This case study, prepared byRafael Gutierrez Jr. ofKey Forecasts, details a successful financial reconciliation for a client facing aCalifornia Department of Tax and Fee Administration (CDTFA) audit.

The report addresses a$360,609 tax discrepancy stemming from the CDTFA’s use of gross Form 1099-K credit card data, which incorrectly categorized non-taxable labor as taxable sales.By leveraging internal invoice management systems, the study provides a detailed breakdown of2022 revenue, demonstrating that approximately50% of the gross revenue consisted of non-taxable service charges.This precise data reconciliation was used to amend tax returns and establish the business’s actual sales tax liability.

Key metrics included in the analysis:

• Total Internal Revenue (2022): $143,627.59

• Non-Taxable Labor Portion: $71,743.60

• Actual Sales Tax Collected: $6,855.87

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