What is the name of your state? California
OK, back to helping my friend again. The State of California says my friend owes a sizeable amount of money. My friend did not file his tax returns. So I called the state to find out if they could tell me why my friend owes taxes for this particular year.
So I get the info from the state and it says that my friend had "Estimated Income" of about $34000. Since my friend did not file his return and did not deal with the state, they taxed him, penalized him, and charged him interest. I believe the total owed is about $8000.
The form which shows the "Estimated Income" on it says that my friend had a license with the Bureau of Automotive Repair. My friend cannot put air in a tire and did not own a business related to automotive repair. However, my friend did buy used vehicles at auctions. I think what happened is when he would go to these auctions, I am assuming that not anyone off the street can go to, that maybe he registered as a business with the intent to buy and later sell these vehicles. However my friend never actually followed through on that and believe it or not, he lost most of the vehicles he bought. When I say lost, I mean they were either junked or towed away. He never ever sold a vehicle for a profit.
The state of California says he had a license which was reported to them. Since he did not file a tax return, we tax the industry average of those who do have such a license and tax you. If you do not file a tax return. and do not respond, we assume this is what you owe and then penalize you and charge you interest.
Personally I have never heard of such a thing. That is like saying that since one is a doctor since you did not file a tax return, we will take the industry average that a doctor makes and tax you on it.
You know I can see the state or IRS coming after a person if actual income was reported and a tax return was not file, but taxing one for estimated income seems a bit crazy to me.
Anyway, I plan on talking to a tax professional for my friend. My personal advice is to fill out the state return with zero income since that is what happened. If the state accepts that, then great but if not I imagine they would have to perform an audit or request some additional proof. The thing is, how does one prove $0.
Anyone got any thoughts on this?
OK, back to helping my friend again. The State of California says my friend owes a sizeable amount of money. My friend did not file his tax returns. So I called the state to find out if they could tell me why my friend owes taxes for this particular year.
So I get the info from the state and it says that my friend had "Estimated Income" of about $34000. Since my friend did not file his return and did not deal with the state, they taxed him, penalized him, and charged him interest. I believe the total owed is about $8000.
The form which shows the "Estimated Income" on it says that my friend had a license with the Bureau of Automotive Repair. My friend cannot put air in a tire and did not own a business related to automotive repair. However, my friend did buy used vehicles at auctions. I think what happened is when he would go to these auctions, I am assuming that not anyone off the street can go to, that maybe he registered as a business with the intent to buy and later sell these vehicles. However my friend never actually followed through on that and believe it or not, he lost most of the vehicles he bought. When I say lost, I mean they were either junked or towed away. He never ever sold a vehicle for a profit.
The state of California says he had a license which was reported to them. Since he did not file a tax return, we tax the industry average of those who do have such a license and tax you. If you do not file a tax return. and do not respond, we assume this is what you owe and then penalize you and charge you interest.
Personally I have never heard of such a thing. That is like saying that since one is a doctor since you did not file a tax return, we will take the industry average that a doctor makes and tax you on it.
You know I can see the state or IRS coming after a person if actual income was reported and a tax return was not file, but taxing one for estimated income seems a bit crazy to me.
Anyway, I plan on talking to a tax professional for my friend. My personal advice is to fill out the state return with zero income since that is what happened. If the state accepts that, then great but if not I imagine they would have to perform an audit or request some additional proof. The thing is, how does one prove $0.
Anyone got any thoughts on this?