California Tax Attorney
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California not only has a reputation for heavily taxing residents and businesses, but also for aggressively collecting state income, sales, and payroll taxes. The Franchise Tax Board has been known to be more aggressive than the IRS, and CDTFA sales tax audits frequently result in adjustments that affect back taxes, interest, and penalties. Even EDD audits can result in the reclassification of independent contractors to employees for payroll tax purposes, and in extreme cases lead to allegations of payroll tax fraud. Nevertheless, in many California tax controversies, an experienced tax attorney can mitigate tax liability. Whether you need to navigate a California tax audit or pursue tax resolution strategies like offers in compromise or installment agreements, The Law Office of Jin Kim can help.
To learn more about how The Law Office of Jin Kim can help you resolve your tax controversy call her office at (916) 299-9913 for a free consultation.
California Tax Audit
Nearly every taxpayer knows the IRS audits some tax returns, but some California taxpayers are surprised to find out that the State of California audits income, sales, and payroll tax returns. In brief, the Franchise Tax Board performs income tax audits, the CDTFA performs sales tax audits, and the EDD performs payroll tax audits.
The potential outcome of a California tax audit ranges from uneventful to criminal, with most cases falling somewhere in between with the assessment of back taxes, interest, and penalties. To reduce the likelihood of serious outcomes, a California tax attorney can help the taxpayer present clear evidence to the auditor and negotiate any debatable points of law and fact. If additional tax liability is assessed, a California tax attorney can pursue options for tax resolution such as installment agreements and offers in compromise.
FTB Income Tax & Residency Disputes
The Franchise Tax Board has a reputation for being aggressive and in many cases more difficult to deal with than the Internal Revenue Service. One area in which this reputation is earned is in the FTB’s attention to residency. In cases where an individual moved to or from California, the Franchise Tax Board may argue that the taxpayer was a California resident for a greater duration than claimed in order to tax income earned during residency. A California tax attorney can help taxpayers dispute the FTB’s claim of residency and mitigate liability in FTB audits.
CDTFA Sales Tax Issues
California sales tax audits are performed by the CDTFA which is also charged with the collection of use tax. This large tax agency uses a variety of procedures to audit businesses that vary according to industry. Following the CDTFA audit manual, auditors reconstruct sale volume to account for unreported income and sales tax. Where there’s an adjustment to tax liability following an audit, the consequent deficiency in unreported income can have significant income tax consequences. Accordingly, retaining a sales tax audit attorney can be economical even when the initial adjustment appears to be minimal.
Due to the nature of our government system, taxpayers can end up owing amounts both to the IRS and on the local state level. In some instances, state governmental entities may be more aggressive than the IRS itself when it comes to collecting taxes owed. For California, the entity responsible for collecting personal income tax and corporate income tax in the state is the California Franchise Tax Board (FTB). Sales and use tax on the other hand are administered by the Board of Equalization. Lastly, payroll taxes, unemployment, and other state programs are administered by the Employment Development Department.
EDD Payroll Tax Issues
Employment taxes are a leading cause of California tax debt for businesses. When business expenses must be paid and payroll taxes are held in trust, sometimes well-meaning businesses use withheld payroll taxes to meet ongoing expenses, only to find themselves unable to remit payroll taxes when due. As a result, payroll tax penalties and interest can quickly turn a modest sum of payroll tax arrears into significant tax liability that cannot be immediately repaid. When this occurs, California payroll tax attorneys can secure installment agreements with the EDD and IRS to create affordable repayment plans.
California Tax Debt Relief
The California Franchise Tax Board has twenty (20) years to collect unpaid tax liabilities. This seems a long time, but there are other options other than just waiting for the statute of limitations to expire.
Like the IRS, installment agreements are also possible tax relief schemes for California state taxes. They may fall into two categories – informal and formal installment agreements. An informal installment agreement is technically more of a collection delay since the taxpayer requests the board for an extension of ninety days, during which the tax must be paid in full. A shorter collection delay of thirty days may also be requested by the taxpayer instead. Failure to pay after the expiration of the delay period will result in the tax bill being sent to collections.
A formal installment agreement is similar to the installment plans available from the IRS. In order to qualify for an installment agreement, the taxpayer must not owe more than $25,000 in taxes and must be able to pay the full amount in 60 months (five years). The FTB may be more strict in its requirements than the IRS. Generally, you will be asked to provide financial information before your application is approved. A lien may also be filed by the FTB on your property, which will be lifted once the full amount is paid.
There’s also a third form of installment payment plan that’s available on the state level, which is the partial payment installment agreement. This agreement is based on the taxpayer’s ability to pay if the taxpayer is unable to meet high monthly payments based on the total amount of tax that needs to be paid.
Offer In Compromise
The CA FTB also accepts offers in compromise like the IRS. A taxpayer may request an offer in compromise from the FTB to pay an amount lower than the full liability of the tax. The CA FTB will take into consideration factors such as the taxpayer’s age, ability to pay, and future earning potential in deciding whether or not to approve an offer in compromise.
Innocent Spouse Relief
Innocent Spouse Relief is also a tax relief option that’s available on the state level. Both spouses and registered partners may apply for innocent spouse relief. Since the rules may get complicated with regard to this, the availability of this relief may vary depending on the circumstances surrounding the case.
When a taxpayer is undergoing bankruptcy proceedings, some state taxes may be discharged. There are certain criteria that must be met, such as that the taxes have already been assessed by the CA FTB at the time the taxpayer files for bankruptcy. The discharge of these taxes in bankruptcy may be affected by the circumstances of the case.
Califonria Tax Lawyer Resources
- The California Tax Lawyer is a publication from the Califonria Lawyers Association to keep professionasl up-to-date of recent legal developments.
- The Power of Attorney form from the FTB that gives a designated invidiual the authority to look at your account information, communicate with the FTB on your behalf, send information to the FTB on your behalf, and represent you before the FTB.
- The Cornell EDU list of Califonria tax attorneys provides a directory of qualified tax lawyers.
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