Can You Get California Tax Penalties Removed? (FTB Penalty Relief Guide)

Introduction: Don’t Let FTB Penalties Worsen Your Tax Debt

If you’ve fallen behind on your California taxes, the Franchise Tax Board (FTB) likely hit you with penalties and interest—sometimes adding up to 25–50% or more of the original balance. Whether your tax issue started with a late return, underpayment, or non-compliance, penalties make the problem worse fast.

But here’s the good news: California allows eligible taxpayers to request penalty relief. In some cases, you can even settle your California tax debt after penalty abatement and avoid further collection actions.

In this guide, we’ll break down:

• The types of penalties the FTB charges
• Who qualifies for penalty abatement
• How to request relief
• What alternatives exist if your request is denied

What Types of  Penalties Does the FTB Charge?

The FTB may assess a variety of penalties, depending on your situation:

1. Late Filing Penalty

• 5% of the unpaid tax per month, up to a maximum of 25%

2. Late Payment Penalty

• 0.5% of the unpaid tax per month, also up to 25%

3. Underpayment or Estimated Tax Penalties

• Applies when required estimated payments aren’t made

4. Accuracy-Related Penalty

• 20% of the underpaid tax due to negligence or substantial understatement

5. Demand to File Penalty

• $100 penalty if you fail to file after the FTB demands a return

If these apply to your account, acting fast is crucial—especially if you want to resolve FTB penalties before the lien hits.

Can You Get These Penalties Removed?

Yes—in many cases. The FTB offers Penalty Abatement for taxpayers who can demonstrate:

• Reasonable cause
• Circumstances beyond their control
• Compliance efforts before and after the issue occurred

Unlike the IRS, California has not typically offered a formal “first-time abatement” program like the IRS, but there are recent changes that may allow this so relief is still possible under the right conditions.

What Qualifies as “Reasonable Cause”?

Reasonable cause means you had a legitimate reason for failing to file or pay. Common accepted reasons include:

• Medical emergencies or serious illness
• Natural disasters (e.g., wildfires, earthquakes)
• Death in the family
• Unavoidable financial hardship
• Reliance on bad professional advice
• Mail errors or IRS/state tax agency delays

The key is to show that you acted responsibly and tried to comply, but were prevented from doing so.

What Does NOT Qualify?

• Forgetting to file
• Ignoring notices
• Claiming you “didn’t know the rules”
• Lack of funds with no documented hardship

How to Request FTB Penalty Abatement

To apply for penalty relief, you must:

Step 1: Ensure Tax Compliance

• File all outstanding returns
• Pay any remaining tax or be on an installment agreement

Step 2: Prepare Your Request

You’ll submit a written explanation with supporting documentation. Include:

• The tax year(s) involved
• The specific penalties you want removed
• A timeline of events
• Medical records, death certificates, disaster declarations, etc.

Step 3: Submit Your Request

• Mail to:
  Franchise Tax Board
  PO Box 942840
  Sacramento, CA 94240-0040

Or call FTB customer service to discuss your case and ask about best next steps.

To save time and increase your chances of success, you can request FTB penalty relief with help from an Orange County CPA who understands the nuances of California tax law.

What if My Penalty Abatement Is Denied?

If the FTB denies your request, you still have options:

• Appeal the decision by writing to the FTB’s Protest Unit
• Request a Payment Plan to avoid new penalties and interest
• Explore settlement through an FTB Offer in Compromise if your total tax debt is unmanageable
• Apply for a Hardship Deferral if collection would cause severe financial strain

You may still get relief even if you owe a large balance to the state, especially if your hardship is well documented and you’ve made a good-faith effort to comply.

Penalty vs Interest: Can I Get Both Removed?

Usually, penalty relief is more common than interest abatement. The FTB rarely removes interest unless it was:

• Caused by an unreasonable delay from the FTB itself
• Tied directly to a penalty that was successfully abated

If your penalty is removed, associated interest may be reduced as well—but it’s not guaranteed.

Case Study: Successful FTB Penalty Abatement

Mark, an Orange County resident, was hospitalized for several months and missed filing his California return on time. He was assessed over $7,000 in penalties and interest.

With the help of Boulanger CPA:

• He submitted a penalty abatement request citing medical hardship
• Included documentation from his hospital and physician
• Received full removal of penalties and a partial interest adjustment

He also set up a low monthly installment plan—allowing him to settle your California tax debt after penalty abatement   without further collections.

How a CPA Can Help You Get Penalty Relief

The FTB holds you to a high standard when it comes to proving reasonable cause. A tax professional can:

• Review your case for abatement eligibility
• Prepare a formal request with persuasive documentation
• Handle communications with the FTB on your behalf
• Help negotiate installment agreements or other resolutions

A tax expert can also compare IRS and California penalty removal options and help you choose the path that gives you the greatest relief with the least risk.

How to Prevent Future FTB Penalties

• File on time (even if you can’t pay)
• Make estimated payments if you’re self-employed
• Set up auto-pay for state taxes due
• Work with a CPA for tax planning and compliance

Final Thoughts: Don’t Let Penalties Spiral Out of Control

FTB penalties can double or triple your original tax debt—but they’re not always permanent. If you’ve had a legitimate hardship or just need professional help navigating California’s tax system, you may be able to remove penalties and regain control of your finances.

Talk to an Orange County Tax Expert Today

At Boulanger CPA and Consulting PC, we’ve helped clients across California—especially in Orange County—remove thousands in state tax penalties, reduce balances, and avoid collections.

Virtual meetings available. In-person by appointment.

Contact Us
  Website: www.orangecounty.cpa
  Phone: 657-218-5700
  Email: marc@boulangercpa.com

📣 About the Author

Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.

He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.

With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.

Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.

Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.

📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.