IRS & California Tax Blog

If you have just received an IRS audit notice, the first question is almost always the same: why me? Did the IRS catch something specific? Did a software algorithm flag the return? Did someone report you? Was it random? The honest answer is that IRS audit selection is rarely random, and “why was I selected…

California’s proposed billionaire tax has put the California residency audit back in the national spotlight, and made it the single most important issue for wealthy individuals who have recently left the state or are thinking about it. As Proposition 40, the 2026 Billionaire Tax Act, heads toward a statewide vote, the California Franchise Tax Board…

Tax professionals and taxpayers alike have noticed a shift: IRS frivolous return notices (Letter 3176C) are landing on returns that claimed ordinary tax credits, not the tax-protester filings the program was built to catch. If you claimed a credit you believed you were entitled to and received a notice calling your position frivolous, the explanation…

Not all IRS audits are the same. The IRS conducts three distinct types of IRS audits: correspondence audits, office audits, and field audits. The differences among them are not cosmetic. Each type involves different procedures, different IRS personnel, different scope, and different stakes. Identifying which type of audit you are facing is the first defensive…

Receiving a frivolous return notice when you filed an ordinary, good-faith tax return is jarring. The IRS uses the word “frivolous” to describe positions it considers baseless — the stuff of tax-protester theories — yet a growing number of taxpayers are getting these letters (IRS Letter 3176C) for returns that were nothing of the sort.…

For most taxpayers facing an IRS cryptocurrency examination, the defining problem is asymmetry of information. The Revenue Agent on the other side of the table has access to exchange records produced through John Doe summonses, blockchain analytics that trace transactions across wallet addresses, expanded broker reporting under digital asset rules, and dedicated IRS training programs…

If you have received IRS Letter 3176C, the notice is telling you the IRS believes your tax return contains a “frivolous” position, and that a $5,000 penalty may follow if you do not respond correctly within 30 days. For many taxpayers, that language is alarming and confusing, especially when the return in question looked entirely…

Most IRS audits are administrative exercises — civil examinations conducted by Revenue Agents who develop adjustments, propose additional tax, and eventually close the case. Most audits end with no change, with an agreed adjustment, or with an unagreed Revenue Agent’s Report that proceeds to Appeals. Some audits are something else entirely. An eggshell audit is…

The Information Document Request (IDR) is the workhorse document of an IRS examination. It is the form IRS Revenue Agents use to ask for the records, statements, and information they need to develop adjustments, and it is, in practice, the document on which most audits are won or lost. For taxpayers who have just received…

When an IRS Revenue Agent opens an examination, they are not approaching your return with an open mind looking for whatever happens to come up. They are approaching it with a defined set of issue categories they have been trained to develop, supported by analytical techniques the IRS teaches in formal examination training. Knowing what…