In my previous article on the Franchise Tax Board audit, I talked about the importance of pre-auditing the tax return in question in order to identify any issues before your first meeting with the Franchise Tax Board auditor. In this article, I will discuss another advantage of pre-auditing a return, the importance of the presentation of records in general, and the importance of your relationship with the auditor in order to gain successful outcomes in Franchise Tax Board audits.
Brotman Law
Franchise Tax Board Audit Tips
Throughout my years of practice, I have developed a few helpful tips for dealing with a Franchise Tax Board audit and auditors from the state of California. Franchise Tax Board audits are not nearly as common these days. Most of my clients who receive contact from the Franchise Tax Board are contacted after they are subject to an IRS audit and merely sent a bill based on the adjustment in taxable income that the IRS has already calculated. In other words, they let the IRS do all the hard work and send a supplemental bill later on. However, I hope that these few helpful tips will guide you in your dealings with the Franchise Tax Board. For more information on California state tax matters, please visit the Franchise Tax Board attorney services section of my website.
What is the Taxpayer Advocate?
The Taxpayer Advocate helps taxpayers resolve problems with the IRS. The Taxpayer Advocate also recommends changes to help prevent problems in the future. The advocate handles those tax problems that are causing significant financial difficulty; when you or your business are facing immediate, adverse threat; and when you have tried to contact the IRS repeatedly to no avail. The Taxpayer Advocate is a member of the Taxpayer Advocate Service (TAS).
IRS Taxpayer Advocate – What it Does
The IRS Taxpayer Advocate helps taxpayers resolve problems with the IRS. The Taxpayer Advocate also recommends changes to help prevent problems in the future. The Taxpayer Advocate handles those issues when the tax problem is causing significant financial difficulty; when you or your business are facing immediate, adverse threat; and when you have tried to contact the IRS repeatedly to no avail.
Who Qualifies for Legal Aid – Part One
A list of free legal clinics is available on your local and state Bar Association website and through Volunteer Attorney programming. Local entities also offer neighborhood legal services and legal aid clinics. In addition, university law programs offer free legal aid. Consult your local websites and universities for more information. In general, qualifying for free legal aid is based upon a number of factors related to income, health status, safety, location, and civil and/or criminal issues. The following sections provide insight into those categories that are specific to qualifying for legal aid.
Who Qualifies for IRS Legal Aid?
Click here for the previous section about legal aid.
Disabled Veteran Status
If you are a disabled veteran, you may qualify for free IRS legal aid. Eligibility is based upon issues that may range from rental assistance to child visitation matters. To determine if you are eligible, contact your local veterans association. The association will help you to determine if you or a member of your household qualifies for a number of services and free legal aid.
S Corporation Reasonable Compensation
There are categories of business entities responsible for paying shareholder-employee reasonable compensation. An S Corporation[1] is one such corporation. An S Corporation is defined as a type of corporation that elects to be taxed under a section of the U.S. Internal Revenue Code. “S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee” (IRS.gov, “S Corporation Compensation and Medical Insurance Issues,” 8/31/2013). The shareholder cannot receive an amount of S Corporation reasonable compensation that exceeds the amount the shareholder receives either directly or indirectly.
IRS Innocent Spouse Relief Rules
This article discusses the IRS innocent spouse relief rules. When couples file jointly, the law makes both parties responsible for the entire tax liability. Under tax law, this is called joint and several liability,[1] which is defined as two or more persons who share responsibility with respect to the same liability (i.e., event or act).
IRS Innocent Spouse Relief Requirements
IRS Innocent Spouse Relief Requirements – What is Innocent Spouse Relief?
You and your spouse are jointly responsible for paying federal tax due, interest accrued, and any applicable penalties under the IRS innocent spouse relief requirements. This is especially true if you and your spouse filed a joint return. However, if you believe that your current or former spouse should be solely responsible for a particular item or the underpayment of tax on the joint tax return, then you may be eligible for Innocent Spouse Relief.
IRS National Standards
IRS National Standards
The IRS has developed IRS national standards as guides for taxpayers responsible for resolving their tax liabilities. The IRS national standards (or IRS Collection Financial Standards) are defined as five categories of necessary expenses developed and used by the IRS to calculate a taxpayer’s payment potential. The standards are used for the purpose of calculating repayment of federal tax liability. “IRS National standards have been established for five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous” (IRS.gov, “IRSNational Standards: Food, Clothing and Other Items,” 8/25/2013). For example, under the category of food, the IRS allows for calculations of both food at home and food away from home. “Food at home refers to the total expenditures for food from grocery stores or other food stores. . . . Food away from home includes all meals and snacks, including tips, at fast-food, take out, delivery and full-service restaurants” (“National Standards: Food, Clothing and Other Items”).