Author Topic: County of LA says my in-laws owe taxes from 20 years ago and that there's a lien  (Read 898 times)

jeromedawg

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Hey all,

So the County of LA Tax Collector recently sent a letter to escrow per my in-laws' restaurant business sale, stating that they owe $4000+ in back-taxes (most of it interest) from 20 years ago..! I think I read the statute of limitations in CA is 20 years. Anyway, they said there were liens placed against them for these purported unpaid taxes, however they are unaware of any liens and the escrow company even stated they saw no liens against my in-laws' record. Has anyone ever encountered anything like this?
My wife has been talking to the CPA and he's insistent that my FIL paid everything up but doesn't have records. My FIL doesn't have records that far back either. We are checking to see if their bank might have records but the county says they need an image/copy of the canceled check (not sure how that makes sense) - I doubt the bank would have that information.

This seems pretty shady of the county to pull on them but maybe they legitimately did miss the payments those years. Of course, nobody seems to know for sure...

Any suggestions on where else to look?

Cassie

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Is the sale finished with funds dispersed? If so hopefully they donít have a legal leg to stand on.

jeromedawg

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Is the sale finished with funds dispersed? If so hopefully they donít have a legal leg to stand on.

Unfortunately not - they transitioned ownership early but are still waiting for the ABC liquor license transfer to be wrapped up as the final part of all this. Once that happens, which is anticipated to be end of month latest, then the funds will be released. Right now the county has directed the escrow company to withhold the payment due from the escrow funds.

jeromedawg

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BTW: shouldn't the CPA have retained all records related to this and more? Their CPA has been their CPA since the inception of their business, which was over 30 years ago. You'd think they would keep everything regardless. When my wife asked, the CPA said "if I kept everything there wouldn't be space in my office" - uh, isn't that what archiving and digital archiving is for? I'm sure there were archiving services back then - it just seems a little irresponsible.

Another Reader

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Who or what entity is named in the lien?  Did you get a copy?  It should have been recorded.

The lien should be on the assets of the business.  That may be why nothing is recorded naming them.

jeromedawg

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Who or what entity is named in the lien?  Did you get a copy?  It should have been recorded.

The lien should be on the assets of the business.  That may be why nothing is recorded naming them.

So we don't have a copy and my wife didn't think to request one at the time - it's possible to request for a copy to be mailed? Or is it available online somewhere? She asked what name it's under though and was told that it's under her father's name and not the business.  They referred to it as "unsecured property tax" but as a general categorization under which "business taxes" falls. BTW: my FIL and MIL were sole proprietors and not an LLC.
« Last Edit: February 06, 2019, 04:25:16 PM by jeromedawg »

Midwest

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BTW: shouldn't the CPA have retained all records related to this and more? Their CPA has been their CPA since the inception of their business, which was over 30 years ago. You'd think they would keep everything regardless. When my wife asked, the CPA said "if I kept everything there wouldn't be space in my office" - uh, isn't that what archiving and digital archiving is for? I'm sure there were archiving services back then - it just seems a little irresponsible.

CPA's aren't going to retain records for 30 years nor would be expected to.  Statute of limitations for assessment of most filed income/payroll taxes is 6 years at most and CPA's often don't retain beyond that.  Archiving and digital archiving has an associated cost and clients are typically provided copies.

Lack of records often works in the taxpayers favor.

If there is a lien, I would think someone would have been notified when filed.  I would find out the exact nature of the taxes owed.  Some liens even have a limit on how long they are valid.

jeromedawg

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BTW: shouldn't the CPA have retained all records related to this and more? Their CPA has been their CPA since the inception of their business, which was over 30 years ago. You'd think they would keep everything regardless. When my wife asked, the CPA said "if I kept everything there wouldn't be space in my office" - uh, isn't that what archiving and digital archiving is for? I'm sure there were archiving services back then - it just seems a little irresponsible.

CPA's aren't going to retain records for 30 years nor would be expected to.  Statute of limitations for assessment of most filed income/payroll taxes is 6 years at most and CPA's often don't retain beyond that.  Archiving and digital archiving has an associated cost and clients are typically provided copies.

Lack of records often works in the taxpayers favor.

If there is a lien, I would think someone would have been notified when filed.  I would find out the exact nature of the taxes owed.  Some liens even have a limit on how long they are valid.

Lack of records works in the taxpayer's favor in what way specifically?

I don't know if they ever got notification outside of several bills sent to them during the two years. Supposedly they were notified of payment due 5 times in each year. After that, there's no further notice of anything. The most we know in terms of the nature is: "business taxes" under the broader categorization of "unsecured property taxes" - is it possible that there are more details or specifics beyond this? I asked if it was the result of an underpayment and the guy said no.  According to the escrow company, there are no liens filed by the secretary of state in CA however per the LA County Tax Collector/Treasurer, a lien was supposedly filed at the registrar in Norwalk.

Another Reader

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Most counties in California do not have online searchable databases of recorded documents. You may have to see if something is online and then try to retrieve it through the escrow company.  They should be provided proof before paying the bill.

jeromedawg

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Most counties in California do not have online searchable databases of recorded documents. You may have to see if something is online and then try to retrieve it through the escrow company.  They should be provided proof before paying the bill.

Yea, we called and they said she'd have to go into the office of the recorder and search there. The broker is asking the title company agent to search for any other outstanding liens. I would think this would have been found already at this point in time though.

SwordGuy

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Find out if there really is a lien on the property and when it was filed.

And if it was filed before the title search was done, ask the title search folks to explain why they didn't find it.

If it was just filed, it may be filed too late and I doubt they have the supporting documentation to prove their case.

Another Reader

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The lien is for not paying unsecured business personal property taxes to the County.  Unsecured means they are not secured by the real estate.  Your parents either filed returns (Form 571-L) or were assessed by estimate by the County Assessor if they did not file the returns.  The lien is not on the real property, it is against your parents, who owned the unsecured property.

jeromedawg

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Find out if there really is a lien on the property and when it was filed.

And if it was filed before the title search was done, ask the title search folks to explain why they didn't find it.

If it was just filed, it may be filed too late and I doubt they have the supporting documentation to prove their case.

Yep, hopefully we'll hear back from the title search agent. My wife my head up to Norwalk anyway to search the archives.

BTW: who are you referring to when you say "I doubt they have the supporting documentation to prove their case?" My in-laws? Or the county?

jeromedawg

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The lien is for not paying unsecured business personal property taxes to the County.  Unsecured means they are not secured by the real estate.  Your parents either filed returns (Form 571-L) or were assessed by estimate by the County Assessor if they did not file the returns.  The lien is not on the real property, it is against your parents, who owned the unsecured property.

Did the county tell us the wrong thing or use incorrect terminology when they said the lien was placed because the unsecured property tax wasn't paid? Or was the rep confusing the lien with something else in that case? My in-laws were leasing the space so they definitely didn't own it - is that why this would be considered "Unsecured" ?
« Last Edit: February 06, 2019, 06:35:15 PM by jeromedawg »

Another Reader

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The County Tax Collector should provide a copy of the lien or at least the recorded document number to the escrow company.  They should show which years were not paid.  Are they paying business personal property taxes now?  If so, there should be an account number.  She might be better off trying the tax collector's office with that account number rather than the recorder.

The County is correct.  The tax bill is unsecured because they do not own the real estate.  If they did not pay the property tax on the house they own, the lien would be against the property.  Payment is secured by the real estate in that case.  The County can take the real estate if the bill is not paid after a number of years.

jeromedawg

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The County Tax Collector should provide a copy of the lien or at least the recorded document number to the escrow company.  They should show which years were not paid.  Are they paying business personal property taxes now?  If so, there should be an account number.  She might be better off trying the tax collector's office with that account number rather than the recorder.

The County is correct.  The tax bill is unsecured because they do not own the real estate.  If they did not pay the property tax on the house they own, the lien would be against the property.  Payment is secured by the real estate in that case.  The County can take the real estate if the bill is not paid after a number of years.

I don't think they provided any documentation of the lien itself to the escrow company. OK, so I was confused about what "business personal property taxes" were and looked it up - pretty much all restaurant equipment and fixtures (and not the real estate or sale items/goods/inventory). Yes, they have been paying business personal property taxes on all this stuff both before the two years that the county claims they didn't as well as after up until now. As far as we know. My wife is working with their bank to dig up archived records that might show the payments and check images, so we're crossing our fingers with that. Their CPA is in disbelief over all this, claiming my FIL has always been on top of tax payments and for something like this to slip would be out of character for him. But you never know... 

My in-laws took a mortgage on a home back in 2004 as well as took a couple car loans after that up until now. They may have taken loans out for other purposes as well. If there's actually a lien against my FIL's name, wouldn't that have prevented him from taking loans out? Especially with the mortgage in 2004? Or is it possible that the county requested that the lien be put on his name *after* all that? My wife actually didn't ask when the lien was placed nor did the agent mention when it was actually placed.
« Last Edit: February 06, 2019, 08:06:01 PM by jeromedawg »

cchrissyy

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Maybe this helps -  I used to pay unsecured property tax to a different CA county for my business property. The "property" had nothing to do with real estate property taxes. It was a % of the value of my retail inventory. Maybe also the shelving and fixtures and computers?  Things like that.

jeromedawg

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So we heard back from the bank and they do not retain records beyond 7 years. My FIL is pretty positive that he got rid of the records that far back too. So beyond trying to see if a lien exists or not, it sounds like we're SOL. Even if we found that there is no lien in his name, is there any recourse? It seems the county still would require payment but if there's no lien what happens if you just don't pay?


EDIT: actually I forgot that in the letter sent to, the county is giving escrow instructions to withhold the funds from the sale. It then says that if tax is not paid per section 2951, revenue and taxation code, the tax collector will enforce the payment by seizure and sale of the property. However, if there's no lien can they still legally do this?


And a couple side questions:
1) Is there a general rule of thumb or best practice regarding checking for potential liens against your name or business every X years or something? Like should everyone check for liens against them every year or other year?
2) Can or should the CPA be held accountable for this in the case that payments were really missed?
« Last Edit: February 07, 2019, 11:39:10 AM by jeromedawg »

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BTW: shouldn't the CPA have retained all records related to this and more? Their CPA has been their CPA since the inception of their business, which was over 30 years ago. You'd think they would keep everything regardless. When my wife asked, the CPA said "if I kept everything there wouldn't be space in my office" - uh, isn't that what archiving and digital archiving is for? I'm sure there were archiving services back then - it just seems a little irresponsible.

CPA's aren't going to retain records for 30 years nor would be expected to.  Statute of limitations for assessment of most filed income/payroll taxes is 6 years at most and CPA's often don't retain beyond that.  Archiving and digital archiving has an associated cost and clients are typically provided copies.

Lack of records often works in the taxpayers favor.

If there is a lien, I would think someone would have been notified when filed.  I would find out the exact nature of the taxes owed.  Some liens even have a limit on how long they are valid.

Lack of records works in the taxpayer's favor in what way specifically?

Tough to audit non-existent records.  If the client has filed a return and the taxing entity tries to reopen for some unusual reason after the standard statutory period, lack of records can be helpful.

I don't know if they ever got notification outside of several bills sent to them during the two years. Supposedly they were notified of payment due 5 times in each year. After that, there's no further notice of anything. The most we know in terms of the nature is: "business taxes" under the broader categorization of "unsecured property taxes" - is it possible that there are more details or specifics beyond this? I asked if it was the result of an underpayment and the guy said no.  According to the escrow company, there are no liens filed by the secretary of state in CA however per the LA County Tax Collector/Treasurer, a lien was supposedly filed at the registrar in Norwalk.

I'm not an attorney and don't practice in California in any capacity.  If this occurred to one of my clients, I would  request a copy of the lien and support for the lien and exactly what the lien if for.

Another Reader

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To whom are the current business personal property taxes being billed?  Is there an account number?  Take that information to the Tax Collector's office.  Take your FIL if he will go or get authorization to view the records from the in-laws.  Show the tax collector staff the current bill and account number and ask to see the records.  See if they can track down the lien.  Go to the local Business Personal Property Division office of the Assessor.  Review their records.   See how far back their trail goes.

If your father in law or mother in law have Asian names, look for variants of the names.  Look under the first name as the last name.  Perhaps the assessment was made to "the owners of the business at..." or the name of the restaurant.

Get a copy of what was sent to the escrow company.  Take that with you when you visit the various county government offices.

Someone has the information. 

jeromedawg

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To whom are the current business personal property taxes being billed?  Is there an account number?  Take that information to the Tax Collector's office.  Take your FIL if he will go or get authorization to view the records from the in-laws.  Show the tax collector staff the current bill and account number and ask to see the records.  See if they can track down the lien.  Go to the local Business Personal Property Division office of the Assessor.  Review their records.   See how far back their trail goes.

If your father in law or mother in law have Asian names, look for variants of the names.  Look under the first name as the last name.  Perhaps the assessment was made to "the owners of the business at..." or the name of the restaurant.

Get a copy of what was sent to the escrow company.  Take that with you when you visit the various county government offices.

Someone has the information.

So it's sort of a hairy situation because they handed over business operations to the new business owner while escrow still hasn't closed. I believe the new business owner will be getting billed from now on. But outside of that, I guess we'll have to try to track things down if the title search company can't find anything. The thing about my FIL is that he'll more than likely end up telling us "too much trouble just pay it and be done" while my MIL and the rest of us would be pissed off. On the other hand, now that he's retired he should have plenty of time to deal with it.

So if we end up doing all this and nothing turns up, what then?

Another Reader

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The current 2018-19 taxes were assessed as of January 1, 2018.  The bill should show who is being assessed as of January 1, 2018 and the account number.  Whose name is on that bill??  Is it an individual or the business?  That is a key piece of information.  Take THAT bill to the Tax Collector's office.  Trace the account and the name back as far as you can in their records.  Try the Assessor's Office as well. The tax collector would have filed a lien naming the assessee for the year in question.  If the name used then was different, that's why you are not finding the lien.

jeromedawg

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The current 2018-19 taxes were assessed as of January 1, 2018.  The bill should show who is being assessed as of January 1, 2018 and the account number.  Whose name is on that bill??  Is it an individual or the business?  That is a key piece of information.  Take THAT bill to the Tax Collector's office.  Trace the account and the name back as far as you can in their records.  Try the Assessor's Office as well. The tax collector would have filed a lien naming the assessee for the year in question.  If the name used then was different, that's why you are not finding the lien.


So it looks like all the personal property taxes have or will be paid for by my FIL through 2019. We do not have or currently have access to any of the actual bills to see the name. In the letter to escrow from the county though, there are associated bill numbers and years corresponding with the unpaid tax amounts and penalties. If this were under my FIL's name, I don't think anything would have changed. I guess  we'll just have to go to their house at this point if we want to get the actual bills to get more information.

jeromedawg

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BTW: shouldn't the CPA have retained all records related to this and more? Their CPA has been their CPA since the inception of their business, which was over 30 years ago. You'd think they would keep everything regardless. When my wife asked, the CPA said "if I kept everything there wouldn't be space in my office" - uh, isn't that what archiving and digital archiving is for? I'm sure there were archiving services back then - it just seems a little irresponsible.

CPA's aren't going to retain records for 30 years nor would be expected to.  Statute of limitations for assessment of most filed income/payroll taxes is 6 years at most and CPA's often don't retain beyond that.  Archiving and digital archiving has an associated cost and clients are typically provided copies.

Lack of records often works in the taxpayers favor.

If there is a lien, I would think someone would have been notified when filed.  I would find out the exact nature of the taxes owed.  Some liens even have a limit on how long they are valid.

Lack of records works in the taxpayer's favor in what way specifically?

Tough to audit non-existent records.  If the client has filed a return and the taxing entity tries to reopen for some unusual reason after the standard statutory period, lack of records can be helpful.

I don't know if they ever got notification outside of several bills sent to them during the two years. Supposedly they were notified of payment due 5 times in each year. After that, there's no further notice of anything. The most we know in terms of the nature is: "business taxes" under the broader categorization of "unsecured property taxes" - is it possible that there are more details or specifics beyond this? I asked if it was the result of an underpayment and the guy said no.  According to the escrow company, there are no liens filed by the secretary of state in CA however per the LA County Tax Collector/Treasurer, a lien was supposedly filed at the registrar in Norwalk.

I'm not an attorney and don't practice in California in any capacity.  If this occurred to one of my clients, I would  request a copy of the lien and support for the lien and exactly what the lien if for.

Well, apparently the county keeps *everything* or at least 20 years back. Seems they were banking on the likelihood that my FIL wouldn't have retained records that far back no would his CPA or the bank he's with, and they were right.  I'm not sure what the statute of limitations is for Los Angeles county or if the state determines that but I thought I saw up to 20 years back. In this case they're stating that my in-laws owe per their records, and there is no documentation or proof (like a copy of the check or bank statements showing the paid amounts) that my in-laws have that would prove otherwise AFAIK. So it doesn't seem like "lack of documentation" would help much in this case, unless the statute of limitations is actually shorter and they have no right in demanding payment. It seems pretty serious that they would instruct escrow to withhold payment and threaten to seize the property if it is not paid though. 
« Last Edit: February 07, 2019, 11:49:05 PM by jeromedawg »

jeromedawg

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My wife is currently at the recorder's office now searching the DB for her father's name and variations as well as my mother-in-law and the business name. So far nothing indicating "lien" has popped up. Just a bunch of "deeds", "reconveyance", "release", "agreement", "subordination", "termination financing statement", "notice intended sale", and "substitution trustee" are the title terms she has seen thus far. Nothing shows up for either 1998 and 1999 either, so not sure what the deal is.

EDIT: nm - she found a couple liens. What's weird is that one is from the state board of equalization and the other one is IRS/Federal related. Not sure how these even correlate with the liens the county supposedly filed or how to fully account for those.
« Last Edit: February 08, 2019, 05:02:35 PM by jeromedawg »

Another Reader

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Look under the business name. 

Make sure she looks for the name that is on the bill as written.
« Last Edit: February 08, 2019, 05:30:00 PM by Another Reader »

Another Reader

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The SBE lien is likely for sales tax.

If you have bill numbers and years, you should be able to get some information from the tax collector.

jeromedawg

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So it looks like his name was spelled incorrectly at least for both years where the payment was missed.


Is it possible that an incorrectly spelled name: the initials are exactly the same but the actual names are pretty different and noticeably different too. Is it possible that the county billed my FIL under that wrong name, then he sent a check in (obviously not under that name that the county got incorrect), and the county misapplied the funds to the incorrectly spelled name/entity? My wife also saw a large number of other business entities that share the same name as my in-laws' business - is it possible that if my FIL paid, the funds could have been misapplied into a different account?

What's weird is that when my wife spoke with the county earlier this week, they pronounced my FILs name just like how it's incorrectly spelled on the lien. So we're thinking someone at the county screwed the name up and sent out a bill with the wrong name. I think it likely would have still gone to the restaurant since that incorrectly spelled name is associated with their restaurant business name. We would have to talk to the county to make sure. But that aside, this is why I was asking prior about whether or not the county could have misapplied the funds to the incorrectly spelled name 'entity' - my wife said that for a period of six years the incorrectly spelled name shows up like that (1995-2001). But my FIL's correct name also has records shown within that same period of time.
« Last Edit: February 08, 2019, 06:47:06 PM by jeromedawg »

jeromedawg

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Curious but are unsecured personal property taxes deductible from federal and state income taxes when it comes time to file? The reason I ask is because if they are, I would think that the CPA would have caught on when he didn't see that unsecured personal property taxes were paid the year of.
My wife tallied up everything she gathered from the recorder's office and there are a total of ten liens that were put against my FIL for federal, state and county taxes over a 5-6 year period. Most of them have associated lien releases. Given this, our immediate thought is that he had a track record of delinquent payments during this period of time (we think it was a rough patch) and then paid up later, thinking he paid for everything but missed those two years ('98 and '99). The strange thing is that she also found a couple liens that she couldn't find the corresponding lien releases but the county hasn't said anything about those.

Anyway, outside of the possibility that the payments were misappropriated due to the incorrect name listed, it seems like my theory (or something close to it) would stand. My wife will call the county again next week and ask about that.