Shell Game

COLUMBIA FINANCIAL AND TAX SERVICES, INC.
_____________________________________________________________________________
9901 NE 7TH Ave Ste, C120, Vancouver, WA 98685 360-314-6274


3/24/2010


Dear Client,

We are aware of the current audit/examination assault by the state of California FTB. Please don’t let their letters mislead you because examinations are usually audits. We are sending this to you to clarify and provide information. First, at least some of the state auditors are stating that the ventures, Tahoe Investments, LLC and Blackbriar Investments, LLC were “sham” companies and never even existed. Interestingly, we have other letters from California auditors that state they have the federal EIN (Employer Identification Numbers) for these companies which means they went through the IRS application process and IRS verification of being a duly chartered company. Some people are receiving a letter stating that the companies did not exist, and some a different letter acknowledging that they did exist. So, the answer to this is that they did exist and some auditors are using scare tactics to get taxpayers to act outside of their best interests. This misinformation is intentional and meant to scare you. Auditors have their jobs by collecting money ANY WAY THEY CAN. Do they mislead, distort the truth, and make misstatements? Absolutely! They will tell you anything to get you to agree and pay tax whether you owe it or not. Many of their actions such as calling you at work, calling repeatedly, making threats and more are violations of the Fair Debt Collection Act and other laws. Yes, these auditors will ignore the law to collect, and failure to collect could lead to the loss of their job.

Why would the state of California allow this? The answer is simple. California is totally broke. The state treasury is out of money and the state is being sued by thousands of companies and others for lack of payment. California was recently threatened with a drop in their bond rating. What this means is that California would have considerable difficulty in borrowing money and could mean the stoppage of state services – the state’s problems are that serious! The solution? Go after the taxpayers. This is the same method that the federal government used in the bailouts of AIG and the banks (those same banks that will not now loan money to finance home purchases, again the taxpayer loses).

Additional letters are being sent that give taxpayers two choices. The first is to amend their tax returns for the years stated, any year from 2001 through 2008. This may not be a wise choice. If taken, the state will tax you on any money owed adding interest and penalties and then refer it to the IRS for audit and continuing problems. The second choice is to continue through the audit process and continue to fight for your rights. In our research, we have found that the law in CA for audit procedures is not being followed by the auditors. The brochure issued by the state of California outlines their audit, protest and appeals procedures, this is a condensation of the state law. It says the following (a summary of important points)

1. Audits must be completed with a minimum of inconvenience to the taxpayer.
2. Audits are to be conducted either at the office of the auditor or the place where the records of the taxpayer are kept, there is no provision for telephone audits.
3. There is a requirement for an initial contact letter scheduling the audit appointment, the issues to be reviewed and the name of the auditor. Note: the current letters being generated do not meet these criteria; they are demand letters, not initial contact letters.
A Violation.
4. The law requires an opening conference to establish the groundwork for the audit; the auditor will present an audit plan, agree on timeframes and have a general discussion.
Note: The current letters violate this and are demand letters not letters outlining an audit plan, etc. A Violation
5. The auditor, after going through the preceding, will issue a document information request (IDR) WITH A THIRTY DAY RESPONSE TIME. This is not being done and the time generally given is ten days or less. A Violation
6. Status Conference. The auditor is to schedule a “status conference” to see how the progress of the audit is proceeding and measure the proceedings against the “benchmarks” initially established. This is definitely not being done; all that is being done is the sending of a demand letter. A Violation
7. The auditor is to schedule a “closing conference”; this has not been done in any case we are aware of. Another Violation.
8. At the end of the audit, the auditor is to issue an “Audit Issue Presentation Sheet”. If the taxpayer disagrees, a meeting can be scheduled with the auditor’s supervisor. The
auditor’s supervisor is to listed on all notices to the taxpayer. Note: None of this is being done and we have not seen any notices naming the auditor’s supervisor. Multiple Violations.
9. End of the audit. The auditor is required to issue a notice to the taxpayer outlining whether they accepted the tax return or if they are going to issue a “Notice of Proposed
Assessment” indicating the amount of tax they claim is owed. This is definitely not being done. More Violations of CA State Law.
10. If a Notice of Assessment is issued, the auditor is to inform the taxpayer of their right to protest or appeal the findings. Note: CA law distinctly says “FOR ALL AUDIT NOTICES, (THE TAXPAYER) MAY PROTEST THE AUDIT FINDINGS”.
11. Protest process. Pursuant to CA Revenue & Taxation Code 19041 the taxpayer has sixty
(60) days to file a written protest with the FTB’s Protest Section. Note. According to CA law, the finding (any finding) of the auditor does not become final until the sixty days has elapsed.

It is very important for each person involved to understand that is he/she is being denied “due process” as guaranteed by the 5th and 14th Amendment to the US Constitution. If the state makes a determination and assesses anyone a tax, fine or penalty, you have the right to dispute the determination. However, due to the desperate situation in CA, this right is being ignored. The desperate nature of the actions of CA FTB is advance notice of their desperation. At last count, CA is $ 30 billion in the red and is not making up the difference with tax increases and other increases in types of tax or assessments.

We are proposing to protect your rights that every violation have a complaint filed by the taxpayer and sent to the auditor’s supervisor and the FTB Executive Officer as well as the CA state attorney. This is the most effective way to stop this “steamroller” approach to CA audits. The auditors are violating their own laws, policies and procedures. They are also violating constitutional guarantees, primarily due process of law. If you do not fight back, you lose. The choice is yours; our goal is to help you through information and research.

Although we would be happy to provide instant service to every client we have, we have limited staff but will respond to every client as quickly as possible. To help us, you need to fax us any letters you receive from CA FTB or the IRS and such can be faxed to us at 360-314-6527.
We in turn will send via email a Complaint/Violation letters for you to send. Is this process likely to make matters worse? No, we have found that confronting these agencies and having them abide by the law is your best course of action.

Sincerely,


Jolie Namsa BA
Audit Division