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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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I was the secretary for a 501 (C3) foundation that was set

Customer Question

I was the secretary for a 501 (C3) foundation that was set up in California, to undertake some research. The foundation never received any funding, and therefore just lapsed since there was never a bank account nor money to pay bills. Recently, I was contacted by the Franchise Tax Board in CA, trying to collect penalties and fines for non-payment of taxes by the foundation. I called to tell them that the foundation never really got started, and never had any funds or funding, once the set-up was complete. Now, the FTB is threatening to put a lien on the mailing address (my mother-in-law's home, since I live overseas) for the foundation. My question -- I assume this is either not possible or extremely unlikely, since the amounts claimed are small (less than $200) and the address has no real affiliation with the foundation or me. Can anyone tell me which of these threats are actually credible? I really don't like paying money to these harassers just to get them off my back. Thx.
Submitted: 3 years ago.
Category: Tax
Expert:  Jax Tax replied 3 years ago.

Jax Tax : First, secretary can mean officer or employee like get the coffee secretary. Also, in small companies, the officers are.typically owners. This brings.me to my next point, owners and officers can be held personally liable.for.certain excise taxes. These are typically the taxes collected for the state but never submitted like sales tax and income tax withholding. Sales is paid by the customer and income withheld from employees checks in trust for.the state. Other taxes that are not trust but simply corporate taxes cannot be collected against anyone other than the corp.
Jax Tax : So, I would look at who the letter is addressed to and what kind of taxes they are. The tax may be a result of simply not filing a required return. Even if the return would have all zeros as it seems would be true, returns must be filed.until actively closed out.
Jax Tax : Sometimes, calling the state can effect this.closing and.get.rid of the debt. Call the state and.find out why the amount is owed and what if any returns are missing and what.can be done to close.it all out. I know the way to do it by paper formally, but this Will nite fix the past issues and all of it may be able.to be done more quickly by calling.
Jax Tax : Otherwise, if the letter is in the old business name and not yours, you can just disregard it. I don't recommend it, but it could be done.
Customer:

Well, this is helpful but I would prefer a more complete answer: I think I was the legal Secretary or CEO of this non-profit corporation, however there was never any revenue, any payroll, or any payroll taxes. All of the penalties have to do with non-filing of returns (3 years, I think).

Customer:

So, does this mean I am personally liable for this foundation not actually being set up to the point where it could be closed down?

Customer:

and more germane, really -- will the FTB really follow through on trying to put a lien on my mother-in-law's house? It seems unlikely that if I were a tenant, they would be able to put a lien on the landlord

Customer:

The letters are addressed to the old business name, not me

Jax Tax : If in fact all balances.are.penalties for.non filing, the state can only collect against the corporation. This is a.primary principle of corporate.structure, liability protection. With the exception of trust taxes, no action can be taken against individuals. The letter is not in anyone's name other than the corp. Right?. You should at a minimum let state know the business never.operated.
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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