State Tax Problems

California State Tax Problems-Franchise Tax Board, CDTFA Sales Tax, EDD Employment Tax

We are a California based tax law firm and can assist any taxpayer that has tax issues with the California Franchise Tax Board, Employment Development Department, California Department of Tax and Fee Administration, and County or City Tax Departments located within California. California state tax problems, whether you are in-state or via nexus, requires thorough analysis by a tax attorney to provide a proper defense.

Resolving California State Tax Problems:

Navigating tax issues with California state agencies like the Franchise Tax Board (FTB), Employment Development Department (EDD), California Department of Tax and Fee Administration (CDTFA), or local county and city tax departments can be daunting. These agencies enforce complex tax laws, and unresolved issues can lead to penalties, liens, levies, or even business closure. At Tax Lawyers Group APC, our Los Angeles-based tax attorneys specialize in resolving a wide range of California state tax problems, including EDD payroll tax issues, CDTFA sales tax disputes, and FTB income tax challenges.

Types of California State Tax Problems

California’s tax system is multifaceted, involving multiple agencies with distinct roles. Below are the primary types of state tax problems taxpayers may encounter, along with their associated challenges:

1. Franchise Tax Board (FTB) Income Tax Problems

The FTB administers California’s personal and corporate income taxes, as well as franchise taxes for businesses. Common FTB issues include:

• Unfiled Tax Returns: Failing to file state income or franchise tax returns, leading to failure-to-file penalties (up to 25% of the tax owed) and interest.
• Underreported Income: Discrepancies between federal and state returns, unreported income, or errors in reporting California-specific income (e.g., rental income, business profits).
• Disallowed Deductions or Credits: The FTB may deny deductions (e.g., business expenses) or credits (e.g., child and dependent care credit) due to insufficient documentation or misapplication of state tax rules.
• Estimated Tax Penalties: Self-employed individuals or businesses failing to make quarterly estimated tax payments.
• Collection Actions: FTB liens, wage garnishments, bank levies, or property seizures for unpaid taxes.
• Residency Disputes: Non-residents or part-year residents facing FTB claims of California residency, triggering tax assessments on worldwide income.

2. Employment Development Department (EDD) Payroll Tax Problems

The EDD oversees California’s payroll taxes, including unemployment insurance (UI), employment training tax (ETT), state disability insurance (SDI), and personal income tax (PIT) withholdings. Common EDD issues include:

• Unfiled or Late Payroll Tax Returns: Failure to file quarterly DE 9 or DE 9C forms, resulting in penalties and interest.
• Nonpayment of Payroll Taxes: Delinquent deposits of UI, ETT, SDI, or PIT, often due to cash flow issues, triggering EDD audits or liens.
• Worker Misclassification: Incorrectly classifying employees as independent contractors, leading to retroactive tax assessments, penalties, and interest under California’s ABC Test (Assembly Bill 5).
• Audit Disputes: EDD audits targeting payroll compliance, worker classification, or expense deductions, which can result in significant liabilities.
• Collection Actions: EDD bank levies, wage garnishments, or business asset seizures for unpaid payroll taxes.

3. California Department of Tax and Fee Administration (CDTFA) Sales and Use Tax Problems

The CDTFA administers California’s sales and use taxes, cannabis taxes, and various excise taxes. Common CDTFA issues include:

• Unfiled Sales Tax Returns: Failure to file sales tax returns, leading to penalties and estimated assessments based on industry benchmarks.
• Underreported Sales: Not reporting all taxable sales, especially in cash-heavy businesses like retail, restaurants, or cannabis, triggering audits and penalties.
• Use Tax Noncompliance: Failing to report or pay use tax on out-of-state purchases or taxable items used in business operations.
• Cannabis Tax Issues: Noncompliance with cannabis excise or cultivation taxes, often due to complex licensing and reporting requirements.
• Audit Challenges: CDTFA audits scrutinizing sales records, exemptions, or resale certificates, which can lead to large tax assessments.
• Collection Actions: CDTFA liens, levies, or permit revocations, threatening business operations.

4. County and City Tax Problems

Local tax departments in California, such as those in Los Angeles County or the City of Los Angeles, impose taxes like property taxes, business license taxes, or transient occupancy taxes (TOT). Common issues include:

• Property Tax Disputes: Incorrect assessments, missed exemptions (e.g., homeowner or nonprofit exemptions), or delinquent payments leading to liens.
• Business License Tax Noncompliance: Failure to register or pay city business taxes, resulting in penalties or license suspensions.
• TOT Delinquency: Hotels or short-term rental operators failing to collect or remit transient occupancy taxes.
• Local Audits: County or city audits targeting compliance with local tax ordinances, often uncovering errors in reporting or payment.

Each type of California state tax problem requires a tailored resolution strategy, as FTB, EDD, CDTFA, and local agencies have distinct rules, procedures, and enforcement mechanisms. Tax Lawyers Group APC is well-versed in navigating these complexities to achieve optimal outcomes.

Common Scenarios for California State Tax Problems

State tax issues can arise in various situations, including:

• Small Business Cash Flow Issues: A retail business fails to remit CDTFA sales taxes due to declining revenue, triggering liens and permit revocation threats.
• Worker Misclassification: A gig economy company is audited by the EDD for classifying workers as independent contractors, facing retroactive payroll tax assessments.
• Unfiled FTB Returns: An individual neglects to file state income tax returns after moving to California, accumulating penalties and interest.
• Cannabis Tax Noncompliance: A cannabis dispensary underreports CDTFA cannabis excise taxes, leading to an audit and substantial liabilities.
• Property Tax Disputes: A homeowner receives an inflated county property tax assessment, requiring an appeal to correct the valuation.

Step-by-step Approach to Resolve California State Tax Problems

1. Comprehensive Case Assessment

• Record Review: We analyze your tax records, agency notices, and financial situation to identify the root cause of the problem, whether it’s unfiled returns, underreported income, or audit disputes.
• Agency-Specific Analysis: We apply FTB, EDD, CDTFA, or local tax rules to assess your liability and potential defenses, ensuring a strategy tailored to the agency involved.

2. Achieving Compliance

• Filing Delinquent Returns: We prepare and file unfiled FTB income tax returns, EDD payroll tax forms (DE 9/DE 9C), or CDTFA sales tax returns to halt failure-to-file penalties and establish compliance.
• Record Reconstruction: If records are missing (e.g., W-2s, sales receipts, or payroll data), we obtain agency transcripts or reconstruct financial data using bank statements, vendor invoices, or industry benchmarks.
• Current Compliance: We ensure ongoing filings and payments are up to date, a prerequisite for most state tax relief options.

3. Resolving Tax Debt and Tax Penalties

We explore a range of strategies to reduce or manage your state tax debt, including:

• Offer in Compromise (OIC): We negotiate with the FTB or CDTFA to settle tax debts for less than the full amount owed, based on financial hardship or doubt as to collectibility.
• Installment Agreements: We arrange affordable payment plans with the FTB, EDD, or CDTFA to satisfy the debt over time, allowing businesses to continue operating.
• Penalty Abatement: We request removal of penalties for reasonable cause, such as illness, reliance on a negligent professional, or financial distress, supported by detailed documentation.
• Audit Defense: We represent you during FTB, EDD, or CDTFA audits, challenging erroneous assessments, defending deductions or exemptions, and negotiating reduced liabilities.
• Hardship Relief: For severe financial distress, we seek temporary suspension of collection actions or “currently not collectible” status.

4. Defending Against Collection Actions

• Lien Releases or Withdrawals: We pursue lien releases (e.g., after full payment or an OIC) or withdrawals (e.g., if the lien was filed in error or hinders tax collection).
• Levy Releases: We negotiate releases of bank or wage levies by demonstrating hardship or proposing a payment plan.
• Permit Protection: For CDTFA issues, we work to prevent revocation of seller’s permits or cannabis licenses, preserving your business’s ability to operate.

5. Addressing Worker Misclassification (EDD)

• Classification Analysis: We evaluate worker relationships under California’s ABC Test or Borello Test to defend against EDD claims of employee misclassification.
• Audit Defense: We represent you in EDD audits, presenting evidence (e.g., contracts, payment records) to support independent contractor status or negotiate reduced assessments.
• Voluntary Compliance: We assist with reclassification or voluntary disclosure programs to minimize retroactive liabilities and penalties.

6. Resolving Local Tax Issues

• Property Tax Appeals: We challenge incorrect assessments or secure exemptions with county assessors, reducing property tax liabilities.
• Business Tax Compliance: We ensure compliance with city business license taxes or TOT, negotiating penalty abatements or payment plans.
• Local Audit Defense: We represent you in county or city audits, resolving disputes over local tax obligations.

Our comprehensive approach addresses both immediate crises and long-term compliance, ensuring your financial stability and peace of mind.

Why Choose Tax Lawyers Group APC?

As a California-based tax law firm, Tax Lawyers Group APC is uniquely positioned to resolve state tax problems with the FTB, EDD, CDTFA, and local tax departments. Here’s why we’re the trusted choice:

• Specialized Expertise: Our Los Angeles tax attorneys have extensive experience with California’s complex tax laws, including FTB income tax rules, EDD payroll tax regulations, and CDTFA sales tax requirements.
• Proven Success: We’ve successfully resolved FTB audits, EDD misclassification disputes, CDTFA sales tax assessments, and local tax issues, saving clients significant costs and protecting their businesses.
• Comprehensive Tax Analysis: We thoroughly evaluate your tax records, agency notices, and financial situation to identify all possible defenses and relief options.
• Strategic Advocacy: We negotiate with state agencies on your behalf, challenging assessments, securing penalty abatements, and arranging affordable resolutions.
• Total Tax Solution: Beyond state taxes, we address related federal tax issues (e.g., IRS audits or trust fund penalties) to achieve complete tax compliance and relief.

Our Los Angeles tax attorneys have successfully represented clients in these and other scenarios, leveraging our expertise to resolve disputes and secure relief.

Consult with a Tax Attorney

California state tax problems can threaten your business, personal finances, and peace of mind, but with the right strategy, you can resolve issues with the FTB, EDD, CDTFA, or local tax departments. At Tax Lawyers Group APC, our Los Angeles tax attorneys are ready to intervene, negotiate with state agencies, and develop a tailored plan to address your tax challenges.

Contact us today at (310) 788-9820 or schedule a confidential consultation. We’ll review your tax records, agency notices, and financial situation to create a comprehensive resolution strategy.