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Old 16th March 2008, 03:46 PM   #1
PacSun
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Default California State Wants Money! Help!



Please be kind as this is going to sound stupid.

Back in '04, I started an S Corp that performed professional house cleaning services. According to my Accountant, I did not have to pay estimated taxes until the end of the year. During '04, the Corp never made any money even on a quarterly basis, in fact it lost money. For reasons that escapes me now, I did NOT file the Corp's '04 & '05 Income Taxes to the State of CA nor the IRS. I remember thinking the Corp was loosing money fast and I was working hard trying to save it so I procrastinated on the taxes. Big mistake! Six months into '05, after getting beat up with the excorbitant Worker's Compensation Insurance premiums (47% of payroll), the S Corp ran out of money and I basically closed shop. I tried to close the S Corp down but the State wanted confirmation from the CA State Board of Equalization and the IRS that the Corp did not owe any money. When I tried to get that confirmation, the State Board of Equalization suddenly came down hard and sent the Corp a letter stating I needed to file State Taxes for '04 and '05. I complied. Since the Corp did not make any money, I figure that was the end of that. Wrong! This was back in 2006. After I sent the State Board the paperworks showing a loss of income in all of '04 and the 2nd half of '05, they came back with a demand for payment in 2008! Basically, they sent the Corp a letter stating I owed them estimated taxes for both years, plus penalties, all amounting to $4,500!

I admit to making a mistake by ignoring to file Income taxes for '04 and '05. Big mistake. I have no excuse except stupidity. But this new demand for payment is vexing me. How on Earth is the Corp. suppose to pay this tax when it never made enough money to begin with? I ran the S Corp out of my house so the State Board has been sending the mail for the Corp. there. But the Corp has no assets to speak of. It has no bank account, no property, nothing. I personally am unable to pay this amount using my own personal finances either. I would have to sell my car then how am I suppose to go to work?

Any advice on what to do?

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Old 16th March 2008, 04:04 PM   #2
pete
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Yes, except for the advice I am going to give right now, don't take any advice from a forum.

Actaully, that is the advice. Too much is at stake for you to take free advice from any forum.

You had an accountant. Talk to her/him. You may want one of those "free first visits" with an attorney. Don't use one listed under Divorce Specialists, even if they are cheaper.

Many times there are ways to eliminate a lot of the claimed debt. I'm not going into details, I can just tell you I know a number of people who have been hit with such things and gotten away for little or nothing.

Talk to your ex-accountant and get a business oriented attorney. Or work out an "Offer in Compromise" where you can pay as you go. But talk to some professionals.
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Old 16th March 2008, 06:19 PM   #3
PacSun
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I was afraid you would say that but I guess I need to face this head on. I am still paying for this Corp's debts out of my own pocket and now this....I guess I had it coming. What puzzles me is that the State asked me to file so I did, showing them a loss every year. This is all true that is why I shut down the business! Now that they have seen that the S Corp was taking a loss, now they want MORE money? I just do not understand the reasoning behind that kind of thing.

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Old 16th March 2008, 10:10 PM   #4
Logan
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Yep, I agree with pete. Although I think one more piece of advice is important.

Do not talk to the IRS or state yourself.

Straight up, you are not doing good on your own so stop talking to them and direct all communications through someone who is qualified. They can and will take advantage of you if you are not qualified to communicate with them.

Get back in touch with your accountant and direct all communications through them. Personally, I would go that route and not necessarily with an attorney immediately. I would ask the accountant if they recommended getting an attorney, and if so if they had a particular one that they worked with before.

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Old 17th March 2008, 11:20 AM   #5
Tom Young
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Do not be in a big hurry to ignore advice given on this forum.

You may be able to get the help that you need from one of the volunteer professionals at SCORE.

I just did a quick Counselor Search on the SCORE home page for “California State S Corp taxes” and came up with a listing for:

Murray Schlussel, Oakland, CA
Career Summary: Assistant General Counsel Taxes, Ford Motor Co International Mergers and Acquisitions U.S. and Foreign government negotiations Commercial Real Estate, hotel, apartments. Other small business involvement.
Language Spoken: English

There is a link allowing you to contact Mr. Schlussel for advice. This could be a place to start. Give it a try and let us know how it works out.

Tom


Last edited by Tom Young; 17th March 2008 at 09:58 PM.
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Old 21st March 2008, 04:34 PM   #6
SeattleCPA
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My comment (as a CPA) would be to get someone to file your returns for you. It's very likely that the situation isn't anywhere as dire as you think (as long as you stayed current with any payroll tax liabilities, like employee withholding).

I do lots of returns for delinquent taxpayers... and almost always people are worrying way too much. Talk to someone who's local to you and competent... and get this weight off your shoulders.

Good luck,

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