CALIFORNIA FTB ATTORNEY

TAX CASE EVALUATION

CALIFORNIA FRANCHISE TAX BOARD (FTB) ATTORNEY | TAX AUDITS AND SETTLEMENTS

The California Franchise Tax Board (FTB) is the agency responsible for enforcing the income tax laws of California. The California Franchise Tax Board is notoriously one of the most aggressive taxing agencies in the State of California. Since income taxes are a significant portion of the revenues to the State of California, the FTB aggressively pursues its audit and collection efforts in order to maximize revenue to the state.

DEALING WITH THE CALIFORNIA FRANCHISE TAX BOARD

It is not uncommon for a taxpayer to be uncomfortable in dealing with the Franchise Tax Board on a California tax problem. The Franchise Tax Board collectors and agents are very demanding to taxpayers. Although an IRS audit and FTB audit are similar in many respects, California FTB audits are unique in many significant respects. For instance, the FTB is unique in how it selects taxpayers for audit, especially taxpayers with delinquent tax returns. The California Franchise Tax Board (FTB) has access to DMV registration and driver’s license information, as well as California property tax bills, and will use that information to select taxpayers for audit.

Another major difference between IRS and FTB audits is that California FTB audits tend to be more “theme-based” than IRS audits and the FTB will often select taxpayers for audits based on certain transactions that the FTB has been investigating. For instance, the FTB has recently and frequently audited taxpayers who have executed 1031 like-kind exchanges, taxpayers reported losses from flow-through entities such as S-corporation, partnership, and LLCs, and also capital gain and loss transactions.

Also, under California law, the DMV has the ability to suspend your driver’s license for failure to pay California income tax under some circumstances.

HOW TO PREPARE FOR A FRANCHISE TAX BOARD AUDIT

  • Organizing Your Financial Records

    Maintaining accurate and organized financial records is crucial to obtaining a successful audit result. Good records can help the auditor determine whether you are making or losing money, the correct total of your taxable income, and help you to substantiate the returns that you submitted. Common records include copies of payroll records such as W2s or 1099s, sales invoices, contracts, receipts for business expenses and other deductions, asset purchase and sales agreements, and copies of checks. Utilizing accounting software or professional assistance can ensure that your records are organized and complete.

  • Reviewing and Understanding Tax Laws and Regulations

    Knowledge of the tax laws relevant to the audit will be necessary to avoid inadvertent mistakes. Enhancing legal knowledge through research or seeking guidance from a tax professional can help to ensure that accidental errors or omissions are avoided.

  • Conducting a Self-Audit

    Conducting a self-audit prior to the FTB audit is one way to make sure you are prepared. Reviewing your own returns can help you identify potential red flags or areas that need correction. Also, the self-audit can help to ensure you have collected all the documentation necessary to substantiate your returns.

  • Gathering Documentation

    Gathering the documentation required for the audit can increase your chances of a successful audit outcome. The FTB will request specific documentation required for the audit. Make sure that you gather all of the documentation and that it reconciles with your returns. Also, avoid volunteering excessive or unrelated information as it can open the door for additional audit issues or complicate the process. Limit your disclosure to the specific information requested and present the information in a concise and organized fashion.

APPEALING AN UNFAVORABLE AUDIT RESULT

Thankfully, a taxpayer has options when facing an unfavorable audit result. If the taxpayer disagrees with the result, the taxpayer, or their designated representative can submit a timely protest and begin the appeals process. The protest must include all information required by the FTB as well as evidence and documentation that supports the taxpayer’s position. If the taxpayer agrees with the audit assessment, and does not file a timely protest, the result will become final.

Preparing a strong case to support the appeal is crucial in obtaining a successful result. A tax attorney can advise you on your position, help you organize and compile compelling evidence, and develop strong arguments showing why the audit decision was incorrect. Additionally, a tax attorney can help you navigate the appeals process and ensure that all mandatory deadlines are met.

TOP 500 DELINQUENT TAXPAYERS – SERIOUS CONSEQUENCES

What is especially unique about the California Franchise Tax Board is that it publishes, on a regular basis, the top 500 most delinquent taxpayers in California. According to California tax law, the FTB must (1) notify each taxpayer by certified mail 30 days before the FTB intents to post the information on its website; (2) as a taxpayer resolves the case with the FTB through full-payment, a California payment plan, or a FTB offer in compromise, the taxpayer is removed from the list and another added.

The impact of being listed on the Top 500 list is that in addition to pursuing normal collection activities such as file liens, issue wage garnishments and bank levies, and seize assets, the Franchise Tax Board may suspend a taxpayer’s driver’s license and his/her occupational and professional license. Furthermore, if the taxpayer conducts business with the State of California, such a government contractor, State agencies will discontinue doing business with the taxpayer.

HELP FROM AN EXPERT SAN DIEGO TAX LAWYER

At Dallo Law Group, our California tax lawyers are trained and experienced in handling your Franchise Tax Board (FTB) audit. Contact us today to schedule a consultation!