On: July 15, 2022

CDTFA Audit Experienced Tax Experts Pasadena

  You can receive in the mail “good news” or “bad news” concerning your taxes. When you receive a tax refund check in the mail, that is “good news”. When you receive a tax audit notice in the mail, that is “bad news”.  No person wants a government authority to review the person’s tax affairs. In California, one source of tax audits is the California Department of Tax and Fee Administration (“CDTFA”). If you are in Pasadena and are audited by CDTFA, you need help from a CDTFA audit experienced tax expert in Pasadena.  

What Does CDTFA Audit?

  CDTFA is one of the four principal state tax agencies in California.  While the California Franchise Tax Board is generally involved with income and franchise taxes, the California Employment Development Department is generally involved with employment taxes, and the California State Board of Equalization is generally involved with property taxes, CDTFA is generally involved with sales and use taxes. In addition to sales and use taxes, CDTFA is responsible for the administration of over 30 different taxes and fees, including, in particular:

• Alcoholic beverage taxes;
• California tire fees;
• Cannabis taxes;
• Cigarette and tobacco products taxes;
• Fire prevention fees;
• Insurance taxes;
• Natural gas surcharges;
• Water rights fees;
• Various fuel taxes, including aircraft jet fuel taxes, diesel fuel taxes, and motor vehicle fuel taxes; and
• Various hazardous substance taxes and fees, including hazardous waste fees and environmental fees.

CDTFA can conduct audits concerning any of these taxes and fees.  

What Are the Key Elements of a CDTFA Audit?

  The objective of a CDTFA audit is to verify that the taxpayer has correctly reported taxes or fees on a tax return. Generally, CDTFA conducts audits of accounts in three-year intervals, at the time a permit or license is closed out, or in connection with an audit of another permit or license held by the taxpayer or feepayer.  CDTFA audits may also be initiated as a result of information received from outside sources. In a CDTFA sales and use tax audit, the auditor will seek to answer the following questions:

• Did the taxpayer report all gross receipts from sales of tangible personal property and taxable labor and services?
• Did the taxpayer report the cost of all business equipment and supplies thar the taxpayer purchased without tax either from out-of-state vendors or for resale that would be subject to use tax?
• Did the taxpayer properly claim deductions?
• Did the taxpayer properly allocate local tax?
• Did the taxpayer use the correct rate of tax when reporting sales in special tax districts?
• Did the taxpayer properly apply tax to the taxpayer’s sales and uses of tangible personal property?

As part of a CDTFA audit, you typically will need to turn over certain of your records to the auditor.  The types of records the auditor will want to review will depend on the CDTFA tax or fee program for which the audit is being conducted.  For sales and use tax audits, the auditor generally will want to review the following types of records:

• Books of account, including your income statements, balance sheets, general ledgers, and other summary records of your business operations, including income tax returns;
• Original documents that support the entries to your books, such as sales and purchase invoices, purchase orders, contracts, bank statements, cash register tapes, and any other documents thar result from your business operations;
• Resale certificates, exemption certificates, bills of lading, or other documents supporting claimed exempt sales; and
• Copies of the CDTFA returns you have filed and the working papers and schedules used to prepare the returns.

A CDTFA audit generally will result in one of three outcomes, as follows:

• The auditor can determine that no changes shall be made to the audited CDTFA return;
• The auditor can determine that changes shall be made to the audited CDTFA return, potentially resulting in you owing additional tax or fee liabilities, and you agree with the audit findings; or
• The auditor can determine that changes shall be made to the audited CDTFA return, potentially resulting in you owing additional tax or fee liabilities, and you disagree with the audit findings. In this third outcome, you can discuss your objection to the audit findings with the auditor’s supervisor or a CDTFA representative.  You also have certain appeal rights.

 

How to Respond to a CDTFA Audit – Best Practices

  The proper response to a CDTFA audit actually begins before you receive notice of any audit.  You should be able to support with evidence each item that is included on a CDTFA tax return.  You should maintain all records that CDTFA requires you to maintain.  While you still may be audited, with this evidentiary support and these required records, you will be in a better position to resolve your audit successfully. Two key words to keep in mind in properly responding to a CDTFA audit are contact and cooperation.  First, you should not “run away” from a CDTFA audit notice; the matter will not go away.  Contact should be made with the CDTFA auditor after you receive notice of the pending CDTFA audit.  Second, it will not help your case to be hostile to the auditor.  You have the right to defend yourself, but your general attitude in a CDTFA audit should be characterized by cooperation. Perhaps the most important best practice in responding to a CDTFA audit is to hire a CDTFA audit experienced tax expert with significant knowledge and experience in CDTFA audits.  CDTFA audits can be complicated matters if you are not familiar with them.  Even if you have in your possession good evidentiary support and required records, it is easy to make a mistake.  You can disclose a record that you do not need to disclose to the auditor.  You can make an incorrect statement to the auditor. A knowledgeable and experienced CDTFA audit tax expert will not make these mistakes.  Instead, a knowledgeable and experienced CDTFA audit tax expert will help you disclose records to and answer questions from the auditor in the most effective manner to help your audit case.  In addition, a knowledgeable and experienced CDTFA audit tax expert can help you:

• Develop the best arguments in your audit case;
• Negotiate effectively with the auditor, the auditor’s supervisor, and the CDTFA representative; and
• Decide if you should exercise your appeal rights if you disagree with the audit findings.

 

Leading Tax Group – The Best CDTFA Audit Experienced Tax Expert in Pasadena

  If you are in Pasadena and want the best CDTFA audit experienced tax expert, you should hire Leading Tax Group (their experienced team consists of a former IRS tax attorney, an experienced payroll tax and sales tax attorney, a retired IRS auditor (of 40+ years), and their own in-house accounting team!). Leading Tax Group knows all the intricacies of the CDTFA audit process.  It has years of experience successfully helping other clients with their CDTFA audits and resolving these cases in a favorable manner.  Leading Tax Group understands how to most effectively deal with CDTFA in each case. With this knowledge, experience, and understanding, Leading Tax Group will do a better job responding to your CDTFA audit than if you try to respond to the audit on your own without representation. Leading Tax Group is the best CDTFA audit experienced tax expert (their experienced team consists of a former IRS tax attorney, an experienced payroll tax and sales tax attorney, a retired IRS auditor (of 40+ years), and their own in-house accounting team!) in Pasadena to help you attain a successful outcome in your CDTFA audit case. Leading Tax Group has a conveniently accessible office in Pasadena at 225 S Lake Avenue, 3rd Floor. If you have a CDTFA audit issue, you need to resolve this issue by hiring the aggressive CDTFA audit experienced tax experts from Leading Tax Group (their experienced team consists of a former IRS tax attorney, an experienced payroll tax and sales tax attorney, a retired IRS auditor (of 40+ years), and their own in-house accounting team!). For the best CDTFA audit experienced tax expert (their experienced team consists of a former IRS tax attorney, an experienced payroll tax and sales tax attorney, a retired IRS auditor (of 40+ years), and their own in-house accounting team!) in Pasadena, contact Leading Tax Group now at (800) 900-4250 and schedule your free consultation today!