Check Out the Secrets of Piggyback Audit from FTB

 

The notice contained in the California Franchise Tax Board can be frightening to any taxpayer. Even after you have endured a federal IRS audit, California can spring a piggyback audit, acting upon the IRS auditor. It simply implies the state sees through your taxes on the basis of the federal audit.

Knowing about this process is crucial to Californians who have already faced the IRS, since it can help them anticipate any scrutiny at the state level and handle it in a manner that helps them avoid any complications and penalties. Find the best tax attorney in San Francisco who can help.

What is a Piggyback Audit?

Piggyback audit. The piggyback audit arises where the California FTB piggybacks off an IRS audit. The two agencies are interconnected by data exchange, and hence any federal revisions, such as deductions that are disallowed, reclassification of income, or added tax, are stressed and transmitted to California.

Since state tax liability is generally related to federal adjusted gross income, it is normally necessary to make changes at the federal level make changes at the state level. This means that in many cases, the FTB will use the findings of the IRS as a baseline and conduct very little further research, but instead render their own tax assessment, in practice matching state levies with federal audits.

Importance of Piggyback Audit

a.      It is not good to ignore a piggyback audit notice.

b.      Adjustments to your return by the IRS will very likely result in to similar adjustment in the FTB, but it will be a close call on the automatic level.

c.       Response delays may result in high California interest and penalties that are not deductible.

d.      The audit will require the state to claim all taxes due to it using your amended federal return.

e.      Timely attention helps to prevent extra charges and possible aggravation.

f.        It is important to understand and respond to a piggyback audit, as it constitutes the focus of California's tax auditing strategy.

Ways of Handling A Piggyback Audit

1.      It may be intimidating to receive a Notice of Proposed Assessment, issued by the FTB in the wake of an IRS audit, but it is imperative to follow a step-by-step approach.

2.      Timely act within the stipulated deadline, which in most cases is 60 days.

3.      Carefully compare the adjustments made by the FTB with the IRS audit to make sure there is no mistake involved, where mistakes can and do happen, but are not very common.

4.      When the determination is accurate, on-time payment eliminates any additional interest. Better consult with an expert before hiring a Fresno tax lawyer.

5.      You can defend your position by formally filing a protest should you believe it is wrong.

6.       Knowing what your options are and acting quickly will help when successfully managing a piggyback audit.

You are not left alone to face a California tax audit. Consider seeking the advice of a trained Tax specialist and/or an Offer in Compromise or other forms of relief in a situation like the ‘Innocent Spouse’ Rule, which can help to mitigate liability.