Joshi: A Later Move Did Not Explain an Earlier Failure to File

A move for graduate school in 2024 and 2025 did not explain why a taxpayer failed to file a 2021 return due in 2022. In Appeal of S. Joshi, 2026-OTA-520 (nonprecedential), the California Office of Tax Appeals sustained estimated tax, two penalties, a filing-enforcement fee and interest. Each item rested on a different part of the record; hardship alone did not answer them all.

The official nonprecedential OTA opinion, dated July 21, 2026 and posted in the October release, applies California’s assessment and relief rules to this written record. The parties waived an oral hearing. Its value is the separate analysis of tax, penalties, fee and interest against the evidence supplied.

The income estimate had a supported starting point

The taxpayer did not file a 2021 California return. FTB issued a demand in February 2024 and a proposed assessment that April. It used information returns and federal adjusted gross income of $198,346 to calculate additional tax of $14,873. The taxpayer protested and later appealed. Pages 1–3.

Under Revenue and Taxation Code section 19087(a), FTB may estimate net income when a required return is missing. Its Integrated Non-Filer Compliance program identified a federal return using a California address. Federal adjusted gross income, corroborated by Forms 1099, supplied the reasonable and rational foundation required by Todd v. McColgan (1949) 89 Cal.App.2d 509. The burden then shifted to the taxpayer to establish error. Joshi did not contest the method or amount estimated and ultimately limited the appeal to penalties, interest and the fee. The assertion of prior payment lacked supporting proof. California’s ordinary-income treatment of capital gains also answered the taxpayer’s rate argument. Pages 2–4.

The still-missing California return was important beyond the original assessment. No return had been filed when briefing closed, leaving the estimate unrebutted and the continuing filing failure unexplained. Factual finding 7 and pages 3–5.

The reasonable-cause explanation did not fit the missed filing period

The late-filing penalty was $3,718.25. The taxpayer relied on being out of state for graduate studies in 2024 and 2025, but the 2021 return had been due in April 2022. OTA found no explanation connecting those later circumstances to the earlier filing failure or establishing reasonable cause for the continuing failure to file. Pages 4–5.

Section 19131 requires reasonable cause despite ordinary business care and prudence. Applying Appeal of Head and Feliciano, 2020-OTA-127P, OTA found that pursuing other affairs while leaving tax obligations undone did not establish that standard. The taxpayer had also failed to explain why the return remained unfiled after learning of the assessment. Pages 4–5.

California’s one-time timeliness-penalty relief did not supply an alternative for this year: Section 19132.5’s statutory program begins with tax years starting on or after January 1, 2022. The appeal concerned 2021. A current application therefore needs the actual tax year, not just the year in which the notice arrived.

The demand penalty required a separate notice history

FTB also imposed a $3,718.25 demand penalty. OTA examined the unanswered current demand and an earlier failure to respond that led to a proposed assessment for 2019 within the required four-year period. Revenue and Taxation Code section 19133 and California Code of Regulations, title 18, section 19133(b), made that earlier history part of the conditions for this individual taxpayer’s penalty. Pages 5–6.

FTB validly used the last known address under Revenue and Taxation Code section 18416. The taxpayer had not supplied the relevant change before mailing. Footnote 1 explains that a last known address may be replaced by clear written or electronic notice or an address FTB has reason to believe is current. Pages 5–6.

The enforcement fee and interest had their own grounds

The $108 filing-enforcement fee followed failure to file within 25 days after the formal demand. Under section 19254(a)(2) and Appeal of Shanahan, 2024-OTA-039P, OTA found the notice conditions satisfied and no authority to abate a properly imposed fee for reasonable cause. Interest likewise remained due unless a recognized statutory basis for relief applied. The taxpayer established no basis under sections 19104, 19112 or 21012. Interest compensates for the use of money and requires its own statutory ground for abatement. Pages 6–7.

Difficulty paying can lead to a separate discussion of collection arrangements or an offer in compromise, as the opinion notes. It does not by itself reduce the underlying tax, establish reasonable cause for a missed return or authorize OTA to disregard interest statutes. Footnote 2.

Match the proposed correction to the item being challenged

Tax calculations need corrected numbers and supporting records. Penalty relief needs the applicable legal ground and a chronology tied to the failure. Notice objections need the address and mailing history. A collection request addresses ability to pay. Our guide to challenging an FTB income estimate focuses on the first task; the FTB penalty-relief guide addresses the separate relief routes.