Awards & Recognition
San Diego, a bustling coastal city in California, is renowned for its beautiful beaches, thriving biotechnology sector, and robust economy. As a hub of rapid economic growth, San Diego is home to many startups and well-established corporations contributing to the city’s dynamic financial landscape. Navigating through the intricate federal and California state tax laws is crucial for these enterprises, as adherence to them is not only mandatory but pivotal in safeguarding them from severe legal repercussions.
Amid San Diego’s bustling economic environment, the IRS Voluntary Disclosure Practice (VDP) and California State VDP offer indispensable lifelines for taxpayers. Whether individuals or corporations have inadvertently failed to meet their complete tax compliance obligations or have engaged in intentional omissions, overstatements, or understatements, the Voluntary Disclosure Practice offers a valuable opportunity for rectification. Engaging in voluntary disclosure allows taxpayers to amend these errors, mitigate the impact of civil tax penalties, and significantly eliminate the risk of criminal tax prosecution.
At the Tax Law Offices of David W. Klasing, our San Diego, CA Voluntary Disclosure Attorneys & CPAs navigate the complexities of various federal and California state voluntary disclosures, including domestic, offshore, CDTFA (BOE), and FTB voluntary disclosures, streamlined procedures, and delinquent FBAR and international information return submission procedures. If you have financial accounts abroad, ensure you report the assets correctly – and avoid costly tax penalties – by working with our San Diego Foreign Account Tax Compliance Attorneys & CPAs.
As long as a taxpayer who has willfully committed tax avoidance (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the federal or California state tax non-compliance through a domestic or offshore voluntary disclosure before the IRS or the California state agency has started an audit or criminal tax investigation/prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
Federal and California State Voluntary Disclosure in San Diego: Key Considerations
The IRS Voluntary Disclosure Practice (VDP) in San Diego provides a crucial pathway for taxpayers who have intentionally failed to adhere to federal tax laws. This practice allows them to amend their previous mistakes without the looming threat of criminal tax prosecution. The IRS meticulously considers voluntary disclosures that are timely, accurate, and comprehensive when deciding whether to recommend criminal tax prosecution. Engaging in a voluntary disclosure with the IRS necessitates providing truthful, complete, and appropriate information regarding past non-compliance with federal tax laws.
Like the IRS, the State of California’s Franchise Tax Board (FTB) and the California Department of Tax and Fee Administration (CDTFA) provide a method for non-compliant taxpayers in San Diego to regain compliant status by coming forward with the details of their failure to comply with the California state tax code. The path to voluntary disclosure to the FTB depends on whether you are an in-state or out-of-state filer.
What is the In-State California Voluntary Disclosure Program?
For in-state taxpayers, sales tax voluntary disclosure is only available for purchasers within California who are not otherwise required to hold a seller’s permit. It is only used to report and pay the balance of any sales and use taxes that the applicant owes. To qualify for the In-State Voluntary Disclosure Program, all of the following must be true:
- You reside or are located within California and have not previously registered with the CDTFA;
- You have not previously filed an Individual Use Tax Return with the CDTFA;
- You have not reported an amount for use tax on your Individual Income Tax Return filed with the Franchise Tax Board;
- You are not engaged in business in this state as a retailer, as defined in Revenue and Taxation Code section 6015;
- The CDTFA has not contacted you for failure to report the use tax imposed by section 6202 of the Revenue and Taxation Code;
- Your failure to pay the tax or file a return was due to reasonable cause and not as a result of negligence, intentional disregard of the law, or an intent to evade taxes;
- Your purchase is not of a vehicle, vessel, or aircraft, and
- You submit your application voluntarily.
How Can Out-of-State California Voluntary Disclosure Program Guide Me
The FTB’s Voluntary Disclosure Program provides a method of recourse for out-of-state businesses and their operators to avoid penalties for delinquent or amended filings where honest mistakes prevented their timely compliance.
The state legislature passed expansions to the Voluntary Disclosure Program in 2017, including out-of-state trusts with California beneficiaries and nonresident partners from out-of-state partnerships. The new additions to the program also allow the FTB to waive late filing penalties for specified returns from S corporations and partnerships.
Applications to the FTB must be submitted via mail through form FTB 4935, coupled with the supplementary documentation necessary to explain the nature of the non-compliance. You will not qualify for the program if you have registered with the California Secretary of State, filed a return with the State of California, or received a notice to file a return in California.
Requirements and Timing for Voluntary Disclosure
Taxpayers engaging in voluntary disclosure must:
- Commit to paying the federal and California state tax, interest, and any penalties that are applicable in good faith;
- Collaborate with the IRS and the California Franchise Tax Board (FTB) to ascertain the accurate amount of federal and state tax liability;
Voluntary disclosure is deemed timely under the following conditions:
- It is made before the IRS initiates a civil audit or criminal tax investigation;
- It occurs before the IRS receives information about tax non-compliance from third parties, such as informants, other governmental agencies, or through John Doe summons;
Note: We have seen the IRS routinely admit taxpayers into voluntary disclosures where we are positive that they have John Doe information as a matter of administrative convenience, but this cannot be guaranteed. The trick is to get into a voluntary disclosure before the IRS acts on the information they have obtained via John Doe summons.
- It is submitted before the IRS obtains information related to non-compliance through criminal tax enforcement actions, like search warrants or grand jury subpoenas.
What Benefits Does California Voluntary Disclosure for Income or Corporate Taxes Provide?
The exact benefits your organization or company can obtain are based on the facts and circumstances surrounding your income, corporate, franchise, sales, or use tax error. However, businesses, taxpayers, and other entities that can qualify will generally be able to avoid a worst-case scenario. They can typically expect to have specific penalties that would otherwise be imposed waived. San Diego taxpayers who enter the FTB’s voluntary disclosure program to address income, franchise, or corporate tax issues can potentially avoid any or all the following penalties under California law:
- Failure to make and file a return (Section 19131)
- Failure to pay any amount due by the date prescribed for payment (Section 19132)
- Underpayment of estimated tax (Section 19136)
- Secretary of State penalty (Section 19141)
- Failure to furnish information or maintain records (Section 19141.5)
- Underpayment of tax (Section 19142)
- Failure to file information returns (Section 19183)
- Late filing of partnership returns (Section 19172)
- Contract voidability penalty (Section 23301.5)
This potential tax penalty relief will apply for all the years covered by the disclosure agreement. Eliminating penalties that would otherwise be imposed can significantly reduce a business or entrepreneur’s tax burden.
Get Back into Tax Compliance without Facing Criminal Tax Prosecution with our dual-licensed Voluntary Disclosure Attorneys and CPAs
If you’re in San Diego and realize that you could face criminal tax prosecution over a history of blatantly cheating on your tax returns if discovered, voluntarily disclosing this history by knocking on the IRS’s door before they bang down your door is the most crucial step towards resolution without facing criminal tax prosecution. This program is vital for individuals who have willfully understated their federal and California tax liabilities. It provides a systematic and secure avenue to rectify their tax status while avoiding criminal tax prosecution. Similarly, the State of California’s Franchise Tax Board (FTB) and the California Department of Tax and Fee Administration (CDTFA) provide methods for non-compliant taxpayers in San Diego to regain compliant status by coming forward with the details of their failure to comply with the California state tax code.
At the Tax Law Offices of David W. Klasing, our seasoned team is adept at preparing thorough initial disclosures, ensuring that all relevant facts, documents, and return information are presented with transparency and cooperation. We are not just another legal office in the city; it’s a nexus of federal and California state tax proficiency led by one of the nation’s most uniquely qualified civil and criminal tax controversy defense professionals. While the nation boasts approximately 1.1 million attorneys and 560k CPAs, an estimated mere 24k hold both prestigious designations. More profoundly, you’ll find that an even tinier elite group, roughly 3,000, have additionally earned a Master’s in Taxation. David W. Klasing is a proud member of this exclusive elite.
For any tax planning compliance and controversy needs in San Diego, 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 (619) 780-2538 or 800-681-1295 or contact us online today to schedule a reduced rate initial consultation at our San Diego tax law offices or one of our other convenient locations across Southern California.
Our San Diego Office is Conveniently Located at:
501W Broadway Suite 300,
San Diego, CA 92101
(619) 780-2538
