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David Warren Klasing
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David Klasing’s Answers

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  • I JUST FIND OUT I OWE 100K ON MY SALES TAX OVER 4 YEARS CAN IT BE REDUCED DOWN?HOW MUCH?

    I JUST GOT AUDIT ON MY RESTAURANT SALES TAX GOT HIT 100K CAN I NEGOTIATE ON THE BALANCE TO REDUCE IT DOWN.

    David’s Answer

    Possibly... Horribly I have more often seen it go the other way... Your looking at a 100K assessment... it goes into management review and increases by a factor of three! Seek a consultation... A BOE audit can indeed be your worst nightmare and can lead to potential criminal tax exposure where the BOE makes an assertion that you have unreported income for sales tax and federal and state INCOME tax purposes - see: https://klasing-associates.com/topics/sales-tax-faq/
    And especially: https://www.youtube.com/watch?v=yXVIXvUKxD0

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  • My dad died about 8 months ago. His tenants still live at the house. Are their rental payments income to the estate

    My father recently died. He has a mortgage on his house that is about $1600 a month. Since he has died the tenants living at the property have been paying the mortgage of $1600. If I open a probate for my dad is this going to result in a tax l...

    David’s Answer

    Technically with most estate plans two income tax returns will need to filed. The decedent's final 1040 with income from the beginning of the year through date of death, and a trust return from date of death to end of the calendar year. Occasionally a judgement call is made to just file a decedent's final return with income for the entire calendar year rather than just a portion of it. In any event - yes the income has to be picked up either by the estate or by your father on his final 1040 (or some combination of both). Engage a professional as these rules are complicated.

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  • How do I fill out IRS Form 3520?

    My wife is a naturalized US citizen. Her Mother is not a US citizen and lives in a foreign country. Her Mother wants to give my wife a monetary gift in a couple of months from now. I am aware that my wife is required to fill out form 3520 when ...

    David’s Answer

    Have you read the form instructions? See: https://www.irs.gov/pub/irs-pdf/i3520.pdf

    The bottom line here is filling out forms is how many of us make our livings. A 25% or 35% penalty - (depending on the facts and circumstances) of the total distribution can apply if you get It wrong. If a tax professional gets it wrong you can claim reliance on a professional as grounds for penalty abatement and if that does not work - reputable professionals have malpractice insurance. Best of luck.

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  • Franchise Tax Board levied by bank account - i feel it may be fraud - what should i do?

    I got levied for $2,000 on June 8th... how long does the bank hold the funds? I called the FTB and they said i was audited back in 2013 (i would have known if i was) bottom line is... i suspect their is fraud going on. What can i do to get my mo...

    David’s Answer

    A $2,000 levy is hardly sufficient grief to hire an attorney over. If the underlying deficiency is large enough maybe you do need to hire counsel. By way of self-help. Try reaching out to the California Taxpayer Advocates office if you truly feel you have been wronged. By the way... if you have moved since filing that return its possible you were faced with a correspondence audit that you did not receive notice too. Identity theft is also a large issue these days. There is most likely a logical explanation to why your account was adjusted. Best of luck.

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  • Can my LLC receive revenue on a project that was funded through a grant given to my nonprofit?

    I am seeking a grant to fund a movie and that grant must be received by a 501c3 nonprofit. If I set up the 501c3, is there any negative implication/consequence of my company (LLC) receiving profits from the movie since I am the owner of both the t...

    David’s Answer

    • Selected as best answer

    I used to audit non profits as a CPA and do not profess to be a current expert on the subject as a Tax Attorney but from memory and experience I believe what you are proposing could be viewed as "self dealing" by the taxing authorities and could cause the non profit to loose tax exempt status which could be a tax disaster looking to happen. My gut reaction is I would not do what you are proposing.

    The most knowlegeable non profit Attorney CPA I know is Brian Yacker - I would give him a call... byacker@yhadvisors.com 310-982-2803

    Best of luck to you!

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  • I signed for the IRS Voluntary Classification Settlement Program and did not re-classify workers. What does this mean now?

    I'm posting this in a different section, thank you. I signed the agreement with the IRS 2 years ago and went back to running my business. I have not done my taxes since that time and started working on them. I found the agreement in one of my t...

    David’s Answer

    Wow... It could mean the IRS is asleep at the switch. It could mean the IRS is about to declare war on your as your actions show what they might view a lack of diligent compliance with tax law. If I had to guess... (and I am) I would assume the agreement is null and void because you did not honor it. I believe if the IRS brought a workers classification audit you could find yourself facing the most onerous of civil consequences they could dish out for making an agreement to fix a problem and then ignoring the problem. They may want to make an example out of you to send the message to the public - don't do what this taxpayer did. As for the non filing - this is a crime punishable by up to one year in jail for every year you do it. Ask Wesley Snipes...

    Here is some helpful links to my website with more information. Check out the videos at a minimum.

    https://klasing-associates.com/business-tax-lawyer/worker-classification-audits/
    https://klasing-associates.com/filing-back-taxes/
    https://klasing-associates.com/question/what-are-the-common-issues-that-nonfilers-face/
    https://klasing-associates.com/topics/employment-tax-representation-faq/

    I suggest you get proactive and address your compliance issues voluntarily before the taxing authorities come a knocking. Seek a consultation! Best of luck to you...

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  • Do we need a prenuptial agreement because of a tax lien and inheritance?

    I will be receiving an inheritance soon, from a trust, (in the form of a yearly stipend over 5 years), the creditor claims due to expire next month. My partner has a tax lien. We do not own any properties together, keep separate checking & saving...

    David’s Answer

    I see you live in Los Angeles. California is a community property state. A pre-nuptial is an attempt to contractually alter CA's CP laws to ordinarily to resemble or track the laws of a separate party jurisdiction. It may or may not be honored by the IRS but is generally considered a good idea in situations like yours. So is the keeping of separate accounts and the prevention of commingling of assets. Yes they can still come after your money. Not necessarily because they have legal grounds to do so but rather as a matter of practice this occurrence is common. Tax law as written is often different than tax law as applied. You should also file Married Filing Separate returns and hire counsel if you feel they are coming after your assets not his. However the only sure guarantee they will not come after your assets is to not get married. Best of luck to you.

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  • How can I prove I sourced no income in California, when the FTB has imputed taxable income to me since I moved out of state?

    I moved from California 2012. At the time, I was a W2 employee deriving most of my income from that job, plus social security. I paid (new) state and federal taxes as I have always done. However the FTB levied on a non protected account in 2016 ...

    David’s Answer

    File Zero Balance returns in CA for the years they are claiming an assessment. But... be darn sure this is a valid position as criminal charges could follow if your wrong... Seek a consultation.

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  • What yo do about my asset overseas?

    Need some info about international tax. Should I pay tax for my overseas assets I bought years ago before my naturalization? How can I bring that over here money after I sell them? I

    David’s Answer

    Unfortunately once you become naturalized you become subject to world wide taxation even on an offshore asset that you acquired before entering the U.S. When you sell an offshore asset you will recognize either capital or ordinary income depending on the asset sold even where taxed on the sale in the foreign jurisdiction where the asset exists offshore. Hire a good tax preparer familiar with the foreign tax credit to offset your U.S. taxes where taxed twice on the sale of an asset. To not do so is to commit income tax evasion. If the sale results in over $10,000 being deposited offshore for even two seconds don't forget to file a FinCen 114 (FBAR) . The gain you recognize will be the sales price less your adjusted basis in the offshore asset.

    This content my help: https://klasing-associates.com/topics/international-tax-law-faq/

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  • What should I do about my accountant's failure to file my 1040 extension/

    My accountant admitted he failed to file an extension as I requested. He promised to do anything needed to fix the problem but since then has ignored my emails. What are his legal responsibilities and what do I need to do. Paying my taxes is not ...

    David’s Answer

    Reasonable reliance on a professional is fantastic grounds for penalty abatement. If you can get him or her to admit in writing that he or she screwed up and you were relying on him or her to file the extension and they failed to do so late filing penalties and interest should be abated. Most professionals are reluctant to do so as they basically admit to malpractice in writing the penalty abatement letter. Make sure if you have not already done so to pay an additional tax owed on your 2015 return as that is the most expensive part at 5% a month for the five months following the 4/15/16 filing deadline. Get your returns filed ASAP and include a penalty abatement request with the returns. It will be ignored and you will have to write submit another abatement request once they assess penalties but at least you have taken the high ground. If significant dollars are involved - hire representation.

    See: https://klasing-associates.com/wp-content/uploads/2015/11/What-Do-I-Do-When-I-Miss-a-Deadline-Outline.pdf

    Best of luck.

    Dave Klasing Esq. M.S.-Tax CPA

    For more information...

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