194