Michael Gray, CPA’s Option Alert #54

***Special Alert***

An irregular alert for issues relating to employee stock options

May 15, 2008
© 2008 by Michael Gray, CPA
ISSN 1931-2768

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Erroneous Franchise Tax Board Notices are being issued.

Yesterday, two of my clients contacted me about notices they received from the California Franchise Tax Board for their 2007 income tax returns.

The notices indicated charges for penalties plus interest for late payments of income taxes received after the due date of the 2007 income tax return.

Both of the clients had e-filed their California income tax returns and sent their tax payments certified mail before April 15.

Evidently, the Franchise Tax Board erroneously recorded the payments according to when they were received and not when they were mailed.

Under the “timely mailed as timely filed rule”, payments mailed by the due date are considered to be made on time, and not subject to late payment penalties.

These two notices could be an indication that there will be a widespread problem this year of erroneous notices from the Franchise Tax Board. Taxpayers should not assume notices they receive are correct.

If the payment was sent certified mail, the taxpayer can prove timely payment with the certified mail receipt and a copy of the cleared check. If the payment was sent with a stamp as postage, the taxpayer should ask the Franchise Tax Board to determine the postmark date on the envelope they received. (They record that information when they receive mail from a taxpayer.)

The Franchise Tax Board should then cancel the charges. If a taxpayer needs more assistance, he or she should consult with a qualified tax advisor.

Michael Gray regrets he can no longer answer emails personally. He will answer selected questions in this newsletter.

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Consult with a tax advisor

For our readers who aren’t tax advisors, this newsletter is intended to alert you about tax issues that could affect you. It is not a substitute for advice from a professional tax advisor. You will find that getting advice from a qualified advisor is a worthwhile investment.

Tax advisors should view the newsletter as an alert to become aware of issues relating to employee stock options for further research and study.

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(Michael Gray is the author of Secrets of Tax Planning For Employee Stock Options, Stock Grants and ESOPs.)

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