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Federal and state audit activity

To achieve our audit goal of determining the correct amount of tax, we may look at federal issues (where California conforms to federal law), and issues that only apply for California purposes. Our audit strategy is to open an audit on a tax return as soon as we possibly can after the return is filed, and to finish that audit as quickly and efficiently as we can. This is sometimes easier said than done when we are auditing the larger corporate taxpayers, especially when an IRS audit is underway at the same time.

If both the FTB and the IRS are auditing your return, or your client’s return, our goal is to complement the IRS activity and eliminate any IRS or FTB duplication of effort.  When the IRS is reviewing an issue, or has made a determination on an issue, FTB will generally await the final federal determination of that issue.  In the situation where the IRS is auditing your or your client’s return, and we identify a federal issue of concern that the IRS is not looking at, we may request documentation on that issue to determine the correct amount of tax.

Throughout the audit process, our goal is to avoid duplication of effort. If we pursue an issue that you or your client knows the IRS is auditing, please don’t hesitate to tell us. The IRS issues Information Document Requests (IDR) for information, just as we do. The best way to demonstrate that the IRS is auditing an issue is to provide us with a copy of the Revenue Agent or International Examiner’s IDR, showing that the subject of the IDR is the same issue in question.