Money-Grubbing California FTB.

And then there is the poor soul who receives a 1099-B but whose income level is low enough that they are not required to file either Federal or State returns (e.g. elderly ladies who show up at our AARP Tax Aide site).

Sooner or later they will get a nasty letter from the FTB assuming that their basis in what they sold was zero and why didn't they file. We (at our site) always recommend that that these people file Federal.

But that's different. Your situation is that they really didn't file because they were under the threshold.

SNIPPED

HOLD ON THERE AMIGO - Maybe I'm not reading your post correctly, but I feel compelled to jump in here.

It is NOT the amount of gain or loss that triggers the necessity to FILE, it is the GROSS income. The taxing authorities cares not a lick about the taxpayer's basis - all they see or care about is the gross sale price reported on that 1099-B. IF that number (plus the other info) is OVER the threshold amount then a return IS due.

I do agree with you about filing even when not required. As pros - and volunteers - we need to keep in mind that the statute of limitations doesn't start until a return is FILED (even one is not required to file). I always recommend to my fixed incomers that they let me file their returns whether they are required to file or not (typically I do and file these returns for free) JUST to start the clock on the statute of limitations.

Many times over the last 30 years I've had clients and children of clients come in and say "mom/dad passed last year and now we're getting notices from the IRS/CAFTB/MD/Etc. they can't find a return for them for the last 6 or 7 years. They say they owe taxes, what do we do?". Now its puzzle time. Had these folks filed those ZERO returns we would have had much less work to do and we could have saved those stuck with the burden a significant amount of time, money and grief.

It's too bad our tax system is such that NO ONE wants to file, even when it doesn't cost them anything.

Gene E. Utterback, EA, RFC, ABA

Big snip

It costs if they have to use a paid preparer.

And if not, there is still the cost of the Aspirin.

SNIPPED

NOT in my office it doesn't - at least not if they've been a client of mine for at least 5 years. If someone has used and paid me for at least five consecutive years and they are no longer required to file, I will prepare and file their return FOR FREE.

Gene E. Utterback, EA, RFC, ABA

You are a gentleman - unlike the guys at H&R etc

See IRC Sec. 61, where gross income is defined. It is *not* the amount of gross proceeds, as you claim above, rather it is the "Gains derived from dealings in property". (A loss equals gross income of zero).

Since filing requirements are based on gross income, the amount on the

-Mark Bole

But not filing where there is a large reported 1099B sales amount is sure to generate a CP2000 AUR nastygram, so I advise anyone in that position to file.

Well, finally something correct: The FTB sent my client a letter acknowledging they had located the return she had in fact filed and "corrected [their] records." This came from the Filing Enforcement Section (mail stop F180).

Too bad they don't say why they screwed up in the first place.