Common income tax issues February 2021 Tax News

In bringing awareness and increasing accuracy, we have listed some common audit issues for individuals and business entity taxpayers.

Common issues for individual taxpayers include:

  • Sales of personal or real property, including like-kind exchanges
  • Owner's basis in a pass-through entity
  • Sales of interests in a pass-through entity
  • Characterization and sourcing of Income
  • Sheltering income in tax avoidance strategies
  • Determining California residency status

Some audits of like-kind exchanges are the result of incomplete, missing, or improperly completed forms. Visit our related article this month, Compliance effort for FTB 3840, California Like-Kind Exchanges letters continues.

Common issues for business entity taxpayers include:

  • Business Credits (e.g., Research credit)
  • Apportionment and allocation of income

A trade or business subject to California apportionment or allocation rules can include corporations, limited liability companies, partnerships and sole-proprietorships.

We continue to offer flexibility in our audit activities as we all address the changing times. Together, we will continue to find solutions to keep our audits moving towards successful resolutions.