Tax News July 2025

Tax News Flashes for Month of June

June 11, 2025 – Online Services Temporarily Unavailable

June 13, 2025 – Online Services Restored

New Legislative Services Bureau Director

FTB appointed Jennifer Barton as the new Director of the Legislative Services Bureau effective June 2, 2025. Jennifer started her public service career with FTB 15 years ago when she joined the Filing Division as a tax auditor in the Exempt Organization Unit. During her time, she worked in three of the seven Divisions at FTB, including Filing, Audit, and the Financial and Executive Services Divisions (FESD).

Within the Audit Division, Jennifer held many roles which include protest hearing officer, individual audit program supervisor, and section manager for the Federal State and Special Audit Section where she oversaw two large audit programs performing assessment and resolution workloads.

Jennifer’s most recent role was the assistant bureau director in the Financial Management Bureau in FESD. For the past three years, Jennifer managed all external budgetary functions. Prior to joining FTB, Jennifer also performed accounting and audit functions in the private industry.

Jennifer holds a Bachelor of Science in Business Administration with a concentration in Accounting from California State University, Sacramento. She continues to maintain her certified public accountant’s license since March 2009.

California Earned Income Tax Credit Outreach

As part of our commitment under Senate Bill 1409 (Stats. 2020, Ch. 114), FTB is now in its third year of our outreach initiative to increase awareness and participation in the California Earned Income Tax Credit (CalEITC) pursuant to Revenue and Taxation Code section 17052 and the federal Earned Income Tax Credit.

Beginning mid-July 2025, FTB will mail “nudge letters” to inform both, filer and non-filer populations who may be eligible for CalEITC for taxable year 2024. Taxpayers may be eligible for CalEITC for previous taxable years. The letters are intended to inform and prompt potentially eligible taxpayers to take the necessary actions to claim the tax credits. In addition to CalEITC, the letters will include information about the Young Child Tax Credit and the Foster Youth Tax Credit.

To claim CalEITC, potential eligible taxpayers who have not filed a tax return for taxable year 2024 must file a California personal income tax return and include a completed Form 3514, California Earned Income Tax Credit. Filers who filed a tax return for taxable year 2024 need to only file a completed Form 3514.

For more information, go to CalEITC.

Close a Business Entity

Small business owners frequently ask us about the process to close a business entity in California. For this reason, it’s always good practice to inform your small business clients about the proper way to close a California business entity.

Business entities doing business in California or registered with the California Secretary of State (SOS), can dissolve, surrender, or cancel when they cease operations in California and wish to terminate their legal existence.

Business Entity Classification

• Domestic corporations (those originally incorporated in California) may legally dissolve.
• Foreign corporations (those originally incorporated outside California) may legally surrender.
• Limited liability companies and partnerships (both domestic and foreign) may legally cancel.

Steps to Dissolve, Surrender, or Cancel a California Business Entity

To dissolve, surrender, or cancel a California business entity, the business owner must follow the requirements for both FTB and SOS:

FTB Requirements

• File all delinquent tax returns and pay all tax balances, including any penalties, fees, and interest.
• File the final/current year tax return. Check the applicable Final Return box on the first page of the return and write “final” at the top of the first page. All tax returns remain subject to audit until the statute of limitations expires.
• Must cease doing business in California after the final taxable year.

SOS Requirements

• File the appropriate dissolution, surrender, or cancellation form(s) with the SOS within 12 months of filing the final tax return.

If a business entity is suspended or forfeited, it will need to go through the revivor process and be in good standing before it is allowed to dissolve, surrender, or cancel. To revive a suspended or forfeited business entity, an entity must:

• File all delinquent tax returns.
• Pay all delinquent tax balances, including penalties, fees, and interest.
• File a revivor request form.

Get more information on how to revive a suspended or forfeited business entity.

Voluntary Dissolution/Cancellation

If certain qualifications are met, a business entity may be able to voluntarily dissolve. A qualified domestic corporation or qualified domestic limited liability company can request for voluntary administrative dissolution/cancellation. With a written request, a business must certify it:

• Is not actively engaging in any transaction for the purpose of financial or monetary gain or profit
• Has stopped doing business or never did business
• Does not have any remaining assets

Once the SOS formally dissolves or cancels a business, FTB may abate:

• Unpaid qualified taxes
• Interest
• Penalties

Get more information on voluntary administrative dissolution/cancellation.

Additional Steps

There are additional steps to take while closing a business entity. These steps include:

• Notify all creditors, vendors, suppliers, clients, and employees of intent to go out of business.
• Close out business checking account and credit cards.
• Cancel any licenses, permits, and fictitious business names.
• Consider publishing a statement the business has closed on social media accounts and/or in a local newspaper of general circulation near the principal place of business.

Additional Resources

• FTB Publication 1038, Guide to Dissolve, Surrender, or Cancel a California Business Entity
• FTB Publication 1123, Common Forms of Ownership
• Business Help go to “Close a business” section.
• Sell or Close Your Business in California California Office of the Small Business Advocate website
• How do I terminate (dissolve, surrender or cancel) my business entity? FAQs at SOS)

Request a Speaker

This is the time the Taxpayers’ Right’s Advocate’s Office schedules many of our speaking engagements in preparation for the filing season. Our speakers enjoy the opportunity to meet with the tax community in person to field questions, concerns, and issues faced in meeting your tax filing obligations. However, because we are a small team, the number of speaking engagements we can accept each year is limited. For this reason, we established criteria for accepting an engagement.

We are available to speak to groups of 25 or more at:

• Sponsored small business or tax seminars
• Chapter meetings for a non-profit group or organization
• Community groups
• Government-funded educational institutions learning about tax-related issues

Speakers typically present topics such as California tax updates, small business forms of ownership and filing requirements, and other topics impacting the taxpayer community as they come to our attention.

Complete the online Request a Speaker form or email us at EducationandOutreach@ftb.ca.gov.

The email should include:

• Name
• Phone number
• Organization
• Date and location for presentation
• Requested topic
• Number of attendees
• Materials/biography deadlines
• Special requirements

Internal Revenue Service Updates

We partnered with the IRS to provide monthly IRS articles to assist our tax professional and small business communities, and we are excited to share this information; however, questions about the content should be directed to the IRS.

National Taxpayer Advocate issues mid-year report to Congress

IR-2025-71, June 25, 2025 — National Taxpayer Advocate Erin M. Collins released her Fiscal Year 2026 Objectives Report to Congress, highlighting a largely successful 2025 filing season while raising concerns about persistent refund delays for victims of identity theft, delays in processing Employee Retention Credit claims, and critical challenges facing taxpayers and the IRS as the agency prepares for the 2026 filing season.

Long sworn in as the 51st IRS Commissioner

IR-2025-70, June 23, 2025 — Billy Long was sworn in as the 51st Commissioner of the IRS on June 16. Long was confirmed by the Senate on June 12.

IRS improves Pre-Filing Agreement tax certainty program for large business and international taxpayers

IR-2025-69, June 17, 2025 — The IRS announced improvements to its Pre-Filing Agreement (PFA) program to provide greater tax certainty for large business and international taxpayers.

Organizer and seller of micro-captive insurance program agrees to pay penalties for promoting micro-captive insurance companies

IR-2025-68, June 16, 2025 — The IRS announced a settlement with Bruce Molnar, cofounder and majority owner of Alta Holdings, LLC (Alta), U.S. Risk Associates Insurance Company Limited (U.S. Risk), and Newport Re, Inc. (Newport Re).

IRS provides additional transition relief for brokers who are required to file information returns and backup withhold on certain digital asset sales

IR-2025-67, June 12, 2025 — The U.S. Department of the Treasury and the IRS issued Notice 2025-33 extending and modifying the transition relief provided in Notice 2024-56 for brokers who are required to file Form 1099-DA to report certain digital asset sale and exchange transactions by customers.

IRS has options to help taxpayers who missed the filing deadline

IR-2025-66, June 9, 2025 — The IRS highlighted several resources to help taxpayers who missed the April 2025 federal income tax return filing deadline and owe taxes, interest and penalties.

Ask the Advocate
Expect notices to go out soon!

It’s that time of year again... I heard a collective sigh of relief from the tax practitioner community as the April 15, filing deadline ended. Now, the Franchise Tax Board (FTB) ramps up the mailing of notices. As trusted tax professionals, I understand the important role you play to help your clients stay informed.

Once FTB processes incoming tax returns and payments, notices will begin on some tax returns. Given the time-sensitive nature, following the instructions identified on the notice is the most efficient way to quickly resolve any issues. It is also the first step in the resolution process.

Top 3 Notices FTB Receives Calls About:

1. FTB 4601, Demand for Tax Return - Issued when FTB has no record of a filed tax return. If your client does not file by the due date shown (or explain why they do not have a filing requirement), FTB may issue a proposed assessment based on estimated income from third-party sources.
2. FTB 4963, Notice of State Income Tax Due - Reflects the current balance due including tax, penalties, and interest that result from a filed or adjusted tax return.
3. FTB 5818, Notice of Tax Return Change - Sent when FTB adjusts a filed tax return due to identified discrepancies, data mismatches, or missing information

Best Way to Resolve - Save Time, Go Online!

FTB continues to launch online self-service options to improve efficiency and save time. You can also review Notices and Letters by form number or name to determine course of action and how best to respond. Some notices and letters allow you to respond by electronic upload through a special web address (URL) identified on the notice, or through your client’s MyFTB account.

Another time-saving feature is MyFTB’s Secure Message service. When you send a secure message, you can indicate if you are responding to a prior notice, correspondence, or online application.

Follow the steps below:

1. Select the client from your Client List.
2. Select “Send Message to FTB” from the Communication tab to launch the Secure Message service. You can do this with either full or limited account access.
3. Answer “Yes” to the question: Is your message in response to a prior communication or application?
1. This will list recent notices, correspondence, and online applications FTB has for your client.
4. To respond, select the box next to the relevant notice.
1. If the notice is not listed, change your answer to “No” and provide information about the notice (for example, the unique DLN at the top of the notice).
5. Type a brief message and attach the requested documents, if applicable.

When you follow the steps above to submit your Secure Message, MyFTB will automatically keep the documents together to ensure accurate processing.

To stay informed about your client’s notices, I encourage tax professionals to:

• Register for a MyFTB account and request full online access.
• Include an email address on POA declarations to be notified when a new client notice is available.
• Review notices carefully and access MyFTB to confirm account activity.
• Promptly communicate with clients to explain the notice and any required action.
• Respond to FTB, within the specified time frame, to preserve protest or appeal rights and prevent adverse collection activity.
• Remind clients to keep their contact information and address updated with FTB.

If you are unable to resolve your client’s notice through the many online self-service options, please call the number provided on the notice. Calling the number on the notice will direct you to the appropriate FTB business area. Wait times can help you manage the best time to call.

Resolution Process for Los Angeles County Wildfire Clients

As you may be well aware, Los Angeles County taxpayers generally qualify for a postponement to file and pay taxes until October 15, 2025.

If your client’s tax return was not properly marked to alert FTB your client qualified for the postponement and receive an erroneous notice or has questions about disaster relief, contact FTB by:

• Email: FTBLACountyDisasterRelief@ftb.ca.gov
• Phone: 888-825-9868
• Online: MyFTB

Advocate Assistance

It is important to use FTB’s normal channels during the resolution process. Bypassing FTB’s normal channels may slow down the process. The Taxpayers’ Rights Advocate’s Office is often able to redirect your request to the appropriate FTB business area, however, we may be unable to accept your client's case for resolution, unless it meets Taxpayer Advocate criteria. Therefore, it is more efficient to follow the applicable resolution steps indicated above.

I hope you find this information useful. Please take a moment to provide your feedback to the FTB Notices Survey.
Your feedback is invaluable to improve FTB products and services. As always, I appreciate your continued commitment to help taxpayers understand their tax obligations.