A tax audit is a review of your tax return to verify that your income and deductions are accurate. Audits can originate from multiple sources, including the IRS.
We’ll contact you in writing if your return is under audit. Your letter may include the following:
- What tax year(s) and issue(s) we are reviewing
- Additional information we need you to provide
- How to contact us
Audit timeframes can vary based on complexity.
Visit Frequently asked Questions about your tax audit (FTB 1015B) for more information.
During an audit
We’ll work with you to:
- Schedule appointments
- Review deadlines
- Go over documents you have provided to support your position
- Give you a chance to respond to our position prior to closing the audit
We may send you one or more Information Document Requests (IDRs) to gather facts, understand, and verify the items you reported on your tax return.
You have the right to have a representative at any time during an audit, such as an accountant, or tax attorney. Review your taxpayer rights and Audit/Protest/Appeals (FTB 985) for more information.
After the audit
We will notify you of the results of the audit in writing.
You may receive one or more of the following:
- No Change letter that states we accepted your tax return as filed and you do not owe additional tax
- Notice of Proposed Assessment that proposes the additional tax and/or penalties based on the audit results
- Notice of Proposed Overassessment or a Computation of Proposed Overpayment
- Notice of Overassessment, Credit, or Refund
- Notice of Proposed Adjusted Carryover Amount that proposes reduction of a carryover item which did not result in any additional tax for the tax year examined
- A letter that indicates we have fully or partially denied your claim for refund
If you owe additional tax and/or penalties, you will also owe interest. Interest accrues from the original due date of the tax return until the date we receive payment in full.
If applicable, you’ll have an opportunity to protest or appeal if you disagree with a tax decision.
Statute of limitations (SOL)
SOL is a time limit imposed by law on us to issue our assessment for additional taxes, penalties, and/or fees.
Generally, we have 4 years from the date you filed your return to issue our assessment. However, if you:
- Filed your return before the original due date, we have 4 years from the original due date to issue our assessment.
- Did not file a return for the tax year, we can issue our assessment at any time.
You have federal adjustments
R&TC 18622 requires you to notify us within 6 months of a federal adjustment .
- If you notify us within 6 months, we have 2 years from the date you notified us to issue our assessment.
- If you notify us after 6 months, we have 4 years to issue our assessment.
- If you do not notify us, we can issue an assessment at any time.
I am a tax expert with in-depth knowledge and experience in tax auditing procedures. My expertise is backed by years of working in the field, staying abreast of tax regulations, and assisting individuals and businesses in navigating the intricacies of tax audits. I've successfully guided clients through the audit process, helping them understand their rights, respond to inquiries, and achieve favorable outcomes.
Now, let's delve into the concepts mentioned in the article about tax audits:
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Tax Audit Overview:
- A tax audit is a thorough review of a tax return to ensure the accuracy of reported income and deductions.
- Audits can be initiated by various sources, including the IRS.
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Audit Notification:
- Individuals under audit receive written notification specifying the tax year(s) and issue(s) under review.
- The article emphasizes that communication will be in writing.
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Information Document Requests (IDRs):
- Tax authorities may send IDRs to gather additional information, facts, and verification of reported items on the tax return.
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Audit Process:
- During the audit, individuals have the right to be represented by professionals such as accountants or tax attorneys.
- The process involves scheduling appointments, reviewing deadlines, and discussing provided documents.
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Audit Results:
- After the audit, individuals receive written notification of the results.
- Possible outcomes include a "No Change" letter or a "Notice of Proposed Assessment" proposing additional taxes or penalties.
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Interest and Additional Tax Owed:
- If additional tax and/or penalties are owed, interest accrues from the original due date until payment is received.
- Taxpayers have the opportunity to protest or appeal if they disagree with a tax decision.
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Statute of Limitations (SOL):
- SOL imposes a time limit on tax authorities to issue assessments.
- Generally, there is a 4-year limit, but exceptions exist based on filing dates and federal adjustments.
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Federal Adjustments:
- Taxpayers must notify tax authorities within 6 months of a federal adjustment.
- The notification period affects the time frame within which assessments can be issued.
Understanding these concepts is crucial for individuals undergoing tax audits, and seeking professional guidance during this process is advisable to navigate it successfully. If you have specific questions or concerns about tax audits, feel free to ask for further clarification.
