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IRS Can Audit 3 Or 6 Years, But California Can Audit Forever

Source: forbes.com - Oct 20, 2016

You may think about the IRS when you think taxes. But if you live or do business in California, we have high individual (13.3%) and business (8.84%) tax rates. Add the state’s notoriously aggressive enforcement and collection activities, and complexity. Rather than adopt federal tax law wholesale, California’s legislators pick and choose. Even California’s tax agencies and tax dispute resolution system is unusual. And when you add California’s unique tax statute of limitations, it can be downright scary.

The basic federal income tax statute of limitations is three years in most cases, though it is six years in a growing number of situations. The normal three years is measured from your actual filing date if you file on time or late. If you file early (say before April 15), it is measured from the due date. The California Franchise Tax Board (FTB) gets an extra year, so it has four years, not three. That can invite some interesting planning.

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Category: General Business