Appealing an IRS or FTB Tax Audit in San Francisco

If you disagree with the result of an FTB, CDTFA, EDD or IRS audit – for example, if the FTB intends to propose a tax assessment after auditing you and finding that you owe additional payments to the state of California – you may challenge or “protest” the results with written materials, which must include a detailed explanation, supported by factual evidence and information, discussing why you feel the auditor’s findings were inaccurate or inappropriate.

IRS Audit Representation

The IRS is tasked with dealing with any issues related to federal taxes. Audits can be related to your federal income tax return or taxes paid on your business and quite often both simultaneously. Remember that 70% of communication is nonverbal and auditors are trained to read body language. Where possible, it is best to have your attorney appear on your behalf.

There are three different types of IRS audits that might occur: a correspondence audit, a field audit, and an office audit. These three variations range in terms of expected time of completion, seriousness, and invasiveness. Therefore, the first step that your dual-licensed Tax Attorney and CPA will take when evaluating your situation is identifying which type of audit you are facing.

Correspondence Audits

A correspondence audit (also sometimes referred to as a “mail audit”) will be conducted entirely through written communication, phone, and emails. This makes correspondence audits the least invasive or problematic forms of government tax noncompliance investigation possible. Typically, the auditor will be looking to verify or substantiate some sort of information on your taxes. If you have preserved your financial records, you may be able to satisfy this audit by simply supplying the IRS with the documents backing up the tax position they are challenging. Typically, if no issues exist, you can expect a correspondence audit to conclude within three to six months of your first response to the government’s requests. However, if you do not possess these documents, or you fudged the numbers under audit, you need the services of a tax lawyer to avoid incurring civil or criminal penalties.

Office Audits

An office audit will involve the taxpayer being called into an IRS office to work through any issues. An office audit implies a higher level of scrutiny than a correspondence audit, but if all issues are resolved appropriately, the process should not take much longer than the three to six months expected from a correspondence audit. You should have all your financial documents prepared to bring to the office audit, including receipts, bank statements, and personal and business tax returns. You should always have a tax lawyer appear alongside you for an office audit if you have serious concerns about what was claimed on the return under audit. Our Los Angeles-based Tax Lawyers and CPAs are ready and able to physically accompany you to wherever you are called in for your office audit.

Field Audits

A field audit is the most serious type of audit and will involve the IRS coming to your home or place of business to examine the documents in question. This type of audit is usually reserved for situations where the government may suspect criminal tax activity, the income streams in question are complex, the suspected noncompliance lasted across several years, or where one or more business entities are concerned. If the target of a correspondence or office audit fails to substantially cooperate at the initial stages of their action, the government may subsequently pursue a field audit to get to the bottom of the issue. Field audits frequently may take more than a year to resolve. You should engage the services of a dual licensed Tax Attorney & CPA as soon as you learn a field audit is to occur.

California Franchise Tax Board (FTB) Audit Representation

The California Franchise Tax Board (FTB) enforces the state’s income tax laws. The FTB may conduct their own investigations regarding issues that are unique to California’s income tax laws or may bring a challenge based on their assessment on your level of compliance. For example, there may be issues if you recently moved to California regarding when you became a resident and when you started owing taxes to the state. The IRS and the California FTB have different rules, for example, regarding net operating losses. As such, you may sometimes owe large debts to the FTB even if you are not found to owe anything to the IRS. An experienced tax attorney can work to resolve any issues associated with such an audit before they become problematic. They can also help negotiate an installment plan if you are in fact found to owe money to the FTB.

California Employment Development Department (EDD) Audit Representation

The California Employment Development Department (EDD) deals with issues related to the state payroll tax. Every employer is required to take payroll taxes out of their employees’ checks and hold the money in trust to eventually turn over to the appropriate state or federal agency. Payroll tax issues can come up in federal audits in addition to audits by the EDD. If you are not taking the appropriate amount out of your employees’ paychecks or failing to turn the money held in trust over as required, you could face civil or criminal penalties.

Most of the issues in these audits relate to disputes about whether an individual is an employee or an independent contractor. Payroll taxes are not required to be taken out of checks paid to independent contractors. There are a variety of ways that the state calculates who is and is not an independent contractor. An experienced tax law attorney can help gather evidence to show the EDD you have properly classified workers as independent contractors. Note: with the recent passing of AB5, worker classification audits are on the rise.

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

The California Department of Tax and Fee Administration (CDTFA) is tasked with auditing any issues related to the payment of state sales taxes. This can be an issue related to your business failing to charge a proper amount of sales tax or charging the sales tax and not properly remitting it to the state. If the CDTFA believes that your business is underpaying sales taxes, they will request to look at your books and other documents and compare the information in your business records to the amount of sales tax revenue remitted to the state. A California sales tax audit can become your worst nightmare if you have been underreporting cash sales.

An experienced sales tax attorney can help you collect the proper documents and communicate with the CDFTA on your behalf. Once the audit is complete, we can challenge any issue we see at the exit interview with the auditor and their supervisor. If the CDTFA closes the case and sends a Notice of Determination, you need to file a petition within 30 days to challenge it. If the petition is not filed in a timely manner, you will be required to pay whatever amount they have determined you owe.

Unfortunately, this process is seldom simple or straightforward. On the contrary, the appellate system poses many challenges for taxpayers who wish to dispute the results an FTB, CDTFA, EDD or IRS audit, making dependable, knowledgeable representation essential. If you think the results of an audit are incorrect and wish to dispute the findings, ask us about IRS appeals representation in San Francisco. We can walk you through the process for appealing an audit and act on your behalf throughout, ensuring you file the appropriate paperwork, meet all legal deadlines, and satisfy other criteria for making a robust appeal.  We stand ready willing and able to litigate a Federal or California tax issue, where it becomes necessary, but in our experience most issues can be settled before an expensive trial.

Criminal Tax Defense Lawyer in San Francisco

Though tax crimes are nonviolent in nature, offenders are nonetheless subject to some of the nation’s harshest criminal penalties. Many tax offenses are felonies prosecuted in federal court, which typically hand down longer sentences and greater fines than courts which function at the state level. To provide an example, the federal statute for tax evasion establishes a maximum sentence of five years in federal prison, in addition to fines as great as $100,000 for individuals. Moreover, criminal fines can be compounded by IRS restitution orders, which can cost thousands or even millions of dollars depending on the nature and severity of the offense. Finally, a tax-related conviction could saddle you with a permanent felony record, which may make it difficult or impossible to find employment, obtain loans, rent at certain properties, purchase or own a firearm, travel abroad, or take advantage of life’s other opportunities. The criminal tax defense attorneys at the Tax Law Office of David W. Klasing represent defendants charged with misdemeanor and felony tax crimes, including CPAs and tax preparers. Our tax evasion attorneys can protect your rights, prepare you for court hearings, manage your legal documentation, and fight to reduce your penalties if you have been charged with tax evasion, offshore tax evasion, willful failure to file a tax return, payroll tax fraud, making false statements, or other tax crimes.

San Francisco, CA Tax Lawyers for Businesses and Individuals

There is no need to feel panicked or overwhelmed by the U.S. Tax Code, a notice from the government, or an IRS auditor. Instead of struggling to interpret complex statutes and IRS regulations – or worse, attempting to push a tax issue under the rug – allow the experienced, award-winning team at the Tax Law Office of David W. Klasing to help you bring your tax matter to an efficient resolution. Our objective is to mitigate any criminal or civil penalties you may be facing while helping you make the most of the U.S. Tax Code with regard to estate planning, business planning, or financial planning for your future. No matter how complex or difficult the issue may be, our diligent attorneys are prepared to sit down and work with you to develop a strategy and achieve a solution.