There are two forms of California income tax audits – those originated by the State of California, and those based upon another agency’s audit such as the IRS. This second form of audit, often referred to as a “Piggy-Back Audit” is one of the most hazardous and unexpected challenges faced by California taxpayers. The important thing to know is this: If you are audited by the IRS you can expect a California FTB or other state agency audit immediately behind it. The IRS communicates directly with California tax agencies, and vice versa. When changes are made to a California tax form, the IRS is notified by the California Franchise Tax Board (FTB), Board of Equalization (BOE) or Employment Development Department (EDD). When you complete an IRS audit, the IRS notifies the FTB, BOE and EDD appropriately based upon changes to your business or personal tax return(s).
You are probably more likely to be audited by a California agency such as the FTB or the EDD. The BOE is facing tremendous headwinds in the California legislature due to mismanagement and allegations of redundancy and poor practices. If you are notified by the FTB for an income tax audit, or contacted by the EDD for a misclassification audit or payroll tax audit you should contact our experienced California tax attorneys immediately for a free consultation at 866-631-3470.
There is no cost for the initial consult, and you need to learn about the process surrounding your audit and the steps you should take to protect yourself. Learn about the protections of the attorney-client privilege and how this important legal tool allows you to have candid conversations with Allen Barron attorneys without concern that the information can be obtained by subpoena. Your tax preparer, bookkeeper, CPA and online tax solution cannot provide these protections. Learn about the two forms of California income tax audits and the risks you face from a “piggy-back audit” and how you can nip these challenges in the bud.