Tax Law in California

Tax law refers to the regulations governing the calculating, filing, and paying of taxes. When handling tax law cases, attorneys may manage taxes at various levels, such as local, state, and federal. The practice of this type of law involves understanding, defending, and resolving issues related to payment or non-payment.

If you hire a qualified California professional to handle your business or personal taxes, you may feel protected from disputes. However, even a misplaced comma or added zero can cause the IRS to believe you owe more than you do. In some instances, accountants might also take deliberate actions that result in legal and financial repercussions.

The State of California affirms that individuals must file tax returns in the state if they receive income from a source, have a certain amount of income, or meet any other federal requirement for filing. Even if you do not reside in the state, California requires you to pay income taxes if you receive any income from the state. State income tax rates can vary from person to person, and can be as high as 12.3%.

Tax Law Topics to Understand

If you find yourself facing California taxation issues, understanding tax law and how it works can help. Most Americans have only basic knowledge of how the tax systems work, and with good reason. They are complex. Small business owners need to understand tax law and how it impacts their business. Here are some essential tax law topics to get you started.

IRS Audits

An IRS audit is a review of an experienced California individual’s or an organization’s finances and accounts to ensure accuracy. The audit may also uncover discrepancies business owners were not aware existed.

These are just a few of the things the IRS looks for when conducting an audit:

  • Does your lifestyle match your income?
  • Are you passing off personal expenses as business expenses?
  • Are you overstating any of your business expenses?
  • Did you fail to report any business income or did you inflate that income?
  • Do your payroll taxes match that of your employees?
  • If your business handles a lot of cash,  are you diverting any of this into your own pocket?

If you are about to have your business audited, consider hiring a qualified California tax law attorney. They can help you to navigate the complex process ahead and offer advice as issues arise.

Tax Evasion

Tax evasion refers to any activity an individual or business in California engages in to reduce or avoid their tax liabilities. There are two types of tax evasion: evasion of assessment and evasion of payment.

Evasion of assessment means the taxpayer performed an action with the goal of defeating the assessment of a tax. The under-reporting of taxes is a common example of this. Evasion of payment means that you avoid paying the IRS by hiding money or assets that should become taxed.

Here are some examples of tax evasion:

  • Keeping a double set of books
  • Overstating deductions
  • Destroying financial records
  • Concealing sources of income
  • Filing a false return
  • Making false invoices
  • Holding property in another person’s name to avoid taxation

If you are found guilty of tax evasion in California, you can face hefty fines, prison time, or both.

Income Tax Fraud

Income tax fraud is the willful attempt to evade or defraud the IRS and California tax laws. Tax fraud occurs when an individual or business does any of the following:

  • Prepares and files a false tax return
  • Willfully fails to pay taxes
  • Intentionally fails to file an income tax return
  • Intentionally fails to report income received
  • Makes fraudulent or false claims on the tax return

California Tax Law lists the penalties for tax evasion as up to 1 year in jail, and a $20,000 fine. The state is also within its boundaries to demand payment of back taxes. However, if you cannot pay these taxes, the state can seize your property and sell it, using the proceeds to settle the back taxes.

When Would You Need an Experienced California Tax Law Attorney?

Facing Legal Issues Regarding Taxes

If you’re under investigation from the IRS or planning a lawsuit against, you will need a California attorney who practices tax law. To illustrate, counsel can help collect the information you need and create a viable defense.

When Starting a Business

There’s more to starting a business in California than selling products or services. You also need to determine the business type and structure. This status, in turn, determines how the business and your earnings get taxed. Choosing the wrong business structure can cost you.

The California Small Business Owner’s Guide states that in addition to paying federal taxes, a business operating in California must pay the appropriate corporate income taxes to the state. The corporate tax rate for California is 8.84%. These taxes are levied against any net profit that a corporation makes in the fiscal year within the state.

If You Have a Taxable Estate

If your estate is worth more than $11.58 million, or $23.16 million if you’re married, your estate might get taxed up to 40% for surpassing that threshold. No one wants a huge portion of their estate going to the IRS instead of their heirs. This is why wealthy people involve tax lawyers in their estate planning process.

The California State Controller lists very few exemptions to paying estate taxes when you pass on. If you inherit less than $10,000, or are married to the person passing away, you may be able to escape estate taxes, also commonly called “death taxes”, that are levied against you. However, if this is not the case, it may be beneficial to hire an experienced attorney in California to help fight for the assets left to you.

Work with an Experienced Tax Law Lawyer in California

Facing issues related to tax law can feel overwhelming. No one wants to go head-to-head with the IRS. Experienced California tax law lawyers have the expertise you need, from conducting audits to defending you in court.  We can even help you connect with an attorney across California state lines.

Submit a request online or call us today at (866) 345-6784 to get in touch with an experienced lawyer in your area!

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