Federal and State Income Tax Audit Defense | Tax Attorneys in Roseville, CA

Understanding Income Tax Audits

A federal income tax audit is an IRS examination of a taxpayer's return to verify that income, deductions, and credits are accurately reported. The California Franchise Tax Board (FTB) conducts similar audits for California income tax returns. Audits can be triggered by statistical anomalies, specific deductions, high income levels, information mismatches from third parties, or random selection.

IRS audits are conducted in three primary formats: correspondence audits (by mail), office audits (at an IRS field office), and field audits (at the taxpayer's home or business). California FTB audits follow a similar structure.

Common Audit Issues

Federal and California income tax audits frequently focus on business income and expenses, home office deductions, vehicle and travel expenses, depreciation, rental income and deductions, and self-employment income. For individuals with higher income or complex financial situations, the IRS may examine pass-through income from partnerships, S corporations, or LLCs, as well as investment activity and capital gains reporting.

Why Legal Representation Matters

Responding to an income tax audit without experienced legal counsel can lead to costly mistakes. Volunteering information beyond what is requested, failing to assert valid deductions, or misunderstanding audit procedures can result in larger assessments. An attorney-client relationship also provides privilege protections that a CPA or enrolled agent cannot offer.

At NewPoint Law Group, our tax attorneys manage all correspondence with the IRS and FTB, prepare and organize supporting documentation, assert all appropriate legal positions, and represent clients through examination and, if necessary, into the IRS appeals process or FTB protest procedures.

Appealing an Audit Result

If you disagree with the outcome of a federal or state income tax audit, you have the right to appeal. At the federal level, taxpayers may appeal to the IRS Independent Office of Appeals, which is independent from the examination division. California taxpayers may protest FTB determinations through the FTB's administrative protest process or appeal to the Office of Tax Appeals (OTA).