Tax Notice Examples of How the State Misleads Business Owners

This article is a follow-up to the article “State of Michigan Misleads Business Owners”. The purpose is to now provide specific examples and I hope lead you to the same conclusion we have reached.

Unfortunately we are never at a loss for examples of clients with these issues. I have only selected 2 clients though. The examples are in the attached PDF document, Exhibits A to G, Sales Tax Examples. I recommend you print all pages off such that you will be able to line the pages up next to each other. The pages are labeled Exhibit A to Exhibit G.

The first example, Exhibit A, is a great one to begin with. A few days ago a client sent this example to me. She wrote on it “Why are these figures so high?” She paid Junes sales tax on November 19, and all other taxes due on December 20th. While we gave her the sales tax reports to mail in, even though she could not pay them, she did not mail the reports in.

The government then did not have any correct numbers. The June example (Exhibit A) shows she owes $1,755.16 where in fact, she only owed and has paid the correct amount of $757.40. Where did the State come up with $1,755.16? Last year she paid $733.92. The State took last years tax paid and multiplied it by at least 200%.

The remaining Exhibits, B to G, relate to ONE client only. In Exhibit B, as I mentioned in the previous article, the State sends out Tax Due Notices in the form of a bill. Please note the section at the bottom to submit the payment due.

However, there is one MAJOR problem with showing this as a bill. It is inconsistent with the language in the middle of the notice. “Our records indicate no Tax return(s) filed for the taxable period shown above. As provided by law, the tax due has been computed from available information. File actual returns to adjust this computed liability.”

While the State admits in this language it has no idea what is owed, please pay what WE think you should pay based off of available information. “Available information”? and this is the law? To send out false notices?

It becomes worse. Focus ONLY on February of 2009, and SAL (which stands for Sales Tax) in Exhibits B to F. Watch this:

Exhibit C – Monthly Statement – Dated 8-1-09 – $2,392.07 Due

Exhibit D – Final Bill For Taxes Due – Dated 8-31-09 – $0 Due

Exhibit E – Monthly Statement – Dated 10-1-09 – $2,399.32 Due

Exhibit F – Collection Report – Dated 11-20-09 – $0 Due

What is going on – same month, same assessment number? Notices are coming from 2 separate divisions with different databases, even different cities. And when we call about issues into one division and reference notices and filings into another division, they say ‘ Oh, we can’t see what is going on in the other division.’

Finally, the Lien. Refer to Exhibit G. Focus on Assessment Dated 5/12/2009, the first line. This is associated by Assessment Number and the top one of 5/12/2009, Sales Tax is the September 2008 Sales tax. While in Exhibit E, the notice states that $1,640.21 is due on October 1, 2009, with no payments made, on October 16, 2009, in a LIEN notice (where the State is now filing to take Personal Property), the notice states that $1,635.22 is due. Not much of a difference but try to communicate this.

The State needs one database and a system similiar to the IRS. Replicating the manner the IRS notifies and works with the tax payers is necessary.

The State is forcing business owners to spend time themselves dealing with this or paying professionals to communicate with the State. Part of the issue is that tax payers do not realize that they even need to file a sales tax return even if they owe nothing, ie they must file a $0 return. Again, can’t the State save all of us time and money and handle this correctly.

About Christy Federspiel, EA

Christy graduated from Villanova University with a BS degree in Accounting and a minor in Computer Science. Her academic degrees concluded with an MBA in Management from St. Louis University. In 1998 Christy opened Padgett with her husband Jack. Christy is an Enrolled Agent, a member of the National Association of Enrolled Agents and the Michigan Society of Enrolled Agents, and is licensed by the Department of Treasury to practice before the IRS. In doing so, she represents the interests of clients and their companies in dealing with all IRS issues and concerns.

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