video-blog

What Are the Different Types of Offers in Compromise?

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So there’s three main types of offers in compromise at the federal level. There’s doubt as to collectability, there’s doubt as to liability and there’s effective tax administration. So let’s start with doubt as to collectability. It is the traditional offer or compromise that you may have heard of to settle your tax liability for pennies on the dollar and much like the name suggests, the reason that you’re submitting an offer of compromise is the doubt that the government will ever be able to collect that liability over the next X amount of years. So from a government’s perspective, the government has a lot of people that owe money. It’s not interested in going after a lost cause, so the government would rather cut its losses, settle the account, get you in compliance and move forward. So that’s essentially what the ask is and a doubt as to collectability offer in compromise. In a doubt as to liability offer in compromise you’re debating whether or not you actually owe the liability and you’re making a settlement offer to the government based on the fact that you don’t owe this liability and the risk to the government if they don’t take your doubt as to liability is that they won’t collect anything or will collect less than

Key Takeaways

  • So there’s three main types of offers in compromise at the federal level. There’s doubt as to collectability, there’s doubt as to liability and there’s effective tax administration. So let’s start with doubt as to collectability.
  • the offer. An effective tax administration offer in compromise is asking the government to forgive a tax liability for a reason that doesn’t fall within doubt as to liability but it is generally a good idea.

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What Documents Do I Need in a Payroll Tax Audit?

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Key Takeaways

  • They’re running a test on payroll that was paid, taxable wages tax that was paid, payroll tax expenses that are on the general ledger and then independent contractors that basically payroll tax in …
  • Because at the beginning of the payroll tax audit, you have the best opportunity to limit the scope of the documents requested.
  • So the best opportunity you have with respect to documents is really to limit the scope.

What usually happens is that the auditor will send you a laundry list of documents that they’re looking for and of the different types of audits, payroll tax audits are usually the ones that have the most flexibility because in a payroll tax audit they’re basically reading through tests. They’re running a test on payroll that was paid, taxable wages tax that was paid, payroll tax expenses that are on the general ledger and then independent contractors that basically payroll tax in a box. So if you’re running an audit, what they’re going to ask for is they’re going to ask for three years of records and they’ll ask for tax returns and they’re going to ask for payroll tax returns and they’re going to ask for internal accounting and this and that mail, so before you go and tackle that big laundry list of documents, the best thing to do is to talk to the auditor. Because at the beginning of the payroll tax audit, you have the best opportunity to limit the scope of the documents requested. For some people providing payroll records for three years isn’t that big a deal but for other companies, particularly companies that utilize a large workforce or large amount of independent contractors, it can be a huge deal to have to come up with all the 1099s and w-2s and everything that gets filed. So the best opportunity you have with respect to documents is really to limit the scope. Most EDD auditors will limit the scope of the records of their request, at least for the first audit meeting, to the last three years of tax returns. They may ask for three years’ bank statements but to limit the other documents to a year, which is the best thing to do because if you can go through a limited testing period, establish that there’s no error and the auditor has a chance to complete their process and check the box, problem solved. So when going through a payroll tax audit don’t just accept the initial document request. Work with the auditors – it’s actually needed so that you’re not having to produce records and digging yourself into a big challenge that is going to take you a lot of time to get out.

What Is the IRS Appeals Process Like?

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So, the IRS appeals process is actually reasonably friendly to taxpayers and let me explain why. First of all the function of Appeals technically is to be an independent body of the IRS away from examinations and collections. The sole function of appeals is to resolve disputes between the taxpayers and the government and to do so in a mutually beneficial way. The most common time we run into appeals is usually with respect to when we’re filing a Tax Court petition and trying to work things out. Most of our audits that we do at the firm we will file a tax court petition for and then we’ll try and negotiate with appeals. The benefit of dealing with Appeals is most of the Appeals officers are either former collection agents or they’re formal auditors so they understand what you’re talking about. You’re dealing with professional people who know the same playing field as you and that are a representative that we can communicate with on a high level and get a lot done. Number two is with Appeals you’re dealing with a very high volume of cases, so Appeals is trying to screen cases out prior to litigation. Because it’s trying to resolve disputes, it has a lot more flexibility. They’re dealing with so many cases that if, for example, you’re taking an audit into appeals, appeals isn’t going to go through bank statements. They’re not going to go through receipts but appeals will take a look at the presentation of information and they will make an objective decision independently of the author.

Key Takeaways

  • So, the IRS appeals process is actually reasonably friendly to taxpayers and let me explain why. First of all the function of Appeals technically is to be an independent body of the IRS away from examinations and collections.
  • The way the appeals process works is it’s kind of like an informal mediation. The auditor isn’t there if the collection agent isn’t there but it’s you and the appeals officer.

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What Is the EDD Appeals Process Like?

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So if you can’t reach a resolution in a payroll tax audit you have essentially three options. The first option is to deal with the auditor and their manager. Oftentimes this can be problematic. Obviously this depends on the two people that are involved and people are people. Like any other organization, you get good people and you get bad people so depending on the relationship with the auditor that’s been developed during the course of the audit and depending on the relationship of the manager, it’s going to change the dynamic on how things are resolved at that level. Going to the manager is always an option. Generally speaking, the audit manager is going to back their auditor’s determination. It’s not like the manager is going to sit there and throw the auditor under the bus. The purpose of bringing in the manager is you get somebody more senior. You get somebody who usually is a former auditor but who has exposure to dealing with these issues and can often resolve tensions if they popped up in the audit process by being kind of a third party representative for the government to come in and resolve the situation. The managers don’t really like dealing with these issues. They would rather their auditor deal with these issues and not go to the manager but there is a possibility. Above the manager of the EDD level, you also have the head of the audit division.

Key Takeaways

  • So if you can’t reach a resolution in a payroll tax audit you have essentially three options. The first option is to deal with the auditor and their manager. Oftentimes this can be problematic.
  • So the way the EDD appeals process works is like this. Essentially what you’re doing is you’re going in for a mini trial.

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How Does the EDD Settlement Process Work?

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Key Takeaways

  • So let’s say you have an audit and the audit doesn’t go well and you file an appeal.
  • Often the EDD settlement officer is allowed to consider the risk of litigation, so they’re trying to get cases out of the appeals process.
  • Usually if there’s a favorable resolution, they’re willing to settle.

So let’s say you have an audit and the audit doesn’t go well and you file an appeal. Before you get into the appeals process, you have the option of going to EDD settlement and so what that takes is your attorney is going to draft a written settlement request and they’re going to state their case and why they believe that the EDD should settle this issue. So you want to basically do the best job that you can and put together the biggest package you can to get to the EDD because the EDD settlement officer is going to take the audit report and they’re going to take your settlement offer and they’re going to look at it and they’re going to compare the two and then they’ll probably come back to you with questions. Often the EDD settlement officer is allowed to consider the risk of litigation, so they’re trying to get cases out of the appeals process. Usually if there’s a favorable resolution, they’re willing to settle. In most cases with the EDD on payroll tax liabilities, particularly with independent worker classification, there will be an omission and a requirement that any errors that were uncovered during the audit can be corrected for the future so just know in advance that might be a condition to the settlement. Settlement is not going to eliminate your liability entitlement entirely. Particularly in the context of illegal settlement, both sides don’t get exactly what they want so if you understand that and keep that framework in mind during the process, settlement can be a very good tool at the EDD level in order to dismiss cases.

What Is the CDFTA Appeals Process Like?

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Key Takeaways

  • When you have a sales tax audit and you can’t agree on the audit, the very first step in the process is that you have an exit conference with the auditor and the manager, and if that doesn’t bear fruit, the auditor is going to submit the sales tax audit report.
  • the appeals officer will come in. They’ll look at all the evidence that’s been presented and they’ll give you a written decision, usually within about 60 to 90 days. So that’s the process. That’s CDTFA.

When you have a sales tax audit and you can’t agree on the audit, the very first step in the process is that you have an exit conference with the auditor and the manager, and if that doesn’t bear fruit, the auditor is going to submit the sales tax audit report. It’s going to go up through technical review. They have a review department review the audit report to make sure it’s technically correct and then it goes to a final billing. Once it goes to a final billing and I notice the determination is issued, that is your ticket to file your petition of redetermination to go into Appeals. So you file your petition and redetermination, the case moves from Sacramento, it goes back down to the district level and then the district level will try one more time to get it resolved before going through Appeals. What this usually means is as follows. Number one you get a chance to do a 10-day conference with the district principal auditor so CDTFA will schedule you to talk with the head of the audit unit for the particular district that you’re working in and the manager and the auditor will both be there and then you can kind of negotiate. If there’s an opportunity to get the case settled with the person who is making the final decision on the issue (for the district number two, this is just your principal auditor) and you don’t agree for whatever reason and the case can’t be resolved in the district, then you go through the formal CDTFA appeals process. The way it usually works out is you’ll get a hearing officer at CDTFA, you’ll go in for an appeals conference which is much like a mediation, so you’ll sit there, the auditor sits there, the manager sits there and the Appeals officer sits there. Usually the appeals officer is either an attorney or their former auditor, and then there’s a discussion between the parties on what the issues are and how to resolve. So what usually happens is there’s a conference and then there’s a follow-up document submission for the petitioner, usually the taxpayer, to prove their point and so on and so forth. What ends up happening after that is an exchange of information back and forth between you and the auditor and the manager of “here’s our documents that prove our point,” “here’s our counter response” and you kind of go back and forth. Eventually you read through to the point where you can’t submit any more documents, you can’t make any more arguments and the parties just kind of wear themselves out and at that point

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What Is the CDFTA Settlement Process Like?

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What Is the CDFTA Settlement Process Like? So CDTFA settlement process when dealing with the sales tax audit it used to be a very good Avenue to resolve cases unfortunately nowadays it’s been late a little bit more difficult and here’s why so the problem is is if you go through settlement you can’t resolve things and then you go through Appeals cases will naturally progress to something called the office of tax appeals which is California’s version of a Tax Court and recently cbt fa has been so good at disposing of taxpayer cases and Tax Court but the issued guidance to their own settlement division which basically states don’t settle cases let them go forward to Appeals now it will still give some measure of reduction through the settlement division usually about 10% sometimes as much as fifteen but settlement is no longer as reliable as an option as it once was so unless you have new documents or new evidence and we’ve actually had some pretty good victories in settlement in light of the changes but it’s very difficult to get things pushed through and get your tax payer in a position where they’re gonna be happy so the important thing.

Key Takeaways

  • Topic: What Is the CDFTA Settlement Process Like?
  • Read the full article below for complete details on this topic.

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Is It a Good Idea to Meet With Your Sales Tax Auditor?

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Key Takeaways

  • Topic: Is It a Good Idea to Meet With Your Sales Tax Auditor?
  • Read the full article below for complete details on this topic.

Is It a Good Idea to Meet With Your Sales Tax Auditor? yYES! a hundred percent go meet with your sales tax auditors spend as much time as possible with your sales tax auditor driving your sales tax auditor completely crazy in all seriousness way that we have had the most success in the firm is by face-to-face contact the more time you spend with these auditors as individuals. The more you get to know them the more they like you the more latitude that gives you people naturally do business with people once you get to know like and trust somebody then you start to develop a relationship with it you know one of the big reasons were successful in problem in law is because we deal with these cases over and over and over and over and over again we deal with the same people over and over and over and over and over again I might not know every auditor in the San Diego office of CDTFA but I know a ton of them and it’s really important and we’ve developed that relationship because of face-to-face contact because an auditor or manager who I’m having a disagreement with is not gonna take it on a reasonable position if they know they have to see me again and again and again and again and again so it’s not like you know we’re gonna take a hard line on this case and you know hope this never shows up again because there’s a level of contact there’s a level of familiarity if you decide to represent yourself in the CDTFA on it which I don’t recommend but if you do you want to have as much contact as much touch point with you auditor as possible you’re not gonna be able to like influence them or buy them dinner bribe them under the table but just having that familiarity developing trust and developing rapport is a very important so I would absolutely recommend you go and meet with your sales tax auditor I would recommend that you bring them into your business I recommend you actually go to see the cafe the meetings will be a lot shorter you’ll get the time to interact with in the conference room you can walk them through your documents and you just give them much better presentation by doing.

What Are Common Problems in a Sales Tax Audit?

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So we’ve done a lot of sales tax audits on our firm and I can speak very generally about some of the problems that we see most often that our clients encounter or that we’ve encountered through the course of dealings. So problem number one is the majority of people who are under reporting on sales tax for whatever reason or another don’t do enough to cover their bases. While that seems fairly silly, it’s really true. The biggest way that people get nailed for sales tax audits is by data that doesn’t match. So what happens is when you file a sales tax return that gets reported to CDTFA and then in the evaluation process to determine whether they’re going to audit you, CDTFA is looking not only at your taxable sales and your total sales due looking at your federal income tax returns, but they’re looking at the information that was reported on your 1099 Ks and any other publicly available information that they could find. So the biggest problem that people have right off the bat is sales tax returns and federal income tax returns not matching. You’re reporting a lower or higher amount of sales than you are on your federal

Key Takeaways

  • So we’ve done a lot of sales tax audits on our firm and I can speak very generally about some of the problems that we see most often that our clients encounter or that we’ve encountered through the course of dealings.
  • income taxes so when you have those situations, you’re probably going to get audited. There may be a natural explanation. You may have taxable demand labor built in there, you may have certain sales that were not in California and may have exempt sales.

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How Important Is Presentation in an Audit?

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Key Takeaways

  • During the course of the audit process, there’s so much time that’s involved in going through and trying to minimize liability.
  • You’re going through and hopefully actively controlling the scope of the documents.
  • I can’t tell you how many compliments that we’ve gotten based on the way that we prepare materials and the ease of those materials for the people that we’re dealing with.

During the course of the audit process, there’s so much time that’s involved in going through and trying to minimize liability. You’re going through and hopefully actively controlling the scope of the documents. You’re controlling the scope of the information that’s being presented and so when you get to the point where you’re giving a final presentation or giving a preliminary presentation to an auditor, how that information is presented is critically important. I can’t tell you how many compliments that we’ve gotten based on the way that we prepare materials and the ease of those materials for the people that we’re dealing with. I mean look at this. Man if you were having an audit client and somebody comes in with a nice organized well presented binder and you’re able to sit across from that person during the course of an audit meeting, having a casual conversation with you, you’re flipping through the tabs as I’m talking to you, it just makes things easy. You’re in a good mood and you go back and do your audit report, you’ve got something easy to reference. It just helps. Consequently if I bring you a box of stuff and it’s not organized and you have to dig through it and you can’t find things and you can’t refer to things and pages are missing or whatever, you’re going to get frustrated. So you want to present materials in a way that tells a story. All of the stuff tells the story. We’re going to walk through a sequence. You want your materials to line up to that sequence, so the presentation portion is extremely critical. It can save you a ton of money and it’s very valuable to make sure that your presentation is right going into an audit.

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