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California Tax Litigation

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    A dispute with a taxing authority does not always necessitate entering the courtroom. In many instances, taxpayers and agencies can reach mutually acceptable resolutions outside of court, eliminating the need for expensive tax litigation. However, litigation becomes necessary to resolve the conflict when a mutually satisfactory solution cannot be reached. If you face an audit with unfair results, you have two choices: leave yourself at the mercy of the IRS’s decision or prepare to fight for your rights through tax litigation. The taxing authority can and often do get the facts or the law flat out wrong. If you do not contest their determination, you will be financially liable for their mistakes. There is case law that basically states that the IRS is not responsible for their own negligence or incompetence.

    Few people wish to dispute the IRS and its army of agents, investigators, and prosecutors. After all, for many taxpayers, the primary goal after receiving notice of a serious tax issue is to resolve the matter as quickly – and cost-effectively – as possible. Unfortunately, when it comes to allegations involving large IRS tax debts, alleged tax fraud, or corporate tax issues, a rapid resolution to the tax dispute may not be possible. In complex cases like these, the most practical option may be to initiate tax litigation by suing the IRS with help from an experienced tax litigation attorney.

    A tax dispute typically arises when a taxpayer or company disagrees with the amount of taxes owed, as assessed by a taxing authority, or when a taxpayer believes they are owed a refund. Tax litigation is how civil tax disputes that sometimes have underlying criminal tax matters are presented, reviewed, and decided in the appropriate legal forum. At the federal level, tax litigation can involve both civil and criminal tax matters and may be heard in various venues, such as the U.S. Tax Court, which exclusively handles federal tax disputes; the U.S. District Court, where tax cases may be heard alongside other federal issues; and the U.S. Bankruptcy Court, which may address tax disputes arising in the context of bankruptcy proceedings.

    In California, tax disputes may be addressed through several state courts, including California Superior Courts, which have general jurisdiction and can hear tax disputes involving state taxes; the California Court of Appeal, which hears appeals from Superior Courts; and the California Supreme Court, which may review tax disputes involving critical legal issues or questions of statewide significance.

    While litigating a tax controversy is not always the right choice, this approach may provide additional leverage in cases where the taxpayer owes a tax debt they cannot satisfy. Particularly in the case of a significant deficiency, it may be necessary to engage in tax litigation to protect the freedom of the taxpayer or tax professional. At the Tax Law Office of David W. Klasing, we provide aggressive legal representation for clients facing disputes with California state and federal tax authorities.

    Our clients benefit from the exceptional combination of comprehensive tax litigation expertise typically found in large firms and the personalized attention characteristic of boutique tax practices. David W. Klasing, a distinguished professional with dual licenses as an attorney and CPA, has earned a Master’s in Tax, placing him among an elite group of professionals in the country with such prestigious credentials and expertise. As the past chair of the California Society of CPAs State Tax Committee, past vice-chair of the California Society of CPAs State Education Committee, and past chair of the California Society of CPAs State Education Committee, his experience and accomplishments further demonstrate his exceptional standing in the field of Tax Law.

    Having an experienced CA tax litigation attorney by your side is crucial in a challenging tax dispute. Simple mistakes or misinterpretations of the tax code can lead to litigation, fines, and penalties. That’s why enlisting the help of a knowledgeable professional can significantly impact your tax litigation case. Our highly-skilled dual-licensed Tax Attorneys and CPAs leverage the firm’s comprehensive knowledge and courtroom experience to develop winning litigation strategies in various forums where tax cases can be heard. David W. Klasing Esq. CPA M.S.-Tax possesses dual California licenses, allowing him to practice as an Attorney and a Certified Public Accountant in Taxation, Estate Planning, and Business Law. With an “A” rating from the Better Business Bureau and a 10.0 AVVO rating, Mr. Klasing provides comprehensive Tax Representation, Planning & Compliance Services, and Criminal Tax Representation for businesses and individuals across California. If you need help resolving a state or federal tax dispute in California, our tax firm is here to provide 24/7 assistance.

    Proficient Tax Litigation Services for Complex Tax Disputes

    At the tax law offices of David W Klasing, our highly-qualified Dual-licensed tax litigation attorneys, and CPAs have extensive knowledge and experience handling various federal and California state tax issues. This includes representing clients in cases involving IRS audits, disputes with the California Department of Tax and Fee Administration (CDTFA), the California Employment Development Department (EDD), and California’s Franchise Tax Board (FTB), claims for refund, tax collection defense, innocent spouse relief, criminal tax defense, and more. With our comprehensive understanding of tax law and procedure, we are committed to providing comprehensive legal support to our clients, safeguarding your rights and interests throughout each phase of the tax litigation process. Our services encompass representing clients in the following situations:

    IRS Disputes: Taxpayers dealing with the IRS may encounter various disputes, such as audits, deficiency notices, or refund claims. These circumstances can be daunting and intricate, necessitating specialized knowledge and training in tax law and procedure. Therefore, it is vital to have a proficient legal advocate who can ardently represent your interests before the IRS. We have extensive experience handling IRS disputes, assisting clients in navigating the complicated process, and ensuring your rights are protected throughout the tax litigation period.

    The California Department of Tax and Fee Administration (CDTFA): This agency collects taxes and fees that fund numerous state programs, such as public health, transportation, education, and natural resources management. Some of the taxes that the CDTFA administers include sales and use taxes, fuel taxes, tobacco taxes, alcohol taxes, and cannabis taxes. If you encounter any issues with the CDTFA, such as an audit or dispute, our team can be your advocate and guide you through the process. We have substantial experience managing CDTFA matters and can help safeguard your rights and interests during these intricate legal proceedings.

    The California Employment Development Department (EDD): EDD oversees the state’s payroll tax program and enforces employment tax laws. As an employer, it is crucial to comply with all employment tax laws to avert penalties and legal consequences. We can support clients with EDD audits, appeals, and litigation, helping you understand employment tax laws’ complex and evolving landscape. Our team of seasoned litigators can work to protect your rights and ensure a fair outcome in your EDD disputes.

    California’s Franchise Tax Board (FTB): This agency collects California’s personal and corporate income tax. We have a strong track record of representing businesses and individuals before the FTB, assisting in navigating complex tax laws and regulations while advocating for your interests.

    When is Tax Litigation Advisable?

    IRS and California auditors frequently get either the facts or the law in your audit wrong in assessing additional tax penalties and interest. A taxpayer that wants to challenge this error has limited options. A California tax attorney is invaluable in rectifying the situation.

    Most of the time, it is best to pass on the opportunity of entering into fast-track mediation as the taxpayer and their representative will have to convince an appeals officer that the auditor and their manager got either the facts or the law wrong in a face-to-face meeting with the IRS auditor and their manager present with the appeals officer.

    When a taxpayer decides to sue the IRS for their mistakes by filing a tax court petition, the taxpayer and their representative can argue the case with appeals without the involvement of the auditor and manager. Since the auditor and their manager are typically emotionally invested in the case’s outcome and defensive of their reputation, the appeals officer is not. Bypassing fast-track mediation and moving directly to filing a tax court petition to address the issues raised during the audit may be more beneficial.

    Moreover, If the appeals process does not bear fruit, the tax court is not part of the IRS. Instead, this court is part of Congressional oversight of tax disputes without IRS interference.

    It allows taxpayers to argue that the IRS is not treating them fairly before an impartial judge. There is no jury in a case like this. In this case, the taxpayer becomes the plaintiff, while the IRS becomes the defendant.

    The most common type of case to litigate in tax court occurs after an audit. Tax litigation is an option if the taxpayer and their representative disagree with the IRS’s findings in an audit.

    The burden of proof for the taxpayer in this type of action is extremely high. The taxpayer will need extensive, credible evidence that shows the IRS did not behave appropriately in the case. This is not a type of case that is easy to win, especially if you don’t have a representative well-versed in how the IRS operates and how tax litigation cases work. On the other hand, a reputable tax attorney will not opt for tax litigation if it is not likely to benefit the taxpayer. Our office, for example, has never taken on tax litigation that did not substantially improve our client’s position.

    Tax court petitions must be drafted correctly against the IRS in a tax litigation case, or the taxpayer could lose fundamental rights in the litigation process. The filing of the petition is the practice of law, and therefore you will ordinarily need an experienced California tax attorney to ensure the best odds of success.

    The Tax Litigation Process

    Tax litigation is a legal system through which tax disputes are presented, reviewed, and resolved in the appropriate venue. These disputes can stem from various tax-related issues, such as civil and criminal tax matters, audits, administrative appeals, and international tax issues. Consulting an experienced dual-licensed Tax Litigation Attorney and CPA is crucial, given the complexity of tax law. We can help you address potential disputes and understand your position before entering a tax audit.

    Criminal tax litigation arises when a taxpayer is suspected of committing tax crimes at both federal and California state levels, such as tax evasion, filing fraudulent tax returns, concealing foreign assets, state income tax fraud, or failing to remit sales and use taxes. This process involves a thorough investigation by the IRS or relevant state tax agencies, potential criminal charges, and subsequent court proceedings. During the investigation, federal and California state tax agents meticulously analyze the taxpayer’s financial records and tax returns to uncover evidence of illicit activities, employing advanced data analytics and forensic accounting techniques and collaborating with other law enforcement agencies to strengthen their cases. If compelling evidence of criminal activity is uncovered, the case may be referred to the Department of Justice (DOJ) or the California Attorney General’s Office for prosecution. Taxpayers charged with a criminal tax offense face significant penalties, including fines, restitution, and imprisonment, which may vary based on the crime and jurisdiction.

    Civil tax litigation typically begins at the end of an examination when the IRS proposes any changes. In this case, the IRS agent sends the taxpayer an examination report outlining the modifications made to their tax return, accompanied by a letter notifying them of their right to appeal these proposed changes within 30 days. An appeal generally involves a conference with an IRS Appeals Officer and submitting a formal written protest stating the taxpayer’s disagreement with specific proposed changes and the reasoning behind the dispute.

    If the taxpayer does not respond to the 30-day letter or an agreement with the IRS Appeals Office is not reached, the taxpayer will usually receive a notice of deficiency. This notice gives the taxpayer 90 days to petition the U.S. Tax Court. Failure to respond to this 90-day letter will result in assessing the amount stated in the notice of deficiency, even if the proposed changes were made in error. This comprehensive overview covers the essential aspects of the tax litigation process, ensuring you understand the steps involved and the potential consequences of inaction.

    Why Hire the Tax Law Office of David W. Klasing to Litigate Your IRS Claim?

    Our tax attorneys offer over 20 years of experience handling highly complicated tax matters throughout Northern and Southern California, including Los AngelesSan FranciscoSan Diego, and Sacramento. When you retain the legal services of David W. Klasing, you benefit from working with an accomplished, award-winning tax attorney and CPA for the same price, ensuring cost-efficient yet comprehensive representation.

    Among Mr. Klasing’s credentials as an Orange County tax litigation attorney, he is a past chair of the California State Bar Association Tax Procedure and Litigation Committee and the Orange County Bar Association Tax Section and an active Member at Large of the California Society of CPAs Committee on Taxation. We help business entities and individual taxpayers appeal the results of the following:

    • California Income Tax Audits;
    • Civil and Criminal tax investigations and litigation;
    • Partnership taxation;
    • Collection due process disputes;
    • Penalty and interest issues.

    IRS Notice of Deficiency

    A taxpayer with tax debt due, owing, and unpaid will receive a written notice of deficiency from the Internal Revenue Service. The IRS notice of deficiency, sometimes called a “90-day letter” or “tax deficiency letter,” gives the formal taxpayer information that their unpaid tax obligation will become enforceable in 90 days. The letter will also contain the latest date on which the taxpayer is entitled to file an action in Tax Court. The letter will also collect information regarding the legal basis for the additional amounts sought by the IRS.

    The tax deficiency letter is usually sent after an IRS tax audit, as discussed here. If you have been selected for an audit, you should contact a tax audit attorney for guidance right away. For more on this topic, you may also be interested in our discussion of how the audit and litigation cycle works.

    What to Do if You Have Received a Notice of Deficiency from the IRS: If you have received a notice of deficiency from the IRS, your immediate concern should be locating tax records, financial information, and any other evidence that may be relevant to the allegations or your defenses to provide to your tax lawyers. Obtain as many financial records as possible, such as pertinent tax returns, bank statements, invoices, Forms W-2 or 1099, and residential or commercial leases.

    Second, you should contact a tax litigation lawyer immediately to avoid the potential loss of your right to petition for relief from a tax court. While not every tax issue can be litigated, the types of actions most frequently litigated successfully are deficiency and refund actions. Though both are prevalent, Tax Court deficiency actions are much more common, as taxpayers are not required to prepay deficiency actions.

    When Should You File a Deficiency Suit or Refund Claim Against the IRS? Only an experienced tax litigation attorney can determine when litigation is the most appropriate means of dispute resolution, as opposed to alternative methods like arbitration or mediation. Depending on the nature of your case, there are certain factors to remember before you attempt to litigate a claim in federal claims or district court, such as legal deadlines and outstanding tax debts.

    Filing a Deficiency Suit Against the IRS: For a taxpayer to bring a deficiency suit, they must have already received a deficiency letter from the IRS. Note that an IRS letter sent to the taxpayer’s last known valid address is generally deemed sufficient for notice.

    Furthermore, the taxpayer must file their suit within 90 days if they are located within the United States. If the taxpayer resides outside the United States, they have additional time – up to 150 days – to file suit with the Clerk of the Tax Court in Washington, D.C.

    The taxpayer is required to list every error in law or fact made by the IRS. It is critical to note that if the taxpayer fails to raise a mistake, that point is conceded to the government. Therefore, working with an attorney with considerable experience litigating cases like yours is critical.

    Filing a Refund Claim Against the IRS

    If taxpayers believe they are entitled to a refund for taxes already paid, they may need to engage in tax refund litigation. This type of litigation can be complicated, involving matters such as the statute of limitations for filing a claim or interpreting tax laws. If the IRS denies a taxpayer’s refund claim, the taxpayer can dispute the decision through an appeals process. This process entails an independent review of the case by an appeals officer who was not involved in the original decision. The officer will assess the taxpayer’s arguments and evidence to resolve.

    If the lawsuit against the IRS appeals process fails to reach a satisfactory resolution, the taxpayer can file a lawsuit against the IRS in a federal district court or the United States Court of Federal Claims to challenge the refund denial. The litigation process may include pre-trial proceedings, such as discovery, followed by a trial where the taxpayer and their attorney present their arguments and evidence to the judge. After the trial, the judge will render a decision, which, like deficiency disputes, can be appealed to a higher court if necessary. There are three crucial factors to consider:

    1. First, a refund action can only be filed after an alleged tax debt has been paid in full, with the taxpayer seeking to recover the funds. Therefore, as mentioned earlier, federal tax debts must be fully paid before the taxpayer may bring a refund action against the Internal Revenue Service.
    2. In addition, the taxpayer must exhaust their administrative remedies by filing a timely claim for a refund using IRS Form 1040X (Amended U.S. Individual Income Tax Return), Form 1120X (Amended U.S. Corporation Income Tax Return), or other appropriate forms.
    3. Third, there is a waiting period. Only six months (or longer) after filing the initial refund claim or upon receipt of a notice of disallowance may the taxpayer file a lawsuit to litigate the matter.

    Tax litigation’s refund and deficiency methods have particular strengths and weaknesses for taxpayers. Before deciding on a legal strategy, a taxpayer should consult a knowledgeable tax litigation lawyer to ensure critical legal rights or remedies are not forfeited because of a tactical oversight.

    Our dual-licensed tax litigation attorneys & CPAs have the experience and the necessary knowledge and training to represent taxpayers in tax deficiency disputes and tax refund litigation. Our thorough understanding of tax law and the litigation process allows us to achieve the best possible outcomes for our clients. The IRS has a 98% settlement rate, indicating that they, like taxpayers, prefer not to engage in litigation. As a result, in most instances, both parties can find a mutually agreeable resolution outside of court, avoiding the substantial costs typically associated with litigation. However, our skilled CA tax litigation attorneys will fight vigorously on your behalf if necessary. With a proven track record of successfully negotiating settlements with the IRS and other tax agencies, our commitment to providing personalized and effective representation for our clients is unparalleled in the industry.

    Alternatives to Tax Litigation

    Tax litigation can be complex and challenging, with a single mistake potentially leading to significant consequences, such as loss of rights, penalties, and interest charges. At the Tax Law Offices of David W. Klasing, we understand the risks and difficulties tax litigation presents. We can help you navigate this process or explore other viable alternatives like administrative settlements with the IRS or state tax officials.

    1. IRS Appeals:The IRS Appeals process is a crucial alternative to tax litigation, allowing taxpayers to resolve disputes outside the courtroom. This process offers an impartial and independent review of tax issues, aiming for fair and timely resolutions. Taxpayers present their case to an Appeals Officer not involved in the initial examination or audit, which considers both the taxpayer’s and the IRS’s viewpoints to reach a balanced resolution. The IRS Appeals process can help taxpayers avoid tax litigation’s complexities, costs, and time commitments while ensuring their tax disputes are fairly and thoroughly addressed.
    2. Administrative Settlements: Sometimes, taxpayers can negotiate directly with tax authorities to reach an administrative settlement. This process involves working with the tax agency to find a mutually acceptable resolution, which may include penalty abatement, payment plans, or an offer in compromise. Administrative settlements can be a viable alternative for those who prefer to avoid the time and expense of litigation.

    Our comprehensive understanding of tax laws and negotiation strategies enables us to advocate for your interests in the IRS, FTB, CDTFA or EDD Appeals process. We strive to achieve the best possible result while minimizing tax litigation’s costs, stress, and potential risks. However, suppose mediation, IRS appeals, or other methods fail to resolve your dispute with the Internal Revenue Service. Legal action might be the only way to prevent improper penalties and fines in that case. The dual-licensed tax litigation Attorneys and CPAs at the Tax Law Office of David W. Klasing are ready to advocate fiercely and persistently on your behalf, assisting you with all aspects of your lawsuit against the IRS. Contact us online today to schedule a reduced-rate consultation or at (805) 617-4566.

    Why You Shouldn’t Rely on Your CPA, EA, or CTEC Certified Preparer for Tax Litigation or Tax Appeals

    In a tax controversy, it’s crucial to have an experienced tax attorney to guide you through the appeals and litigation process. Although CPAs, EAs, and CTEC-certified preparers may have the expertise to prepare your tax return, they are not authorized to represent you in tax court. Attempting to do so constitutes the unauthorized practice of law, leading to severe penalties for the preparer and potential negative consequences (loss of non-asserted rights) for the taxpayer.

    Even if a preparer is authorized to represent a taxpayer in an administrative appeal, they might not have the necessary skills to advocate for your interests effectively. CPAs, EAs, and CTEC-certified preparers lack persuasion, evidence, and tax procedure training. They are ill-equipped and untrained to handle criminal tax issues that could emerge during tax litigation and could inadvertently become government witness number one against you as they cannot offer attorney client privilege or work product privilege. Their primary focus is often on preparing tax returns rather than representing taxpayers in tax litigation cases.

    It’s important to note that there is no attorney-client privilege between taxpayers and their preparers. As a result, any communication or advice received from a preparer can be legally compelled to be disclosed to the government under court contempt powers. This means that if you rely on your CPA, EA, or CTEC-certified preparer for your tax litigation case, they might unintentionally become the government’s key witness against you.

    Tax Litigation Attorney and CPA Serving Northern and Southern California

    If you owe a tax debt that you likely cannot pay or satisfy in the foreseeable future, litigating your matter may be the most effective way to reduce or eliminate the IRS penalties you face. Furthermore, if you have already paid a tax debt erroneously, litigating the matter may provide substantial tax relief. However, litigating a tax action has technicalities and other legal pitfalls. For instance, in a deficiency action, interest can continue to accrue. Working with an experienced attorney-CPA who understands the system can help taxpayers proceed with their dispute strategically.

    The California tax defense attorneys and CPAs of the Tax Law Office of David W. Klasing take an innovative and forward-thinking approach to tax litigation, working tirelessly to mitigate the consequences the taxpayer or tax preparer faces. To schedule a reduced-rate consultation concerning an IRS dispute, call (800) 681-1295 or contact the Tax Law Office of David W. Klasing online.

    Note: If you have concerns about the privacy of our initial or subsequent communication and cannot 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.

    It will cost me more to hire the Tax Law Offices of David W. Klasing, whose main office and the vast majority of the firm’s staff is 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.

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    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

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