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My client a restaurant owner, received audit notice from CDTFA , with the notice they asked him to sign a "WAIVER OF LIMITATIONS" indicating that:
A Waiver of Limitations that is signed by the taxpayer prior to the statute expiration date extends the three-year statute of limitations (or eight years where no return was filed), for the period indicated on the form. A waiver duly signed by only the taxpayer is still a valid waiver. which mean it will give them the right to extend the audit beyond 3 year statute of limitations. I am sure it's legal for them to ask. However, should my client sign the waiver? will they retaliate if he didn't? Does anyone have any experience similar with such situation? Thank you
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Does he need the additional time to gather information? Is the client ready for the audit? I don't have experience, but I think there could be a benefit to your client with granting the extension.
Even if there were an extension, wouldn't both parties want to end the audit as soon as possible?
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Haven't done this with CA.
But many times with IRS.
If:
Auditor and I are getting along. Auditor seems reasonable, etc. Auditor may need time. too.
If you don't consent you risk getting a large bill and having to fight.
The more I know the more I don’t know.
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I don't think it's anything like what you have done with IRS. They ask for extensions of the statute when the audit has already made enough progress to identify issues, but requires more work on legal research, or substantiation, or both. What California apparently does is ask for the extension at the same time the audit begins. They do that, probably to cover as many years as possible.
The threat is that they will propose an assessment of some outrageously high amount. Depending on appeal rights, you might want to call their bluff. Or, you might decide instead to move to Arizona (which seldom audits anyone) or Oregon (which doesn't have a sales tax).
