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FTB interest on amended return

February 13, 2017 • Robert Warnick • Log In to Post Comments

Taxpayer filed 2014 F540 which reflected $186,000 overpayment which was applied to 2015.  Taxpayer subsequently filed an amended 2014 F540X showing an additional $84,000 tax liability, which the taxpayer requested the $186,000 overpayment to be reduced by the $84,000, and he only applied $102,000 to 2015.  The FTB has assessed interest on the underpayment of $84,000.  Is that correct even though the FTB merely reduced the overpayment applied to 2015 by the additional tax liability?



You may want to call the FTB to find out exactly why they are charging the penalties.  Even though your client ended up with a large overpayment in 2014, they may have still have underpayment penalties if any of their estimates were underpaid during the year for any quarter.  If that's the case, then any additional tax liability would also increase the estimated tax penalties.

The interest is because of a late payment, not an underpayment. So, it could be that becasue the taxpayer elected to have the overpayment applied to the next year, it is the same as if the refund were paid and the amount applied to estimated tax was paid by the taxpayer. It also could be a timing issue and it could be that the liability was taken out of the 2015 refund? In any event, I agree, a call to the practitioner hotline should get you some information.


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