IRS and CA State Enforcement Action Rising 5/11/2020

Good Morning it's Monday May 11th and I wanted to talk to you today about the collection and enforcement efforts that are ramping up across the country with the IRS and the state of California so I've spent a lot of time talking with collection agents and with auditors over the last few weeks and although there's a moratorium on collection and examination activity through the middle of July it's going to be open season after that let me explain why so the federal government gave away three trillion dollars in fonts and we all know nobody in their right mind is goin to raise taxes this year given the coronavirus climate so the government just gave away a lot of money they aren't going to raise taxes so the natural conclusion is they're going to get it back through enforcement and specifically they're going to go after businesses so I want to share a couple of things that businesses can do now to protect themselves in the current coronavirus climate so the first thing that a business can do to protect itself is to get its finances in order and to come up with a projection for how the rest of the year is going to lock I realize that we're dealing with a lot of uncertainty right now a lot of us are either stay at home orders we don't know exactly when the lights are going to go back on but using a reasonable projection you should be able to track kind of what your revenue is going to be for the rest of the year and if you've got up you need funding or if you've got idle funding how that's going to impact your decision to carry your business so the very first thing you need to do whenever you're in a hole is you need to stop digging and figure out where you're at having a longer projection at least through the end of the year is going to let you know number one how much cash is gonna come in number two what you project your expenses are and number three how much you're gonna have left over a profit to devote to any back liabilities whether they be taxes or other obligations so you can get your arms around the situation the second thing you're going to do is you're going to stop being so not all liabilities are created equal so for example if you accrue payroll tax liability or sales tax liability in particular those are deemed as trust fund taxes those are money is that you hold in trust for somebody else so when you run a coffee shop and you sell a cup of coffee and you collect the sales tax that is your customer paying sales tax on a product you are holding that money in place for the state and you are remitting those funds so you are not allowed to spend that money and if you spend that money and you both with that tax liability later the government will come after you personally for those liabilities so you need to draw a line between the liability is that you could be held personally responsible ie trust fund taxes and other liabilities that your business only may be liable for and then you need to start prioritizing those liabilities based on who gets paid first but the important part about this is don't spend money right now that's not yours and the final thing that you need to do is build a plan so you've got your revenue projection you've got your expenses going out you know what you're gonna owe in terms of liability and even if you've had cash challenges a lot of businesses have been really hurting by this we've had businesses that basically disappeared overnight even if you're a million or a couple million dollars in debt right now there is a way out of this situation but what it's gonna take is it's going to take planning lights are gonna come back on in the IRS to the state as of July 15th so you could take the next three months particularly three months where you're gonna be out of business and really build your financial situation 2% an offer to the IRS IRS collection agents are basically going to throw people into two buckets there's the bucket of people that they can't do anything with and there's a bucket of people where there's some meat on the bone they're going to go after so the more that you can present yourself like bucket one and really minimize yourself as a target for the government that's the way things are going to go so it's about building a plan about minimizing your exposure on the collection side and then on the audit side you need to make sure your house is in order it's finding.

The chaos going on right now build things to make sure you're keeping records that you could pass an examination there are certain types of businesses they're really gonna get hit with a lot of audits come become the end of this year and the beginning of next year so put your documents in place talk to somebody and help prepare for what's going to come later they are gonna go after businesses they need to collect the tax revenue and you need to prepare yourself for what eventually comes down the pipeline so today as an effort to help business owners we're offering a free tax strategy session so what we're gonna do is it's a 60-minute free consultation normally we charge for consultations but there are so many people that are out there that are in some measure of pain that we as a firm want to do what we can to help people get back on the path recovery and not make this problem worse you know as a tax attorney I'm still dealing with problems from the 2008 financial crisis and I don't want to be dealing with problems from this crisis 10 or 15 years down the road so we're putting together this free strategy session we're gonna sit here we're gonna analyze the way that your business is we're going to do through your expenses and we're gonna build a plan and if you're the recipient of PPP or idle funds we're gonna help spend those monies to maximize your forgiveness and to maximize your tax deductions at the end of the year if you're not gonna have a lot of free cash going around you might as well minimize your taxes as much as possible so it's a 60 minute strategy session we're gonna get in we're gonna build a plan you're gonna sit down with me directly and we're gonna just go to power through this and if we sit down we do this together and we build a plan to get out of this I promise you you're gonna feel a lot better about the glidepath of your business and you're going to be able to weather this crisis no matter what happens going for.


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law