Over the past few years, we identified common Personal Income Tax audit issues.
These issues typically involve substantiation or interpretation of the facts:
- Gains and Losses from Sales of Stock: When shares of stocks are sold, we will ask for substantiation for the gains/losses. Adjustments are typically found in the computation of stock basis.
- Real Property Sales: We will typically ask for substantiation of purchase costs, improvements, and repairs. Adjustments are made when the documentation provided does not reconcile to the amounts claimed.
- Like-Kind Exchanges: We will look at all aspects of the exchange. Common adjustments are for certain requirements not being met, when there is a difference in the calculation of boot, or when the property basis is unsubstantiated.
- Charitable Contributions: We will ask for appraisal reports for large non-cash donations to support the claimed fair market value (FMV) of donated items. Adjustments occur when we find that FMV is overstated.
Additionally, here are some tips that may help facilitate a timely completion of an audit:
- Let the auditor know as soon as possible if there will be a delay or you are unable to provide a complete responses to an information document request. This allows the auditor to plan accordingly and grant a reasonable extension as well as discussing alternative documentation without causing unnecessary delays to the audit.
- If you determine that an amended return or claim for refund will be filed, let the auditor know as soon as possible to prevent delays in the audit.
- Report any federal audit activity to our auditor as soon as you are aware of it. The auditor may decide to wait for the final federal determination when federal and California laws are the same. Doing so may save time and work for both you and us.
- In the event you are unable to resolve an audit issue with the auditor, you may contact the auditor’s supervisor listed on the initial contact letter for assistance.
We value your input and invite you to participate in the Audit Customer Experience Survey provided by the auditor after completion of the audit. This survey allows us to gather insights and identify opportunities for improvement so that we may better serve you.Print