Newsom takes credit for stopping $6 billion in California tax fraud

Newsom announces a big fraud prevention win

California Gov. Gavin Newsom said on Feb. 25, 2026, that the state’s Franchise Tax Board has blocked more than $6 billion in tax fraud since he took office.

That money funds schools, public safety, and other core services. In fiscal year 2024-2025 alone, the agency stopped about $579 million in improper refunds.

The announcement comes as California faces a projected budget shortfall of nearly $18 billion.

Budget pressure makes every dollar count

California’s nonpartisan Legislative Analyst’s Office projects a budget deficit of nearly $18 billion for fiscal year 2026-2027.

State Controller Malia Cohen, who chairs the Franchise Tax Board, said stopping fraud is critical as the state faces tough money decisions.

Cohen said early detection preserved funding for services Californians depend on. The FTB’s success matters more right now because the state needs every dollar it can protect.

The FTB handles most of the state’s money

The Franchise Tax Board runs California’s personal income tax and corporation tax programs. The agency collects about 78% of California’s General Fund revenue.

In fiscal year 2024-2025, the FTB received more than 22.8 million tax returns and processed more than 9.9 million payments.

That volume makes the agency’s ability to catch fraud quickly especially important for keeping the state’s finances on track.

Three main types of fraud are targeted

The FTB’s fraud team focuses on three key areas: fake claims for refundable tax credits, erroneous refund payments, and tax-related identity theft.

Refundable credit fraud happens when people file bogus claims for credits like the California Earned Income Tax Credit or the Young Child Tax Credit.

Identity theft fraud involves criminals using stolen personal data to file fake returns and pocket refunds. The expansion of refundable business credits at the federal level has also shifted parts of the fraud landscape.

Staff training and data tools drive results

The FTB invested in training staff to spot new fraud patterns and act fast on suspicious filings. The agency uses data-driven review practices to flag fraudulent returns before refunds go out.

It also strengthened its website to help taxpayers recognize scams and file securely.

The agency’s fraud detection system, known as the Fraud Analysis and Detection Solution, supports the program’s day-to-day work, according to the Governor’s office press release on FTB fraud prevention results.

Multiple agencies work together on fraud

The FTB teams up with several California agencies, including the Employment Development Department, the California Department of Tax and Fee Administration, and the Secretary of State.

It also takes part in the national Information Sharing and Analysis Center, a public-private partnership formed in 2017 that includes the IRS, state tax agencies, and the tax industry.

Through that partnership, agencies share intelligence and track national fraud trends. The FTB also works with the California Highway Patrol and the FBI on fraud cases.

California faces scrutiny in other programs

While the FTB reported strong results, California has faced questions about fraud elsewhere.

The California State Auditor reported that about $1.5 billion in improper unemployment insurance payments went out in 2023 and 2024, according to The Center Square reporting on broader California fraud challenges.

The state has also faced scrutiny over $24 billion in homelessness program spending that has not been fully accounted for. The FTB’s tax fraud prevention figures have not been independently audited outside the agency.

Scammers pose as tax officials to steal data

Scammers often pretend to be IRS or FTB employees to trick people into sending money or handing over personal information. They use text messages, phone calls, emails, fake websites, and fraudulent mail.

Last year, the FTB and its partners fought a texting scam that sent taxpayers to a fake version of FTB webpages built to steal banking and personal data.

The FTB said bad actors keep evolving their tactics, including using artificial intelligence to create convincing fake notices.

Here is how to protect your information

Do not reply to or click links in messages claiming to be from the IRS or FTB. Do not download attachments from unknown senders.

Never share personal, tax, bank, or credit card details in response to unsolicited contact. If a message looks suspicious, call the FTB directly at 800-852-5711 to verify it.

The FTB said that when in doubt, taxpayers should always reach out before responding to anything that asks for sensitive information.

Refundable credits draw the most fraud attempts

California offers several refundable tax credits aimed at lower-income residents, including the California Earned Income Tax Credit and the Young Child Tax Credit.

Because these credits pay out as cash refunds, they attract more fraud than non-refundable credits. Newsom noted that expanding refunds and tax relief increases risk and requires more vigilance from the agency.

These credits help working families, which makes protecting them from fraud a priority for the state.

Deficits could grow without action

The LAO fiscal outlook projecting California’s budget deficit points to spending growth that outpaces revenue as the main driver of the gap.

The state has run deficits for several years in a row, even with strong tax revenue from the tech and AI sectors. The LAO warned that structural deficits could reach about $35 billion a year by fiscal year 2027-2028.

Every dollar protected from fraud helps narrow the gap between what California collects and what it spends.

The FTB pushes for better detection tools

The FTB has asked for funding to modernize its data platform and improve how it detects fraud in real time. The agency said it needs faster access to tax return data to catch problems as they happen.

The FTB also plans to expand its partnerships and keep up with new threats, including scams built with artificial intelligence.

Tax season is underway, and the FTB urged all California taxpayers to file accurately and stay alert.

This article was created with AI assistance and human editing.

Read more from this brand:

• Declawing your cat is now a crime in California
• Newsom Sticks California with $2.9 Billion Deficit in Final State Budget
• California Accused of Losing $250 Billion to Fraud in Largest State Scandal Ever