Small Business Owners: You Don’t Want the IRS Talking to Your Employees

September 30, 2013 by

If you’re a small business owner who’s recently received a notice from the IRS about a tax audit, you’re going to want to keep reading this article. There are three types of IRS audits: a correspondence audit, an office audit, and a field audit.

During a field audit, the IRS revenue agent comes to see you in person, in order to complete the audit. They will come to your home or place of business.  Having the IRS agent conduct the audit at your place of business can have two effects:

One: The IRS’ auditor’s presence can disrupt your business. When your attention is focused on the IRS agent, you’re not going to be able to run your business. This can mean a slowdown  in customer service, lost sales, or other negative consequences. Having the IRS on scene doesn’t look good for your business.

Two:  There’s the opportunity for the IRS agent to talk to or overhear your employees talking. A disgruntled employee can create a lot of damaging impressions with a few carefully chosen words: even if it’s not true, the IRS agent may be motivated to investigate further.

 IRS agents are trained to extract information that isn’t otherwise readily available. They’ve been known to ask questions that exceed the scope of their investigation in the pursuit of discovering unreported income and discovering personal expenses deducted by your business.  The seemingly innocent questions they ask your employees have a deeper, darker purpose. Your employees’ answers could fuel the fire.

Avoid the disruption to your business and reduce your risk of exposure by keeping the field audit from occurring at your place of business. When you hire our firm as your audit representative, the IRS revenue agent will have to come to our office and meet with our expert team. We’ll advocate on your behalf. You never even have to talk to the agent in person!

Running a small business is hard. An IRS audit doesn’t have to be.

If you’re a small business owner who’s facing an IRS audit, call us today. We’re here to help you. Let our experienced team handle your IRS audit, and you’ll never have to worry about the IRS disrupting your business. You can focus on making your business grow. We’ll focus on making your tax problems go away.

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Where’d My Paycheck Go? Understanding IRS Wage and Income Levies

August 28, 2013 by

When Tom S. got a call from HR, he knew it wasn’t good news. “They wanted me to go down there, so I went down there and they told me that they’d gotten a notice from the IRS. Because I had unpaid taxes, the IRS was levying my paycheck. I’d have 125 dollars left after the levy was taken out from each paycheck until all my back taxes were paid off – so I was looking at the next 3 months with hardly no money to live on!”

IRS Wage and Income Levies: Your Employer Has To Comply!

“I asked HR if there was some way they could let things slide, just for a week or two, so I could get prepared for the financial hit,” Tom said. “But they told me no way. If a company doesn’t do what the IRS tells them, they could get hit with huge penalties and fines.” Tom sighed. “By the time that conversation was over, it was pretty clear to me that I was lucky to have a job at all.”

Many people don’t know that it’s perfectly legal for your employer to terminate your employment if you have tax trouble with the IRS or MA DOR.  Having tax problems can be seen as a motivation to commit embezzlement – and no one wants to have a potential criminal working for them!

Types of Wage and Income Levies

There are two types of IRS wage and income levies. A continuous levy is generally brought against someone who has an employer and receives a regular paycheck. A non-continuous levy is generally brought against someone who receives a form 1099-MISC, and is considered self-employed. If you’re self-employed, you can imagine how embarrassing and stressful it would be to have the IRS contacting the people you do business with directly trying to collect your tax debts. It’s the type of thing that can ruin your business reputation.

What Can Be Done About Wage and Income Levies

If you receive notice that the IRS is going to levy your wages or other income, you want to get help right away. An experienced tax professional can work with the IRS on your behalf to resolve your tax issues and have the wage or income levy released. This can mean setting up a payment plan with the IRS, making an offer in compromise, or taking advantage of other legal means to solve your tax problems.

You have to take action! A wage or income levy won’t go away on its own, and every day it’s in place is a day that’s damaging your reputation with your employer or customers. If you’re dealing with a wage or income levy now, and you want the pain to stop, give us a call. We’re here to help!

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JK Harris Locks Doors

January 18, 2012 by

By David Slade, December 29, 2011, Post & Courier, Charleston SC

GOOSE CREEK — Bankrupt tax-preparation firm JK Harris suspended all operations late this afternoon and is bracing for a likely liquidation of the firm’s assets, according to founder and Chief Operating Officer John K. Harris.

As of the end of November, the company still employed about 135 people in Goose Creek. They were told late today that they would be locked out of the building at 5 p.m. and could return Friday to pack up their personal belongings.

The company was unable to secure additional funding after filing for Chapter 11 bankruptcy protection in October, and will ask the court to convert the case to a Chapter 7, Harris said, which means that instead of restructuring, the company could be shut down and its assets sold.

“This is truly the most devastating event I have been forced to deal with in my 58 years on this earth,” Harris said in an email to employees. “I am not sure it will reach that level for all of you, but I know that for some of you it will be as personally devastating for you as it is for me.”

JK Harris & Co. once advertised that it could resolve people’s tax debts for “pennies on the dollar,” but the nationwide company was dogged by cash-flow problems and the cost of large settlements related to multiple claims that it misled consumers

The company sought bankruptcy protection in October to head off an attempt by the Texas attorney general’s office, related to consumer claims, to force the company into receivership. Harris, in emails to employees, vendors and clients, blamed today’s shutdown on the refusal of the company’s largest creditor, RAI Credit of New Jersey, to provide additional financing.

Employees who were previously laid off are among the creditors owed wages. Money is also owed to vendors, and to consumers who were to get millions of dollars in compensation from previously agreed-upon settlements, from a class-action suit and from complaints by multiple attorneys general.

 

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Getting Rid of IRS Tax Liens and Fixing Your Credit Report

July 12, 2011 by

By Matthew J. Previte CPA MST
www.taxproblemsrus.com
July 12, 2011

Nothing can kill your credit rating like an IRS tax lien. Your credit report can drop about 100 points after an IRS tax lien is filed in the public record. Having a federal tax lien on your credit record can eliminate many lenders from loaning you funds to buy a house, a car, or to refinance your existing loan to get a more favorable rate. So just how do you deal with an IRS tax lien and fix the mess it has left in its wake? Well, to explain how, we need to start with what is an IRS tax lien, when does it come into existence, and how does one get it off your credit report.

IRS tax liens are filed in the public record to protect the federal government’s interest in IRS tax debts owed to it by you, the taxpayer. It is kind of like the IRS’s insurance policy. If you have any real estate or personal assets, the IRS tax lien attaches to it and allows the IRS to pursue enforced collection action (liens, levies, seizures) against your assets in order to collect what you owe them.

All IRS tax liens come into existence upon the assessment of a federal tax against a taxpayer. This usually happens when you file a tax return and it is processed by the IRS. However, federal tax assessments may also come into existence when the IRS audits your tax return, adjusts your tax return due to a mistake or missing W-2 or 1099, or they file a substitute tax return against you because you didn’t file a tax return. However the federal tax assessment came into existence, the IRS tax lien exists but is not effective against certain assets (like real estate) until it is perfected under state law by the filing of a federal tax lien in the public record.

The federal tax lien is filed in one of several places to insure it becomes public notice that you have an IRS tax problem and that the IRS has a federal tax lien securing the back taxes owed by you, the taxpayer, against your assets. Where an IRS tax lien is filed depends on state law. Some of the most common places the IRS files a federal tax lien is with one of the following: the Registry of Deeds or County Recorder, the office of county clerk, the office of town clerk, the office of probate judge, or the clerk of the circuit court. There are a few other places for some states but we won’t list them all here. The point is, state law controls where the IRS has to file its federal tax lien to be considered public notice that you owe them back taxes and that they have a claim against your assets. Most states have one place where federal tax liens need to be filed to be considered valid as against real estate while they have another place for IRS tax liens filed against personal property. To be sure, one must research their state’s law to determine where it requires federal tax liens to be filed.

To obtain a certificate of release of federal tax lien, one of several things has to happen. Either you have to full pay the tax, settle your tax debts through an Offer In Compromise and full pay the settlement amount, run out the statute of limitations on collection, or discharge the back taxes in bankruptcy. If there is real estate when you discharge any back taxes owed, the IRS will not release the lien until it expires. Liens generally last ten years but can be refiled if for some reason the collection statute has been extended beyond 10 years. There are several events that can extend the collection statute but we will discuss that in another article.

Keep in mind that with bankruptcy, some types of taxes are never dischargeable and for those types that are, you must have filed tax returns and wait certain periods of time before the taxes become dischargeable. There are also other rules beyond whether the taxes are old enough and of the proper type which must be met before one can qualify to file bankruptcy and discharge back taxes in bankruptcy. You should always consult a qualified tax resolution specialist as well as a bankruptcy attorney before filing. Otherwise, you may be surprised after you come out of bankruptcy court and the IRS is in hot pursuit, threatening to levy and seize every asset in sight.

To fix your credit rating, one must obtain a certificate of withdrawal of federal tax lien. A certificate of release of federal tax lien will not do as it only demonstrates that the IRS tax debts have been resolved to the satisfaction of the IRS. The problem with a certificate of release of federal tax lien is that it effectively lets the world know you have resolved your back tax debts but it does not remove the fact that at one time you owed the IRS back tax debts. Mailing a copy of the IRS certificate of release of federal tax lien to the big three credit agencies (Equifax, Trans Union, and Experian) only helps them update your credit file and notate that you have resolved your outstanding back taxes with the IRS. The original federal tax lien will stay on your credit report, along with the notation that it has been resolved, for 7 years. This hardly restores your credit score to its former level pre-IRS lien.

Obtaining a certificate of withdrawal of federal tax lien necessitates first requesting and receiving a release of federal tax lien with one exception which we will discuss in a bit. Once the back tax debt has been resolved through normal means (either full paid, discharged in bankruptcy—with no real estate owned, settled through an Offer In Compromise, or the collection statute has expired) and a certificate of release of federal tax lien has been requested by the taxpayer and issued by the IRS, then a request can be made for a certificate of withdrawal of the federal tax lien and the IRS will issue a certificate of withdrawal of federal tax lien.

As stated above, there is one exception where there is no need to obtain a certificate of release of federal tax lien first before requesting a certificate of withdrawal of federal tax lien. In fact the strange thing is that IRS procedure does not allow for a certificate of release of federal tax lien to be issued unless one of the above four criteria is met but it will allow a certificate of withdrawal of federal tax lien to be issued under new guidelines if the taxpayer enters into a Direct Debit Installment Agreement. Only certain taxpayers qualify to enter into a Direct debit Installment Agreement and they must meet one of several eligibility requirements as well.

Due to the current state of our economy, the IRS realized that the filing of federal tax liens was doing great damage to people’s credit ratings and their ability to borrow money for life’s necessities (car, home, college tuition, etc). So, they developed a new program that would allow those taxpayers who have resolved their tax debt or entered into a Direct Debit Installment Payment Agreement and that are currently compliant with all tax filings and current tax estimates or withholding levels, to request a withdrawal of federal tax lien. What the withdrawal effectively does is eliminate the effect of the original federal tax lien. It’s as if the original federal tax lien should have never been filed by the IRS in the first place. With a certificate of withdrawal of federal tax lien in hand, you can effectively remove and completely eliminate any trace of the federal tax lien from your credit report as if it never existed.

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All IRS Payment Agreements Are Not Equal

July 7, 2011 by

By Matthew J. Previte CPA MST
www.taxproblemsrus.com
July 7, 2011

If you owe back taxes to the IRS, you have undoubtedly wondered how on earth you’re going to get a mountain of back IRS taxes off your back so you won’t have to live in fear anymore. Living with IRS tax problems is stressful and can cause many problems in your life. One of these IRS tax problems is having an IRS tax levy placed on your wages or bank accounts which leaves you with little to no money to live on. An IRS tax lien can also be filed against you in the public record (usually the county recorder or registry of deeds) which not only lets the world know about your IRS tax problems but severely damages your credit rating by a good 100 points or more, leaving you unable to get a loan. So what can you do to resolve your IRS tax problems?

Although Offer In Compromise is advertised heavily on late night TV, it is rarely an option for most people with back IRS tax debts. Roughly 95% of delinquent taxpayers with IRS tax debts do not qualify for the IRS Offer In Compromise program. Unfortunately, these late night TV hucksters tout the OIC as the magical cure-all for your IRS tax debt woes. There is an old saying, if it sounds too good to be true, it probably is. And so it is with the Offer In Compromise program. Although my tax resolution firm has filed many Offers In Compromise over the last 16 years, most of our clients who owe large back taxes to the IRS do not qualify. Simply put, they have too much equity in assets (bank accounts, houses, retirement accounts, etc) and/or cash flow (what’s left over after what the IRS allows for basic living expenses) to qualify. So that begs the question, what are my options?

While bankruptcy can sometimes be a good option, we will leave that discussion for another article (see archives for February 2011). Short of running out the statute of limitations on collection, which is generally ten years, or hitting the lottery or inheriting a boatload of money and paying off the IRS tax debts in full, the only option left is an installment agreement. However, not all installment agreements are equal.

The IRS has two different types of installment agreements to pay off back taxes. The first type is a Full Pay Installment Agreement. In this type of IRS installment agreement, the monthly payments are sufficient to pay off the back taxes (plus any penalties and interest that accrues) until it is paid off in full. With this type of IRS installment agreement, your payments will full pay the back IRS tax debts, as well as all penalties and interest accruing on the debt, within the statute of limitations on collection. The statute of limitations on collection is generally 10 years. However, there are numerous actions that can extend the time the IRS has to pursue collection action (liens, levies, seizures, etc). We will leave that to another article to discuss.

The second type of IRS installment agreement is called a Partial Pay Installment Agreement. Under this type of IRS installment agreement, the monthly payment is insufficient to pay off the back taxes plus accruing penalties and interest by the collection statute expiration date. What does this mean in plain English? Well, it means that you make payments until the statute of limitations on collection (in IRS speak the “CSED”) runs out. So if at the collection statute expiration date there is $10,000 of unpaid back tax debt, it expires to zero and you do not owe it anymore. Nice huh? There is one catch however. As part of the terms of the Partial Pay Installment Agreement, the IRS will review your financial condition every two years to see whether or not your financial condition (i.e. your ability to pay more) has improved. If it has, they will require a higher payment if your financial condition shows you can afford to pay more towards the back tax debt. The downside of this type of installment agreement is it is possible that in the future your financial condition improves and the new monthly payment required becomes sufficient to full pay the back taxes, penalties, and interest by the collection statute expiration date. In other words, it’s possible to start out with a Partial Pay Installment Agreement and end up with a Full Pay Installment Agreement. The positive aspect of a Partial Pay Installment Agreement is that if your financial condition does not improve enough or at all, you could still end up paying less than the full amount owed and end up with a large balance of unpaid back taxes expiring to zero at the collection statute expiration date.

With all IRS Installment Payment Agreements, your financial condition is reviewed via a Form 433-A and/or 433-B depending on whether your tax issues are personal or business tax debts. Individuals and sole proprietorships use the Form 433-A while corporations, partnerships, and LLCs use a Form 433-B. If you owe personal taxes and have income on your personal tax return from a flow through entity (S corporation, partnership, or LLC treated as an S corporation or partnership), you may have to submit both the Form 433-A and the Form 433-B to get your installment payment agreement approved.

There are strategies to minimize your monthly payment amount but that will be discussed in a future article. Also, just because the IRS initially denies your IRS installment payment agreement does not mean you should give up. Many initially rejected IRS installment payment agreements were later accepted upon filing an Appeal to the IRS Appeals Division. Persistence and perseverance are key to obtaining a fair IRS installment agreement that you can live with.

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Finding A Good Tax Attorney, Tax CPA, or Tax EA to Fix Your IRS Tax Problems

July 6, 2011 by

By Matthew J. Previte CPA
www.taxproblemsrus.com
July 6, 2011

Finding a competent tax attorney, tax CPA, or tax EA to represent you before the IRS can be a daunting task. Fixing IRS tax problems is a tricky business left to those who do it full time year round. Although any attorney, CPA, or EA (enrolled agent—takes 2 day test on federal taxes given by the U.S. Treasury) is legally allowed to represent you before the IRS, not every attorney, CPA, or EA is qualified or competent enough to do so. IRS tax problems are a specialty requiring full time dedication to learning how the IRS works and how to work within that system to fix IRS tax problems.

Very few attorneys have any experience in dealing with the IRS on a daily basis much less a few times a year. Although some attorneys pursue and obtain a Master of Laws degree (LLM), this does not necessarily mean they know how to resolve IRS tax problems since most Masters programs in Taxation have but one general survey course on IRS practice and procedure. A good tax attorney will have represented hundreds or thousands of people with IRS tax problems before the IRS and rarely will they practice in this area less than full time.

CPAs and EAs are also legally able to represent taxpayers before the IRS. Although most are competent in preparing tax returns, most CPAs and EAs do not have any experience in fixing IRS tax problems on a regular basis. They are lucky if they see one or two cases a year. CPAs and EAs greatly shy away from taking on an IRS tax problem client because they have no experience resolving messy complicated IRS tax problems or they fear they won’t get paid since the client owes huge amounts of money to the IRS.

One of the first things you should do in searching for a competent tax attorney, tax CPA, or tax EA is Google their name. See if there are any negative articles or postings on websites about them. If you find a lot of complaints or bad reviews, beware! A good tax attorney, tax CPA, or tax EA should have very few if any complaints out there. Check also with their state licensing board to see whether any complaints have been filed against them.

Second thing you should do is make sure they have a current license. This is easy enough to check out online as most state licensing boards post the names of licensees and whether or not their license is current or has expired. If you are researching an EA, you will have to call the IRS Director of Practice in Washington D.C. or look on their website (irs.gov).

Next, I would check out their website. What type of content do they have. Do they give you their address, phone number, and email address. Many tax resolution firms on the net only have a contact page for you to email them your name and address and a description of your IRS tax problem. They have no information about who they are, key officers or employees, where they are located, etc. This should be a tip off that you’re dealing with a fly by night operation. If their site has little content or makes guarantees about what they can achieve, even without getting any information from you, watch out! There are a lot of scam artists and snake oil salesmen on the internet. Caveat emptor. Let the buyer beware.

The size of the organization should also be a clue as to how you will be treated. Large national tax resolution firms usually operate on volume. Their goal is to sell as many people as they can usually with little or no regard to actually providing good service and most importantly fixing your IRS tax problems. Their salespeople are almost never tax attorneys, tax CPAs, or tax EAs but unqualified sales reps who haven’t the foggiest idea of how to fix even the most basic of tax problems. Oh sure, they will tell you all the right things to make you believe their tax resolution firm can make all your IRS tax problems go away. Problem is, they haven’t a clue as to nature of your IRS tax problem and how to fix it since they have absolutely zero experience fixing IRS tax problems. They’re sales reps! A small tax resolution firm will have experienced tax attorneys, tax CPAs, and/or tax EAs on staff to answer calls from prospective clients. This assures that the prospective client with the IRS tax problem is speaking with a licensed tax professional who understands IRS tax problems and how to fix them.

The quality of service that large tax resolution firms offer tends to be haphazard, inconsistent, and unreliable. Small tax resolution firms are much more suited to providing great service since they are able to respond quickly without clients getting lost in the shuffle. Without all the layers of management and bureaucracy that large national firms have, small tax resolution firms can deal with issues in a more timely manner. Large national firms often give you an unlicensed “case representative” as your point of contact instead of the licensed tax attorney, tax CPA, or tax EA who is actually representing you. This is a big red flag. If you can’t have access to the licensed tax professional actually representing you, run away as fast as you can. You WILL experience frustration since you will almost never speak, if at all, with the licensed tax professional representing you.

One other issue that should be discussed is the location of the tax resolution firm. There are national firms and local firms. Which would you rather hire, a firm hundreds or thousands of miles away or a local firm you can actually meet with face to face. There is nothing like looking someone in the eye to get a sense of their honesty and integrity. Seeing their office in person will tell you how they run their operation. Does it appear to be smoothly operating or in a state of chaos. A local firm is also much more accountable since they live and work in the community or state where you live. Maintaining their reputation is far more important than a firm thousands of miles away. I would exercise extreme caution hiring anyone you can’t hop in the car and meet with face to face. That doesn’t mean work can’t be done via fax, phone, email, and Fedex. However, meeting your tax representative face to face at least once before you hire them tells you a lot about them, their firm, and how you can expect to be treated after you hire them to fix your IRS tax problems.

So before hiring any tax attorney, tax CPA, or tax EA to help you fix your IRS tax problems, check them out carefully and spend the time to look in depth at their track record, any complaints on the web or with state licensing boards (the IRS Director of Practice if an EA). And, use your gut. If something sounds too good to be true, it probably is. Do your due diligence and get educated on the different types of resolutions available to people with IRS tax problems. That way, you will be able to sort out the scam artists and snake oil salemen from the good competent licensed tax professionals out there.

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IRS identity theft keeps innocent taxpayers waiting months to receive their refund

June 21, 2011 by

By: Jenn Strathman, newsnet5.com

CLEVELAND – The IRS said there’s been a five fold increase in identity theft from 2008 to 2010. While the IRS said the breach is not happening at their offices, they are stuck finding a solution to this costly problem that leaves legitimate taxpayers waiting months for their refund check.

Despite a year of hard work, Sarah Madunicky’s financial future is up in the air.

“It’s very frustrating because you work for something and it’s owed to you and someone else can go right under there and take it from you,” Madunicky said.

The IRS rejected Madunicky’s tax return this year. She said the IRS told her someone else already used her social security number to file a return.

An IRS Tax Return Transcript shows a return with Madunicky’s social security number using a Cleveland Heights, Ohio, mailing address, but Madunicky lives in a different city.

The Cleveland Heights home used in the fraudulent filing sold this spring, and the new owners said they have nothing to do with this case.

There was another red flag on the return for Madunicky. The dependent listed on the return would have been born when Madunicky was just two years old.

“It doesn’t really add up,” Madunicky explained.

The return still went through. Five months later, Madunicky is still trying to get answers and her tax refund from the IRS.

“They are not very cooperative and not helping me with any of this,. Madunicky said.

IRS identity theft victims wait months for help

Madunicky is not alone. Testimony from three other identity theft victims at a Congressional subcommittee led the IRS Commissioner to issue an apology.

“We obviously need to do better,” Commissioner Douglas Shulman said.

The IRS told the Government Accountability Office that it’s difficult to screen every return for fraud, and said there are “trade-offs” if it adds more restrictive screening.

It’s expected there would be delays in processing, and could overwhelm the IRS’ capacity to issue refunds in a timely manner.

The GAO report also discussed additional screening mechanisms for known identity theft victims. Returns that fail screenings require a manual review and contact with your employer. The IRS said it feels even this type of screening for ID theft victims would pose delays and a burden for employers.

While improvements would help, the Ohio IRS spokeswoman, Jennifer Jenkins, told NewsChannel5 that the IRS stopped nearly 117,000 ID theft returns just this year. Those measures protected more than $582 million from ending up in the wrong hands.

IRS wants to use PIN system to reduce fraud

“I think the PIN is really the solution,” Commissioner Shulman explained.

Taxpayers would need a six digit Identity Protection Personal Identification Number (PIN) to file a return.

It’s only a pilot program used by 56,000 previous identity theft victims. During the pilot program, the taxpayers will get a new PIN each year for 3 years following ID theft.

“Anything would make it better, especially with a PIN that only certain people would have,” Madunicky said.

Once someone else has your social it takes years to unravel the mess leaving Madunicky to continue to wonder how her social security number was stolen and when the thief will use it again.

“It’s going to be something that haunts me,” Madunicky said.

We called the IRS and Congresswoman Betty Sutton’s office (D-Ohio, 13th District). Sutton’s office said the IRS was just finishing the investigation and the check was immediately issued.

While the case is resolved, this may never go any farther. The IRS told the GAO a “small number of cases” lead to criminal investigations. Privacy laws prohibit them from sharing information with other government agencies and local investigators. So, protection is key.

Protecting yourself from ID theft

If you suspect IRS identity theft, call the IRS Identity Protection Specialized Unit at 1-800-908-4490.

Checking your credit report is the best way to keep tabs on your identity. ” Annual Credit Report ” is the official free site that allows you to check your report. There are three credit reporting agencies, and you can check each agency’s report once a year for free. To keep tabs on your credit year round, check one report every four months.

If you notice anything unusual, call the credit reporting agency. The steps to dispute a record on your report are contained in the back of the credit report.

Repairing your credit and identity can take a long time. The Federal Trade Commission outlines all the steps you can take to fight back once you’re victimized. It outlines how to place a fraud alert on your account.

You may also explore a credit freeze. This freezes your credit to reduce the damage. Nobody will be allowed to open another line of credit with your social without proving they are who they say they are. This will make it more difficult for you to get credit, but will reduce the damage to your identity. To obtain a freeze, call Experian , Equifax , and TransUnion .

Finally, don’t give your social security number to anyone unless it’s absolutely essential. Many companies ask for your social, but they don’t really need it. Don’t give it out to anyone unless it’s absolutely necesary.

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‘Tax Lady’ Roni Deutch Pleads Not Guilty

June 21, 2011 by

Sacramento, Calif. (June 20, 2011)
By Michael Cohn, Accounting Today

Roni Deutch, the tax attorney who heavily advertised her IRS tax resolution services before she was forced out of business, has pleaded not guilty to contempt of court charges.

Deutch billed herself as the “Tax Lady” in her infomercials before she closed down her law firm and surrendered her law license last month (see ‘Tax Lady’ Roni Deutch Closes Firm amid Allegations). She was sued for $34 million last August by the California Attorney General’s Office, which accused her of swindling clients who had gone to her firm seeking help resolving their outstanding tax debts with the IRS (see California AG Sues ‘Tax Lady’ Roni Deutch for $34M). In April, a California judge froze her assets after the Attorney General asked the court to hold her in contempt for shredding millions of documents and diverting hundreds of thousands of dollars in funds from her clients (see ‘Tax Lady’ Roni Deutch’s Assets Frozen by Judge).

During her arraignment Friday in Sacramento Superior Court, Deutch’s attorney registered a not guilty plea on her behalf to the contempt of court charges, according to The Sacramento Bee.

Deutch herself did not speak during the court hearing. Outside the courthouse, a small group of supporters, including several of her relatives, demonstrated on her behalf, holding up signs and yelling, “Justice for Deutch.”

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‘Tax Lady’ Roni Deutch Closes Firm Amid Allegations

June 21, 2011 by

North Highlands, Calif. (May 16, 2011)
By Michael Cohn, Accounting Today

Roni Deutch, who heavily advertised her tax problem resolution services on television, has closed her law firm and surrendered her legal license after a California judge froze her assets.

Deutch was sued last August by the California Attorney General for $34 million, charging her with swindling thousands of people who came to her for help with fixing their tax problems with the Internal Revenue Service (see California AG Sues ‘Tax Lady’ Roni Deutch for $34M). Last month, a California judge froze her assets after the Attorney General asked the court to hold her in contempt for shredding millions of documents and diverting hundreds of thousands of dollars in funds from her clients.

The State Bar of California said Thursday that it has initiated disciplinary proceedings against her. Deutch held a press conference last Thursday at the headquarters of her law firm in North Highlands, Calif., to announce the closure of her firm and her financial difficulties, but sounded a note of defiance.

“I am letting you know right now that I am turning in my state bar license after 20 years,” she said. “So I say this to you, State Bar of California, ‘Are you going to come to my building and help my 4,000 active clients? Are you going to do that, State Bar of California? Will you now come and pick up my 45,000 debt files? Will you come and pick those up? Do you really care about my clients, State Bar of California? Never disciplined me for 20 years, approving my policies, practices and procedures. Are you now going to show up and help my clients? The last time I checked, you were unwilling to help any of my clients unless I was dead or in a mental hospital. Those were the only conditions that you were going to show up and help my clients, dead or in a mental hospital.’”

Deutch said her firm had run out of money and owed $10 million. She said she personally owed $5 million and did not have enough money to defend herself in court, according to the Sacramento Bee. Her own attorney has asked to be removed from the case because he hasn’t been paid.

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‘Tax Lady’ Roni Deutch’s Assets Frozen by Judge

June 21, 2011 by

accountingtoday.com
Sacramento, Calif. (April 21, 2011)

A California judge has frozen the assets of “Tax Lady” Roni Deutch after the state attorney general asked the court to hold her in contempt for shredding millions of documents and wrongfully diverting funds from clients of her tax law firm.

Sacramento Superior Court Judge Shellyanne W.L. Chang signed an order Wednesday freezing Deutch’s assets and appointed a receiver who will take over the financial aspects of her business. Deutch heavily advertises her services for helping clients resolve their problems with the Internal Revenue Service, but has been the subject of a $34 million lawsuit by the California Attorney General’s Office accusing her of swindling clients (see California AG Sues ‘Tax Lady’ Roni Deutch for $34M).

Attorney General Kamala D. Harris asked the court on Wednesday to hold Deutch in contempt of court, imprison her for five days on each violation, and fine her thousands of dollars for shredding millions of pages of documents and failing to pay refunds to her clients in violation of a court order.

“Deutch showed herself to be a predator for profit, preying on innocent, hard-working people who were simply hoping to settle their accounts with the IRS,” Harris said in a statement. “By defrauding these victims, and then pleading poverty, she created a real danger that her clients will never receive their advance fees back.”

In August, the attorney general filed suit against Deutch for swindling thousands of people facing serious and expensive tax collection problems with the IRS. On August 31, the court issued an order that prohibited Deutch from destroying evidence.

“Despite this order,” the attorney general said, “Deutch has been routinely shredding documents on an almost a weekly basis.” The Attorney General estimates that to date Deutch has shredded some 1,643,000 to 2,708,600 pages of documents. Deutch’s shredding campaign has permanently deprived the attorney general of evidence needed to fully prosecute the action against her.

Deutch’s law firm, based in Sacramento County, had revenues of at least $25 million a year. She spent $3 million a year on advertising, much of it on late-night cable TV, and frequently offered tax advice on popular TV shows. In her pitches, she promised to significantly reduce the IRS tax debts of people who signed up with her firm. Instead, she took thousands of dollars in up-front fees from clients but offered little or no help in lowering their tax bills. Hundreds of clients complained to the Attorney General and other government agencies.

In addition to shredding documents, the Attorney General also charged that Deutch violated a November 17 preliminary injunction by failing to issue some $435,000 in refunds to her clients within 60 days. Instead she “decided to disperse funds to friends, family and other creditors. By draining her estate and that of the law firm, Deutch has placed her clients at serious risk of never receiving their refunds.”

For instance, Deutch opted to transfer hundreds of thousands of dollars in equity from the sale of her home to a media firm. She also personally withdrew $241,000 from the law firm’s accounts and her personal accounts at just one bank. In addition, since the preliminary injunction order was issued, Deutch made more than $21,000 in unnecessary expenditures, including gifts to family and friends, and a payment to a NASCAR racing team.

The attorney general asked the court to fine Deutch $1,000 and imprison her for five days for each count of contempt, to immediately freeze Deutch’s personal assets, and to appoint a receiver to manage her law firm’s business operations.

A spokesperson for Deutch’s firm did not respond to a request for comment.

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