Sacramento IRS Attorney

Written by Sam Brotman, J.D., LL.M. (Taxation), CPA — Managing Attorney, Brotman Law  ·  Updated May 2026

What the IRS Does in Sacramento

The IRS Sacramento Field Examination Office, located in the North Highlands area north of Sacramento, handles field examinations for the Sacramento territory. Field exams are the in-person audits — an IRS revenue agent comes to your home, your business, or your representative's office and reviews records. Most correspondence audits (the paper-and-mail variety) are handled through the IRS campus system rather than the Sacramento field office.

When you receive IRS contact, the type of contact tells you which IRS unit is involved:

• Audit notice (Letter 2205, 30-day letter, CP2000): This comes from the Examination division. The IRS is questioning one or more items on a specific tax return. An audit notice does not mean you owe additional tax — it means the IRS wants to look more closely at something.
• Balance-due notice or revenue officer visit: This is a collection matter. The IRS believes there is a tax debt that has not been paid. An IRS revenue officer who contacts you directly is a field collection employee — different from an examiner. Revenue officers carry badges and credentials and can show up at your home or business.
• IRS Criminal Investigation special agent: If someone identifies themselves as an IRS special agent and wants to interview you, do not answer any questions. Contact a criminal tax attorney before any communication. CI investigations are criminal matters, not audits.

The FTB headquarters is in Rancho Cordova, a Sacramento suburb. This proximity does not change how the IRS operates, but it does mean that Sacramento-area taxpayers sometimes receive IRS and FTB audit notices within the same period — particularly if a return involves issues that both agencies have flagged independently. Coordinating representation at both levels is something I handle for Sacramento clients.

Common IRS Issues in Sacramento

State Government Employees — Pension and Retirement Plan Taxation

Sacramento's large state government workforce creates a specific set of retirement plan and pension tax issues that come up in IRS examination with some regularity.

California state employees participate in CalPERS (California Public Employees' Retirement System). CalPERS distributions are taxable federal income in the year of receipt, and the tax treatment of lump-sum distributions, rollovers, and early distribution penalties under IRC § 72(t) can be complicated. State employees who take early retirement buyouts or who have both CalPERS and deferred compensation accounts (such as IRC § 457 plans) can end up with taxable distributions that require careful reporting. When reporting errors occur — over- or under-reporting of taxable income from retirement distributions — the IRS typically identifies the discrepancy through its document-matching program and issues a CP2000 notice.

Federal employees in the Sacramento area (there is a significant federal government presence) have FERS and CSRS pension issues that are similarly reported on Form 1099-R and subject to IRS document-matching. The distinction between return-of-basis amounts and taxable pension income under the General Rule or Simplified Method matters here and is a recurring examination issue.

Agriculture and Farming Operations — Hobby Loss and Cash Accounting Scrutiny

The Sacramento Valley has a substantial agricultural sector, and IRS examination of farming operations — particularly around hobby loss rules and cash method accounting — is a consistent issue for Sacramento-area agricultural businesses.

Under IRC § 183, if an activity is not engaged in for profit, deductions are limited to income from the activity. The IRS presumes a farming activity is engaged in for profit if it produced a profit in at least three of the last five tax years. Farms that consistently report losses — particularly those that appear to shelter income from other sources — are examined for whether the farming activity is genuinely conducted for profit under the nine-factor test in Treas. Reg. § 1.183-2(b).

Cash method accounting, which most small farming operations use, creates its own examination issues. The timing of income recognition and expense deductions on a cash basis can produce significant year-to-year variations that look unusual in the IRS's statistical comparisons. Pre-paid feed, seed, and fertilizer expenses — deductible in the year paid rather than the year used for cash-method farmers — are a recurring examination focus under Rev. Rul. 79-229.

Real Estate and Small Business — Sacramento's Mixed Economy

Sacramento has a significant real estate market and a diverse small business sector, both of which generate consistent IRS audit activity.

Real estate investors in the Sacramento area dealing with both IRS capital gains issues and California FTB issues simultaneously is common, particularly on property sales with large appreciation. The FTB conforms to federal law on most income tax issues but has its own rules on depreciation recapture and installment sales that require attention when transactions cross tax years. For 1031 exchanges — which defer capital gain under IRC § 1031 — California requires a Clawback Agreement when the replacement property is located outside California, or the state loses taxing jurisdiction over the deferred gain. Sacramento investors moving equity into out-of-state replacement properties need to get this right at closing, not after the fact.

Cash-intensive small businesses — restaurants, retail, contractors — are a consistent IRS examination target in Sacramento as in most California markets. Revenue reconstruction through bank deposit analysis and cash-T analysis is a standard IRS technique in these examinations. The IRS does not need a complete set of books to reconstruct income; it uses indirect methods. Having an attorney manage the production of records in these examinations matters.

Payroll Tax Issues — Trust Fund Recovery Penalty

Sacramento-area businesses that have fallen behind on payroll taxes face the possibility of the Trust Fund Recovery Penalty (TFRP) under IRC § 6672, which makes responsible officers personally liable for the employee portion of unpaid payroll taxes.

The TFRP is not a business liability — it is assessed against individual officers, owners, or employees who had authority over payroll and willfully failed to remit withheld taxes. The penalty equals 100% of the unpaid trust fund portion. When a business has unpaid Form 941 (Employer's Quarterly Federal Tax Return) liabilities, the IRS typically opens a TFRP investigation against individuals associated with the business. Challenging the TFRP requires demonstrating either that the individual was not a responsible person or that the failure was not willful. See our full guide on IRS collections and payroll tax defense.

Federal Tax Court for Sacramento Taxpayers

The U.S. Tax Court holds sessions in Sacramento roughly twice a year. Tax Court is the primary forum for contesting an IRS deficiency determination before paying the disputed tax.

When the IRS issues a Notice of Deficiency — sometimes called a 90-day letter — the taxpayer has 90 days from the date of mailing to file a petition with the Tax Court under IRC § 6213. This deadline is absolute. If the 90-day window passes without a petition, the IRS can immediately assess and collect the deficiency. The Tax Court loses jurisdiction and the only remaining option is to pay the assessed tax and file a refund claim in the U.S. District Court for the Eastern District of California (which serves Sacramento) or the U.S. Court of Federal Claims.

Filing a Tax Court petition is not a commitment to go to trial. Most Tax Court cases resolve through settlement at the IRS Independent Office of Appeals before they reach trial. The petition preserves your rights and triggers the opportunity for a pre-trial settlement conference. For Sacramento taxpayers, the twice-yearly Sacramento Tax Court sessions mean that a trial, if it proceeds, does not require travel to San Francisco.

IRS Collections in Sacramento

IRS collection cases in the Sacramento area are handled through two channels: the Automated Collection System (ACS) for routine cases, and field revenue officers for cases that have escalated.

ACS is the IRS's centralized phone-and-mail collection operation. It handles installment agreements for balances under certain thresholds, issues levies and liens through automated processes, and manages most collection correspondence. ACS employees do not make field visits.

Sacramento-area revenue officers are field employees who work directly with taxpayers on larger or more complex collection cases. A revenue officer contact means the IRS has concluded that a balance cannot be resolved through ACS channels — typically because of the size of the balance, a history of non-compliance, or prior installment agreement defaults. Revenue officers can issue a summons for financial records, file a Notice of Federal Tax Lien in the Sacramento County Recorder's office, and recommend bank account or wage levies.

The resolution options in a Sacramento collection matter are the same as anywhere: installment agreement under IRC § 6159, Offer in Compromise under IRC § 7122, Currently Not Collectible status under IRM 5.16, or a strategy around the Collection Statute Expiration Date (CSED) — the 10-year window under IRC § 6502 within which the IRS must collect. The FTB also has its own collection statute, separate from the IRS's, which affects Sacramento clients with parallel state and federal balances.

About Sam Brotman

I am the managing attorney of Brotman Law, a California tax law firm I founded in San Diego in 2013. I hold a J.D., LL.M. in Taxation, and CPA license. The LL.M. in taxation is the postgraduate law degree specific to federal tax practice — it is the credential that distinguishes tax attorneys from general practitioners who also handle tax matters.

I am admitted to practice before the U.S. Tax Court and all IRS divisions under Form 2848. Since 2013, Brotman Law has represented over 400 clients in audits and recovered or saved $1B+ in taxes and penalties. Sacramento-area clients are part of that practice. Most Sacramento clients work with me by phone and video; I travel for Tax Court sessions and IRS proceedings that require in-person attendance.

You can reach the office at (619) 378-3138. For an initial conversation about your IRS matter, book a free 15-minute call.