Awards & Recognition
In Panorama City, many employers are looking for ways to cut operating costs, and a common approach has been to hire independent contractors instead of full-time employees. As a bustling and diverse community within Los Angeles, Panorama City has seen an increase in businesses choosing this strategy to avoid expenses like workers’ compensation insurance, payroll taxes, and employee benefits. Additionally, businesses in Panorama City, particularly in highly regulated industries, may be attempting to protect themselves from potential wrongful termination claims by classifying workers as independent contractors. However, this approach often leads to the oversight of crucial consultations with seasoned California employment tax attorneys, resulting in potentially severe legal and financial consequences.
The California Employment Development Department (EDD) is generally concerned with conducting audits on businesses paying the proper payroll taxes. Businesses must withhold payroll and income taxes from their employees’ checks and remit them to the appropriate government agency. Failing to pay employment taxes and file employment tax returns can lead to severe consequences, including prison time and other significant civil and criminal tax penalties. Panorama City employers must be mindful of their federal and California state tax obligations, especially those in the bustling administrative, tech, and agricultural sectors. Suppose you have failed to comply with your tax responsibilities—particularly employment taxes—or have intentionally evaded your tax obligations. In that case, it is in your best interest to speak with a seasoned employment tax attorney as soon as possible. Together, you can evaluate your situation, take corrective actions, and create a plan to bring you back into compliance with the law.
The local economy in Panorama City and the San Fernando Valley delivers multiple business and job opportunities, which is a highly appealing aspect of living and working in this area. However, this can also lead to some complex employment tax situations that are best handled by our dual-licensed Tax Lawyers and CPAs. At the Tax Law Office of David W. Klasing, our dual-licensed Panorama City Employment Tax Attorneys and CPAs combine nearly three decades of legal experience assisting businesses and individual taxpayers with the full spectrum of California state, federal, and international tax matters, ranging from employment and payroll tax to divorce tax issues to general tax planning and tax preparation to criminal defense in felony tax cases. We excel at representing clients under high-risk federal or California state tax audits, especially where they blatantly cheated on the tax return under audit and thus fear criminal tax prosecution. When facing high-risk tax audits from agencies like the IRS, EDD CDTFA, or FTB, certain red flags, such as destroyed records, underreported income, badges of fraud, or unfiled returns, can intensify the examination and may lead to high-risk eggshell and reverse eggshell tax audits. As such, residents and businesses must be aware of potential criminal tax violations and the signs indicating that they might be under a more rigorous investigation by the IRS’s Criminal Investigation Division (CID).
For a reduced-rate initial consultation on your Tax, Employment, and Business law needs, contact our Panorama City Tax Lawyers today at 888-640-3408. The Tax Attorneys, CPAs, and EAs at The Tax Law Offices of David W. Klasing are more than able to take your case, fight the IRS on your behalf, and work to keep you clear of criminal and civil tax violations if you need to play defense.
Can Misclassification of Workers Lead to a Criminal Tax Investigation in Panorama City?
Determining whether to classify a worker as an employee or an independent contractor has profound tax implications for Panorama City employers across various industries, including landscaping, tech, and construction. This classification dictates responsibilities around the payment and withholding of several federal and state taxes, such as:
- Federal income tax
- Social Security taxes under the Federal Insurance Contributions Act (FICA)
- Federal Unemployment Tax Act (FUTA) taxes
When employers treat workers as independent contractors, they bypass specific legal responsibilities, including obligations for payroll taxes and workers’ compensation. While the cost savings may seem appealing, the financial and legal risks of misclassification can be severe. Proper classification is critical to avoid costly repercussions.
What are the Consequences of Misclassifying Workers?
Imagine running a landscaping business in Panorama City and hiring workers per job as independent contractors without withholding employment taxes. As the business grows, you switch to paying workers weekly but continue to classify them as contractors. An audit from the IRS or Employment Development Department (EDD) could reveal this as misclassification, potentially resulting in:
- A payroll tax deficiency
- Substantial penalties and interest on unpaid taxes
Consider also a cash-based landscaping business in Panorama City that attempts to classify workers as independent contractors but faces obstacles because the workers are reluctant to obtain the required business licenses. The business has them submit invoices, but eventually, the IRS sends a letter indicating an “employment tax compliance check” to review employment and income tax returns. In such scenarios, seeking help from experienced dual-licensed Panorama City EDD Tax Attorneys and CPAs becomes essential.
Who Could Be Personally Liable Under the Trust Fund Recovery Penalty?
Panorama City employers should be aware that misclassifying employees could expose owners and certain employees to personal liability for unpaid payroll taxes. If deemed a responsible person who acted willfully, you could be personally liable for the trust fund recovery penalty, which brings civil penalties and, in some cases, criminal charges. At the state level, California’s EDD conducts similar audits. Individuals who may be held responsible often include:
- Owners
- Corporate officers
- Key employees like bookkeepers or office managers
The IRS scrutinizes those who manage daily operations, such as corporate officers and managing partners, as well as employees involved in payroll who have authority over tax payments.
What Makes Someone a “Responsible Person” in the Eyes of the IRS?
The IRS takes a broad approach when determining who may be classified as a responsible person. Key factors include:
- Authority to sign checks or direct payments
- Involvement in tax payment decisions
- Influence over company funds
Even employees or investors who theoretically influence payroll decisions could be held responsible. Cases have occurred where individuals were liable despite opposing payroll decisions and even resigning over the dispute. IRS guidelines exist, but they do not guarantee immunity from being deemed a responsible person if you hold any authority over payroll decisions.
How Can Civil Audits Lead to Criminal Investigations?
An “eggshell” audit—where a taxpayer with potentially false returns is selected for a civil audit—can result in criminal charges if significant discrepancies are identified. In these cases, we leverage our expertise to seek a civil resolution and convince auditors that criminal action is unnecessary. However, auditors can still make criminal referrals.
A reverse eggshell audit, which is even riskier, involves a criminal investigation disguised as a civil audit. This approach is prevalent in Panorama City, where local and federal agencies collaborate to uncover tax fraud. Here, the taxpayer and their representative may be unaware that the audit is actually a criminal investigation. A Fraud Referral Specialist may assess the case before handing it over to a Criminal Investigation (CI) special agent, and any false statements during the audit can lead to additional criminal charges.
At The Tax Law Offices of David W. Klasing, our dual-licensed Tax Attorneys and CPAs possess deep experience in federal & California Employment tax and tax litigation. We have effectively represented taxpayers in Panorama City and surrounding areas, navigating diverse matters from audit defense to complex IRS and EDD disputes. Our grasp of federal and California state tax law, combined with a thorough understanding of the dynamic local economy, facilitates us in proficiently managing your case.
Our local office on Roscoe Boulevard enables us to provide personalized, easily accessible services to our clients, including those residing in Van Nuys, North Hills, North Ridge, North Hollywood, Burbank, and other neighborhoods in the San Fernando Valley. This local presence is especially beneficial during in-person scenarios such as IRS and EDD field or office audits.
Our professional relationships with local tax authorities, including the California Department of Tax and Fee Administration, the Office of Appeals, the Franchise Tax Board, and the California Employment Development Department (EDD) further equip us to advocate for your interests effectively. Whether your tax issues are California state or federal, you can count on us for a productive case assessment and skilled representation in the San Fernando Valley courts.
Our team combines a comprehensive understanding of the local economy and taxation environment, profound expertise in tax and employment law, and a dedication to client service to manage tax litigation in the San Fernando Valley effectively.
Understanding the Office of Tax Appeals (OTA) and Appealing an EDD Audit in Panorama City
In Panorama City, as in the rest of California, tax law encompasses a complex system of courts and agencies designed to resolve various tax disputes. While federal tax disputes typically go before the United States Tax Court, taxpayers may also choose to litigate in the United States District Court or the United States Court of Federal Claims. The primary venue for state-level tax disputes in Panorama City is the California Office of Tax Appeals (OTA).
The Role of the California Office of Tax Appeals (OTA)
Established in 2017 by Assembly Bill (A.B.) 131 under the Taxpayer Transparency and Fairness Act, the OTA is an independent entity that reviews disputes between Panorama City taxpayers and state tax agencies, which include:
- The Employment Development Department (EDD)
- The Franchise Tax Board (FTB)
- The California Department of Tax and Fee Administration (CDTFA)
Appealing an EDD Audit in Panorama City
If your Panorama City-based business is dissatisfied with the results of an EDD employment tax audit, it’s essential to know that you have options to appeal:
- Filing an Appeal: Appeals to the OTA must be submitted within a specific timeframe following receipt of the audit results.
- Review Process: The OTA has the authority to review the audit findings thoroughly and can either overturn or adjust the results if errors are found.
- Legal Representation: Engaging a seasoned tax attorney is crucial for navigating the appeal process effectively. An attorney will help ensure all necessary documents are accurately submitted and argue your case, maximizing your chances of a favorable outcome.
Mistakes in applying the law or assessing facts during an EDD audit are common. These errors can lead to inaccurate findings and unjust financial consequences for your business. California law provides a structured appeals process through the OTA, allowing Panorama City businesses to challenge audit results and rectify inaccuracies. Whether you have recently been notified that you were selected for an audit and need help navigating the following steps or have already been audited and are now seeking California or IRS appeals representation, our aggressive EDD negotiators and, where necessary, California State FTB, EDD, CDTFA Tax Litigation Attorneys & CPAs stand ready willing and able to litigate your tax case, but we find that the taxing authorities are more than willing to settle on fair and equitable terms once we convince them that the law and facts are on your side and we can prove it. To date, we have never lost in tax court. We won’t take your case if we don’t believe we’ll win.
Contact Our Dual-Licensed Panorama City EDD and Criminal Tax Investigation Attorneys Today
The Federal and State (CA) Tax Attorneys at The Tax Law Offices of David W. Klasing represent taxpayers in Panorama City and throughout Los Angeles, Los Angeles County, and the San Fernando Valley on a variety of tax law needs. Our Tax Lawyers, CPAs, and EAs are ready, willing, and able to represent you if you are facing a Federal or California Tax Audit or criminal tax investigation. The firm has extensive experience with the following California taxing authorities: California Department of Tax and Fee Administration “CDTFA” and its sister agency, Office of Appeals “OAT”, together formerly known as the “BOE”, Franchise Tax Board “FTB” Employment Development Department “EDD”.
Our skilled tax litigation lawyers have extensive knowledge and experience dealing with various federal and California state tax issues. This incorporates representing clients in disputes involving IRS audits, disputes with the CDTFA, EDD, and FTB, claims for refund, tax collection defense, innocent spouse relief, criminal tax defense, and more. Whether it’s handling cases of criminal tax exposure, guiding you through a civil tax audit, eggshell audit, reverse eggshell audit, or defending against a criminal tax investigation, the expertise of our seasoned dual-licensed Panorama City Tax Litigation Attorney and CPA is invaluable. As an experienced litigator, David W. Klasing can represent you in the Tax Court or before the California Office of Tax Appeals (OTA). Call 888-640-3408 or schedule a reduced-rate initial consultation here at our Panorama City office or one of our other convenient locations across Southern California.
Our Panorama City Office is Conveniently Located at:
14500 Roscoe Blvd 4th floor
Panorama City, CA 91402
(818) 935-6098
