Don't Mess With the IRS

[IslandGuy]

Business taxes can really be a pain. I was part of a 3-person corporation that created some software that was then licensed by some hot-shot west coast software company. We got paid royalties on the sales, but it sure beat selling the software one copy at a time off our internet site. Of course this was a few years ago, but in the end they sold over 250,000 copies of our software.

One of my partners was all for just pretending it didn't exist because it was an internet deal, and he didn't really like me insisting that we incorporate and file even before our software was licensed, but we were sure happy when the deal went through, because we were clean from Day One.

As I've said in some other posts in this forum, I used to work with a tax attorney who had clients who owed the IRS millions of dollars and I sure learned a lot about how the IRS operates. He had been an attorney for the IRS previously and knew all the local IRS attorneys and agents, so he was quite successful at his business (mediating and working out deals for his clients). His favorite saying was, and I still think it's true, "don't mess with the IRS" ... if you get caught, if there is a fair amount of money involved or if they suspect you've done something fraudulent in addition, their powers are incredible -- your bank accounts can be frozen before you are informed and your assets seized and even taken away (as in a yacht or something on those lines) before they inform you they are going to do it.

Anyone have any experiences with problems with business taxes where they fought the IRS and won? I guess I've been fascinated with how they operate ever since working for this guy, because until then I didn't know much about the internal workings and how to deal with them if you are unfortunate enough to have to

 

[yooperchick]

I knew of someone who had in writing from the IRS they were a monthly 941 depositor. The year before they were semi-weekly depositors. So, being a good citizen, the listened to the letter and paid only monthly. Some months later they start getting nasty letters saying the were supposed to be depositing semi-weekly and many letters were written to them about the letter THEY sent telling this person to file monthly. Even sent copies of the letter. Didn't work - they ended up freezing their bank account.

There is help out there - called the Taxpayer Advocacy Service. They were contacted about this situation and helped to clear it up ASAP. If you need help with business taxes and feel you are in the right, contact TAS. They can help you.

Oh, and as a former bookkeeper for many business clients, I agree 100% with Island Guy - don't mess with the IRS.

 

[IslandGuy]

The one case that really sticks in my mind was a client we had who definitely was messing with the IRS, but it still amazed me with how amazingly efficient they were at taking him down before he knew what hit him.

In this case he tried to hide an asset by putting it in someone else's name (a beautiful cigarette boat), but the IRS had what they considered (and stood up in tax court) as enough "evidence" to prove he was scamming the IRS, so they seized the boat and put it in storage at some place that the attorney I worked for could not even get out of them. It sat there for about 4 years, not being cared for (as you would do for such an expensive boat) in storage until finally the lawyer got it released (he actually won against the IRS in tax court on this part of the case anyway). Meanwhile, the boat of course had decreased in value not just because of its age, but because it had not been cared for and stored properly, but no compensation for that .... sheesh ... those guys can be tough.

Thanks for another interesting story yooperchick about taxes and business and for seconding the "motto" ... too many people I think take risks that they may be really, really sorry about if substantial assets are involved especially.

Makes me kind of glad I don't have a lot right now