California FTB Notice Statute of Limitations Waiver Cover Letter (AUD 3570)

The AUD 3570 is a cover letter the California Franchise Tax Board sends when asking you to voluntarily extend the statute of limitations — the legal deadline by which the FTB must complete an audit and issue any assessment. The FTB sends this when an ongoing audit is close to the end of the four-year assessment window under California Revenue and Taxation Code Section 19057 and they don’t have enough time to finish. Signing the waiver extends their deadline.

The FTB’s standard audit assessment period is four years from the original return due date. For a 2020 return due April 15, 2021, the FTB generally has until April 15, 2025 to issue an assessment. If an audit started in 2024 and isn’t complete by that date, the FTB either issues an assessment based on what they have, closes the case, or asks you to waive the statute. The AUD 3570 cover letter accompanies the actual waiver form — usually AUD 3570D for individuals.

Deciding whether to sign a California FTB statute of limitations waiver is one of the more consequential decisions in an audit. The Reed Corporation evaluates every waiver request on its specific facts before recommending a course of action to clients.

Not automatically. Signing the AUD 3570 waiver is entirely voluntary — the FTB cannot force you to extend the statute. But refusing has consequences. If you decline and the statute expires before the FTB completes its audit, the FTB must issue an assessment based on what they’ve developed so far, or lose the ability to assess additional tax for that year entirely. That’s sometimes favorable, sometimes not — it depends on where the audit stands.

The waiver benefits the FTB more than it benefits you in most cases. You’re giving them more time to build a case against you. However, there are situations where signing makes sense: if additional time would allow you to gather documentation that reduces your liability below the FTB’s current estimate, if the FTB has indicated they’d issue a large assessment if forced to close, or if the audit involves complex issues where a rushed assessment would be harder to dispute than one that’s been fully developed.

We analyze every waiver request by asking: what’s the FTB’s current estimated adjustment? What documentation do we have left to provide? Is the assessment they’d issue today better or worse than what they might issue with more time? Our recommendation varies case by case, but we’ve told clients to decline waivers when the FTB’s current position was weak and the statute expiring was actually in the client’s favor.

If you refuse to sign the AUD 3570 waiver and the statute of limitations is close to expiring, the FTB has two choices: issue a protective assessment for the maximum amount they believe you owe before the deadline, or close the audit without assessment for that tax year. The protective assessment is their most common response — they’ll issue a Notice of Proposed Assessment at the high end of their estimated range before the statute runs out, then give you 60 days to protest.

A protective assessment isn’t the end of the story. You can protest it within 60 days and continue to present documentation during the protest process. The assessment amount at that point often doesn’t reflect the final liability — it’s a placeholder issued under time pressure. That means you may actually have a better argument in protest than you would have had in the audit itself if the FTB was rushed.

There’s one more option: a limited-scope waiver. You can offer to sign a waiver that extends the statute only for specific issues — not the entire return. For example, if the FTB is questioning your rental income but the rest of your return is clean, you might offer to extend the statute only for Schedule E items. The FTB sometimes accepts limited waivers. That negotiation requires knowing exactly what the FTB is focused on.

The AUD 3570 waiver typically extends the California FTB assessment deadline by one year, though the specific duration is negotiable and stated on the waiver form itself. Most waivers extend the standard four-year period under California Revenue and Taxation Code Section 19057 to five years from the original return due date. You and the FTB can agree to a shorter extension — six months, for example — if you both want to set a firm closing deadline.

A waiver can be signed more than once if the audit is still unresolved when the extended deadline approaches. Some complex audits result in two or even three waivers stacked on top of each other, pushing the effective audit window to six or seven years beyond the original return date. Each waiver extension is a separate negotiation and signing decision. Just because you signed one doesn’t mean you have to sign the next.

We negotiate the scope and duration of California FTB waivers carefully. We won’t sign an open-ended waiver when a fixed-term extension achieves the same goal. A waiver with a firm expiration date creates pressure on both sides to resolve the audit — which is usually in the client’s interest even when some additional time is needed.

The standard California FTB assessment period is four years from the original due date of the return under California Revenue and Taxation Code Section 19057. For a 2021 California return due April 18, 2022, the FTB has until April 18, 2026 to assess additional tax. If you filed an extension, the four-year clock still starts from the original due date — not the extension date. Extensions to file don’t extend the FTB’s assessment window.

There are important exceptions that extend the statute well beyond four years. If you underreported California income by more than 25% of gross income, the assessment period jumps to eight years under R&TC Section 19057(b). If the FTB alleges fraud, there’s no statute of limitations at all — they can assess at any time. And for a year where no return was ever filed, as mentioned earlier, the clock never starts.

Federal changes are another exception. When the IRS makes an adjustment to your federal return, that restarts the California statute for the same year — the FTB gets a new two-year window from the date you’re required to report the federal change to California. If you don’t report it, that two-year window never starts and California’s assessment right remains open indefinitely for that year and issue.