Are California State Tax Returns Subject to IRS Audits?

Whether it’s state or federal, receiving a notice that you are being audited is enough to send anyone into a panic. An audit is always serious and should be dealt with head on; however, it does not need to disrupt your entire life or business. Most people think of the IRS when they hear the word “audit.” But individual states conduct audits through their Departments of Revenue. Regardless of who is performing the audit, an experienced tax attorney can help guide you through the process with minimal disruption to your day-to-day life. Here’s what you need to know about federal and California state tax audits.

The main difference between a federal and state audit is the agency conducting it. An audit is when the IRS or your state’s Department of Revenue takes a deep dive into your federal or state tax return. Generally, they do this to ensure the income and deductions you reported on your tax returns are accurate. If discrepancies are found, the agency conducting the audit may issue fines, penalties or even jail time (if, for instance, you are found guilty of fraud). 

If you receive a notice that the IRS is auditing you, they will examine your federal tax return. And while the IRS does not evaluate the information you submitted to the state, your federal tax return can directly affect your state return. For example, if the IRS requires you to amend your federal return, chances are you will also have to amend your state tax return. 

Conversely, a state audit may trigger an IRS audit if the state requires you to make changes to your state tax return. For example, if you claimed deductions on your state tax return that you did not qualify for, the state could report that to the IRS. That may prompt an audit from them. This is one reason it is crucial to be honest and transparent when doing your taxes. Enlisting the help of a qualified Orange County tax attorney to help you figure out the nuances will go a long way in making the process easier.

Whether it’s the IRS or the state of California that sends you a notice of audit, the best thing you can do is enlist the help of an experienced Orange County tax attorney. And while an IRS or state audit is common and generally not reason for panic, letting an experienced tax professional help you with the process can make the process easier to navigate.

Allison Soares is a partner and tax attorney at Vanst Law. Before starting her own practice, Soares was a partner at a tax law firm where she honed her skills handling a wide variety of tax and employment-related cases. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits.

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Allison Soares

Allison Soares, a renowned tax attorney, excels in representing clients before the IRS, FTB, EDD, and CDTFA. With a Bachelor of Arts in Finance from the University of Wisconsin, Milwaukee, and a transformative teaching stint in Brazil, Allison’s diverse background enriches her legal expertise. She pursued law at St. Thomas University School of Law, Miami, complementing it with an MBA in accounting and forensic accounting. Further honing her skills, she obtained a Master of Laws in Taxation from the University of San Diego School of Law. As an adjunct professor at San Diego State University, Allison imparts her knowledge in tax procedures, practice, and ethics. Her accolades include being named Best of the Bar by the San Diego Business Journal and multiple Super Lawyer recognitions. Committed to community service, she volunteers with Forever Balboa Park and Friends of Balboa Park. Allison’s authoritative contributions in tax law are showcased through her publications and speaking engagements.

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