San Jose, CA Tax Audit Lawyer
It is difficult not to panic when you receive a Federal or California tax audit notice. Whether you are being audited by the Internal Revenue Service (IRS), or by a state agency, such as the California Franchise Tax Board (FTB), the California Employment Development Department (EDD), or the California Department of Tax and Fee Administration (CDTFA), formerly known as the (BOE), you are likely feeling anxious and uncertain about the weeks and months ahead.
Though you may be feeling nervous or overwhelmed, you do not have to face the tax audit process on your own. Serving businesses and individuals throughout the San Jose area, the California and Federal tax audit attorneys & CPAs at the Tax Law Office of David W. Klasing can guide you, protect you, prepare you, and defend you against allegations ranging from mere negligence through tax fraud. In addition to being an accomplished attorney, David W. Klasing is also a former public auditor, giving our firm an insider perspective on audit methods and how to combat them effectively. If you, your husband or wife, or your business is being audited in the San Jose region, contact us for a reduced-rate consultation about the audit defense services we can provide for you.
Reasons You May Be Audited by the IRS, CDTFA, EDD, or FTB
There are various reasons the EDD, FTB, IRS, or CDTFA (formerly known Board of Equalization) may select an individual or business entity for audit. While some of these reasons are more innocuous than others – for instance, being chosen at random by computer software – any audit has the potential to endanger the net worth and liberty of a taxpayer, particularly if the auditor uncovers errors, discrepancies, or purposeful omissions while examining the original issues underlying the audit. To supply just a few examples, factors that can cause you to be audited include the following:
- Claiming inappropriate deductions, exemptions, and/or credits
- Claiming deductions that happen to be loosely associated with tax fraud, such as the Home Office Deduction
- Failing to file state and/or federal tax returns (personal or business)
- Failing to pay and/or collect and remit taxes (e.g. income tax, payroll/FICA taxes)
- Failing to report sales and use tax
- Overstating (“padding”) your business expenses
- Understating your income
- Using outdated or stolen identifying information
- Working in a field or industry where there are high rates of fraud or noncompliance, such as dentistry, real estate, veterinary care, auto sales, or the restaurant industry
- Working with other companies which have been audited
What Happens During an Audit?
The answer to this question depends on two factors: (1) which agency is conducting the audit, and (2) why the audit is being conducted. The former determines which forms, procedures, and rules will guide the audit process, while the latter determines what type of audit will be conducted. The more extensive or complex the issue, the likelier it is that the auditing agency will choose to conduct a field audit, wherein the auditor attempts to search records in the taxpayer’s home and/or business, as opposed to a correspondence audit, which is undertaken entirely via mailed communications (and is therefore aimed at minor anomalies).
During the audit, you will be asked to answer questions and provide documentation, which the auditor will use to determine whether an error was made, and if so, which course of action is appropriate – for example, whether additional tax, penalties and interest should be assessed, whether a tax refund should be issued, or whether the taxpayer should be investigated by the IRS Criminal Investigation Division (IRS-CI), the Department of Justice (DOJ), or other agencies. Your representative can handle negotiation and correspondence, protecting you from accidentally revealing too much information or inadvertently making a criminal admission. If you disagree with the audit’s results, you may be able to dispute the auditor’s findings by filing a written protest or tax court petition, which initiates the “appeals” process first, and if not resolved at that level – tax litigation.
Eggshell Audits and Criminal Tax Investigation Representation
If the auditing agency believes that the taxpayer’s return contains substantial and intentional mistakes or omissions, it may conduct an “eggshell” audit. For this reason, eggshell audits pose a serious legal threat to the taxpayer. If the audit reveals mere negligence – in other words, the failure to make reasonable efforts to obey state and/or federal tax laws – a penalty of up to 20% of an additional tax assessed may be imposed. If the audit reveals fraud – in other words, one or more willful attempts to evade the proper assessment of tax – the penalty increases to 75% of the additional tax assessed at best and in a hand off to IRS criminal investigations for criminal tax investigation and subsequent tax crime prosecution, at worst.
Willful violations of state or federal tax laws can send the audited or investigated taxpayer to prison. Various statutes within the U.S. Tax Code, also called the Internal Revenue Code (IRC), establish maximum sentences for misdemeanor and felony tax crimes, including:
- Up to five years in prison per count of willful failure to collect or pay over tax
- Up to five years in prison per count of tax evasion
- Up to three years in prison per count of false statements
- Up to one year in prison per count of failing to file a return or failing to pay tax
Because eggshell audits are so risky for the taxpayer, aggressive audit representation is imperative – as is criminal tax representation, should misdemeanor or felony charges arise or threaten to arise from the auditor’s findings. A San Jose eggshell audit lawyer can mitigate the danger by ensuring the audit does not violate the taxpayer’s constitutional rights against unreasonable searches and seizures, protecting the taxpayer rights against self-incrimination, and attempting to prevent the development of damaging direct evidence against the taxpayer from being utilized in a subsequent criminal tax proceeding.
San Jose, CA Tax Audit Attorneys Offering Reduced-Rate Consultations
The San Jose audit attorneys at the Tax Law Office of David W. Klasing provide the full array of audit defense services for California residents and businesses, as well as out-of-state entities which have a sales tax nexus with California. Comprised of tenacious, experienced tax lawyers and CPAs our zealous, nationally recognized tax audit defense team handles income tax audits, sales tax audits, employment tax audits, worker classification and payroll tax audits, foreign account and FBAR tax audits, audit appeals and tax controversy resolution, and, in cases where criminal tax charges are filed as a result of the audit, state and federal criminal tax defense in misdemeanor and felony cases. To arrange a reduced-rate consultation about the tax audit services we offer in San Jose, you can contact us online, or call (408) 643-0573 or (800) 681-1295 to schedule a reduced rate initial consultation.
San Jose Tax Law Offices
For any of your tax planning compliance and controversy needs in San Jose, 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 408-643-0573 or 800-681-1295 or contact us online today to schedule a reduce rate initial consultation at our San Jose tax law offices, or at one of our other convenient locations across Southern California.