The State Stole My Money: Is Your Tax Refund Safe?

SACRAMENTO (CBS13) – If you take money that doesn't belong to you, it's theft, but somehow the Franchise Tax Board, the agency that collects your taxes, is getting away with it.

Pedro Dominquez says the state stole his tax refund to pay someone else's debt

"You just can't reach into somebody's pocket and take their money," he said.

But Dominquez says the State of California did just that. He says the Franchise Tax board swiped $420 out of his tax refund and sent it to Napa Superior Court for an unpaid traffic ticket issued to someone with a similar name.

"I don't have any relationship to Napa," he said.

The Franchise Tax Board also serves as a collection agency for more than 600 government agencies. But first, it requires those agencies to send a warning letter to give you time to clear up any mistakes. But Dominquez never got a warning letter.

Neither did Anthony Jones before the state swiped $125 from his tax refund, for a traffic ticket that wasn't his.

"I feel as if you're putting a gun to me and robbing me," said Jones.

It's the same story for Randy Settlemire, who we spoke with in 2017, as both were left with no chance to clear the mistake on debts they didn't owe.

"It borders on criminal activity in my opinion," Settlemire said.

Especially since the state knows where to find him. Jones works for the State of California. Still, a letter went to an address he hadn't used in 15 years.

"That's correct," said Settlemire.

We've learned those local warning letters went to the wrong addresses, even the wrong people. And this may be why – the Franchise Tax Board only requires a local agency to do an internet search to find someone's address.

That's right, only a simple Google search, which makes it hardly surprising that warning letters are going to the wrong address and the wrong people causing the state to raid money from the wrong taxpayers.

"There should have been more due diligence to find out before they start taking somebody's money," said Dominquez.

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Especially considering the Franchise Tax Board has what just might be the most accurate, up-to-date database of addresses from every California tax filer.

We asked Settlemire if he pays his state taxes each year.

"Like clockwork. Yes, sir," he said.

That means the Franchise Tax Board knows where to find him. But we've learned the agency doesn't even compare the addresses the local agencies used for those warning letters.

We asked Jacob Roper of the Franchise Tax Board in 2017 about that process.

"It's frustrating," Roeper said.

It took a while but the state finally admitted a problem.

"Taxpayers have the right to be notified beforehand, so they get time to take care of it," Roper said.

Nearly four years later, it's still a problem. Since 2017, the state has taken money in error 638 times.

"I would consider that a lot," said Jon Coupal of the Howard Jarvis Taxpayers Association.

Coupal says the Franchise Tax Board should protect Californian's money, not give it away, which he calls a crime.

"Maybe the FTB should not be involved in this process of being a collection agency for local governments," Coupal said.

The Franchise Tax Board says with one million intercepts a year, "perfection is not always achievable."

But since our investigation, the agency said they've put a "process in place to quickly resolve intercept errors."

Dominquez says it shouldn't happen at all.

"In my eyes? You stole my money," he said.

And it was only after we got involved that each of our viewers got their money back.

"Now I understand why people say our justice system just don't work. Because it don't," Dominquez said.

The state told us they'll "consider suggestions to improve the program."

We gave them a list: Require more than a Google search before intercepting someone's money or perhaps compare addresses with what they have on file in their own database.

[2/10 UPDATE]

State Controller Betty T. Yee, the chair of the Franchise Tax Board, responded to our investigation Wednesday.

After our investigation, she said she would support requiring more than a Google search to find taxpayer addresses before intercepting refunds, saying: "The information FTB has readily shared with you since October accurately reflects the efforts the team has undertaken to improve the offset program in recent years. Your own reporting indicates an error rate of less than one per day for a program that sees a million offsets per year. The goal, of course, always is 100 percent accuracy, and I support FTB's ongoing efforts to improve review of external data to move us closer to that goal."

[2/11 UPDATE]

A second FTB member responded to the investigation on Thursday. Antoino Vazquez is Chairman of the Board of Equalization.

"As a Member of the Franchise Tax Board, I take this oversight very seriously.  This needs to be a priority and I look forward to working with our board to explore ways to improve the debt-collection program. I have previously had an unpleasant experience of mistaken identity and would not like anyone to experience the stress it can cause.  I have spoken with the FTB Executive Officer and we aspire to improve and work with other state and local agencies to ensure the accuracy of all information. I appreciate the input I have personally received, and we will work on further improvements in the processes as we explore additional solutions," Vazquez said.