California FTB Notice Reported Income (FTB 4108 ENS)

The FTB 4108 ENS is a Reported Income notice from the California Franchise Tax Board. It’s sent when the FTB has income information on file — from W-2s, 1099s, or other information returns — that doesn’t match what was reported on your California return, or when you haven’t filed a California return at all for the year referenced. The FTB is essentially telling you: ‘We know about this income, and we need you to account for it.’

California receives information reports from all employers and payers doing business in the state — W-2s, 1099-NEC, 1099-MISC, 1099-INT, 1099-DIV, 1099-B, and others. They cross-reference these against filed returns. The FTB 4108 ENS is specifically formatted for situations where the discrepancy has reached the point where the FTB wants a formal response from you or your employer. The ‘ENS’ designation means employer notification was also sent.

This isn’t a final assessment, but it’s one step away from becoming one. Ignoring the FTB 4108 ENS typically results in a Notice of Proposed Assessment based on the income the FTB has on record, without any credit for your deductions, exemptions, or credits. That proposed assessment is almost always higher than your actual tax liability.

The FTB 4108 ENS can cover virtually any type of income that was reported to the FTB by a third party. Wages on a W-2, freelance income on a 1099-NEC, rental income that was reported by a property management company, investment income from a 1099-DIV or 1099-B, retirement distributions on a 1099-R, or unemployment compensation on a 1099-G are all possibilities. The notice will specify which income type and the dollar amount the FTB believes you received.

California taxes nearly all types of income, including unemployment compensation and Social Security benefits (to the extent they’re taxable federally). California’s top marginal rate is 13.3% on income over $1 million, and the 9.3% rate kicks in at just $66,295 for single filers (2023 figures). Even modest unreported income — a $5,000 freelance gig — can generate a $500-600 additional tax bill plus penalties before interest is added.

One thing the FTB 4108 ENS doesn’t account for: the income it lists is gross income, not net. If you received $20,000 in freelance income and had $8,000 in legitimate business expenses, your taxable net income is $12,000 — but the FTB’s notice will reference the full $20,000. Responding with documentation of your deductible expenses is critical to arriving at the correct tax owed.

Your response to the FTB 4108 ENS depends on whether you agree or disagree with the income reported. If the income is correct and you simply didn’t include it on your California return, file an amended return (California Form 540X) reporting the income and paying the resulting tax as soon as possible. Filing an amended return proactively is almost always better than waiting for the FTB to issue a formal assessment — it demonstrates good faith and often results in lower penalties.

If the income is incorrect — wrong amount, income attributed to you that wasn’t yours, or income that’s exempt from California tax — you need to respond in writing with documentation explaining the error. This might mean showing that the 1099 has an error and providing a corrected version from the payer, demonstrating that the income was earned in another state (if you were a nonresident), or showing that the funds represented a return of basis rather than taxable income.

Respond within the timeframe stated in the notice — usually 30-60 days. If you need more time to gather documentation, call the FTB and request an extension before the deadline passes. A written extension request is better than a phone request because it creates a record. We handle FTB 4108 ENS responses regularly and know how to present income adjustments in a way that moves the FTB toward accepting your position quickly.

If you failed to report income on your California return, the FTB can assess several penalties on top of the additional tax. The delinquency penalty under Revenue and Taxation Code Section 19132 is 5% of the unpaid tax for the first month, plus 0.5% for each additional month (up to 25% total) if you didn’t file. If you filed but simply underreported income, the accuracy-related penalty under Section 19164 is 20% of the underpayment. Interest on the unpaid tax runs at 8% annually from the original due date.

For more significant underpayments — particularly where the FTB believes the omission was intentional — the fraud penalty can reach 75% of the understatement. The FTB rarely pursues fraud penalties for first-time omissions of modest amounts, but the possibility shows why addressing the FTB 4108 ENS quickly and transparently is important. Proactive disclosure and cooperation consistently lead to better outcomes on penalty abatement requests.

California does have a first-time penalty abatement program under Revenue and Taxation Code Section 19132.5. If you have a clean prior compliance history and this is your first instance of failing to report income, you can request waiver of the delinquency or accuracy penalty. This doesn’t reduce the underlying tax or interest, but it can cut the penalty to zero in qualifying cases. We file penalty abatement requests as standard practice when the facts support it.

Yes. If the FTB’s review of your response to the FTB 4108 ENS raises additional questions, or if the income discrepancy is large enough to suggest broader compliance issues, the FTB can escalate from a correspondence inquiry to a full field audit. The FTB’s audit selection models are sensitive to large, unresolved income discrepancies — an unanswered 4108 ENS for a substantial amount is exactly the kind of signal that can trigger a more thorough examination.

The good news: if you respond fully and accurately to the 4108 ENS, the matter often closes at the correspondence level. The FTB’s goal at this stage is to get the right tax paid, not necessarily to investigate your entire financial picture. A clear, documented response that accounts for the income and pays the resulting tax (or explains why the reported income isn’t taxable) usually ends the matter.

Where it can expand: if your response reveals deductions or credits the FTB wants to examine, or if the FTB notices other years where similar patterns appear in your filings, they can open a broader audit. This is one reason why the 4108 ENS response needs to be accurate and consistent with your actual return — a response that raises new questions can invite more scrutiny, not less. We structure responses to answer what was asked without creating new audit hooks.