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Sacramento IRS Audit Representation: FTB, EDD, CDTFA

Sacramento IRS Audit Representation

For any of your tax planning compliance and controversy needs in Sacramento, contact the Lawyers at The Tax Law Offices of David W. Klasing today. Our experienced Tax Lawyers offer a reduced-rate consultation on new cases or engagements. Call (916) 290-6625 or 800-681-1295 or contact us online today to schedule a reduce rate initial consultation at our Sacramento tax law offices, or at one of our other convenient locations across Southern California.

180 Promenade Cir #300 Sacramento, CA 95834

Fear and anxiety often accompany learning that you are the subject of an IRS Audit of your federal business or personal income tax returns. Typically, these audits can look at your records going back 3 years, but in extreme cases they may be able to look even further back. An IRS audit can either be a correspondence audit, an office audit, or a field audit. A correspondence audit is conducted entirely through the mail, over the phone, or by electronic messaging. Most audits during Covid will be correspondence audits. You will receive a letter asking for certain documents or records to back up positions taken on your tax returns. If you are unable to substantiate the return you filed, you may need the assistance of a dual licensed Tax Lawyer and CPA to gather or reconstruct these records before submitting a response to avoid civil and even criminal fraud penalties including the potential for jail time.

The second type of audit is an office audit. For this type of audit, you will be asked to come into the IRS office for an in-person meeting. An experienced Tax Lawyer & CPA can help you gather the documents you will be required to produce and can appear with you at the meeting to facilitate a smooth process. The third type of audit, a field audit, is the most serious type and is usually reserved for cases where civil and criminal penalties are being considered. The auditor will come to your home or place of business to examine records in person. As soon as you receive notice that a field audit will occur, you should contact a Tax Defense Lawyer & CPA right away.

See our IRS Audit Q and A library

California Franchise Tax Board (FTB) Audit Representation

The California Franchise Tax Board (FTB) conducts audits related to California state income taxes. Such an audit will usually occur if the FTB believes you have underreported income on your tax return or falsely claimed deductions, exemptions, or credits. Additionally, state law requires you to amend your California return within 6 months of a federal audit to reflect any related additions to California taxable income. If you fail to do so, the FTB may not actually conduct an audit but may merely “piggy-backs” off the findings of a federal audit done by the IRS and add penalties and interest. Even if the IRS finds that you did not owe the federal government money, you may owe money to the California due to differences between state and federal tax law.

The FTB also conducts numerous independent income tax audits for general compliance and delves into issues specifically related to California state tax law. An audit by the FTB should be treated just as seriously as one by the IRS and can also lead to criminal tax exposure. A tax lawyer can help you prepare your records and documents and can explain the difference between what the state will be looking at and what the IRS could look at. If you are found to owe additional tax penalties and interest to the state, your tax lawyer can file a protest to challenge their audit findings or negotiate directly with the FTB auditor (and if need be their manager) to negotiate a reasonable audit resolution.

California Employment Development Department (EDD) Audit Representation

The California Employment Development Department (EDD) conducts audits related to California payroll tax and worker classification issues (Independent Contractor Versus Employee). Each employer must take a certain amount out of their employees’ paychecks to forward to the proper state and federal agencies that require payroll taxes to be remitted. If you fail to take the money out of employees’ paychecks or take it out but do not remit it to the proper agency, you could face serious consequences.

Many times, the issue being investigated by the EDD is related to whether your company has been properly classifying its workers as either employees or independent contractors. While employers are required to withhold and remit payroll taxes for all employees, they are not required to withhold or remit for independent contractors who provide services for them. The rules regarding who is an employee and who is an independent contractor are complex. An experienced tax attorney can fight to prove that you have been properly classifying workers and work to mitigate any consequences if you made improper classifications.

See our Employment Tax Audit Library

California Department of Tax and Fee Administration (CDTFA) Audit Representation

The California Department of Tax and Fee Administration (CDTFA) conducts audits related to the collecting and remitting of sales taxes by businesses. There are complex rules that vary by locality and product about the amount of sales tax each company must charge and remit to the state. Issues investigated by a CDTFA auditor might include the failure to charge proper sales taxes on purchases or failing to remit the sales taxes charged to the proper state agencies as required.

These types of audits can be very invasive, with the CDTFA looking into every aspect of your business in addition to requesting a multitude of records and documents related to every sale that you have made. An experienced Tax Lawyer can help you gather and reconstruct the necessary documents and can try to work out a deal with the CDTFA if you have underpaid. If a final decision about an amount owed is issued by the CDTFA and you do not believe it is accurate, you will only have 30 days to file a petition challenging this, so having a lawyer on top of dates and deadlines can be crucial in fighting your case.

See our Sales Tax Audit Q and A Library