Governator terminates $79k of taxes

[The Observer]

Only notices of liens may come with warnings before being recorded. The federal tax lien itself comes into existence after the tax has been assessed, demand for payment has been made and the tax goes unpaid.

As far as "oversight", it would be very hard to believe that someone did not get some correspondence at one point or another about the fact that they have a tax liability. Given the number of letters issued to taxpayers about past due taxes, it is rather unlikely that somehow the government overlooked getting a notice/demand issued to the governor. On the other hand, if there have been a multiple number of addresses or address changes due to Schwarzenegger moving frequently or changing his address for privacy's sake, I would suppose that under the right circumstances, mail could have a hard time catching up to him.

[LPC]

On the other hand, if there have been a multiple number of addresses or address changes due to Schwarzenegger moving frequently or changing his address for privacy's sake, I would suppose that under the right circumstances, mail could have a hard time catching up to him.

I once had some personal correspondence with a governor of another state, and was told to address all personal communications to his secretary, because anything with his name on it got opened and routed somewhere before he or his secretary ever saw them.

I would expect that California works the same way, so it's entirely possible that IRS notices with Schwarzenegger's name on them got intercepted and routed in some screwball way that resulted in his staff never seeing them.

[Quixote]

[Jeffrey] Kahn[, a Bay Area tax attorney consulted by the Mercury News,] said the governor may have been listed as a "responsible person" by a business in which he is involved, possibly with a group of partners, and that the IRS might file liens against all of the designated agents of the business.

While certainly true, that can heve nothing to do with the penalty noted on the lien. The penalty, for failure to properly file information returns, is assessed only against the entity responsible for filing the returns, not against partners or agents. Moreover, the lien shows an EIN, not an SSN as the identifying number. The penalty was assessed against Schwarzenegger as a sole proprietor or as the sole member of an LLC that had elected to be treated as a disregarded entity for federal tax purposes.

"The issue is completely unrelated to the payment of taxes," Schwarzenegger spokesman Aaron McLear said in a statement. "The matter will be resolved and the lien expunged without any penalty assessed upon the governor."

Uh, the penalties were assessed years ago. Presumably he means that the liens will be released due to abatement of the penalties, rather than payment of them. It has been my experience that the overwhelming majority of penalties under IRC §6721 are abated after the oversight is corrected.

[notorial dissent]

And as has been pointed out, this was to an LLC, which means it may well have had a totally different address than the Gov, or a bad address, or a business manager who either did not respond properly or at all, or may no longer have been there to respond.

The problem with complicated business arrangements of the type popular in La La land is that they are complicated.

Since I personally do not see him as being the hands on accounting type I am more than willing to believe that sort of thing is handled by lots of someone elses who may or may not have dropped the ball, or even got the original filings to begin with. While embarrassing, hardly evidence of anything else.

You will note that there was an immediate we'll get this taken care of response as opposed to certain other parties immediate spouting of some flavor of TP theory. This has all the earmarks of good old fashioned human error.

[Kimokeo]

What is really sad, not just for Arnold but others, is that the Lien shows what was owed at the time of filing the lien.

If you pay about 99% of a lien's debt, the lien still shows the original amount.

You need to call someone to find out what is actually owed on liens. So, unless an article is written the day of filing, the figure is either more (due to interest) or could be drastically different.

[Judge Roy Bean]

What is really sad, not just for Arnold but others, is that the Lien shows what was owed at the time of filing the lien.

If you pay about 99% of a lien's debt, the lien still shows the original amount.

You need to call someone to find out what is actually owed on liens. So, unless an article is written the day of filing, the figure is either more (due to interest) or could be drastically different.

This is an extremely important point - the existence of a lien and especially the amount showing can do incredible damage to your credit score. In one case I'm aware of, it prevented a family from being able to refinance out of a dangerous loan for over three months while the original creditor dragged its feet and two of the three credit bureaus had to be threatened with a FCRA suit to get the record corrected. In another case, the owners paid off about half their $100K note on a piece of vacant land but the creditor filed a second lien for the new balance without removing the first - instead of being $50K in debt the total obligation gleaned from the county documents and reported by one of the "other" information services was in excess of $150K. According to that system, the folks owed more on the piece of land than it was worth.

[The Observer]

Latest explanation coming from the Terminator's camp is that the IRS did send notices out by certified mail, but it went to an address that didn't forward the mail to an address where someone was authorized to read/respond/take action. A spokesman for Schwarzenegger said that the governor acknowledges the fact that the lien filing was legitimate on that basis and that he intends to "refile" the return in question to resolve the penalty issues.

Lesson to be learned from this is to always ensure that the IRS has a current address for you so that you can be aware of what they are doing or intend to do. The law does not require the IRS to hunt you down and perfect your address - they only have to send notices to the last know address they have on record for you. After that all bets are off in terms of questioning a notice of lien filing. And the courts have supported this position time and time again - when the IRS cannot show that they sent a legally required notice to the last known address, the courts have ordered the IRS to reverse their actions, be it a notice of lien filing or an audit assessment.

[Demosthenes]

Lesson to be learned from this is to always ensure that the IRS has a current address for you so that you can be aware of what they are doing or intend to do. The law does not require the IRS to hunt you down and perfect your address - they only have to send notices to the last know address they have on record for you.

Not that doing so will necessarily help.

My only negative experience with the IRS was several years ago when they garnished my spouse's paycheck for $80 out of the blue. They claimed that I hadn't included a very small check in my income from a few years earlier, and when I asked why I hadn't received a single notice over the years, they claimed that they had sent it to my address on record. I'd moved, but used the standard mailing forwarding service provided by the post office, and had filed at least two years of tax returns with my new address since that move date. I found it interesting how they could find my spouse's place of employment, but they couldn't find mine or look at my recent tax returns to see where I lived. We weren't even married at the time the original tax return with the missing income was filed.

I never contested either the tax or penalty (it wasn't worth my time) and years later, the mystery was solved. When the state of CA published their unclaimed assets database online, I put in my name et voila, a $75 insurance commission check had been waiting for me to cash it for more than a decade. I hadn't included it in my income way back when because I never received either it or a 1099.