Awards & Recognition
Much as your federal tax returns can be audited by the IRS, your state tax returns can be audited by California agencies, such as the Franchise Tax Board (FTB), Employment Development Department (EDD), or California Department of Tax and Fee Administration (CDTFA). At the Tax Law Office of David W. Klasing, we are Santa Barbara tax audit attorneys with more than 20 years of combined experience providing FTB, EDD, and CDTFA audit representation to individuals and businesses, including taxpayers who are not California residents but owe state income, sales, or employment taxes. If you are a California resident or out-of-state taxpayer who has been chosen for an EDD, CDTFA, or FTB tax audit, turn to our Santa Barbara tax attorneys and CPAs for zealous, 24-hour assistance.
Do State Tax Returns Get Audited?
The IRS exclusively audits federal returns, such as the federal income tax return (Form 1040) you file each April. California tax returns are examined by California tax authorities, as described in the following section.See our Audit Representation Q and A Library
Who Audits State Taxes in California?
In the state of California – which boasts the nation’s largest economy, but also grapples with some of its most complex tax regulations – there are three organizations authorized to administer tax laws and process returns. These organizations are (1) the Franchise Tax Board (FTB), which audits California personal and corporate income tax returns; (2) the California Department of Tax and Fee Administration (CDTFA), which performs California sales tax audits; and (3) the Employment Development Department (EDD), which performs California employment tax audits. Accordingly, the FTB, EDD, and/or CDTFA may audit your California tax return(s), depending on what sort of return(s) you or your business filed.
Taxpayers should be advised that these agencies routinely share information with, and receive information from, the IRS. Information-sharing regulations are set forth under 26 U.S. Code § 6103 (pertaining to “confidentiality and disclosure of returns and return information”), with 26 U.S. Code § 6103(d)(1) providing, “Returns and return information… shall be open to inspection by, or disclosure to, any State agency, body, or commission,” subject to certain criteria.See our Sales Tax Q and A librarySee our Employment Tax Law Q and A Library
How Long Can State Taxes Be Audited in California?
There are many differences between state and federal tax audits. One of the most significant differences is the statute of limitations for a tax audit – in other words, the maximum number of years the taxing authority can go back in time for an audit.
The IRS statute of limitations to audit is generally three years, with exceptions where longer time periods apply. In some cases, the IRS may audit your returns for up to six years, while in others, there is no applicable time limit. In California, the statute of limitations to audit is generally four years, giving the state of California an additional 12 months to audit.
Why Did the FTB, EDD, or CDTFA Choose Me or My Business for a California Tax Audit?
Do not panic if you have received an audit notice from the FTB, CDTFA, or EDD. Being selected for a California tax audit is not necessarily indicative of wrongdoing by the taxpayer. That being said, it is essential to heed your notice carefully and follow any deadlines or instructions provided therein, which our tax audit lawyers will assist you with.
Even if your return is error-free, there are many reasons you or your business may have been chosen for an examination. For example, businesses are sometimes targeted for auditing because they are part of a certain industry, because they make numerous cash transactions, or because their assets fall within a certain range.
A mistake or omission will greatly increase your likelihood of being audited. Common tax errors that can trigger audits include:
- Attempting to use another taxpayer’s personal information on your return
- Failing to report financial accounts, assets, or sources of income
- Failure to file tax returns
- Failure to pay taxes
- Filing delinquent tax returns
- Improperly or falsely claiming credits, deductions, or dependents
- Underreporting your income
See our Non-Filer Q and A Library
Can I Appeal if I Disagree with the Outcome of a California State Tax Audit?
Unfortunately, auditors do not always deliver accurate or reliable findings and often get either the law or the facts wrong in reaching a tax assessment. If you believe that your auditor made a mistake and disagree with the results of your audit, you may dispute the outcome by requesting an appeal.
In California, tax appeals are heard by the Office of Tax Appeals (OTA), which describes itself as “an independent and impartial appeals body created by the Taxpayer Transparency and Fairness Act of 2017.” If you do not agree with FTB or CDFTA findings, you may file an appeal by either (1) completing and submitting OTA Form L-01 (Request for Appeal), or (2) filing a written request, which our office can help you prepare. You must submit your request before the “appeal-by” date displayed on your Appeals Bureau Decision or Notice of Action, one of which you must receive prior to filing an appeal.
California State Tax Return Audit Combo Lawyer + CPA in Santa Barbara
Complying with California’s tax regulations is not always an easy or straightforward task, especially for taxpayers who reside in other states, sell products online, or operate small businesses. The best way to avoid errors – and to minimize costly penalties – is to work with an experienced California Tax Lawyer, like David W. Klasing, who can help you navigate the state’s many tax regulations.
If you or your company has been targeted for an EDD, FTB, or CDTFA tax audit, or if you wish to appeal the results of a California tax audit, the Tax Law Office of David W. Klasing is standing by to provide 24/7 assistance. Contact us online right away to set up a reduced rate consultation or call our Santa Barbara tax office at (805) 200-4053.
Please note meetings at our Santa Barbara location are by appointment only.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here
