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TAX NEWS - FEBRuary 2010

California Tax: FTB Extends the Filing Season Notice Delay

With the growth of e-file and e-pay, more and more taxpayers are sending their balance due payment separate from their tax return. To prevent notices and payments from crossing in the mail or during tax processing, we delay many notices during tax filing season. These notices include Return Information Notices (RINs) related to e-file returns and Statements of Tax Due (STDs) related to both paper and e-file tax returns. However, for various reasons, some payments still are not processed before notices are mailed. In response to this problem, we extended the notice hold periods during 2009 as a pilot. The extension was an effort to reduce the number of notices that do not reflect timely payments and to reduce taxpayer calls to their representatives during the busy filing season. The chart below shows the changes.

Notice Hold Periods

Notice type            2008            2009

e-file STDs      1/01 - 5/3      1/01 - 5/29
paper STDs     3/21 - 5/3      3/20 - 5/29
e-file RINs       4/10 - 5/3      3/20 - 5/29

Note: STDs related to electronic returns are held earlier because it is expected that e-filers know they owe the balance due and intend to pay by April 15. RINs related to paper returns are not held as these taxpayers do not usually know about the balance due.

To minimize the impact to our call center, we spread the release of notices over three weeks once the delay period ended. Extending the notice delay and the subsequent delayed release caused up to 358,000 initial notices to be mailed later than if the notice delay had not been extended. The additional delay for individual taxpayers ranged from one day to three months. Many of these taxpayers received increased monthly late payment penalties, interest, or both. The average additional monthly penalty for those taxpayers was $11 and the average additional interest was $6. Extending the notice delay prevented approximately 18,500 incorrect notices.

Feedback regarding the extended delay was generally positive. With the reduction of incorrect notices and the positive feedback, we decided to extend the notice delay period permanently.
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