Can IRS Reveal Your Income to California State Agencies?

Navigating the complexities of income reporting can be challenging, especially when it involves interactions between federal and state agencies. At income-partners.net, we clarify these processes, focusing on how the IRS and California state agencies handle income information. Let’s explore the extent to which the IRS can share your income details with California state agencies, providing clarity on data sharing and privacy while helping you discover partnership opportunities, enhance your business strategies, and boost your financial growth. Discover how strategic alliances, joint ventures, and collaborative projects can redefine your earning potential.

1. What Authority Does the IRS Have to Share Income Information with State Agencies Like Those in California?

Yes, the IRS has the authority to share income information with California state agencies through established legal frameworks and agreements. This exchange primarily facilitates tax administration and compliance. According to IRS regulations, sharing data ensures accurate state tax collection and helps identify discrepancies.

The IRS operates under a complex framework of federal laws that govern the exchange of information with state tax agencies. This framework is primarily built upon two key pillars: the Internal Revenue Code (IRC) and Information Sharing Agreements (ISAs). Let’s delve into each of these components to understand the scope, limitations, and operational mechanisms that dictate how the IRS interacts with state entities like the California Franchise Tax Board (FTB).

1.1. Internal Revenue Code (IRC)

The IRC serves as the bedrock of federal tax law, authorizing the IRS to collect taxes and enforce tax laws. Several sections within the IRC provide the legal basis for sharing information with state tax agencies.

1.1.1. IRC Section 6103: Confidentiality and Disclosure of Returns and Return Information

This section is pivotal in safeguarding the privacy of taxpayer information. It establishes stringent rules about who can access tax data and under what circumstances. While the general rule is that tax returns and return information are confidential, IRC Section 6103 includes numerous exceptions that permit disclosure to specific entities under certain conditions.

Key Provisions Allowing Disclosure to State Tax Agencies:

• Tax Administration Purposes: IRC Section 6103(d) allows the IRS to disclose tax information to state tax agencies for the purpose of tax administration. This includes assessing and collecting state taxes, as well as civil and criminal tax investigations.
• Federal-State Agreements: The IRS can enter into agreements with state tax agencies to exchange information. These agreements outline the specific types of information that can be shared, the purposes for which it can be used, and the safeguards that must be in place to protect the confidentiality of the data.

1.1.2. IRC Section 6109: Identifying Numbers

This section mandates that taxpayers include their Taxpayer Identification Number (TIN), such as a Social Security Number (SSN) or an Employer Identification Number (EIN), on tax returns and other documents submitted to the IRS. This requirement is crucial for matching income information reported to the IRS with state tax records, ensuring accurate tax assessments and facilitating the detection of underreporting or non-compliance.

1.2. Information Sharing Agreements (ISAs)

Beyond the statutory authority provided by the IRC, the IRS formalizes its data exchange practices through Information Sharing Agreements (ISAs) with individual state tax agencies. These agreements are legally binding contracts that specify the terms and conditions under which information is shared.

1.2.1. Key Components of ISAs:

• Types of Information Shared: ISAs delineate the specific types of tax information that the IRS can share with the state tax agency. This may include income data, deductions, credits, and other relevant details reported on federal tax returns.
• Purposes for Which Information Can Be Used: The agreement clearly states the purposes for which the shared information can be used. Generally, this is limited to tax administration, which encompasses assessing and collecting taxes, conducting audits, and pursuing civil and criminal tax enforcement actions.
• Safeguards and Security Measures: ISAs mandate that state tax agencies implement robust safeguards to protect the confidentiality and security of the taxpayer information they receive. These safeguards typically include:
  • Data Encryption: Ensuring that data is encrypted both during transmission and when stored to prevent unauthorized access.
  • Limited Access: Restricting access to tax information to authorized personnel who have undergone thorough background checks and security training.
  • Secure Storage: Storing data in secure facilities with physical and electronic security measures to prevent theft, loss, or unauthorized access.
  • Audit Trails: Maintaining detailed audit trails to track who has accessed taxpayer information and for what purpose, enabling the detection of any unauthorized or inappropriate use.
  • Compliance Monitoring: Regularly monitoring compliance with the terms of the ISA and conducting periodic audits to ensure that safeguards are being followed.
• Restrictions on Redisclosure: ISAs typically prohibit state tax agencies from redisclosing taxpayer information to other parties without the express written consent of the IRS. This restriction is critical for maintaining taxpayer privacy and preventing the misuse of sensitive data.
• Data Retention Policies: The agreement specifies how long the state tax agency can retain the shared information and the procedures for securely destroying the data when it is no longer needed.

1.2.2. Examples of Information Sharing in Practice:

• Income Verification: The IRS shares income information with the California FTB to verify the income reported on state tax returns. This helps the FTB identify individuals who may be underreporting their income or claiming improper deductions or credits.
• Audit Selection: Shared data is used to identify taxpayers who are at high risk of non-compliance. By comparing federal and state tax data, the FTB can pinpoint discrepancies and select returns for audit.
• Enforcement Actions: In cases of suspected tax fraud or evasion, the IRS and the FTB may collaborate and share information to pursue civil or criminal enforcement actions.

Alt text: The IRS headquarters building in Washington, D.C., symbolizing the federal agency’s authority in tax administration and data sharing.

2. What Specific Types of Income Data Can the IRS Share with California Agencies?

The IRS can share various types of income data with California agencies, including wages, salaries, investment income, and business profits. This data helps California ensure residents and businesses accurately report their income for state tax purposes.

To provide a clearer understanding of the specifics, here’s a breakdown of the types of income data the IRS can share and how this information is utilized by California state agencies:

2.1. Types of Income Data Shared by the IRS

The IRS collects a wide array of income data from various sources, which is then potentially shared with California state agencies through established agreements. The primary types of income data include:

• Wages and Salaries:
  • Description: This encompasses all income reported on Form W-2, which includes wages, salaries, tips, and other forms of compensation paid to employees.
  • Importance: Essential for verifying the income reported by individuals on their state tax returns.
• Investment Income:
  • Description: Includes income from investments such as dividends, interest, capital gains, and royalties. This information is typically reported on Forms 1099-DIV, 1099-INT, and 1099-B.
  • Importance: Helps California ensure that residents are accurately reporting investment earnings, which are subject to state income tax.
• Business Profits:
  • Description: Income from self-employment, partnerships, S corporations, and other business entities. This data is reported on Schedule C (Form 1040) for sole proprietorships, Schedule K-1 (Form 1065) for partnerships, and Schedule K-1 (Form 1120-S) for S corporations.
  • Importance: Crucial for verifying business income and ensuring that businesses are paying the correct amount of state taxes.
• Retirement Income:
  • Description: Distributions from retirement accounts such as 401(k)s, IRAs, and pensions. This information is reported on Form 1099-R.
  • Importance: Ensures that retirees are accurately reporting their retirement income, which is subject to state income tax.
• Rental Income:
  • Description: Income earned from renting out real estate properties, reported on Schedule E (Form 1040).
  • Importance: Helps verify that landlords are reporting their rental income and deducting appropriate expenses.
• Unemployment Compensation:
  • Description: Benefits received from unemployment insurance, reported on Form 1099-G.
  • Importance: Ensures that individuals are reporting their unemployment benefits, which may be subject to state income tax.
• Social Security Benefits:
  • Description: Social Security retirement, disability, and survivor benefits, reported on Form SSA-1099.
  • Importance: Verifies that individuals are reporting their Social Security benefits, a portion of which may be subject to state income tax depending on their income level.

2.2. How California Agencies Use the Shared Income Data

California state agencies, primarily the Franchise Tax Board (FTB), utilize the income data shared by the IRS for several critical purposes:

• Income Verification:
  • Process: The FTB compares the income reported on California state tax returns with the income data reported to the IRS.
  • Purpose: To identify discrepancies and ensure that individuals and businesses are accurately reporting their income.
  • Example: If an individual reports $50,000 in wages on their California tax return but the IRS data shows $70,000 in wages, the FTB may investigate the discrepancy.
• Audit Selection:
  • Process: The FTB uses data analytics to identify tax returns that are likely to have errors or underreported income.
  • Purpose: To select returns for audit, increasing the efficiency of the audit process.
  • Example: Returns with significant discrepancies between reported income and IRS data are flagged for potential audit.
• Tax Enforcement:
  • Process: The FTB pursues enforcement actions against individuals and businesses that are found to have underreported their income or evaded taxes.
  • Purpose: To ensure compliance with California tax laws and collect unpaid taxes.
  • Example: If an audit reveals substantial underreporting of income, the FTB may assess additional taxes, penalties, and interest.
• Compliance Programs:
  • Process: The FTB uses shared income data to administer various compliance programs and initiatives.
  • Purpose: To improve tax compliance and reduce the tax gap.
  • Example: The FTB may send notices to individuals who appear to have underreported their income based on IRS data, giving them an opportunity to correct their returns.
• Assessing Eligibility for Credits and Deductions:
  • Process: Verifying income levels to determine eligibility for various state tax credits and deductions, such as the California Earned Income Tax Credit (CalEITC).
  • Purpose: Ensuring that only eligible taxpayers receive these benefits, preventing fraud and improper payments.
  • Example: Confirming that a taxpayer meets the income requirements for the CalEITC by cross-referencing their reported income with IRS data.

2.3. Safeguards and Limitations

While the IRS and California agencies share income data, it’s important to note that this exchange is subject to strict safeguards and limitations to protect taxpayer privacy:

• Legal Framework: Data sharing is governed by federal and state laws, including the Internal Revenue Code (IRC) and California Revenue and Taxation Code.
• Information Sharing Agreements (ISAs): The IRS and FTB have ISAs that outline the specific types of information that can be shared, the purposes for which it can be used, and the safeguards that must be in place to protect the confidentiality of the data.
• Confidentiality Requirements: Both federal and state laws impose strict confidentiality requirements on tax information, prohibiting unauthorized disclosure or use.
• Data Security Measures: Agencies must implement robust data security measures to protect against unauthorized access, theft, or loss of taxpayer information.
• Limited Use: Shared income data can only be used for tax administration purposes, such as verifying income, selecting returns for audit, and pursuing tax enforcement actions.

Alt text: A collection of tax forms highlighting various types of income such as wages, investment returns, and business profits, all of which are potentially shared between the IRS and state agencies.

3. How Does Data Sharing Between the IRS and California Impact Taxpayers?

Data sharing between the IRS and California can lead to more accurate tax assessments and quicker detection of discrepancies. However, it also increases the risk of audits if inconsistencies are found between federal and state returns.

Let’s delve into the specific ways data sharing affects taxpayers and what measures are in place to protect their rights and privacy.

3.1. Increased Accuracy and Reduced Errors

One of the primary benefits of data sharing between the IRS and California tax agencies is the increased accuracy of tax assessments. When the IRS shares income data with the California Franchise Tax Board (FTB), it allows the FTB to cross-reference the information reported on state tax returns with the data reported to the federal government. This cross-referencing helps to identify discrepancies and errors that might otherwise go unnoticed.

• Example: If a taxpayer mistakenly reports a lower income on their California tax return than what was reported to the IRS via W-2 forms or 1099 forms, the FTB can quickly identify this discrepancy. This can lead to a correction of the error, ensuring that the taxpayer pays the correct amount of state taxes.

This increased accuracy not only benefits the state by ensuring proper tax collection but also helps taxpayers avoid potential penalties and interest charges that could arise from underreporting income.

3.2. Enhanced Detection of Discrepancies and Audits

Data sharing significantly enhances the ability of California tax agencies to detect discrepancies in tax filings. By comparing federal and state tax data, the FTB can identify inconsistencies that may indicate unintentional errors or deliberate tax evasion.

• Audit Triggers: Discrepancies between federal and state tax returns are often a significant trigger for audits. If the FTB finds that a taxpayer’s reported income, deductions, or credits differ substantially from what the IRS has on record, the taxpayer may be selected for an audit.
• Example: If a taxpayer claims a large deduction on their California tax return that is not supported by documentation or is inconsistent with their federal tax return, the FTB may initiate an audit to verify the validity of the deduction.

While being selected for an audit can be stressful, it is important to remember that audits are a standard part of the tax system. Taxpayers who have accurately reported their income and deductions have nothing to fear and can use the audit process to clarify any questions or concerns the FTB may have.

3.3. Risk of Increased Scrutiny and Audits

While data sharing can lead to more accurate tax assessments, it also increases the risk of taxpayers being subjected to increased scrutiny and audits. As mentioned earlier, discrepancies between federal and state tax returns are a common trigger for audits.

• Increased Audit Rates: With more comprehensive data available, tax agencies can more effectively identify returns that warrant closer examination. This can lead to higher audit rates for certain groups of taxpayers, particularly those with complex financial situations or those who are self-employed.
• Burden of Proof: During an audit, the burden of proof is generally on the taxpayer to demonstrate that their tax return is accurate and that they are entitled to the deductions and credits they have claimed. This can require gathering and organizing financial records, which can be time-consuming and challenging.

Taxpayers should maintain accurate and complete records of their income, deductions, and credits to minimize the risk of being selected for an audit and to ensure that they can successfully defend their tax return if audited.

3.4. Protection of Taxpayer Rights and Privacy

Despite the increased data sharing and potential for audits, there are important measures in place to protect taxpayer rights and privacy. Both the IRS and California tax agencies are bound by strict confidentiality requirements and legal frameworks that govern the use and disclosure of taxpayer information.

• Confidentiality Requirements: Federal and state laws, such as the Internal Revenue Code (IRC) and the California Revenue and Taxation Code, impose strict confidentiality requirements on tax information. These laws prohibit unauthorized disclosure or use of taxpayer data.
• Information Sharing Agreements (ISAs): The IRS and FTB have ISAs that outline the specific types of information that can be shared, the purposes for which it can be used, and the safeguards that must be in place to protect the confidentiality of the data.
• Data Security Measures: Tax agencies must implement robust data security measures to protect against unauthorized access, theft, or loss of taxpayer information. These measures include encryption, firewalls, and physical security controls.
• Taxpayer Bill of Rights: Taxpayers have certain rights during an audit, including the right to representation, the right to a fair and impartial hearing, and the right to appeal an adverse decision. The IRS and FTB are required to inform taxpayers of their rights and to treat them with fairness and respect.

3.5. Transparency and Notification

Taxpayers have the right to be informed about how their tax information is being used and shared. Tax agencies are generally required to provide transparency and notification regarding data sharing practices.

• Privacy Policies: The IRS and FTB have privacy policies that explain how they collect, use, and share taxpayer information. These policies are typically available on the agencies’ websites.
• Audit Notices: If a taxpayer is selected for an audit, they will receive a notice from the tax agency explaining the reason for the audit and the information that is needed.
• Data Breach Notifications: In the event of a data breach that compromises taxpayer information, tax agencies are generally required to notify affected individuals and provide them with information about how to protect themselves from identity theft and other potential harms.

Alt text: An individual carefully reviewing tax documents with a calculator, symbolizing the importance of accuracy in tax filings to avoid discrepancies between federal and state agencies.

4. What Steps Can Taxpayers Take to Ensure Compliance and Protect Their Privacy?

Taxpayers can ensure compliance by accurately reporting all income and maintaining detailed records. To protect their privacy, they should understand their rights and the data-sharing agreements between the IRS and California.

To further elaborate on this, let’s explore detailed steps taxpayers can take to ensure compliance, maintain privacy, and safeguard their financial information.

4.1. Accurate Income Reporting

One of the most critical steps in ensuring tax compliance is to accurately report all income on both federal and state tax returns. Accurate income reporting minimizes discrepancies that could trigger audits or other compliance actions.

• Key Actions:
  • Collect All Income Documents: Gather all necessary income documents, such as W-2 forms, 1099 forms (e.g., 1099-DIV, 1099-INT, 1099-MISC), and any records of self-employment income.
  • Reconcile Income: Cross-reference the income reported on these documents with your own financial records (e.g., bank statements, invoices) to ensure accuracy.
  • Report All Sources of Income: Include all sources of income, even those that may seem small or insignificant. Common sources of often-overlooked income include interest from bank accounts, dividends from investments, and income from side gigs or freelance work.
  • Double-Check Entries: Before submitting your tax returns, carefully review all income entries to ensure they are correct and consistent with your supporting documentation.
• Example: If you have multiple sources of income, such as a full-time job (W-2), investment income (1099-DIV, 1099-INT), and freelance income (1099-MISC), make sure to report all of these sources accurately on both your federal and state tax returns.

4.2. Maintain Detailed Records

Maintaining detailed records of income, deductions, and credits is essential for supporting the accuracy of your tax returns and defending against potential audits.

• Key Actions:
  • Keep Income Documents: Retain copies of all income documents, such as W-2 forms, 1099 forms, and records of self-employment income.
  • Track Deductions and Credits: Keep detailed records of all deductions and credits you plan to claim, including receipts, invoices, and other supporting documentation.
  • Organize Records: Organize your tax records in a systematic manner, making it easy to retrieve information when needed. This could involve creating digital folders or physical files for each tax year.
  • Retain Records for the Required Period: The IRS generally recommends retaining tax records for at least three years from the date you filed your original return or two years from the date you paid the tax, whichever is later. However, certain records, such as those related to real estate transactions or retirement accounts, may need to be retained for longer periods.
• Example: If you plan to claim deductions for business expenses, keep detailed records of all expenses, including receipts, invoices, and mileage logs. If you plan to claim credits for educational expenses, retain copies of tuition statements and other supporting documentation.

4.3. Understand Data Sharing Agreements

Understanding the data-sharing agreements between the IRS and California tax agencies can help taxpayers be more aware of how their information is being used and shared.

• Key Actions:
  • Review IRS Publications: Familiarize yourself with IRS publications and guidance on information sharing with state tax agencies.
  • Check State Tax Agency Websites: Review the California Franchise Tax Board (FTB) website for information on data sharing practices and taxpayer rights.
  • Understand Legal Framework: Understand the legal framework governing data sharing, including the Internal Revenue Code (IRC) and California Revenue and Taxation Code.
• Example: The IRS and FTB have Information Sharing Agreements (ISAs) that outline the specific types of information that can be shared, the purposes for which it can be used, and the safeguards that must be in place to protect the confidentiality of the data.

4.4. Protect Personal Information

Protecting personal information is crucial to prevent identity theft and safeguard your tax records.

• Key Actions:
  • Secure Your Social Security Number: Be cautious about sharing your Social Security Number (SSN) and only provide it when absolutely necessary.
  • Use Strong Passwords: Use strong, unique passwords for all online accounts, including tax preparation software and online banking accounts.
  • Beware of Phishing Scams: Be wary of phishing emails, phone calls, or text messages that attempt to trick you into providing personal or financial information. The IRS and FTB will never request sensitive information via email or phone.
  • Secure Your Mailbox: Protect your mailbox from theft, as tax-related documents often contain sensitive information.
  • Monitor Your Credit Report: Regularly monitor your credit report for any signs of identity theft or unauthorized activity.
• Example: If you receive an email claiming to be from the IRS or FTB asking you to update your account information, do not click on any links or provide any personal information. Instead, contact the agency directly to verify the authenticity of the email.

4.5. File Taxes Electronically and Securely

Filing taxes electronically can reduce the risk of errors and ensure that your tax returns are processed efficiently.

• Key Actions:
  • Use Reputable Tax Preparation Software: Use reputable tax preparation software that incorporates security measures to protect your personal information.
  • File Through Secure Channels: File your tax returns through secure channels, such as the IRS e-file system or a trusted tax professional.
  • Update Software Regularly: Keep your tax preparation software updated to ensure that you have the latest security patches and features.
• Example: When filing your taxes online, look for indicators of a secure website, such as a padlock icon in the address bar and an “https” prefix in the URL.

4.6. Seek Professional Assistance

If you have complex tax situations or concerns about compliance, consider seeking assistance from a qualified tax professional, such as a certified public accountant (CPA) or a tax attorney.

• Key Actions:
  • Choose a Qualified Professional: Select a tax professional who is knowledgeable, experienced, and has a good reputation.
  • Provide Accurate Information: Provide your tax professional with accurate and complete information to ensure that your tax returns are prepared correctly.
  • Review Tax Returns: Carefully review your tax returns before signing them to ensure that you understand the information being reported.
• Example: A tax professional can help you navigate complex tax rules, identify potential deductions and credits, and represent you in the event of an audit or other tax dispute.

Alt text: Securing files in a safe, symbolizing the importance of protecting personal and financial information to ensure compliance and safeguard privacy.

5. Are There Any Legal Restrictions on What the IRS Can Share?

Yes, there are legal restrictions on what the IRS can share. The IRS must comply with federal laws, such as the Internal Revenue Code, which sets strict guidelines on disclosing taxpayer information. These laws protect taxpayer privacy and limit the types of data shared.

Let’s delve deeper into the specific legal restrictions governing the IRS’s ability to share taxpayer information, with a particular focus on how these restrictions impact data sharing with California state agencies.

5.1. Internal Revenue Code (IRC) Section 6103

The cornerstone of taxpayer privacy protection in the United States is Section 6103 of the Internal Revenue Code (IRC). This section establishes a general rule that tax returns and return information are confidential and cannot be disclosed. However, it also provides numerous exceptions to this rule, outlining specific circumstances under which disclosure is permitted.

5.1.1. General Rule of Confidentiality

IRC Section 6103(a) states that tax returns and return information are confidential and cannot be disclosed by any officer or employee of the United States or any state. This provision reflects a fundamental principle of taxpayer privacy and is intended to encourage voluntary compliance with tax laws by assuring taxpayers that their personal and financial information will be kept private.

5.1.2. Exceptions to the General Rule

Despite the general rule of confidentiality, IRC Section 6103 contains numerous exceptions that permit the IRS to disclose tax information to specific entities under certain conditions. These exceptions are carefully crafted to balance the need for taxpayer privacy with other important governmental interests, such as tax administration, law enforcement, and national security.

Key Exceptions Relevant to Data Sharing with State Agencies:

• Tax Administration Purposes (IRC Section 6103(d)): This exception allows the IRS to disclose tax information to state tax agencies for the purpose of tax administration. Tax administration is broadly defined to include assessing and collecting taxes, as well as civil and criminal tax investigations. This exception is the primary basis for the IRS’s data sharing with California state agencies like the Franchise Tax Board (FTB).
• Statistical Use (IRC Section 6103(j)): The IRS can disclose certain tax information to the Bureau of the Census and other federal agencies for statistical purposes. This exception allows the government to use tax data to generate valuable insights into the economy and society, without compromising taxpayer privacy.
• Law Enforcement Purposes (IRC Section 6103(i)): In certain circumstances, the IRS can disclose tax information to law enforcement agencies for criminal investigations. This exception is subject to strict safeguards and requires a court order in many cases.
• National Security Purposes (IRC Section 6103(h)): The IRS can disclose tax information to intelligence agencies for national security purposes. This exception is also subject to strict safeguards and oversight.

5.2. Limitations on Disclosure to State Agencies

While IRC Section 6103(d) permits the IRS to share tax information with state tax agencies for tax administration purposes, there are important limitations on this authority.

5.2.1. Purpose Limitation

The IRS can only disclose tax information to state tax agencies for tax administration purposes. This means that the information cannot be used for any other purpose, such as law enforcement investigations unrelated to tax matters or for political purposes.

5.2.2. Safeguard Requirements

IRC Section 6103(p) requires state tax agencies to implement strict safeguards to protect the confidentiality of the tax information they receive from the IRS. These safeguards must include measures to prevent unauthorized access, disclosure, or use of the information.

5.2.3. Information Sharing Agreements (ISAs)

The IRS typically enters into Information Sharing Agreements (ISAs) with state tax agencies that outline the specific terms and conditions under which information can be shared. These agreements specify the types of information that can be shared, the purposes for which it can be used, and the safeguards that must be in place to protect the confidentiality of the data.

5.3. California State Law Restrictions

In addition to federal law restrictions, California state law also imposes restrictions on the disclosure of taxpayer information by state agencies.

5.3.1. California Revenue and Taxation Code

The California Revenue and Taxation Code contains provisions that protect the confidentiality of taxpayer information held by the FTB and other state agencies. These provisions generally prohibit the disclosure of taxpayer information except as authorized by law.

5.3.2. California Information Practices Act

The California Information Practices Act (CIPA) imposes requirements on state agencies regarding the collection, use, and disclosure of personal information. CIPA requires agencies to maintain accurate and complete records, to allow individuals to access and correct their records, and to protect the confidentiality of personal information.

5.4. Penalties for Unauthorized Disclosure

Both federal and state laws impose penalties for the unauthorized disclosure of taxpayer information.

5.4.1. Federal Penalties

IRC Section 7213 imposes criminal penalties on any person who willfully discloses tax information in violation of IRC Section 6103. These penalties can include fines and imprisonment.

5.4.2. State Penalties

California law also imposes criminal and civil penalties for the unauthorized disclosure of taxpayer information by state employees.

Alt text: Legal documents outlining IRS regulations, emphasizing the legal restrictions on the IRS’s authority to share taxpayer information.

6. How Can Taxpayers Access or Correct Information Shared Between the IRS and California?

Taxpayers can access information shared between the IRS and California by requesting their tax records from both agencies. If they find inaccuracies, they can file amended returns or contact the agencies directly to correct the data.

To further explain this, let’s explore the detailed steps taxpayers can take to access and correct their information shared between the IRS and California tax agencies.

6.1. Accessing Information from the IRS

Taxpayers have the right to access their tax records maintained by the IRS. This includes information reported on tax returns, W-2s, 1099s, and other documents.

6.1.1. Requesting Tax Transcripts

A tax transcript is a summary of your tax return information, including your adjusted gross income (AGI), taxable income, and any payments or refunds. You can request a tax transcript from the IRS in several ways:

• Online: Use the IRS’s Get Transcript tool, available on the IRS website. This is the fastest and easiest way to get a transcript. You will need to verify your identity using the IRS’s Secure Access process.
• By Mail: You can request a transcript by completing Form 4506-T, Request for Transcript of Tax Return, and mailing it to the IRS address listed on the form.
• By Phone: You can call the IRS’s automated phone system at 1-800-908-9946 to request a transcript.

6.1.2. Requesting Copies of Tax Returns

If you need a copy of your actual tax return, rather than just a transcript, you can request it from the IRS by completing Form 4506, Request for Copy of Tax Return. There is a fee of $43 for each return requested, and it may take up to 75 calendar days to process your request.

6.2. Accessing Information from California FTB

Taxpayers also have the right to access their tax records maintained by the California Franchise Tax Board (FTB).

6.2.1. Requesting Tax Information

You can request copies of your California tax returns and other tax-related information from the FTB by:

• Online: Log in to your MyFTB account on the FTB website and request the information online.
• By Mail: You can request information by writing a letter to the FTB and including your name, Social Security Number (SSN), tax year, and a description of the information you are requesting. Mail your request to the address provided on the FTB website.

6.3. Correcting Inaccurate Information

If you discover inaccuracies in the information shared between the IRS and California tax agencies, it is important to take steps to correct the errors.

6.3.1. Correcting Federal Tax Returns

If you find an error on your federal tax return, you can file an amended return using Form 1040-X, Amended U.S. Individual Income Tax Return.

• Key Steps:
  • Obtain Form 1040-X: Download Form 1040-X from the IRS website.
  • Complete the Form: Fill out the form, explaining the changes you are making and providing supporting documentation.
  • Attach Documentation: Attach any relevant documentation to support your changes, such as corrected W-2s or 1099s.
  • Mail the Amended Return: Mail the amended return to the IRS address listed on the form.

6.3.2. Correcting California Tax Returns

If you find an error on your California tax return, you can file an amended return using Form 540X, Amended Individual Income Tax Return.

• Key Steps:
  • Obtain Form 540X: Download Form 540X from the FTB website.
  • Complete the Form: Fill out the form, explaining the changes you are making and providing supporting documentation.
  • Attach Documentation: Attach any relevant documentation to support your changes, such as corrected W-2s or 1099s.
  • Mail the Amended Return: Mail the amended return to the FTB address listed on the form.

6.3.3. Contacting the Agencies Directly

In some cases, you may be able to correct inaccurate information by contacting the IRS or FTB directly, rather than filing an amended return.

• IRS: Call the IRS’s toll-free help line at 1-800-829-1040 or visit an IRS Taxpayer Assistance Center.
• FTB: Call the FTB’s help line at 1-800-852-5711 or visit an FTB office.

6.4. Documenting Communication

When contacting the IRS or FTB to correct inaccurate information, it is important to document all communication.

• Key Actions:
  • Keep Records of Phone Calls: Note the date, time, and