Los Angeles Tax Attorney + Accountant for Passive Income Individuals
If you are a California resident with one or more sources of passive income, or if you are an out-of-state resident with California-source passive income, you should work with an experienced tax compliance attorney in Los Angeles to ensure that you are reporting your income correctly. If you have made compliance errors in the past, your tax attorney can defend you in the event of a civil audit or criminal tax investigation. If you are a non-filer a tax attorney can identify strategies for you to reenter the tax system with minimal damage and risk.
At the Tax Law Office of David W. Klasing, we are Los Angeles tax lawyers CPAs & EAs who have decades of experience representing individuals, corporations, LLCs, and partnerships in tax audits, IRS and FTB disputes, and related matters involving passive income or passive activity losses. Whether you have been chosen for an IRS audit, wish to appeal the results of a completed audit, or have questions about how passive income should fit into your personal or business tax strategy, turn to the Tax Law Office of David W. Klasing for dedicated, 24-hour support across the LA region.
How is Passive Income Taxed?
Certain taxpayers who sustain losses from their passive activities may be able to reduce their taxable passive income, where applicable, by claiming passive losses. To report passive income and passive losses to the IRS, taxpayers should file Form 8582 (Passive Activity Loss Limitations), which should be attached to the taxpayer’s U.S. personal income tax return, or Form 1040, making Form 8582 due April 15. To claim the passive activity tax credit, eligible taxpayers should file Form 8582-CR (Passive Activity Credit Limitations).
Keep in mind that the state of California enforces its own set of passive activity reporting requirements, which are separate from the IRS-enforced federal laws contained in the Internal Revenue Code (IRC). For example, individual taxpayers may need to file Form FTB 3801-CR (Passive Activity Credit Limitations), while corporations file Form FTB 3802 (Corporate Passive Activity Loss and Credit Limitations). FTB refers to the Franchise Tax Board, which, just as the IRS enforces federal income tax laws, rigorously enforces California’s income tax regulations.
Los Angeles Tax Audit Lawyers for Individuals + Businesses with Passive Income
Our LA tax audit attorneys have extensive experience representing taxpayers in tax audits of all varieties, including IRS and FTB tax audits, field audits, desk audits, correspondence audits, eggshell and reverse eggshell audits, individual tax audits, and corporate tax audits. Moreover, lead attorney David W. Klasing was a public auditor for over 10 years, affording our team an invaluable insider perspective on IRS audit strategies and procedures.
Though we work diligently to minimize and prevent criminal tax exposure, our seasoned tax defense attorneys are prepared to fight tirelessly against misdemeanor or felony charges, including tax evasion, willful failures to file or pay taxes, tax obstruction, and tax preparer fraud. We thrive under pressure and are uniquely suited to deal with high-stakes tax cases in federal or state court.
Passive Income Audit Appeals Representation in LA, California
If you disagree with the results of a tax audit, you may be able to successfully challenge the auditor’s initial findings by filing an appeal with the appropriate agency, such as the IRS Independent Office of Appeals or the California Office of Tax Appeals (OTA). However, your success in this complex process – which, for the reasons explained in detail here, should always be guided by a tax appeals attorney – is contingent on your adherence to certain rules and criteria for appealing a tax determination.
For example, you must meet the appeal-by deadline provided by the IRS or FTB. You must also support your appeal with factual evidence and clear, objective reasoning based on sources such as legal statues, previous court rulings, or IRS manuals. Our office can help you start an IRS appeal if you believe that your auditor made a mistake when examining your passive income returns.
Los Angeles Tax Lawyer + Accountant for Passive Income
Passive income is reported and taxed differently than ordinary income, creating a unique – and potentially hazardous – set of financial considerations for taxpayers with passive income streams. Failure to properly file and pay taxes on passive income can lead to an IRS tax audit or California state tax audit, even if the reporting error was purely accidental. Unfortunately, an audit has the potential to result in costly fines, additional tax and penalties, or even an IRS criminal tax investigation or California criminal tax investigation if tax fraud is suspected. In some cases, the initial results of an audit may not even be accurate, putting careful review by a seasoned attorney in the taxpayer’s best interests.
To arrange a reduced-rate consultation with an experienced LA tax attorney-CPA for California, out-of-state, and international taxpayers, contact the Tax Law Office of David W. Klasing online, or call our LA tax office at (310) 492-5583. Please note meetings at our Los Angeles location are by appointment only.
Passive Income Tax FAQs
Federal tax regulations around passive income are located at IRC 469 and related statutes. The following passive income tax FAQs explain some of the basics that taxpayers should know about.
- Do passive losses receive special treatment under IRC 1041 in a divorce?
- How are passive activity expenses and losses characterized?
- Is there a special allowance for rental real estate activities?
- What are passive loss limitation rules?
- What are some tax basics around real estate and divorce?
- When can real estate professionals deduct real estate rental losses?