Can the FTB File a Return for You? (Substitute Returns in California)

Introduction: Think You’re Off the Hook for Not Filing? Think Again.

If you haven’t filed your California tax return for one or more years, the Franchise Tax Board (FTB) might take matters into their own hands.

And no, that’s not a good thing.

The FTB has the authority to file a Substitute Return (SFR) on your behalf — and when they do, they don’t give you the benefit of deductions, exemptions, or credits. The result? You’ll owe far more than you should, and you may be hit with penalties, interest, and aggressive collections.

This guide breaks down exactly what substitute returns are, how they’re triggered, and how Orange County taxpayers can replace an FTB substitute return with an accurate filing before the FTB starts garnishing wages or levying bank accounts.

📌 What Is a Substitute Return (SFR)?

A Substitute Return is a tax return created by the FTB when you fail to file on your own. It’s based on information they receive from:

• Employers (W-2s)
• Contractors (1099s)
• Banks, brokerages, and other third parties
• IRS data matching

But here’s the problem: Substitute Returns are intentionally punitive.

The FTB does not include:

• Business expenses
• Mortgage interest
• Child credits
• Retirement contributions
• Depreciation or deductions

They calculate your tax based only on gross income, which leads to inflated balances.

🧾 Why Does the FTB File Substitute Returns?

California law allows the FTB to protect the state’s interest when a taxpayer fails to file.

The FTB is particularly aggressive with non-filers in:

• High-income ZIP codes (Orange County areas like Irvine, Newport Beach, etc.)
• Self-employed workers with 1099s
• Gig economy workers
• Part-year residents or out-of-state filers with California-source income

If this happens, your best option is to regain compliance after the FTB files for you by taking proactive action.

📅 How Long Do You Have Before the FTB Files for You?

You typically have a few months after the tax deadline before they act — but that can shrink if:

• You’ve ignored previous notices
• You were flagged for prior noncompliance
• The income reported under your name is substantial

🧨 What Happens After the FTB Files a Substitute Return?

If the FTB files for you, you’ll receive a:

🔔 Notice of Proposed Assessment (NPA)

This outlines:

• What they think you earned
• The tax they say you owe
• Added penalties and interest

You have 60 days to respond effectively when the FTB sends a substitute return notice before it becomes final.

👉 What Happens If You Ignore FTB Notices?

💰 How Much More Will You Owe on a Substitute Return?



Let’s say you earned $95,000 as a contractor but had $35,000 in legitimate expenses.

Now add penalties, interest, and a demand for payment — that’s how a manageable balance becomes a tax problem.

🛑 What Happens If You Ignore a Substitute Return?

• The balance becomes final and enforceable
• You lose the right to protest or amend
• The FTB may begin levies, garnishments, or liens

Understanding the steps the FTB takes after an SFR can help you act before the situation escalates.

✅ How to Reverse a Substitute Return in California

The good news: Substitute returns can be fixed.

Here’s how:

✅ 1. Request Your FTB Transcript

This will show:

• The years affected
• The assessed balance
• Whether a Substitute Return has been filed
• The deadline to respond (if still open)

Your CPA can request this using Power of Attorney.

✅ 2. File an Actual Return

This is called a “superseding return.” The FTB will accept a real return even after filing an SFR, provided the debt hasn’t gone to collections. Doing so can reduce penalties after replacing a substitute return and ensure your tax is calculated correctly.

Be sure to:

• Include all income
• Report valid deductions and expenses
• Use reasonable estimates (if necessary)

✅ 3. Respond to the Notice of Proposed Assessment

If you’re within the 60-day window, include:

• The completed return
• A cover letter referencing the NPA
• Any supporting documentation

The FTB may reverse or reduce the balance accordingly.

✅ 4. Request Penalty Abatement (If Applicable)

Once the corrected return is accepted, you may qualify for relief from:

• Late filing penalties
• Late payment penalties
• Estimated tax penalties

👉 Can You Get California Tax Penalties Removed?

✅ 5. Set Up a Payment Plan or Settlement

If the corrected return still results in a balance you can’t pay in full, you may qualify for:

• A payment plan (installment agreement)
• A hardship deferral (temporary pause on collections)
• A settlement through the Offer in Compromise program

👉 Top Tax Relief Options for California Taxpayers

📍 How Boulanger CPA Helps Orange County Taxpayers

We help clients in Irvine, Santa Ana, Anaheim, Tustin, and across California:

• Identify substitute returns filed by the FTB
• Prepare and file accurate returns
• Reverse assessments and reduce penalties
• Avoid or stop collections
• Restore compliance and peace of mind

📞 Call 657-218-5700
🌐 www.orangecounty.cpa

📣 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.