Navigating IRS & FTB Audits
Facing a tax audit is a highly intrusive process that can lead to massive financial penalties. The IRS and the Franchise Tax Board (FTB) rigorously scrutinize deductions, uncover unreported income, and build cases against taxpayers. Answering an auditor’s questions without legal representation can lead to accidental disclosures that expand the scope of the investigation into other tax years or business entities.
This is why consulting with our lawyers is paramount to protecting your rights. We manage the entire audit process by controlling the flow of requested documents, providing what the law requires while preventing the agency from conducting an overly broad search of your financial records, and substantiating high-risk business expenses using compelling arguments grounded in the tax code.
Stopping Active Bank Levies & Wage Garnishments
When you owe back taxes, the IRS and FTB can freeze your bank accounts or seize a significant portion of your paycheck without a court order. These enforcement actions can devastate your personal finances or cripple your business operations. We can intervene early to halt levies by:
- Filing collection due process (CDP) appeals. If you receive a Final Notice of Intent to Levy, we can help you file a CDP appeal to pause active enforcement while your case is reviewed.
- Proving economic hardship. We can petition the IRS or FTB to release a levy by submitting detailed disclosures demonstrating that the seizure prevents you from meeting basic living expenses.
- Negotiating installment agreements. Entering into a structured payment plan can prohibit tax agencies from continuing to levy your assets as long as you remain compliant with the agreed-upon terms.
- Pursuing an offer in compromise (OIC). For taxpayers who can’t afford their total liability, we structure comprehensive settlement offers to resolve the debt for less than the full amount owed.
Capital Gains Tax Advisory for Real Estate & Business Liquidations
Selling a commercial property, successful business, or other highly appreciated asset can trigger a capital gains tax bill that significantly reduces your actual profit. Without the right legal structure in place before the sale, you may surrender a large portion of your equity to federal and state taxes.
We help clients implement strategic tax-deferral and exclusion methods under the Internal Revenue Code (IRC). For real estate investors, we pursue IRC § 1031 exchanges to defer taxes by reinvesting proceeds into new properties or explore opportunity zone investments for long-term tax benefits.
For business owners liquidating assets or selling their companies, we can evaluate options like installment sales to spread out the tax burden over several years. We also help eligible founders utilize the IRC § 1202 qualified small business stock (QSBS) exclusion to potentially eliminate capital gains taxes on the sale of corporate shares.
Challenging FTB Assessments Before the OTA
Disagreeing with an auditor's findings doesn’t mean you have to accept the tax bill. If the FTB issues an inaccurate assessment, taxpayers have the right to challenge that decision. However, appealing a state tax assessment involves strict deadlines and complex administrative procedures that require precise legal navigation.
Our attorneys help clients transition their disputes from the FTB audit level to a formal administrative appeal before the California Office of Tax Appeals (OTA). The OTA is an independent agency where taxpayers can contest FTB decisions in front of an impartial panel of administrative law judges.
We can prepare comprehensive legal briefs, represent you during evidentiary hearings, present clear financial evidence and strong statutory arguments, and fight to reduce or overturn improper tax assessments, penalties, and interest before the debt becomes final.
Defending EDD Payroll Audits & Worker Classification
The Employment Development Department (EDD) audits businesses to uncover misclassified workers under AB 5. If the EDD determines your independent contractors should have been classified as employees, you may face severe assessments for back payroll taxes, penalties, and interest that can threaten the survival of your business.
We work to protect employers by:
- Contesting the ABC test. We can defend your business practices by gathering the necessary contracts, invoices, and operational evidence to prove that independent contractors are lawfully classified.
- Navigating industry exemptions. We help businesses leverage statutory exemptions like the Borello multi-factor test to protect their contractor relationships from reclassification.
- Mitigating personal liability. Unpaid payroll taxes are considered “trust fund” taxes, meaning the EDD or IRS can hold business owners or officers personally liable for the debt. We contest these assessments to protect your assets.
- Negotiating penalty abatements. If a reclassification is unavoidable, we can advocate for the abatement of costly failure-to-deposit and negligence penalties based on reasonable cause to reduce your financial exposure.
Tax Strategies for Divorce: Transfers, QDROs, & Capital Gains
Ending a marriage involves dividing years of accumulated wealth, which can trigger major tax consequences. California is a community property state, meaning most assets acquired during the marriage are divided equally. However, transferring high-value assets without considering the underlying tax basis can result in unfair burdens.
Under IRC § 1041, transfers of property between spouses during a divorce are generally tax-free at the time of the transfer. Our lawyers work to structure property divisions that avoid unexpected capital gains taxes when splitting real estate, investment portfolios, or privately held businesses.
We also help clients divide retirement accounts like 401(k)s and pensions by utilizing a qualified domestic relations order (QDRO), which allows funds to be transferred directly to the receiving spouse without triggering early withdrawal penalties or immediate income tax liabilities.
Protecting Your Rights During FTB & EDD Criminal Tax Investigations
Civil tax audits can quickly spiral into criminal investigations if an agency suspects intentional wrongdoing. State authorities like the FTB and EDD pursue prosecutions for sales tax fraud, payroll tax evasion, and filing false state income tax returns. A conviction carries heavy fines, ruined professional reputations, and prison time.
Because our firm is led by a former public defender, we possess extensive experience in the criminal justice system. Our attorneys understand how prosecutors build their cases and how to counter these tactics during an investigation. If charges are brought, we are prepared to fiercely defend your rights.
Whether you’re facing an IRS dispute or planning for the future, our tax lawyers are here to help. Contact us online to discuss your case. Se habla español.
