California FTB Notice California Audit Position Letter – No AIPS (AUD 1527A)

The AUD 1527A is the FTB’s audit position letter for cases where no AIPS (Audit Issue Processing System) tracking record was created — typically because the audit was handled outside the standard AIPS workflow. This happens in mail correspondence audits, certain limited-scope audits, and cases where the FTB’s review was triggered by a third-party data match rather than a full examination. The substance is the same as the AUD 1527: the FTB is proposing adjustments to your return. The procedural path is what differs slightly.

What’s easy to miss here: the absence of an AIPS record doesn’t mean the audit is informal or that the findings carry less weight. The proposed adjustments in an AUD 1527A are just as legally significant as those in a standard AUD 1527. The same 30-day response window applies. The same right to protest, request penalty abatement, and ultimately appeal to the Office of Tax Appeals all exist. The ‘No AIPS’ designation is an internal FTB administrative classification, not a signal about severity.

At The Reed Corporation, we treat AUD 1527A notices identically to the standard AUD 1527. We pull the underlying audit initiation notice, cross-reference the proposed changes against your original return, and identify what documentation supports or contradicts each proposed adjustment. The response strategy doesn’t change based on the form number.

The FTB issues the AUD 1527A instead of the AUD 1527 when the audit was conducted under a process that bypasses the AIPS system. Common scenarios: automated income verification audits triggered by 1099 or W-2 mismatches, correspondence audits where only a single line item was reviewed, audits initiated by the FTB’s Economic Analysis Unit for residency determination, and cases that started as a return correction but expanded into a broader review. These are typically narrower in scope than a field audit, but they can still generate significant proposed assessments.

The distinction matters for your audit record. AIPS-tracked audits create a paper trail within the FTB’s system that’s easier to access and reference in subsequent appeals. A non-AIPS audit may require additional records requests from the FTB to get the complete picture of what they reviewed and why. Under California Public Records Act requests, you can obtain the auditor’s workpapers, but non-AIPS audits sometimes have thinner documentation on the FTB’s side — which can actually work in your favor if you’re disputing the methodology.

We specifically request the FTB’s audit workpapers when responding to any AUD 1527A. If the FTB’s review was based on limited information — a 1099 data match without reviewing your full Schedule C or Schedule E — the documentation gap in their file becomes part of your defense. A non-AIPS audit that proceeded without complete information is often more reversible than a full field examination.

The response process is the same as for any FTB audit position letter: submit a written protest within 30 days of the letter date, address each proposed adjustment individually, and include supporting documentation for every item you’re disputing. Your protest should state clearly whether you agree, partially agree, or completely disagree with the FTB’s position, and explain your reasoning with specific references to the tax code and your supporting documents.

For AUD 1527A cases specifically, it’s worth including in your protest a request for the FTB’s complete audit file — the workpapers, data sources, and internal records the auditor relied on to propose the adjustments. You’re entitled to this information, and reviewing it sometimes reveals that the FTB’s adjustments were based on incorrect or incomplete data. For example, a 1099-NEC reported to California that you actually earned outside the state can generate an audit finding of unreported California-source income — the fix is documenting that the income wasn’t California-source, not disputing the 1099 itself.

We write every audit protest as if it might end up in front of an OTA judge, because sometimes it does. That means precise citations to R&TC sections, clearly labeled exhibits, and a logical narrative that makes the auditor’s supervisor (who usually reviews the protest) understand why the proposed adjustment is wrong. A well-organized response to an AUD 1527A resolves most non-AIPS audits without escalation.

After you submit your protest to the AUD 1527A, the FTB typically takes 60 to 120 days to issue a response — either accepting your protest, issuing a revised position, or sending a Notice of Proposed Assessment (NPA) that finalizes their adjustments. If the NPA is issued, you have 90 days from the date on the NPA to file a petition with the Office of Tax Appeals. Miss that window and the assessment becomes final and immediately collectible under R&TC Section 19082.

There’s an important timing consideration if you also have a federal audit open for the same year. Under R&TC Section 18622, California automatically picks up IRS audit adjustments and can reassess you within 2 years of being notified of the federal change. This means a California AUD 1527A for tax year 2021 could be followed by a separate California assessment in 2025 if the IRS adjusted your 2021 return in 2023. Closing both the federal and state matters in parallel, when possible, prevents that double-assessment risk.

Our office tracks all deadlines in the case management system the moment we receive an audit notice. We calendar the 30-day protest deadline, the expected FTB response window, and the 90-day OTA petition window. Clients get reminders at each stage. The FTB can be slow, but the taxpayer’s deadlines are strict — we make sure nothing gets missed.

Yes, though it’s uncommon for the FTB to initiate a process that results in a refund — most audit position letters are looking to collect more, not return money. But if your protest reveals that the FTB’s proposed adjustment was based on misapplied law or a math error, and you can show that you actually overpaid for the audit year, you can claim a refund as part of your protest response. California’s refund claim process under R&TC Section 19306 allows refund claims up to 4 years after the return due date or 1 year after the tax was paid, whichever is later.

A scenario where this actually happens: the FTB audits your Schedule C and disallows certain deductions, but in reviewing your complete return, you and your CPA identify a depreciation error from a prior year that was never corrected. Or the FTB’s adjustment to one line item reveals that you reported more income than you received and never claimed a deduction you were entitled to. These situations genuinely do arise in audits, and a skilled CPA will look for them rather than just defending the original return as filed.

We look at every audit as a two-way street — we’re defending the return, but we’re also looking for positions that weren’t taken originally that the evidence now supports. If the audit process is going to involve scrutiny anyway, it makes sense to surface any overpayments. We’ve recovered refunds for clients as part of audit resolutions, sometimes offsetting a portion of the tax the FTB was trying to collect.