Tax Audit Representation
Tax Audit Representation
Receiving a tax audit notice can be stressful. You don't have to face an auditor alone. We can represent you and handle the case on your behalf. Whether it is the IRS, state or local taxing authority, taxpayers have the right to professional representation.
Income Tax Audit
An income tax audit by the Internal Revenue Service (IRS) or the California Franchise Tax Board (FTB) seeks to determine if the correct amount of tax was paid. Tax auditors look for underreported income, as well as improper deductions and credits.
Employment Tax Audit
The Internal Revenue Service (IRS) and the California Employment Development Department (EDD) conduct employment tax audits of businesses. These examinations seek to determine if a business is properly withholding employment taxes from their employees' paychecks, depositing employment taxes with the federal and state state taxing authorities and filing timely employment tax returns.
Worker Classification Audit
The Internal Revenue Service (IRS) may conduct a worker classification audit to determine if an employer properly classified their workers as employees or independent contractors. If a worker is reclassified from an independent contractor to an employee, the business will be responsible for unpaid payroll tax, penalties and interest.
States also conduct worker classification audits. In California, this is handled by the Employment Development Department (EDD). Business owners with employees on their payroll may find themselves in the middle of tax audits with the IRS and EDD due to the sharing of data between taxing authorities. This can be a major tax problem that business owners are not equipped to handle. Hiring a tax professional to represent them can relieve the owners of the stress of dealing with the auditors and allow them to focus on operating their business.
Reasonable Compensation Audit
The Internal Revenue Service (IRS) may conduct a reasonable compensation audit to determine if a corporate officer who is also a shareholder was paid a reasonable salary as an employee for services performed. It is generally not correct for an officer of a corporation to only receive distributions and no salary.
Failing to pay a salary means that payroll taxes were not withheld and paid over to the government in violation of the Internal Revenue Code. In the event a salary was paid to an owner that was too low or no salary was paid at all, it can lead to a tax audit. This often ends with additional tax assessments.
Alternatively, if a corporate shareholder/officer is paid too high of a salary, this may also lead to problems during an IRS audit of certain corporations.
Sales and Use Tax Audit
Sales tax audits and use tax audits in California are conducted by the California Department of Tax and Fee Administration (CDTFA). Businesses in certain industries are required to withhold and pay over sales tax and use tax to the State. Failure to property withhold and deposit sales tax and use tax with the CDTFA can lead to delinquent tax liabilities in the event of a tax audit. Businesses can potentially be shutdown by the CDTFA. Business owners have the right to representation and can appoint a tax professional to defend them during an audit.
State Residency Audit
The California Franchise Tax Board (FTB) conducts state residency audits. The FTB is aggressive with their classification of taxpayers as California residents and therefore subject to California tax. An example includes a former California resident that moved out of state that the FTB continues to classify as California residents. Part year residents of California can also be subject to tax by the FTB. Tax disputes over residency can potentially carry on for extended periods of time.