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California Tax Law Issues [Infographic]

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    California Tax Law Issues [Infographic]

    California’s top tax law issues are unique. Here is an overview of the top tax issues we see in the Golden State so you can avoid these pitfalls as a California taxpayer.


    Sales tax audits


    • Collecting California sales tax and failing to remit it and skimming cash sales off the top or pocketing the cash to reduce both California sales and income tax is fraud
    • Sales tax audits ensure the correct amount of sales tax is paid and raise state revenue
    • Issues that most often trigger audits are:
    • collecting and not remitting sales tax
    • collecting sales tax without a resale number
    • underreporting cash / non-cash sales which is identified by a “markup audit”


    Tax evasion and eggshell audits


    • An eggshell audit happens when the return under audit contain deliberate understatements of income, overstatements of deductions, or claims credits that a taxpayer is not entitled to
    • Eggshell audits expose taxpayers to potential criminal prosecution who fraudulently report less tax liability than they really owe
    • Even if you did everything right on your income tax return, failure to report assets or income in California collections (where the government is trying to collect taxes that have been assessed) is criminally prosecutable as tax evasion



    Employment law mistakes


    Employment tax audits can result in charges of tax fraud, tax evasion, or obstruction


    • Out of state individuals and businesses that ignore California taxing nexus can be charged if they fraudulently avoid California income or corporate tax, payroll tax, use tax, and sales tax obligations
    • The California Voluntary Disclosure Program can help out of state individuals and businesses avoid worst-case scenarios when they’ve made mistakes
    • Other employment problems that can lead to audits or criminal charges include:
    • Businesses that purposely misclassify employees as independent contractors and fail to withhold their income taxes
    • Failure to file
    • Cash-intensive businesses fraudulently not reporting cash sales
    • Businesses that hire illegal aliens


    Tax fraud and divorce issues


    • Schemes to insulate assets from allocation on the Martial Balance Sheet can result in tax fraud where income related to the hidden assets goes unreported for tax purposes
    • Accusations of tax fraud made by a spouse in open court can result in the judge informing the taxing authorities.


    California’s Top 500 List


    • California lists the top 500 delinquent taxpayers, both personal and corporate, here.
    • Owing the state of California for assessed but unpaid tax liabilities can result in the suspension of California professional licensing.




    If you are facing any of these common California tax issues, seek out a skilled professional for help. Contact the Tax Law Offices of David W. Klasing at 800-681-1295 or visit our website for more information



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    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

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