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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 407
Experience:  Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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I am the treasurer of a small company (WY Corp.). The owner

Resolved Question:

I am the treasurer of a small company (WY Corp.).

The owner of the company had given a proxy to his wife to be acting President of the company for seven years before he entered a recovery program in England.

When he was released from the program, he became more aggressive and his wife left him. He then emptied and closed out all of the bank accounts, including the company account.

I do not have access to any of the records for 2012 and the taxes are due to be filed September 15, 2013. His wife does not have access to the files either.

We (his wife and I) are both concerned about our liability in this situation to the company and the IRS. We are unable to file as we have no documentation. We do not have any contact with this person either. All attempts to reach him through legal counsel has gone unanswered.

How should we handle this situation?

Thank you for any help you can give.
Submitted: 1 year ago.
Category: Tax
Expert:  taxmanrog replied 1 year ago.

Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!

 

I am sorry to hear about your problem. Is there any way that you can get copies of the bank statements directly from the bank? That would be a start!

 

Your situation is not unheard of. Many companies suffer disasters or other problems that prevent them from getting their records, or their records have been destroyed. The IRS allows you to reconstruct your records to the best of your ability when you have a situation such as yours. According to the IRS' publications, you can do the following:

 

Record Reconstruction - Business

 

  • - Inventory: Get copies of invoices from suppliers. Whenever possible, the invoices should date back at least one year.
  • - Income: Get copies of bank statements. The deposits should closely reflect what the sales were for any given period.
  • - Payroll records: If the business uses a service, get copies of records. If not, request copies of back forms from federal and state agencies. To reconstruct current quarter, get copies of checks from the bank. Also ask employees for copies of their pay stubs.
  • - Last year's tax returns: Including sales tax reports, business licenses (which normally reflect gross sales for a given period), and payroll returns. Also request any quarters for the current year that are past. The previous returns will have a depreciation list to reconstruct assets.
  • - Furniture and fixtures: Sketch the inside and outside of the business location. Then start to fill in the details of the sketches.
  • - Inside: Where was the equipment located? What fixtures and furniture were in the store or office? Where was the inventory located - bookcases? files?
  • - Outside: Shrubs, landscaping, parking, signs, awnings?
  • - If you purchased an existing business - go back to the broker for a copy of the purchase agreement. Check with the previous owner for a copy. This should detail what you acquired.
  • - If the building was constructed for you - go back to the contractor for building plans.
  • - Check with the county or city planning commission for copies of plans.

 

All of these methods will help you in preparing a tax return that can be filed with the IRS. You do have to disclose that the return was prepared with reconstructed records. As officers of the corporation, you and the president's wife both have an obligation to report the income and file the tax returns to the best of your ability.

 

I hope this helps you! If you have any questions, please let me know. If my answer has helped you, please rate me highly! I would appreciate it!

 

Thanks again! Have a great weekend (almost)!

 

Roger

 

Customer: replied 1 year ago.

If the owner and president is withholding the information, doesn't he have the responsibility to report the taxes?


 


Please help me to understand the situation from the IRS side of things. He is the owner and I am a volunteer treasurer (he never paid me for my work!) He has the records and is not giving access.


 


Is it possible to find out if he has already filed? Or is it possible to serve him notice of the need to file, thereby releasing me or his wife of any obligation?


 


Both his wife and I live in different countries and it is very difficult to get any information, especially when he has closed all the accounts.


 


Again, thank you for helping me to understand a difficult situation.


 

Expert:  taxmanrog replied 1 year ago.
I understand your situation. The key will be whether or not the IRS considers you a "responsible party" or just a nominee.

The IRS defines the “responsible party” as the person who controls, manages, or directs the entity and the disposition of its funds and assets. There may be more than one responsible party.

Further, the “responsible party” is defined as follows:

 

For entities with shares or interests traded on a public exchange, or which are registered with the Securities and Exchange Commission, “responsible party” is (a) the principal officer, if the business is a corporation, (b) a general partner, if a partnership, (c) the owner of an entity that is disregarded as separate from its owner (disregarded entities owned by a corporation enter the corporation’s name and EIN), or (d) a grantor, owner, or trustor if a trust.


For all other entities, “responsible party” is the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage or direct the entity and the disposition of its funds and assets. The ability to fund the entity or the entitlement to the property of the entity alone, however, without any corresponding authority to control, manage, or direct the entity (such as in the case of a minor child beneficiary), does not cause the individual to be a responsible party.

 


A “nominee” is someone who is given limited authority to act on behalf of an entity, usually for a limited period of time, and usually during the formation of the entity. The “principal officer, general partner,” etc., as defined by the IRS, is the true “responsible party” for the entity, instead of a nominee. The “responsible party” is the individual or entity that controls, manages, or directs the entity and the disposition of the entity’s funds and assets, unlike a nominee, who is given little or no authority over the entity’s assets.

 

If you were a volunteer, and had little control over the entity, I believe you could be considered a nominee, and not a responsible party. Likewise, as the wife was given authority for a limited period of time while the company's president was in rehab.

 

So, while initially the IRS might look to you and the wife for the reporting, I believe you could be released from any issues by proving the facts as you have laid them out here. This would show that you were not the responsible party.

 

As an officer of the corporation, you can call the IRS and find out if the corporation has filed its tax return. You would need the Federal Employer ID number (FEIN), but as treasurer, I am sure you have this. The number for general customer service is 1-800-829-1040.

 

I hope this answers your questions! If you have any more, please feel free to ask!

 

Thanks again!

 

Roger

taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 407
Experience: Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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taxmanrog
taxmanrog
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Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.