Los Angeles California State Tax Return Audit Attorney + CPA

Los Angeles California State Tax Return Audit Attorney + CPA

Most residents of Los Angeles are required to file a state tax return, also known as Form 540 (California Resident Income Tax Return). You must generally file a California tax return if you are a state resident, a non-resident with California source income, or a part-year resident with certain types of California income. If you failed to file a state income tax return, made errors on the return that you filed, or failed to provide all of the necessary information, you are at high risk of being audited by the California Franchise Tax Board (FTB), which assesses state income tax and enforces compliance with California’s tax regulations.

If you have been chosen for an FTB tax audit, you are at risk of incurring costly tax assessments, interest, and penalties. It is critical to ensure that you are thoroughly prepared. At the Tax Law Office of David W. Klasing, we are Los Angeles state tax return audit lawyers with more than 20 years of experience representing individuals and businesses in FTB audits and appeals. Our tax firm’s founder, dually certified attorney-CPA David W. Klasing, spent over 10 years practicing as a public auditor, giving our team invaluable insights into FTB procedures, regulations, and auditing strategies. We put our knowledge to work protecting your best interests at every stage of the process. For a reduced-rate consultation regarding a California tax audit, contact the Tax Law Office of David W. Klasing online, or call our Los Angeles tax office at (310) 492-5583 today.

Why Was I Chosen for a Tax Return Audit by the Franchise Tax Board (FTB)?

The Franchise Tax Board reported auditing “approximately 232,000 tax returns, which accounted for $1.63 billion in net assessments and denied refund claims,” during the period from 2016 to 2017. Audits are conducted by five separate divisions of the FTB, but for many taxpayers, the most pertinent is the FTB’s Individual & Pass Through Entity Audit Bureau, which is responsible for auditing both individual taxpayers and flow-through entities, such as LLCs, trusts and estates, and S corporations.

There are various reasons a taxpayer or business may be chosen by the Franchise Tax Board for a tax audit. While some taxpayers are chosen at random by computer software, most FTB audits are initiated because the FTB has detected an issue. Common triggers for FTB state income tax audits include, but are not limited to, the following:

• Attempting to claim credits that are no longer valid, or for which the taxpayer does not qualify
• Failing to file Forms 540, especially if there are multiple failures to file
• Failing to pay California income taxes
• Underreporting California source income

How Long Can the FTB Audit Your California Tax Return?

It is critically important for Los Angeles residents and other California taxpayers to understand that the Franchise Tax Board is not bound to the same statutes of limitations that restrict the Internal Revenue Service when conducting audits. The IRS is generally limited to an auditing period of three years, with some exceptions where the statute of limitations extends to six years. There are only a few scenarios in which the IRS has unlimited time to conduct an audit, such as a case where the taxpayer has failed to file a tax return or has filed a fraudulent return.

By comparison, the FTB has four years – not three – in which to conduct a California tax audit. The four-year period begins counting down from the date on which the taxpayer filed his or her state return. Like the IRS, the FTB also has no time limit to audit a taxpayer in situations where the taxpayer has failed to file a California income tax return, or where the taxpayer has filed a false state return.

Can You Appeal the Results of an FTB Tax Audit?

If you disagree with the results of an audit of your California tax return, it may be possible to dispute the FTB’s findings, which is a process known as “appealing.” Taxpayers may appeal FTB decisions to the California Office of Tax Appeals (OTA), a relatively new agency which was established by the Taxpayer Transparency and Fairness Act of 2017. Los Angeles residents should be advised that the OTA – no longer the California Board of Equalization (BOE) – now oversees all appellate procedures related to state tax return audits.

There are strict time limits for appealing an FTB decision following an audit of your California tax return. Your appeal must be filed no later than your personalized “appeal by” date, which will be printed on the notice you received from the FTB concerning its decision. You will need to include specific materials in order to have a chance of appealing successfully, namely (1) your contact information, (2) a copy of the FTB notice you received, (3) a written explanation outlining the FTB’s findings and why you believe they are improper, and (4) factual and financial documentation to support your argument.

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California State Tax Return Audit Lawyers and CPAs Serving Los Angeles

At the Tax Law Office of David W. Klasing, our California tax return audit attorneys and CPAs have been providing state audit and appeals representation to Los Angeles residents for more than 20 years. Our nationally recognized, award-winning tax team is dedicated to protecting the rights of California taxpayers while helping our clients reenter compliance with state tax laws and filing requirements.

Whether you have just been notified of your selection for an FTB audit of your California returns, or your audit recently concluded, and you now wish to dispute its outcome, our Los Angeles FTB lawyers are here to provide the audit defense you need. For a reduced-rate consultation, call our Los Angeles tax office at (310) 492-5583, or contact the Tax Law Office of David W. Klasing online.