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PDtax
PDtax, CPA firm owner
Category: Tax
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Experience:  32 years tax experience, including four years at a Big 4 firm.
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i just received a letter (my first notice of this!: 2013)

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i just received a letter (my first notice of this!: 2013) from ohio attny general's office that my prior company (ceased ops in 1998) owes use tax for 1992-1995. $20k in use tax, + $31k in penalty and interest. this was supposedly based on a field audit, with certification dated 1999.

i do recall an audit in mid-90's. if it is that one, my accountant disputed it, and provided proof that our vendors already paid the tax on some, while other audit assessments were for labor, which is not subject to use tax.

my accountant passed away in 1997, and i have no records remaining. it is possible that he never finalized resolution with tax authorities, but i have no knowledge. no other notices were ever received by me till now.


1. does the statue of limitations apply?
2. am i personally liable (c-corp = defunct)?
3. how do i dispute this with no records left?
4. i filed for ch-7 personally in 1998. while the tax may not be written-off, it would have been given priority in distribution. since i had no knowledge, am i still liable?
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

PDtax :

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PDtax, CPA firm owner
Category: Tax
Satisfied Customers: 1977
Experience: 32 years tax experience, including four years at a Big 4 firm.
PDtax and 2 other Tax Specialists are ready to help you
Expert:  PDtax replied 1 year ago.
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Customer: replied 1 year ago.

i don't see an answer...?


 

Expert:  PDtax replied 1 year ago.
I am seeing a lot of these old state tax bills now, more than ever. And some states are enacting laws to extend their statutes of limitation on collections.

First, sorry this has happened to you. I will try to advise you on all the issues, so you can look at all the possible remedies.

i just received a letter (my first notice of this!: 2013) from ohio attny general's office that my prior company (ceased ops in 1998) owes use tax for 1992-1995. $20k in use tax, + $31k in penalty and interest. this was supposedly based on a field audit, with certification dated 1999.

i do recall an audit in mid-90's. if it is that one, my accountant disputed it, and provided proof that our vendors already paid the tax on some, while other audit assessments were for labor, which is not subject to use tax.

my accountant passed away in 1997, and i have no records remaining. it is possible that he never finalized resolution with tax authorities, but i have no knowledge. no other notices were ever received by me till now.


1. does the statue of limitations apply? It might. O.R.C. §131.02 was amended to impose an SOL on tax claims. Under the SOL, the State may not commence an “initial action” to collect taxes, interest or penalties after the later of: (i) seven (7) years after the date an assessment is issued; or (ii) four (4) years after the date an assessment becomes final. This period is extended for any period during which collection is stayed. An assessment is considered “final” upon the expiration of the period to petition for reassessment.

2. am i personally liable (c-corp = defunct)? You could be, if the tax is still collectible. Normally, a personal assessment would have to be made within the statutory period (your question states you just heard about it, more than 10 years later. I would check this statute as well.)

3. how do i dispute this with no records left? The best way is to hire a tax pro in Ohio, and ask them to contact the State and request a copy of the audit file, as well as a transcript of the taxes sought. The state must provide an accurate statement of the taxes assessed, and a timeline of what steps they have taken to pursue the debt.

You may be able to get a copy of the complete audit file, which I would want, since you disagree with the results and were never notified of the audit results. I didn't check completely, but an audit reconsideration, or appeal, may be possible. Also possible is use of a Freedom of Information Act (FOIA) request to compel the state to release the documents you seek.

4. i filed for ch-7 personally in 1998. while the tax may not be written-off, it would have been given priority in distribution. since i had no knowledge, am i still liable?
You should check to see if your petition mentioned a debt to Ohio Department of Taxation. If it did, they would have been sent a proof of claim to confirm the listed debt. If you listed them, and they did not respond, you may be able to escape the debt due to discharge.

Expert again...The first thing I would do is review my case with a tax pro to review your options. There are several relief options available to you, due solely to the passage of time, perhaps the lack of personal assessment, or the bankruptcy filing.

While it is likely too late to amend you bankruptcy petition, the state may have had a duty to assess you personally, and failed to do so timely. If so, they can't collect (they may have billed you too late).

A review of what you filed, the audit files, and the statutes applicable to both Ohio assessment and collection, but your bankruptcy petition all are in play as potential relief.

I am assuming you were a responsible party from your question, so I did not address that issue.

You may be able to argue for relief, but I wouldn't even try until after a correction of the amount due was provided, and examination of all the applicable statutes was exhausted.

One additional thing I like to argue is the use of bankruptcy for review and relief. It may be possible to use this threat as a negotiating tool, if all other measures fail. Most people don't know that bankruptcy courts have jurisdiction over state and federal tax matters, and can adjudicate this matter under your old filing, or a threatened new one, if Ohio does not want to strike a deal (again, after all other measures).

Please don't try to go at this yourself. A tax pro will review all the issues I addressed, and maybe one or two I missed, based on your case specifics.

I hope this gives you an idea of what you can do. Thanks for asking at Just Answer/PDtax.
Customer: replied 1 year ago.

the 2013 state notification received (for assessment dating from 1999) is specifically v. the c-corp, with notice to president of corp, which ceased ops in 1998...14 years.


 


is there a statute of limitation re: personal liability for the corp officer/president, given that there has been no notification to date specificaly v. individual responsibility?

Expert:  PDtax replied 1 year ago.
I just reviewed an interesting case on motor-fuel tax and responsible party assessments, Ceccarelli v. Levin, 127 Ohio St.3d 231, 2010-Ohio-5681. In it, the Ohio supreme court outlines the special rules and law applicable to the standard four year statute for assessment of responsible party assessments under R.C. 5739.16(A).

In this Opinion, the court focused on the four year statute as applying to motor vehicle dealers and the taxes on motor fuels, but their comparison to sales tax assessments has relevance to your question. "From the case summary:

"In Bowshier v. Limbach (1990), 52 Ohio St.3d 140, 556 N.E.2d
463, we considered whether an assessment of sales tax against a responsible
SUPREME COURT OF OHIO
4
corporate officer was barred by the four-year limitation on sales-tax assessments
set forth at R.C. 5739.16(A). That section explicitly imposed the time limit on
assessments “issued against a vendor or consumer,” and because of that restrictive
language, we held that the limitation did not apply to assessments against
responsible parties, who were neither vendors nor consumers under the sales-tax
law. The commissioner regards Bowshier as dispositive here."

I did not cite Bowshier, but it appears the issue has been litigated, and that the state does not have a statute of limitations against assessment of you, even after years past the four year statute applicable to vendors has passed. The court held that the corporation, not its officers, was subject to the four year statute (as vendor).

I found the text by googling Bowshier v. Limbach:

52 Ohio St. 3d 140 (1990), BOWSHIER, APPELLEE, v. LIMBACH, TAX COMMR., APPELLANT. No. 89-783.

If there have been subsequent developments re: Bowshier, citating the case will identify them.

Ohio does offer an Offer in Compromise program for these types of debts, so a negotiated settlement is available. http://www.tax.ohio.gov/other/offer_in_compromise.aspx is the link to their web page which explains the process.

There remain other options as suggested. Good luck, and thanks fro asking at Just Answer/PDtax.

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