San Jose IRS Attorney

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

What the IRS Does in San Jose

San Jose and the broader Silicon Valley fall within the IRS San Francisco territory. The IRS San Francisco Field Examination Office at 450 Golden Gate Avenue, San Francisco, CA 94102 handles field examinations for San Jose and Silicon Valley taxpayers. The IRS Large Business and International (LB&I) division also operates from this territory and covers many of the large technology corporations headquartered in San Jose and surrounding cities.

Three types of IRS contact, and how to tell them apart:

• Audit notice (30-day letter, CP2000, Letter 2205): This comes from the IRS Examination division. A CP2000 is the IRS's automated notice that income reported on third-party forms (W-2s, 1099s, Form 3921 for ISO exercises) does not match what appeared on your return. A 30-day letter is an audit finding with a proposed adjustment. Neither means you automatically owe the amount stated — it means the IRS wants to either reconcile the discrepancy or adjust the return.
• Revenue officer visit or notice: A revenue officer is a field collection employee. Their presence means there is an unpaid balance the IRS has been unable to resolve through normal automated channels. Revenue officers can appear in person at your home or business.
• IRS Criminal Investigation (CI) special agent: If someone identifies themselves as an IRS CI special agent, do not answer questions. CI investigations are criminal. Contact a criminal tax attorney before any further communication.

Common IRS Issues in San Jose

RSU and Stock Option Taxation

Equity compensation — RSUs, ISOs, NQSOs, and ESPP shares — is the dominant IRS audit trigger for Silicon Valley employees and founders. The complexity is in the reporting, and errors in reporting are common.

RSU taxation: Restricted stock units vest as ordinary income under IRC § 83 at the fair market value on the vest date. The income appears on Form W-2 as wages. The cost basis for calculating gain or loss on the subsequent sale equals that vest-date fair market value. When employees sell RSUs and report gain using zero basis — treating the entire proceeds as capital gain — the IRS issues a CP2000 notice. The mechanics are straightforward; the error rate is high because brokerage firms do not always carry the correct cost basis to Form 1099-B.

ISO exercises and AMT: Under IRC § 422, the exercise of an incentive stock option does not create a regular income tax event — but the spread between exercise price and fair market value is an AMT preference item under IRC § 56. Silicon Valley employees who exercised large ISO grants in years when private company valuations were high can face substantial AMT bills. If the company's stock subsequently declined, AMT credit carryforward relief under IRC § 53 may be available, but reconstructing the analysis for prior years requires care.

QSBS Exclusion Under IRC § 1202

Qualified Small Business Stock exclusion under IRC § 1202 allows eligible investors and founders to exclude up to 100% of gain on the sale of qualifying stock — but IRS audit activity around § 1202 exclusions has increased as Silicon Valley exit values have grown.

The exclusion applies to stock that was acquired at original issuance for cash or services, in a domestic C corporation whose gross assets did not exceed $50 million at the time of issuance, in an active trade or business in a qualifying industry, held for more than five years. Each of these conditions is a potential examination issue. The gross asset test is often the most contested — at what point in a company's fundraising history did assets cross $50 million? Service-for-stock compensation arrangements raise questions about whether the stock was acquired "in exchange for property" as the statute requires. The IRS is examining § 1202 exclusions with increasing frequency as the dollar values have grown.

Employee vs. Independent Contractor Classification

Silicon Valley's large population of technology contractors — workers engaged as independent contractors rather than employees by tech companies — creates persistent IRS worker classification exposure.

The IRS determines worker classification under the common law control test. The core question is whether the hiring company controls how, when, and where the work is performed. For technology work, the control question often turns on whether the worker sets their own schedule, provides their own tools, and has the right to work for multiple clients simultaneously. Misclassification creates exposure on multiple fronts: the company faces back payroll taxes under IRC § 3102 and § 3111, potential Trust Fund Recovery Penalty under IRC § 6672, and workers who were misclassified may have Form W-2 income that was never withheld on.

California's EDD also enforces worker classification separately under the ABC test — a stricter standard than the IRS's common law test. San Jose technology companies facing IRS worker classification scrutiny often face parallel EDD audit risk.

International Tax — FBAR, FATCA, and Foreign Subsidiary Reporting

San Jose has a significant population of U.S. taxpayers with international connections — executives at multinational corporations, founders with foreign investment structures, and employees with dual citizenship or prior foreign financial accounts. All carry federal reporting obligations with material penalty exposure.

A FinCEN Form 114 (FBAR) must be filed annually by U.S. persons with foreign financial accounts exceeding $10,000 in aggregate value at any point during the year. A Form 8938 (FATCA statement) is required under IRC § 6038D for higher-value foreign financial assets — the thresholds are different from FBAR, and both may apply to the same taxpayer. Foreign subsidiaries or controlled foreign corporations require Form 5471 filing; failure to file carries a $10,000 per-form penalty under IRC § 6038(b). The IRS LB&I division is the primary enforcer of international information return requirements for Silicon Valley companies and their executives.

Carried Interest Characterization

Venture capital and private equity fund managers based in San Jose and Silicon Valley face carried interest taxation questions under IRC § 1061, which can recharacterize long-term capital gain as short-term gain on certain applicable partnership interests.

Under IRC § 1061, gain on the disposition of an "applicable partnership interest" held for less than three years is recharacterized from long-term to short-term capital gain. The three-year holding period for carried interest is longer than the standard one-year period for long-term treatment. The interaction of § 1061 with a fund's actual asset holding periods, the "capital interest" exception, and the look-through rules for passthrough entities creates planning and reporting complexity that the IRS examines on LB&I audits of fund management companies.

Federal Tax Court for San Jose Taxpayers

The U.S. Tax Court holds regular sessions in San Francisco — the nearest regular Tax Court location for San Jose taxpayers. Tax Court is the primary forum for contesting an IRS deficiency determination before paying the disputed amount.

When the IRS issues a Notice of Deficiency (the "90-day letter"), the taxpayer has 90 days from the mailing date to file a petition with the Tax Court under IRC § 6213. If the deadline passes without a petition, the IRS can assess and collect immediately. The Tax Court loses jurisdiction, and the only remaining path is to pay the tax and file a refund claim in federal district court.

Filing a Tax Court petition does not mean the case will go to trial. The vast majority settle at the IRS Independent Office of Appeals before reaching a trial calendar. A petition is the legal step that preserves your rights and opens the door to a settlement conference with an Appeals Officer. For San Jose taxpayers, San Francisco Tax Court sessions are accessible — a two-hour drive or short flight that I handle when proceedings require in-person attendance.

IRS Collections in San Jose

IRS collection cases in San Jose are handled through the same two channels as the rest of the Northern California territory: the Automated Collection System (ACS) and field revenue officers.

ACS handles most collection matters by phone and mail. It can establish installment agreements for balances under certain thresholds, issue levies through automated processes, and manage routine collection notices. ACS employees work remotely — they do not visit in person.

Revenue officers in the Northern California area are field employees who take over when ACS has been unable to resolve a balance. A revenue officer can visit your home or place of business, issue a summons for financial records, file a Notice of Federal Tax Lien, and recommend a levy on wages or bank accounts. Revenue officer assignment means the IRS has escalated the matter — the balance is usually substantial, there is a history of non-compliance, or prior collection arrangements have defaulted.

Resolution options in a San Jose collection matter include an installment agreement under IRC § 6159, an Offer in Compromise under IRC § 7122, Currently Not Collectible status under IRM 5.16, or a strategy around the Collection Statute Expiration Date (CSED) under IRC § 6502. The best option depends on the taxpayer's financial situation and the size and age of the tax balance. See our full guide on IRS collections defense.

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. I am admitted 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. Silicon Valley and Bay Area clients are a regular part of that practice. Most San Jose clients work with me by phone and video. You can reach the office at (619) 378-3138. To talk through your IRS matter, book a free 15-minute call.