Sigh. I understand the angst, tax organizations are the worst. However, a piece of advice.
If you file a tax return in a state, and then you leave. Make sure you file a tax return the next year as well but put down zero taxable income.
What I have seen states do, is take the last year you filed a return "presume" you made that much in the next year but just "forgot" to file, and then charge you for back taxes. You counter this behavior by filing a $0 tax return so that the last year on the books you made $0 and when they use the last year you filed to compute your 'expected' return for the current year they will start with $0. A CPA friend suggested that you continue this for three years as that was the 'average' over which they might make a computation.
Either way, its a pain. But filing a state return with $0 on it is pretty straight forward thing these days with efiling.
But filing a state return with $0 on it is pretty straight forward thing these days with efiling.
It's stupid to have to do that. They shouldn't be estimating your income, they know exactly how much you make from your W-2s, 1099s, etc. This is all to be reported to the state by an employer.
As for the guy in the article, there isn't something quite right. The state could be completely wrong here but there is something fishy with his ownership of part of a business in MA. If everything is as he says is true and the MA tax lawyer isn't getting this settled, he needs to get a different lawyer.
That is really good advice. This is nothing new. The author seems to attribute it to the times but I had something very similar happen in California about twenty years ago when the state was quite flush.
Whoever didn't warn you that this could happen once there was a lien was giving you bad advice.
I like the suggestion of filing a $0 return because once you get on the radar of the state tax agencies it gets very expensive to get them off your back. As a kid I failed to file because I owed like $20 (but I did file a federal return, which alerted the state). They eventually froze my account and it cost about $1k to settle the matter. At the time that was real money to me.
I moved to Austin in 2011 and have worked here since 2012. I'm going to make sure to do this at the same time I file my tax return here. I don't want to give California the chance to retroactively change what I owe. Thanks for the advice!
A similar thing happened to me about 4 years ago in California. At the time I was running a small business and we had several thousand dollars withdrawn from our Wells Fargo Checking account along with a $200 Well Fargo legal fee. After some investigation we discovered that California had sent a notice to Wells Fargo to seize our assets for unpaid taxes. The Wells Fargo legal team was fairly helpful and they told us that 'this happens all the time', meaning the state doesn't really care who they take the money from as long as they get money from somebody. It took us nearly 2 years to prove to the state that they had the wrong business and we we able to recover the money from California. They paid us something like 0.25% interest. We never did get the $200 back from Well Fargo. All of this happened without a single notice or letter from either California or Wells Fargo.
This happened to my dad recently. All accounts frozen. For $22 in unpaid taxes due to a discrepancy.
The funny part is that you can't write them a check for $22 when all of your accounts are frozen. #recursion
To everyone who is alarmed by this it actually happens a lot and is not necessarily Chase's fault. A lot of banks do this. Blame the IRS, our large government, and their incessant need to take everything from everyone in order to pay for all the social programs we don't need. Okay I didn't really need to add that last bit .. don't want to start a big war on HN with my political viewpoint.
I'm not sure the fact that a lot of banks do it should get Chase off the hook, unless they were legally mandated to do it. I would expect a bank to protect their customers' assets to the extent allowed by law. That said, it's unclear from the post whether the Chase policy is legally required, and I'm not familiar enough with this area of the law to speculate.
Me: "I didn't live in your state or earn a dime in your state the year you're claiming I owe you thousands of dollars in tax. Shouldn't you have a shred of evidence that I owe you money before you send out a bill? Why should I have to waste my time proving that I don't owe you money, instead of the other way around?"
Minion at the California Franchise Tax Board: "That's just not how it works, sir."
Happened again when I moved from New York to New Jersey, and I fully expect it'll happen again this year, since I moved from New Jersey to Texas.
My personal and business banking is done at Chase. I've found them to be fantastic and managed to avoid pretty much any fees by following the guidance of very helpful employees. I know everyone loves to bag on big banks, but Chase has been great. Bank of America is another story - their website barely works.
That said, I highly recommend anyone with significant assets open a bank account in a foreign country where seizing assets is much more difficult. Keep a reasonable sum there and know how to transfer the rest quickly if you fear legal action.
If you do this, PLEASE make sure that you are aware of current IRS regulations regarding foreign bank accounts.
When I moved to Canada a few years ago this all got rather hairy and ensnarled. They keep introducing new requirements as well - my Canadian retirement savings account was re-classified as a foreign trust which necessitated additional filings.
Rather than repeat myself, I'll just link to the comment I made about the rules that relate to civil forfeiture and Interbank Accounts for non-U.S. financial institutions.
It sounds like the "problem entity" is the state government of Massachusetts. Given the power the US government, as a whole, has arrogated to itself lately, one just shouldn't expect that having the letter of the law on your side will protect you in any meaningful way once the state decides it wants your stuff. Just staying out of its way may be the best policy if this is at all practical.
I had a similarly insane bill from another state tax board and I count my lucky stars it never came to a full dispute. Fortunately all I had to do was call them and explain the situation. I wouldn't expect that would work for everyone.
> My personal and business banking is done at Chase. I've found them to be fantastic and managed to avoid pretty much any fees by following the guidance of very helpful employees. I know everyone loves to bag on big banks, but Chase has been great. Bank of America is another story - their website barely works.
It's a common thing to not exactly give notice of proceedings despite the legal requirement. http://www.nytimes.com/2009/12/31/nyregion/31debt.html?_r=0 Would like to think that Massachusetts is more scrupulous, but maybe it's one of those "we'll keep our hands clean by demanding more of process servers than is humanly possible and pretend to be shocked when the inevitable happens" kind of things.
However, using the technique that ChuckMcM described, that limitation would be 6 years. Sounds like we should start filing $0 returns for states we don't reside in anymore..
Well, there's yet another good reason to stick with local credit unions whenever possible. If they have no presence in another jurisdiction, they're unlikely to comply with any of that nonsense.
I use a credit union, and I have been the victim of a similar problem as the author, and the credit union folded in exactly the same way. Notably, the credit union is local to a state different from the one that tried to shake me down. I don't especially blame the credit union, though: they were upfront and communicative with me, and told me that their hands were tied.
The advice I was given (not by the CU): either withdraw all my money from the account and put it in a safe deposit box, or wire it to a (very) close relative ASAP -- before the lien is officially issued.
You should always have assets at multiple banks and have lots of cash stored outside of the banking system (in a safety deposit box, at home, in car, etc).
*note: be careful about how you accumulate said cash. CTRs are generated if you withdraw too quickly.
Also, CTRs aren't inherently a bad thing, and they aren't generated behind your back. If you hit the $10k reporting limit, it's a simple one-page form, and you're on your way. Legitimate businesses are required to complete them all the time.
Suspicious Activity Reports (SARs) are filed at the discretion of the institution, are secret, and are independent of the transaction amount. Withdraw $9,990 and you'll probably have a SAR under your name instead of a CTR. Ditto if your deposit smells like drugs, or if you're dealing in large amounts of currency as an individual, and the bank staff can't determine why.
Had a similar episode back in the nineties with the state of California franchise tax board. Before they froze my Wells Fargo account, I transferred my balance to a new ETrade account . They never did anything with that new account because I suspect they didn't have the account info. They had the wells fargo account info because I had previously paid taxes via bank draft. Moral of the story, avoid giving up your account info if possible when paying taxes. Use a credit card.
I wonder if a weekly withdraw/deposit of 10k in cash would provide some identity protection, if the feds are constantly watching all of your financial activity.
Interesting; I finished A Handmaid's Tale last week, and the same thing had happened to the main character's family. Everybody had stopped keeping cash, and without their bank card working they were powerless.
Similar thing happened to me, but with a much happier outcome. I lived in Iowa, moved to Colorado for a few years, and now I'm back in Iowa. I received a letter that I owed estimated taxes plus interest and penalties and... Ignored it. Then, 6 months later, I got a bill with the email address of the Iowa IRS agent.
One friendly email and four days later, her response was:
Thank you for your response to the Department’s billing notice you received for no record of an Iowa individual income tax return on file for tax year ending 12-31-2005. Per review of your 2006 Iowa return I have verified you claimed a part-year Iowa credit therefore please consider this matter resolved. I am in the process of revising your billing to zero. You may continue to receive notices until our Accounts Receivable as officially cleared the billing.
If you have any other questions please feel free to contact me directly. Thank you for your attention to this important matter.
Yes both Missouri and Hawaii have handled my moves in this fashion. At first they assume you owe them money, but if you provide documentation for where you were living and when then they cancel proceedings with no fuss.
I'm not sure how I was able to escape California without dealing with this, but that was some years ago...
The IRS sent me a letter saying that they found I had mis-stated income from one of my freelance gigs. They said their records show that I was paid $800,000 for the job but I only claimed $800. I now owe ~$450k in back taxes along with daily accrued interest and penalties, we have enclosed a envelope for you to mail a check, etc.
I checked my records and I was indeed only paid $800 for the job. I checked with the company to make sure they didn't make an error when they filed their takes, nope, $800 the whole way.
Within days I had IRS agents calling both mine and my wife phones, calling previous employers, showing up at my house looking to put me on a payment program.
Our state and federal tax returns were held up and applied toward the "debt".
I'm sure that if I had a bank account tied to my SSN that those would be locked out as well.
It took 6 months and $3500 for a tax attorney to go back and forth with them over every single dollar on every 1099. They would literally go down the list and say "Thank you for bringing '$1099' into compliance, but we have found a discrepancy with '$1099 + 1', please submit a payment of $payment along with daily accrued interest and penalties".
Granted, it was the state of Nevada, and Nevadans hate taxes and probably loved sticking it to California more than anything. (which is one reason I moved there from CA).
I must say I always paid taxes and never had problems with them. 2008 I made some nice stock trading profits. Paid taxes for them all to the last penny. Actually, I taxes more than I had to, since the bank statement reported higher profits that actually occurred (must be a real gypsy bank). What the bank statement did not report, was the buy and sale of an ETF. I held it for 3 months, made maximal 1% profit of it. The IRS became aware that I sold this ETF, but they could not figure out when and for how much I bought it. Hence, they assume, the sales price is 100% profit. Not they want:
* back taxes for a profit that never occurred
* Fine me since I did not pay taxes for this profit that never occurred.
* on top of that, want interest for this whole cluster-fuck.
I did not receive some letters from them since I was abroad because I was totally broke. I have no idea how I can pay this. It makes me also think that I might have to go offshore. I have to save urgently for retirement and just can not afford that the IRS pulls some random gypsy charges out of nothing.
You don't have to go offshore. The same thing happened to me. What you need to do is get an accountant or get a copy of Turbotax for that year. Then you enter in all your info and make sure you fill out Schedule D. They'll give you the person's (examiner) name on their letter. I filled out a new tax form, and sent the letter below to the IRS. A few weeks later, they said "Thanks for the info, and we'll contact you if we need anything else." That was a few years ago. Haven't heard anything since.
-------------------------------------------
Dear Examiner:
I have attached a Schedule D form, which I did not include in my 2009 tax return. According to the CP 2000 letter, the securities income reported to the IRS was $xx,xxx. But this was using a zero cost basis for stocks sold. The schedule D form I have included provides the cost basis for all stocks sold. The final total for the Schedule D shows a net loss of $xx.
The title suggested to me that Chase had handed over the writer's assets to the writer... reading the article, it's exactly the opposite of a happy ending.
Not surprising, but alarming. More alarming, I think, is that it's not surprising.
They will turn there back on you when you need them most. I had a horrible experience with both back in 2008 when the economy was collapsing. And no, I don't have crappy credit.
[+] [-] ChuckMcM|13 years ago|reply
If you file a tax return in a state, and then you leave. Make sure you file a tax return the next year as well but put down zero taxable income.
What I have seen states do, is take the last year you filed a return "presume" you made that much in the next year but just "forgot" to file, and then charge you for back taxes. You counter this behavior by filing a $0 tax return so that the last year on the books you made $0 and when they use the last year you filed to compute your 'expected' return for the current year they will start with $0. A CPA friend suggested that you continue this for three years as that was the 'average' over which they might make a computation.
Either way, its a pain. But filing a state return with $0 on it is pretty straight forward thing these days with efiling.
[+] [-] Zimahl|13 years ago|reply
It's stupid to have to do that. They shouldn't be estimating your income, they know exactly how much you make from your W-2s, 1099s, etc. This is all to be reported to the state by an employer.
As for the guy in the article, there isn't something quite right. The state could be completely wrong here but there is something fishy with his ownership of part of a business in MA. If everything is as he says is true and the MA tax lawyer isn't getting this settled, he needs to get a different lawyer.
[+] [-] ars|13 years ago|reply
You write on it when you leave the state and then they know you are no longer a resident. I suspect there is something similar in most states.
[+] [-] drunkpotato|13 years ago|reply
If however this is a commonly expected thing to do, shouldn't a CPA (such as the one the author hired) be expected to advise you of that?
[+] [-] georgeecollins|13 years ago|reply
Whoever didn't warn you that this could happen once there was a lien was giving you bad advice.
I like the suggestion of filing a $0 return because once you get on the radar of the state tax agencies it gets very expensive to get them off your back. As a kid I failed to file because I owed like $20 (but I did file a federal return, which alerted the state). They eventually froze my account and it cost about $1k to settle the matter. At the time that was real money to me.
[+] [-] andrewfelix|13 years ago|reply
Thankfully Australia's taxation is handled federally.
[+] [-] the_watcher|13 years ago|reply
[+] [-] nathantotten|13 years ago|reply
[+] [-] caseysoftware|13 years ago|reply
If your wife needs a hand, don't hesitate to drop me a note. I'm happy to do a grocery run, make introductions, or whatever.
[+] [-] chris_wot|13 years ago|reply
Section 319 of the USA PATRIOT Act specifically allow for the seizure of any money in Interbank Accounts held in the U.S... You may not be safe.
18 USC § 981(k) is the specific part of the U.S. Code that deals with this.
I knew that spending two years reading about the Patriot Act and writing it up on Wikipedia would be useful one day...
[+] [-] whalesalad|13 years ago|reply
The funny part is that you can't write them a check for $22 when all of your accounts are frozen. #recursion
To everyone who is alarmed by this it actually happens a lot and is not necessarily Chase's fault. A lot of banks do this. Blame the IRS, our large government, and their incessant need to take everything from everyone in order to pay for all the social programs we don't need. Okay I didn't really need to add that last bit .. don't want to start a big war on HN with my political viewpoint.
[+] [-] _delirium|13 years ago|reply
[+] [-] cpressey|13 years ago|reply
[+] [-] flrpsrmblrb|13 years ago|reply
[deleted]
[+] [-] gyardley|13 years ago|reply
Me: "I didn't live in your state or earn a dime in your state the year you're claiming I owe you thousands of dollars in tax. Shouldn't you have a shred of evidence that I owe you money before you send out a bill? Why should I have to waste my time proving that I don't owe you money, instead of the other way around?"
Minion at the California Franchise Tax Board: "That's just not how it works, sir."
Happened again when I moved from New York to New Jersey, and I fully expect it'll happen again this year, since I moved from New Jersey to Texas.
And people wonder why I moved to Texas.
[+] [-] aneth4|13 years ago|reply
That said, I highly recommend anyone with significant assets open a bank account in a foreign country where seizing assets is much more difficult. Keep a reasonable sum there and know how to transfer the rest quickly if you fear legal action.
[+] [-] derekja|13 years ago|reply
When I moved to Canada a few years ago this all got rather hairy and ensnarled. They keep introducing new requirements as well - my Canadian retirement savings account was re-classified as a foreign trust which necessitated additional filings.
Good advice, but mind the details.
[+] [-] dubfan|13 years ago|reply
[+] [-] gcb0|13 years ago|reply
shouldn't they not have useless fees to begin with?
[+] [-] chris_wot|13 years ago|reply
https://news.ycombinator.com/item?id=5215598
Beware!
[+] [-] joe_the_user|13 years ago|reply
It sounds like the "problem entity" is the state government of Massachusetts. Given the power the US government, as a whole, has arrogated to itself lately, one just shouldn't expect that having the letter of the law on your side will protect you in any meaningful way once the state decides it wants your stuff. Just staying out of its way may be the best policy if this is at all practical.
I had a similarly insane bill from another state tax board and I count my lucky stars it never came to a full dispute. Fortunately all I had to do was call them and explain the situation. I wouldn't expect that would work for everyone.
[+] [-] ImprovedSilence|13 years ago|reply
[+] [-] SeanLuke|13 years ago|reply
Nice try, Jamie Dimon.
[+] [-] citricsquid|13 years ago|reply
[+] [-] patmcguire|13 years ago|reply
[+] [-] epoxyhockey|13 years ago|reply
However, using the technique that ChuckMcM described, that limitation would be 6 years. Sounds like we should start filing $0 returns for states we don't reside in anymore..
[+] [-] TillE|13 years ago|reply
[+] [-] mikhael|13 years ago|reply
The advice I was given (not by the CU): either withdraw all my money from the account and put it in a safe deposit box, or wire it to a (very) close relative ASAP -- before the lien is officially issued.
[+] [-] niggler|13 years ago|reply
*note: be careful about how you accumulate said cash. CTRs are generated if you withdraw too quickly.
[+] [-] oasisbob|13 years ago|reply
This is very bad advice, as it's illegal in the US to intentionally evade CTRs by aggregating smaller transactions. It's known as structuring:
http://www.irs.gov/irm/part4/irm_04-026-013.html
Also, CTRs aren't inherently a bad thing, and they aren't generated behind your back. If you hit the $10k reporting limit, it's a simple one-page form, and you're on your way. Legitimate businesses are required to complete them all the time.
Suspicious Activity Reports (SARs) are filed at the discretion of the institution, are secret, and are independent of the transaction amount. Withdraw $9,990 and you'll probably have a SAR under your name instead of a CTR. Ditto if your deposit smells like drugs, or if you're dealing in large amounts of currency as an individual, and the bank staff can't determine why.
[+] [-] 46Bit|13 years ago|reply
[+] [-] bubbleRefuge|13 years ago|reply
[+] [-] jfoutz|13 years ago|reply
[+] [-] whichdan|13 years ago|reply
[+] [-] axusgrad|13 years ago|reply
[+] [-] HNaTTY|13 years ago|reply
One friendly email and four days later, her response was:
Thank you for your response to the Department’s billing notice you received for no record of an Iowa individual income tax return on file for tax year ending 12-31-2005. Per review of your 2006 Iowa return I have verified you claimed a part-year Iowa credit therefore please consider this matter resolved. I am in the process of revising your billing to zero. You may continue to receive notices until our Accounts Receivable as officially cleared the billing.
If you have any other questions please feel free to contact me directly. Thank you for your attention to this important matter.
[+] [-] jessaustin|13 years ago|reply
I'm not sure how I was able to escape California without dealing with this, but that was some years ago...
[+] [-] unknown|13 years ago|reply
[deleted]
[+] [-] rograndom|13 years ago|reply
The IRS sent me a letter saying that they found I had mis-stated income from one of my freelance gigs. They said their records show that I was paid $800,000 for the job but I only claimed $800. I now owe ~$450k in back taxes along with daily accrued interest and penalties, we have enclosed a envelope for you to mail a check, etc.
I checked my records and I was indeed only paid $800 for the job. I checked with the company to make sure they didn't make an error when they filed their takes, nope, $800 the whole way.
Within days I had IRS agents calling both mine and my wife phones, calling previous employers, showing up at my house looking to put me on a payment program.
Our state and federal tax returns were held up and applied toward the "debt".
I'm sure that if I had a bank account tied to my SSN that those would be locked out as well.
It took 6 months and $3500 for a tax attorney to go back and forth with them over every single dollar on every 1099. They would literally go down the list and say "Thank you for bringing '$1099' into compliance, but we have found a discrepancy with '$1099 + 1', please submit a payment of $payment along with daily accrued interest and penalties".
[+] [-] jmvoodoo|13 years ago|reply
http://www.hgexperts.com/article.asp?id=5410
Granted, it was the state of Nevada, and Nevadans hate taxes and probably loved sticking it to California more than anything. (which is one reason I moved there from CA).
[+] [-] yooy123|13 years ago|reply
I must say I always paid taxes and never had problems with them. 2008 I made some nice stock trading profits. Paid taxes for them all to the last penny. Actually, I taxes more than I had to, since the bank statement reported higher profits that actually occurred (must be a real gypsy bank). What the bank statement did not report, was the buy and sale of an ETF. I held it for 3 months, made maximal 1% profit of it. The IRS became aware that I sold this ETF, but they could not figure out when and for how much I bought it. Hence, they assume, the sales price is 100% profit. Not they want: * back taxes for a profit that never occurred * Fine me since I did not pay taxes for this profit that never occurred. * on top of that, want interest for this whole cluster-fuck.
I did not receive some letters from them since I was abroad because I was totally broke. I have no idea how I can pay this. It makes me also think that I might have to go offshore. I have to save urgently for retirement and just can not afford that the IRS pulls some random gypsy charges out of nothing.
[+] [-] vellum|13 years ago|reply
-------------------------------------------
Dear Examiner:
I have attached a Schedule D form, which I did not include in my 2009 tax return. According to the CP 2000 letter, the securities income reported to the IRS was $xx,xxx. But this was using a zero cost basis for stocks sold. The schedule D form I have included provides the cost basis for all stocks sold. The final total for the Schedule D shows a net loss of $xx.
Sincerely,
xxxxx
[+] [-] obviouslygreen|13 years ago|reply
Not surprising, but alarming. More alarming, I think, is that it's not surprising.
[+] [-] tapatio|13 years ago|reply
Chase bank or American Express
They will turn there back on you when you need them most. I had a horrible experience with both back in 2008 when the economy was collapsing. And no, I don't have crappy credit.