Blog Archives - Page 31 of 52

What’s the Difference Between a Tax Lien and a Tax Levy?

May 25, 2026November 9, 2016 by Brotman Law

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Key Takeaways

Aside from these differences, liens and levies are remarkably similar in most other respects.
Liens and levies are filed by the federal and state tax authorities when you neglect or refuse to pay a tax bill you have received from these agencies.
The IRS usually files liens with the county recorder or the clerk of courts in your county of residence or where your property is located. A lien filed by the FTB is against any property you own in California.

Taxpayers often confuse the terms tax lien and tax levy and do not understand the difference in actions represented by these concepts. While liens and levies can both be filed by the IRS and the California Franchise Tax Board (FTB) and there are many similarities to when they are issued and how they can be removed, liens and levies are terms for very different actions.

What Happens When You Miss Your Tax Extension Deadline?

May 25, 2026October 26, 2016 by Brotman Law

Key Takeaways

As long as you did so by October 17, you will be allowed to file electronically.
The consequences of not filing your state or federal income tax return extension or payment are more interest accrued and additional penalties.
If you owe either of these penalties, pay the failure-to-file penalty first as it is the more substantial or the two. Failure to file is assessed at 5% of the taxes not paid by the due date for each month or partial month the return is late.

October 17, 2016, was the last day you can file California State or Federal income tax returns if you were granted the six-month extension in April. It is not the time to panic, but it is definitely time to move quickly if you have not completed your 2015 tax return and payment.

As long as you did so by October 17, you will be allowed to file electronically. However, if you are planning to file an amended return, you must mail it; neither the state nor the IRS allows electronic filing of amended returns.

Keep in mind that any unpaid taxes from 2015 have been accruing penalties and interest since April 18, 2016. You cannot file for another extension; you must file a return.

What Happens If You Misclassified a Worker?

May 25, 2026October 19, 2016 by Brotman Law

Key Takeaways

What does the employment classification of workers have to do with payroll tax audits.
Previously, we have posted about the difference between employees and independent contractors in the eyes of the IRS and the EDD. Here is a quick reminder.
There is an entire list of factors the EDD (and the IRS) use to determine whether or not someone is an employee. No single factor can be used to make the determination.

What does the employment classification of workers have to do with payroll tax audits?

Everything.

When the Employment Development Department of the State of California decides to audit, the classification of your workers is the auditor’s sole concern. Additionally, the IRS often adopts the results of the EDD audit to use in assessing federal penalties.

For this reason, it is critical to classify your workers properly and supply only the information the auditor asks for, nothing more.

What Are Your Payroll Tax Responsibilities?

May 25, 2026October 12, 2016 by Brotman Law

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Key Takeaways

Such employers see this as a cost-saving for their businesses because they not only do not have to pay taxes, they do not have to pay for someone to administer employee taxes.
Social Security and Medicare, otherwise known as FICA, is paid quarterly. FUTA, the federal unemployment tax act, requires an annual return. Employers are required to provide an IRS Form W-2 detailing the wage withholdings.
Very small employers, defined as those with an estimated tax liability of $1,000 or less for a calendar year can file annually.

In a previous post, we talked about the difference between independent contractors and employees. One of the biggest differences, and one that often drives intentional worker misclassification, is that employers must withhold and pay payroll taxes for employees whereas they do not for independent contractors.

Classifying Employees and Independent Contractors

May 25, 2026October 5, 2016 by Brotman Law

You have hired someone to do work for you. Is that person an employee or an independent contractor?

The answer is important because misclassifying an employee as an independent contractor, whether intentionally or through ignorance, can land you in court and in debt for payroll taxes.

There are several tests from a variety of regulatory agencies that are used to try to determine employment status and occasionally changes are made to the standards. Even if you classified certain of your workers correctly before, you might need to revisit the question to ensure you remain in compliance.

CDTFA Sales Tax Audits, Pt 4: After the Audit

May 25, 2026September 28, 2016 by Brotman Law

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Key Takeaways

If the supervisor was not present at your exit conference, you may now request a meeting with that person if you and the auditor are unable to reach an agreement about the audit findings.
The DPA is actually relatively helpful in resolving issues or clarifying the CDTFA’s position on them.
Afterward, you will have a follow-up meeting the CDTFA representative and make your presentation once again.

Here is the final installment of our four-post series about California Sales Tax and Use Audits. In Part 1, we cover how audits are triggered and companies selected for audit. Part 2 is about how the audit is conducted and the types of documents you may be required to provide. Part 3 gave you some tips for working with an auditor and the type of investigation an auditor may perform.

In Part 4 we take up what happens after an audit is complete, and how an experienced tax attorney can help you through the process of an audit by the California Department of Tax and Fee Administration.

CDTFA Sales Tax Audits, Pt 3: How to Prepare for an Audit

May 25, 2026September 21, 2016 by Brotman Law

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Key Takeaways

Welcome to Part Three in the CDTFA sales tax audit series.
Now you will learn how to prepare for an audit, including how to work with an auditor and which records and documents to have ready.
Provide the auditor easy access to your facility. Include a tour to review the workflow, the types of controls you have in place, and to explain the use of any new machinery. If the auditor is on the premises for a while, offer a comfortable desk or office.

Welcome to Part Three in the CDTFA sales tax audit series. In Parts One and Two, we provided an overview of how an audit is conducted and how companies are selected for audit as well as audit procedures and techniques.

Now you will learn how to prepare for an audit, including how to work with an auditor and which records and documents to have ready. You will also read about audit testing and sampling as well as the PAPE program and cut-off techniques.

One note before you begin your preparations: be ready to comply with auditor requests but do not volunteer additional information. Do not sign anything without careful examination because the auditor is unlikely to explain the consequences or agreements; it is up to you to research and clarify what you do not understand.

CDTFA Sales Tax Audits, Pt 2: Audit Procedures and Techniques

May 25, 2026September 14, 2016 by Brotman Law

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Key Takeaways

The State of California does not have a fixed structure for conducting audits. An auditor is authorized to use a range of methods to find any necessary information.
Auditors may ask for a wide variety of documents from the tax years under investigation.
They may also request documents to support exempt sales, such as resale certificates.

This post is the second in a four-part series explaining how the California Department of Tax and Fee Administration (CDTFA) performs its audit function, what to expect from an audit, how to prepare for it, and what happens when the audit is complete.

The first post of this series explained the role of the CDTFA and the goals of a sales tax audit. It includes when an audit can occur, how companies are selected for audit, and common audit triggers.

This post takes up how the audit is conducted, what records are requested, and the type of tests auditors use to verify tax filings.

CDTFA Audits, Pt 1: What Is an Audit and How Are Companies Selected?

May 25, 2026September 7, 2016 by Brotman Law

Key Takeaways

A sales tax audit occurs when the CDTFA suspects a business’s reported sales have been understated. Typically, records cannot be verified by a direct audit approach, meaning the CDTFA cannot match everything a business reports to it and the other agencies.
A mark-up audit is often used to prove materially misstated or fraudulent accounting, especially for cash-intensive businesses.
Auditors will also approach a vendor to compare the dollar amount of goods sold to the business under audit matches what the business’s cost of goods sold account for the same period.

This post in one in a four-part series explaining how the California Department of Tax and Fee Administration (CDTFA) performs its audit function, what to expect from an audit, how to prepare for it, and what happens when the audit is complete.

Common Tax Issues for Small Businesses

May 25, 2026August 31, 2016 by Brotman Law

Small businesses, of which there are thousands in California, spend the highest percentage of time of any business entity preparing and submitting taxes. Federal, state, and local tax requirements are extremely complex and change every year.

Multiple agencies administer different taxes, and each has its own set of rules and methods of payment. It is no wonder that small business owners often have common tax issues and outcomes of inadvertent noncompliance.