FTB Notice - Excessive Expenses

If you have received a letter from the California Franchise Tax Board (FTB) titled Form 4709 ENS, you are not alone—and you should not ignore it. This notification is part of the FTB’s effort to identify potential discrepancies in tax filings, particularly among self-employed individuals and small business owners who report their income and expenses using Schedule C (Form 1040).

FTB Form 4709 ENS is a letter that the FTB sends to business taxpayers when it flags a tax return for potentially excessive or unusual business expenses. The acronym "ENS" stands for "Entity Notice Schedule" and typically relates to the state’s efforts to compare your reported expenses with industry norms based on your business activity code.

For example, if you report $150,000 in gross income but $145,000 in business expenses—especially in categories that appear inconsistent with standard ratios for your industry—you may be selected for review.

You may receive FTB Form 4709 ENS for several reasons, including:

• High or unusual deductions compared to your business income
• Expenses that deviate from industry norms
• Year-over-year inconsistencies in reported income or deductions
• Missing or misclassified expense categories on your tax return

This notice does not necessarily mean you are being audited, but it is a warning that your tax return may come under closer scrutiny if no action is taken.

If you have received FTB Form 4709 ENS, here are the steps you should take:

1. Review Your Tax Return Carefully
   Compare your business expenses to prior years and to industry benchmarks. Are all your deductions substantiated and categorized correctly?
2. Gather Supporting Documentation
   The FTB may request proof of your deductions—such as receipts, invoices, mileage logs, or payroll records.
3. Consult with a Tax Professional or Attorney
   An experienced tax attorney can help determine whether an amended return is necessary and communicate with the FTB on your behalf.
4. Respond Promptly and Accurately
   If action is needed, respond to the FTB within the timeframe specified in the letter. Ignoring the notice can lead to audits, penalties, or assessments.

While the letter itself is not a penalty or audit notice, failing to address discrepancies could result in:

• Additional tax assessments
• Accuracy-related penalties
• Interest on unpaid taxes
• A full audit of your return

At the Ben-Cohen Law Firm, we assist California business owners and self-employed individuals in navigating FTB notices like Form 4709 ENS. Our legal and tax professionals can:

• Analyze your return for compliance issues
• Help you gather and organize supporting documentation
• Draft a formal response to the FTB
• Represent you in any communications or proceedings

If you have received FTB Form 4709 ENS and are unsure how to proceed, do not ignore it. Contact the Ben-Cohen Law Firm today at (310) 272-7600 for a confidential consultation. We will help you take the right steps to protect your financial and legal interests.