Sacramento, CA Tax Audit Lawyer

Tax audits can pose serious legal or financial threats to businesses and individuals in Sacramento, California. Whether the audit is being performed by a state tax agency, such as the Employment Development Department (EDD), Franchise Tax Board (FTB), or California Department of Tax and Fee Administration (CDTFA), or by the Internal Revenue Service (IRS) at the federal level, it is imperative to approach the process with guidance from a skilled, experienced, and effective tax audit lawyer in Sacramento.

David W. Klasing, founder of the Tax Law Office of David W. Klasing, brings years of experience as a former public auditor to every case our tax firm handles. This enables our aggressive team of tax attorneys and CPAs to anticipate and counteract the strategies auditors use. Over our decades practicing tax law, we have represented thousands of clients in state and federal tax audits, including corporations, partnerships, sole proprietorships, limited liability companies (LLCs), and individuals. No matter why you are being audited or which agency is conducting the examination, our Sacramento audit lawyers are ready to provide robust, sophisticated representation with a focus on minimizing penalties – and maximizing your peace of mind.

Why Am I Being Audited by the IRS, FTB, EDD, or CDTFA?

There are many reasons why individual taxpayers or business entities might be selected to undergo an audit by the IRS, EDD, FTB, or CDTFA, formerly known as the BOE or Board of Equalization. Though numerous, these reasons can generally be sorted into one of three categories:

  1. The audit is being conducted because the taxpayer or business was selected by automated computer software. Most audits are initiated this way. Statistical analysis identifies the three most likely areas of the return likely to be misstated and the taxpayer is selected for audit accordingly. The auditor will expand his or her audit to other areas and tax years depending upon how those three areas hold up to the auditor’s scrutiny and testing / sampling.
  2. The audit is being conducted because the taxpayer or business possesses traits, or took actions, that are have been identified as being associated with high rates of taxpayer noncompliance. Examples of these audit “red flags” for example include:

    • Being self-employed and reporting on schedule C
    • Earning income of $500,000 or more
    • Reporting no adjusted gross income
    • Running a business which conducts most of its transactions in cash, such as a restaurants, bars and liquor stores.
    • Working in an industry where noncompliance is pervasive, such as automotive sales or real estate
  3. A third possibility is that the audit is being conducted because the agency believes the taxpayer or business made mistakes or willfully provided false information. Examples of problems that can lead to audits in this category include:

What if I Don’t Respond to an IRS Audit Letter?

No taxpayer or business owner ever wants to receive a Federal or California tax audit notice. However, if you have been selected for an audit, it is vital that you seek competent representation immediately. Ignoring the notice will not make the audit “go away,” nor will the issuing agency “forget” about your case with prolonged inaction. On the contrary, failure to timely respond to an audit notice will merely weaken your position. The tax authority will continue to assess tax, penalties, and interest regardless of whether you respond – and to make matters worse, you may also forfeit the right to appeal. Failure to respond can also send the message that you may have acted willfully to evade taxation and exponentially complicate matters.

What Happens During the Audit Process?

The length, structure, and comprehensiveness of an audit depend on which sort of audit is being performed. There are three basic types of audits a taxpayer or business may face in Sacramento:

  1. Correspondence Audits – Correspondence audits are sometimes called “mail audits” because they are conducted entirely through mail correspondence. Correspondence audits are the simplest, least intrusive type of audit, but can escalate if the auditor uncovers additional issues.
  2. Office Audits – Office audits are a middle ground between correspondence audits and, as discussed below, field audits. Unlike correspondence audits, office audits take place in person, though the taxpayer may elect a personal representative. They are called “office audits” because they are conducted in the IRS, CDTFA, EDD or FTB’s offices. Seventy percent of communication is nonverbal, and auditors are very adept at reading body language. Evidence will be poured over and my best advice is having your office audit handled be a professional for the best results which include keeping any assessment of tax penalties and interest to a minimum and avoiding a criminal tax prosecution.
    1. The Sacramento IRS office is located at:

      4330 Watt Avenue

      Sacramento, CA 95821

    2. The Sacramento CDTFA is located at:

      3321 Power Inn Rd
      Sacramento, CA 95826

    3. The Sacramento FTB is located at:

      3321 Power Inn Rd
      Sacramento, CA 95826

    4. The Sacramento EDD is located at:

      3321 Power Inn Rd
      Sacramento, CA 95826

  3. Field Audits – Field audits, in which the auditor personally visits your home and/or business to scour for records, are the most intrusive and intensive tax audits. They are often used in cases where the tax authority believes that serious noncompliance, potentially of a criminal nature, has occurred. Note that the typical three-year audit statute of limitations can be extended to six years, or even become indefinite, if extensive or criminal noncompliance is in question.

Eggshell Audits Can Lead to Criminal Tax Investigations

The terms “field audit,” “office audit,” and “correspondence audit” refer to formal audit procedures. By comparison, “eggshell audit” is a colloquial term of art that can be applied to any civil audit – most commonly, though not always, a field audit – in which the taxpayer is suspected of committing tax fraud. For example, an eggshell audit could result from claiming tax credits the taxpayer was ineligible for, or from reporting significantly less taxable income than the taxpayer actually earned.

Because eggshell audits arise from suspected tax fraud and egregious noncompliance, they have a higher likelihood of resulting in one of the following outcomes:

  • The taxpayer is placed under criminal tax investigation and potentially prosecuted for tax crimes.
  • The auditor determines that no criminal activity occurred, but also determines that the taxpayer acted negligently, resulting in costly civil penalties.

Sacramento, CA Tax Audit Defense Attorneys for Businesses and Individuals

The Tax Law Office of David W. Klasing provides zealous, experience-backed audit representation in a broad spectrum of state and federal tax matters. Our Sacramento tax audit defense services include, but are not limited to, FTB tax audits, CDTFA tax audits, EDD tax audits, IRS tax audits, eggshell and reverse eggshell audits, field audits, office audits, correspondence audits, worker classification audits, payroll tax audits, foreign account and FBAR audits (pertaining to Foreign Bank Account Reporting), California employment tax audits, federal employment tax audits, and other types of tax audits. We also provide audit appeals and tax litigation representation, in addition to criminal tax defense in misdemeanor and felony cases. To arrange a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or call us at (916) 290-6625, or (800) 681-1295.

Sacramento Tax Law Offices

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.