Summary: I have caught the Franchise Tax Board, California’s Income Tax Collection Agency, utilizing an assortment of unlawful practices to scam extra tax money out of people (Section 1). I have been trying to put a stop to this government corruption (section 2). If you’d like to help me, I have suggestions at the bottom (section 3).
Both former Governor Brown and current Governor Newsom are actively protecting these schemes, as are State Controller Betty Yee and an assortment of other legislators.
Here is a video of me giving an 8-minute speech to legislators in December 2018, asking them to end some of these schemes. Since I was limited to only eight minutes, I couldn’t address all of the schemes that I’ve found. In the video, I flat out accused them of racketeering, along with other assorted violations. Even though they had more time to speak, the FTB only gave a 2-minute response. Susan Maples only responded to two of the eight items that I brought up, and Jozel Brunett gave a blanket statement that FTB is not doing anything unlawful.
The FTB’s written response to my speech is here: https://www.ftb.ca.gov/about-ftb/meetings/taxpayer-bill-of-rights/2018_Grab_Response.pdf. This response is full of legal improprieties – so much so that the Taxpayer Advocate refused to sign it when I pointed out that her signature was missing.
I will make another speech at the next Annual Taxpayer Bill of Rights Meeting on December 3, 2019 to address the unlawful issues in their response.
I – The Assorted Unlawful Practices
- More information on the withholding policies described in Points 1 and 2 of the video:
Whenever you derive taxable money from a source that does not pay income taxes on your behalf, you have to send in estimated tax payments at the end of the quarter in which you were paid. If you don’t pay these estimated taxes, you get hit with hefty late fees, penalties and interest.
In the schemes above, the taxpayer sends in the estimated tax payments on time. The FTB accepts the money, but they do not apply the money to the taxpayer’s account. Instead, they hold it in suspense — meaning they put it in a general fund. which is the federal crime of embezzlement per federal code 18 U.S. Code § 654. They don’t take the money out of the general fund and apply it to your account until you file your tax return.
If a taxpayer files their return late, the FTB sends notices saying they have received no estimated tax payments; therefore, you need to send them $X (amount of taxes they believe are owed on this taxable money) + late fees, penalties and interest.
When you do file your taxes, you can claim the extra payments sent in as an overpayment and get a refund when you file a return. But you are still on the hook for the late fees, penalties and interest (see #3 under The Assorted Unlawful Practices for more info).
In my case, they withheld my credit elects (a refund from one year that you choose to apply as an estimated tax payment for the next year instead of getting the cash back). In my Appeal, the lawyers for the Franchise Tax Board never denied that the credit elect withholding practice is unlawful. Here is the 35 minute video of the Oral Arguments and here is the written transcript.
2. Misapplication of Estimated Tax Payments
Three of my estimated tax payments were applied to “miscellaneous bills” that never existed on previous years, then refunded several months after I made the payment. Even though it was the FTB’s “mistake,” I was still on the hook for the late fees, penalties and interest for “underpaying” – after all the money had been refunded, so the current year was underpaid. My fight with the FTB began in 2011, after I refused to pay the late fees, penalties and interest for their “mistake.”
One of the “misapplied” payments was broken up and applied to several different years. Because of some strange accounting, it took seven years for the FTB to fully identify where that payment went. With the other two payments, where the “mistake” was more obvious, I re-paid the money and insisted that they back date the re-payments to match the dates the original payments were received. One of the payments wasn’t applied to my account. I was aggressively harassed for “underpaying” – to the point where they filed a wage garnishment — despite the fact that I’d repeatedly sent them proof that I had paid in thousands of dollars that had not been credited to my account.
When I filed an appeal with the Office of Tax Appeals (the administrative court that handles state tax appeals), the FTB submitted their accounting records. The ledgers for the years the payments had been “mistakenly” applied to were inaccurate (this is why the one payment was so hard to locate), as were the records involving the payment that was never re-applied. I requested information about why the ledgers are inaccurate in November 2018, and as of yet, have gotten no explanation from the FTB regarding the accounting improprieties.
3. Improperly Issuing Demand Notices
Per R&TC 19087 and 19133, Demand Notices are only sent out to taxpayers who filed late AND that the FTB believes did not pay their full tax liability for the year based on the metric of single filing zero.
Once a Demand Notice is issued, the taxpayer is on the hook for the crippling 25% of the total tax liability + interest, even if it turned out that they had indeed paid the full liability timely.
So… Taxpayer pays timely. The FTB unlawfully withholds or misapplies estimated tax payments. FTB forces the taxpayer to send in payments of tax monies that would not be due had the payment been applied in accordance with the law is is the federal crime of racketeering per the federal Racketeer Influenced and Corruption Organizations Act (RICO), (18 U.S.C.A. § 1961 et seq. [1970]).
The FTB also issues the Demand Penalty that would not have been imposed had the payment been applied timely and lawfully. The FTB is collecting 25% extra income taxes + interest. This false imposition of penalties is a second count of racketeering: per R&TC 19087, penalties can only be imposed on accounts that were not paid in full by the due date. By withholding the payments, the taxpayer’s account falsely appears delinquent and thus the fees are falsely imposed.
I have sent in a California Public Records Act Request (the CA version of FOIA) asking how many payments are withheld/ misapplied and how many people are assessed Demand Fees. They told me they do not keep records of misapplied or withheld payments.
When I was auditing my records for my OTA appeal, I noticed that one of my bills showing the amount of interest due was lower than the amount of interest that I had paid. The FTB ledgers, however, reflected that was the amount of interest that had always been due. So their accounting ledger conflicted with their own bill.
In a wonderful blessing from God, I had written in my initial Abatement Request (this is a request to the FTB for a refund of penalties, fees and interest charged. When the FTB turns down an Abatement Request – and apparently, they always turn them down — you can then file an appeal with the OTA court) back in 2014 “On July 9, when we found out the late fee could not come from the 2012 overage, [FTB Representative] Carrey told us we had no choice but to pay the balance (which was now…$3,855…)”, so I had legally documented that the reason I sent in more than the bill showed was because the FTB told me to. (I never double checked the bill to verify the amount of interest; I just sent in what she told me to).
When I sent proof of this overcharge of interest to the FTB’s Board of Directors and Governor Brown back in February 2018, no one at the FTB denied that I was overcharged. The legislators swept it under the rug.
Eons ago, I had requested that the FTB send me copies of accounting ledgers for a few select years. I’d noticed a small dollar amount that said “FTB Adjustment.” I’d asked an FTB rep about it at that time, and she had said “Oh, don’t worry about it. It’s an internal thing; doesn’t really affect you.”
When the FTB submitted these ledgers to the OTA court, they redacted this and another adjustment. Since an accounting adjustment isn’t deemed private information worthy of redaction, I requested un-redacted copies be submitted. Their internal documents identified that line item as a “Write-Off.” I asked the FTB’s lawyer why the ledgers they sent to me say “Adjustment”, their internal ledgers say “Write Off,” and why they tried to hide the line items from the judge altogether. I have not gotten an answer, which is a violation of the California Public Records Act (the CA version of FOIA).
I am fairly certain that the scheme is that they tack on extra interest after a collection bill goes out. When I paid those two bills on time as per what the bill said, they wrote off the “underpaid” interest.
5. Deliberately mailing collection notices to invalid addresses:
CBS Sacramento caught this scheme a couple of years ago. Basically, by mailing the bill to an undeliverable address, the FTB denies you the opportunity to dispute a bogus charge or to pay a valid charge timely. One day you wake up to find your bank account drained, with zero recourse whatsoever.
In the article, the FTB first told CBS the bad addresses were all mistakes. When pressed on why the same mistake happened so often, the FTB changed their story to state that mailing to old addresses was required by federal law. It sounds like when CBS pushed for the legal code, FTB didn’t furnish the law and instead said something that indicated they would change this policy.
The FTB’s Disclose Department sent me a copy of their policy regarding updating addresses, which as you can see was implemented in 2002. So the PR department essentially admitted to CBS that they were unlawfully running a scheme to earn extra money by deliberately sending notices to invalid addresses.
II. Personal Update:
- Shortly after the TAAP program was moved to be under the FTB, I was dropped as a client (see Point #6 in video of my December speech for more info). Being fired turned out to be a huge blessing because I realized that the TAAP supervisor was sabotaging my case. And the brief/oral arguments that I wrote for myself were better than a student would have done.
After I filed my brief, I send a copy of it, along with more evidence, to the California State Auditor Investigations Office (which is under Controller Betty Yee, who happens to be one of the FTB Board Members who is covering up the unlawful activity), the FBI and the DOJ. Hopefully, they’ll investigate… but I don’t have high hopes.
I filed a complaint with the CA Bar Association against the FTB’s attorney for improperly redacting documents to hide pertinent info from the judge, which is evidence tampering.
2. Our OTA hearing was on August 20, 2019, a full two years after we first filed the Appeal. I kicked ass! Here is the transcript and here is a video of the hearing.
The slow processing time was a huge blessing; being in litigation, the FTB was forced to disclose info that they wouldn’t have otherwise. It allowed me the time to think of things to ask for from the FTB and get my ducks in a row to file a lawsuit for damages once the appeal was completed.
3. I am currently looking for an attorney for a lawsuit for damages. If you know of any good attorneys, please pass me their contact info.
4. I am also trying to get legislation passed that will help curb some of the systemic corruption in the system. This is quite the rocky road.
III – Californians: Please Help Me Stop The UnlawfulActivity!
- Spread the word! Forward this to every Californian that you know!
- This year, I would like to bring more people with me to the Annual Taxpayer Bill of Rights Meeting (the meeting where I made the speech at the top of this post) so we can address all of the unlawful and unethical business practices that I have uncovered. Since the speeches are limited to eight minutes, I can’t get much in if I am alone.
If you know any California Residents who can come to Sacramento on December 3 (https://www.ftb.ca.gov/about-ftb/meetings/index.html))and are not afraid of public speaking, please have them PM me. I will write the speeches or help them write their own.
3. If any of my legislation ideas resonates with you, please call your local State Legislators and ask them to implement these policies.
4. If any of you have had an FTB experience that left you wondering “How can this possibly be legal?” please PM me. I am certain they have even more schemes going than what I have already uncovered, but the only way we’ll figure them out is by sharing data. Let’s come together to expose all of their schemes!
I am a slow and steady kind of person. It may take me a long time to get back to any PM’s, but I will eventually.