Steps to Challenge CDTFA Audit Findings

The California Department of Tax and Fee Administration (CDTFA) conducts audits to ensure that tax compliance standards are met. However, these audits can sometimes lead to findings that a business may find inaccurate. In these situations, businesses have the option to dispute the findings through a structured appeals process.

Understanding this process helps ensure businesses address discrepancies effectively and avoid potential penalties. Here’s a clear guide on how to raise a dispute for CDTFA audit findings.

Understanding CDTFA Audit Findings

When CDTFA audits a business, it assesses whether tax filings are accurate. If the audit results in discrepancies, CDTFA issues a report outlining these findings and the resulting tax liabilities. Receiving an unexpected audit finding can cause stress for business owners, especially if they believe the findings are incorrect. The CDTFA, however, provides a fair process to contest any inaccuracies.

Step 1: Review the Audit Findings Carefully

The first step in disputing CDTFA findings is thoroughly reviewing the audit report. This report contains specific areas where CDTFA identified potential issues. Careful examination of each point ensures that the business understands the basis for CDTFA’s conclusions.

Often, discrepancies arise from simple clerical errors or misunderstandings about the business’s tax practices. At this stage, involving a tax settlement attorney can be beneficial, as they provide an expert perspective on the report.

Step 2: Respond Promptly to CDTFA

Once the report is reviewed, businesses should respond within the specified period. Generally, CDTFA allows 30 days for taxpayers to respond to audit findings. Timely action shows a commitment to resolving the dispute professionally. A detailed response outlining any discrepancies identified during the review process is essential.

Step 3: Request an Exit Conference

An exit conference provides an opportunity to discuss the audit findings directly with CDTFA representatives. During this meeting, businesses can clarify issues and present any supporting evidence. This step often allows both parties to resolve minor misunderstandings or clear up factual errors.

Step 4: File a Formal Petition if Needed

If issues remain unresolved after the exit conference, businesses may file a formal petition. The petition must clearly explain why the audit findings are disputed and include all supporting evidence. CDTFA requires this petition within 30 days of the audit’s final determination. Hiring an IRS law firm with experience in CDTFA cases can provide a strong advantage here, as they bring insight into navigating CDTFA’s appeals process.

Step 5: Prepare for a Pre-Hearing Conference

The pre-hearing conference offers a final opportunity to resolve the dispute before a formal hearing. CDTFA uses this step to address any remaining issues and explore potential settlements. Businesses should use this opportunity to present their case effectively, summarizing the key points of disagreement and supporting documents.

Step 6: Attend the Formal Hearing

If the dispute is not resolved in previous steps, CDTFA schedules a formal hearing. Here, the business presents its case in front of an administrative law judge. This hearing allows both the taxpayer and CDTFA to present evidence and arguments. A well-prepared presentation with organized documents and professional representation can significantly improve a business's chances of a favorable outcome.

Final Thoughts on Disputing CDTFA Findings

Disputing CDTFA audit findings requires careful preparation and adherence to CDTFA’s guidelines. Each stage—from reviewing findings to the formal hearing—demands organization and a solid understanding of CDTFA processes.

Businesses unfamiliar with tax disputes can benefit significantly from expert assistance. Partnering with a knowledgeable tax settlement attorney ensures businesses approach each step with confidence and precision, maximizing their chances for a successful dispute outcome.