Orange County Tax Litigation

Orange County Tax Litigation Attorneys

Force Taxing Agencies to Prove Their Cases in Court

Tax disputes with the IRS or a California state taxing agency can create significant financial pressure. When an audit escalates into a legal battle, you need a legal team that can identify the core issues and litigate with precision. We represent individuals and businesses throughout Orange County in high-stakes tax controversy and litigation matters.

Comprehensive Tax Defense in Southern California

Tax law in California involves multilayered state and federal regulations. Taxpayers may face scrutiny from the Franchise Tax Board (FTB), the California Department of Tax and Fee Administration (CDTFA), the Employment Development Department (EDD), and the IRS.

Federal tax litigation typically occurs in the United States Tax Court, the U.S. District Court, or the U.S. Court of Federal Claims. In the U.S. Tax Court, the general rule is that the taxpayer bears the burden to prove that the IRS’s determination is incorrect. Under IRC §7491 and Tax Court rules, this burden can shift to the IRS on certain factual issues if the taxpayer introduces credible evidence, maintains required records, and cooperates with IRS requests. There are also specific statutory provisions that place the burden of production on the IRS for penalties and for the reconstruction of income using unrelated statistical data. Our skilled tax litigation attorneys manage every phase of the process, from the initial notice of deficiency to final trials and appeals.

IRS Audit Defense

If handled incorrectly, an IRS audit can lead to substantial penalties and interest. When an audit concludes with an unfavorable determination, you have the right to challenge the findings. Before going to court, many disputes can be resolved in the IRS Independent Office of Appeals, an administrative process separate from IRS examination, where an impartial Appeals Officer reviews your case and seeks a fair, impartial resolution.

If you cannot settle in Appeals, filing a petition in the U.S. Tax Court to contest a Notice of Deficiency generally stays collection of the disputed deficiency while the case is pending. For collection actions such as liens or levies, a separate Collection Due Process (CDP) hearing request may be required to stop those actions. Our tax law firm prepares exhaustive legal briefs and gathers the financial documentation necessary to challenge IRS assertions regarding underreported income, denied deductions, or alleged tax fraud.

State Tax Disputes with FTB, CDTFA, or EDD

California tax agencies have broad enforcement authority under state law and can pursue audits, assessments, and collection actions under the California Revenue and Taxation Code. 

  • Franchise Tax Board (FTB): This agency handles personal and corporate income tax. We represent clients in residency audits, in which the state claims a taxpayer who lives elsewhere is a California resident.
  • California Department of Tax and Fee Administration (CDTFA): CDTFA manages state sales and use tax. Sales tax audits are a common occurrence for Orange County hospitality and retail businesses. We litigate disputes involving successor liability (when you purchase a business or its inventory and inherit the previous owner’s tax debts) and responsible person assessments (when tax agencies hold individuals responsible for a company’s unpaid “trust fund” taxes).
  • Employment Development Department (EDD): Payroll taxes and worker classification are the focus of the EDD. If the state reclassifies independent contractors as employees, the resulting back taxes and penalties can be ruinous.

The Office of Tax Appeals (OTA) provides an independent forum for hearing many California tax disputes. Our firm represents clients in administrative hearings before the OTA.

Civil and Criminal Tax Litigation

Most tax cases involve civil disputes over the amount of tax owed. Some involve criminal allegations of willful tax evasion or filing false returns. If the IRS Criminal Investigation Division becomes involved, the stakes rise from financial penalties to potential incarceration. Our tax litigation team provides counsel for the following:

  • Tax fraud defense: We defend clients against allegations of intentional wrongdoing.
  • Trust fund recovery penalties: The IRS may hold business owners or employees personally liable for unpaid payroll taxes. We fight to prove our client was not a “willful” or “responsible” party in such cases.
  • FBAR litigation: U.S. persons are required to report foreign financial accounts. Failure to timely file an FBAR when required can result in substantial civil penalties, potentially including a penalty of up to 50% of the account balance per violation in some cases, and, in certain circumstances, may subject a taxpayer to criminal penalties.

Importance of Attorney-Client Privilege

In a high-stakes tax dispute, if the matter turns into a criminal investigation, discussions with a CPA are not fully protected under state or federal law. A critical advantage of hiring a tax litigation attorney is the attorney-client privilege. Our founding attorney is a Certified Tax Law Specialist and a CPA. As tax attorneys, we can provide a shield for your communications, analyze the facts of your case, and build a strategy knowing your disclosures are confidential.

Strategic Approach to Tax Court

Unlike other federal courts, the Tax Court allows taxpayers to challenge deficiencies before paying the full amount of tax owed. Our process begins with a thorough review of the Notice of Deficiency and the timely filing of a petition to secure your right to be heard. We then engage in the Branerton process, an informal exchange of information required by the court, to clarify and narrow the issues before trial. This careful and focused preparation often leads to a favorable settlement without the need for a judge’s hearing. 

Business and Sales Tax Audits

Orange County is a hub for diverse industries. Businesses often face complex sales tax questions. CDTFA may use “markup” tests or other flawed indirect audit methods to estimate the taxable sales of a business. We challenge these estimations by presenting primary source data, such as point-of-sale records and inventory logs.

Tax Liens and Levies

The government may use aggressive tools to collect tax debts. Federal liens can attach to your property, and levies can seize your bank accounts or wages. Litigation may be necessary to stop these actions. A timely Collection Due Process (CDP) hearing request stays most collection actions, including levies and liens, and allows a taxpayer to challenge the procedural and substantive appropriateness of the action and to propose alternatives such as an Offer in Compromise, Installment Agreement, or other relief. 

At Dallo Law Group, we have over a decade of experience and a successful track record for our clients. If you are dealing with a tax dispute in Orange County, call us at (949) 812-6930 for a free case evaluation.