How to Respond to a Franchise Tax Board Audit Letter

If you’ve received a letter from the California Franchise Tax Board (FTB), don’t panic — but don’t ignore it either.

Whether the letter says “you’re being reviewed,” “we need more documentation,” or “your refund is on hold,” it means the state wants proof that the information you reported is accurate.

This guide will walk you through what the letter means, what to do next, and how to protect yourself from penalties or refund denial.

What Is an FTB Audit Letter?

FTB letters often come after you file your California state return and claim:

• The Earned Income Tax Credit (EITC)

• The Young Child Tax Credit (YCTC)

• Any refund where self-employment income is involved

The state wants to verify that you actually earned the income you claimed — especially if you’re self-employed or filed a Schedule C.

Why Did You Get This Letter?

Common reasons include:

• Your income doesn’t match IRS records

• You claimed a refundable credit that raises a red flag

• You didn’t include 1099s, or your reported income looks too low or too high

• The FTB randomly selected your return for review

What You Need to Do

Step 1: Read the letter carefully.

It will include a list of the documents the FTB wants, such as:

• Bank statements

• 1099s or invoices

• Proof of business activity

• Receipts for business expenses

• A copy of your federal Schedule C

Step 2: Gather your documents.

Organize them by month and label them clearly. Highlight income deposits and keep personal spending separate.

Step 3: Create a summary.

Prepare a spreadsheet or log that shows your income and expenses month-by-month. This helps the reviewer understand your business without having to guess.

Step 4: Send the documents as requested.

Follow the instructions on the letter. The FTB typically gives you the option to upload, fax, or mail.

What NOT to Do

• Don’t ignore the deadline. It will hurt your refund or result in penalties.

• Don’t send blurry screenshots or unorganized receipts.

• Don’t try to “wing it.” If you’re unsure, get a professional involved.

When to Get Help

If you’re overwhelmed, don’t know how to format your documents, or simply want to make sure it’s done right — that’s where Valoria Consulting comes in.

We help clients prepare FTB response packets that are clean, organized, and review-ready. You’ll also have a licensed EA or CPA on standby if the state requires follow-up.

Need Help Responding to an FTB Letter?

Valoria Consulting can help you:

• Review your FTB letter and explain what’s being asked

• Organize and prepare your documents

• Work with a licensed tax pro to submit a professional response

Don’t risk your refund. Respond with confidence.