Key Takeaways
- Obviously, we want to get the most severe ones off the table first.
- So those are the things that we really work and finesse on with the auditor try and get stuff down and to limit the liability for our clients.
What types of penalties can I face in an EDD audit? So I won’t get too far down this rabbit hole because the EDD has a lot of penalties that they can assess against taxpayers. Anything ranging from something that’s relatively minor, up to your more severe civil fraud penalties and failure to file proper returns and or any sort of evasion penalty. But the biggest problem with the EDD is that the penalties tend to stack on top of
each other.
So you can have an audit, and by the time you get done adding three or four penalties, it really, really adds up. And in a lot of cases, we see penalties that are four and five times the amount of tax, which is just insane. You know, if you owe this much in tax and you owe this much in penalties, that’s not really a fair result. So a lot of our focus on a lot of our care during the course of the audit goes in mitigating
those penalties.
Obviously, we want to get the most severe ones off the table first. You get all the willfulness ones, get all the fraud, get all the evasion ones, get them to go away. But then it’s about working down the definition of what’s negligence in the audit, whether proper documentation was filed, whether the taxpayer has
reasonable cause.
So those are the things that we really work and finesse on with the auditor try and get stuff down and to limit the liability for
our clients.
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