FTB Notice of Proposed Assessment

What Is a Notice of Proposed Assessment?

A Notice of Proposed Assessment (NPA) is the FTB's formal notification that it intends to assess additional California income tax. The NPA states the amount of additional tax proposed, the reason for the adjustment, and your rights to protest. An NPA is not a final assessment — you have the right to protest it within 60 days. If you do not respond within 60 days, the NPA becomes a final assessment and the FTB can begin collection action.

Receiving an NPA does not mean you owe the money. It means the FTB has made a proposed adjustment based on its analysis of your return, and you have the opportunity to agree, disagree, or provide additional information. KDA reviews every NPA to determine whether the FTB's position is correct, partially correct, or entirely wrong — and responds accordingly.

Common Causes of FTB NPAs

Federal audit adjustments: The IRS notifies the FTB of all federal audit changes. The FTB then issues an NPA for the California tax on those adjustments. This is the most common cause of FTB NPAs for KDA's clients.

Information return matching: The FTB matches income reported on 1099s, W-2s, and K-1s against your California return. Discrepancies generate automatic NPAs.

Residency adjustments: The FTB determines you were a California resident and issues an NPA for California tax on income you reported as a nonresident.

Conformity adjustments: You applied a federal tax provision that California does not conform to — such as bonus depreciation or the OBBBA's No Tax on Tips provision — on your California return.

Critical Deadlines

The 60-day protest deadline is the most critical deadline in the FTB process. Missing it means the NPA becomes final and you lose your right to protest. The 60 days runs from the date of the NPA — not the date you receive it. KDA recommends treating the NPA date as the start of the clock and responding well before the 60-day deadline. If you need more time, the FTB will grant a 30-day extension if requested before the original deadline expires.

How to Respond to an NPA

You have three options when you receive an NPA: (1) Agree and pay — if the FTB's adjustment is correct, paying promptly stops further interest accrual. (2) Agree in part — if some adjustments are correct and others are not, you can pay the undisputed portion and protest the rest. (3) Protest — if you disagree with the entire NPA, file a written protest within 60 days. KDA evaluates every NPA against the underlying facts and California law to determine the correct response.

Filing a Formal Protest

A formal protest must be in writing and must: (1) identify the NPA by date and assessment number, (2) state the specific items you disagree with, (3) explain the reasons for your disagreement with legal authority where applicable, and (4) include supporting documentation. The FTB assigns the protest to a protest hearing officer who reviews the case independently. KDA prepares detailed, well-documented protests that address each FTB adjustment with specific legal authority and factual evidence.

After the Protest: OTA and Beyond

If the FTB denies your protest in whole or in part, you receive a Notice of Action. You then have 30 days to appeal to the Office of Tax Appeals (OTA). The OTA conducts a formal hearing and issues a written decision. If you disagree with the OTA decision, you can appeal to California Superior Court — but this requires paying the disputed tax first and then suing for a refund. KDA represents clients at every level of the FTB process and has successfully reversed FTB NPAs at the protest, OTA, and court levels.