The bill does not stop at the company.
What tax problems do Milpitas businesses run into most?
Employment tax problems, by a wide margin. Payroll is the largest recurring tax obligation a production business carries, and it comes due whether or not customers have paid.
Milpitas is a build-and-ship city, not a founder city. More than one in five of its workforce is employed in manufacturing, about twice the Bay Area average [Source: City of Milpitas]. Contract electronics, logistics and trade firms run large hourly payrolls on tight margins.
That profile matters because employment tax is where the federal shortfall concentrates. The IRS projects $117 billion of the $696 billion gross tax gap for tax year 2022 came from employment taxes [Source: IRS Tax Gap Projections 2022].
Most owners here did not set out to skip a deposit. Cash got tight and a quarter slipped. See tax problems for small business owners and tax resolution.
What is the Trust Fund Recovery Penalty and who actually pays it?
The Trust Fund Recovery Penalty makes an individual personally liable for the withheld portion of unpaid employment taxes. The IRS states the penalty makes a responsible person liable for 100 percent of the unpaid trust fund taxes [Source: IRS Internal Revenue Manual 5.7.3].
The authority is Internal Revenue Code section 6672. Trust fund taxes are the amounts withheld from a paycheck: income tax withholding plus the employee share of Social Security and Medicare. The employer holds that money in trust.
Two elements must be established. Responsibility means a duty to collect, account for and pay over the tax, with authority over which creditors get paid. Willfulness, per the IRS, means intentional, deliberate, voluntary, reckless or knowing, as opposed to accidental.
Officers, partners, LLC members and managers can all be assessed, and more than one person can be named. Late deposits carry their own escalating penalty first.
| How late the deposit is | Failure to deposit penalty |
|---|---|
| 1 to 5 calendar days | 2 percent |
| 6 to 15 calendar days | 5 percent |
| More than 15 calendar days | 10 percent |
| More than 10 days after the first IRS notice | 15 percent |
[Source: IRS 2026]. Penalties do not stack. Relief is sometimes available, and our page on penalty abatement explains the general grounds. Related exposure shows up in S corporation reasonable compensation cases.
Employee or independent contractor: how does California decide?
California applies the ABC test and presumes a worker is an employee unless all three parts are met. Misclassification is a common trigger in a city full of shift work and subcontracted assembly labor.
Under the EDD’s statement of the test, the hiring business must show the worker is free from its control and direction, performs work outside the usual course of its business, and is customarily engaged in an independently established trade of the same nature [Source: EDD 2026].
Fail the test and the state assesses the payroll taxes that should have been withheld, with penalties and interest.
| California payroll tax | Rate | Taxable wage limit |
|---|---|---|
| Unemployment Insurance, new employer | 3.4 percent | $7,000 per employee |
| Employment Training Tax | 0.1 percent | $7,000 per employee |
| State Disability Insurance withholding | 1.3 percent | No wage limit |
[Source: EDD 2026]. Federal and EDD cases often run in parallel on the same facts, so a tax attorney will usually work both files together. See business and nonprofit tax.
Does a Milpitas business owe California sales and use tax?
Generally yes, if it sells or uses tangible goods in California. Resellers, distributors and manufacturers moving physical product owe both sales tax and use tax, and the CDTFA audits both.
The statewide base rate is 7.25 percent, with district taxes layered on top that range from 0.10 percent to 1.50 percent [Source: CDTFA 2026].
| Jurisdiction | Combined rate |
|---|---|
| California statewide base | 7.25 percent |
| Milpitas | 10.000 percent (raised from 9.375 percent on 1 April 2026) |
| Unincorporated Santa Clara County | 9.125 percent |
[Source: CDTFA rate change notice L-1022, operative April 1, 2026]. Resale certificates, out of state equipment purchases and drop shipments are the usual flashpoints. Our page on the California sales tax audit goes deeper.
How do foreign accounts fit alongside a business tax problem?
They often sit in the same file. Milpitas has a large immigrant and first generation business community, and 55.4 percent of residents are foreign born [Source: U.S. Census Bureau QuickFacts 2024]. That is a demographic fact about the city, not an assumption about any person.
The reporting rule is mechanical. A U.S. person must file an FBAR if the aggregate value of foreign financial accounts exceeded $10,000 at any time during the calendar year [Source: IRS 2026]. The threshold is the total across accounts, not per account.
Details sit on our page covering FBAR filing requirements for foreign accounts. Offshore funds raise the separate issues in PFIC reporting.
Where does a Milpitas tax case get handled?
In three places, none in Milpitas. In person IRS service runs through the Taxpayer Assistance Center at 55 S. Market St., Suite 100, San Jose, CA 95113 [Source: IRS 2026], by appointment.
If the IRS records a Notice of Federal Tax Lien against Milpitas real property, it is recorded with the Santa Clara County Clerk-Recorder, which records statutory liens including tax liens, at 110 West Tasman Drive in San Jose [Source: Santa Clara County Clerk-Recorder 2026]. A lien notice gives 30 days to request a Collection Due Process hearing [Source: IRS 2026].
Litigation goes north. San Jose is not a United States Tax Court place of trial. Bay Area cases are heard in San Francisco at the Phillip Burton Federal Building, 450 Golden Gate Ave [Source: U.S. Tax Court 2026]. See tax litigation and Tax Court.
When should you call a Milpitas tax lawyer?
Before a deadline closes. The leverage in a tax case sits in windows measured in days, and they run from the date on the letter. A petition after a notice of deficiency must be filed by the 90th day from mailing, and the court cannot extend that date [Source: U.S. Tax Court 2026].
| What arrived | Window to act |
|---|---|
| Notice of Federal Tax Lien filing (Letter 3172) | 30 days |
| Final notice of intent to levy (LT11 or L-1058) | 30 days |
| Notice of deficiency | 90 days |
A revenue officer asking who signed the checks is another moment to get counsel, because that interview builds the responsibility case. See what to do if you receive an IRS notice and IRS bank levy.
How Kim & Rosado helps Milpitas businesses
Kim & Rosado LLP serves Milpitas clients from its San Jose office, minutes down the 880 corridor, and also keeps an office in Walnut Creek. The practice is tax controversy work: audits, collection, appeals and litigation. Several of the firm’s attorneys previously worked for the IRS.
Read the bios of Nicholas Rosado, Anthony Kim, Peter Chang and Qianli Yang, or review the audit and litigation representation service page. Owners weighing who to bring in may find tax attorney versus CPA useful.
Frequently asked questions
Can the IRS come after me personally for my company’s payroll taxes?
Yes, for the trust fund portion. Section 6672 lets the IRS assess a responsible person individually for amounts withheld from employees and not paid over, at 100 percent of the unpaid trust fund taxes. Corporate form does not block it, because the penalty attaches to the person rather than the entity. The IRS must establish both responsibility and willfulness, and more than one person can be named. A tax attorney can review who actually held check signing and payment authority in the quarters at issue.
Does the EDD case go away if I settle with the IRS?
No. Federal employment tax and California payroll tax are separate obligations run by separate agencies. A federal installment agreement resolves the federal balance only. The EDD assesses Unemployment Insurance, Employment Training Tax, State Disability Insurance and income tax withholding under its own rules and appeal timeline. The two cases often arise from identical facts, such as a classification finding, so they are usually handled together. Working them in isolation can produce a position on one side that conflicts with the other.
My contractors have their own tools and set their own hours. Are they safe?
Not necessarily. Control is only the first part of California’s ABC test. The second part asks whether the work falls outside the usual course of the hiring business, and that part defeats many arrangements. An assembler engaged by an electronics manufacturer is doing the company’s core work, however the schedule is set. The third part asks whether the worker truly runs an independent business of the same kind. All three must be satisfied. A tax attorney can assess a specific arrangement against the current standard.
Will a federal tax lien show up against my Milpitas property?
It can. When the IRS files a Notice of Federal Tax Lien covering real property, it is recorded where the property sits. For Milpitas that is the Santa Clara County Clerk-Recorder in San Jose, which records statutory liens including tax liens. The recorded notice alerts creditors to the government’s claim and usually surfaces in title searches and financing reviews. The lien notice carries a 30 day window to request a Collection Due Process hearing, often the practical moment to raise release, withdrawal or subordination.
Getting a second opinion on a payroll tax case
Payroll tax cases move faster than income tax cases and they reach the owner personally. Organizing the facts before a responsibility interview tends to matter more than anything that follows.
If you own a business in Milpitas and a notice is open on your desk, you can schedule a 30 minute consultation or reach the firm through the contact page. This article is general education and not legal or tax advice for any particular situation.
