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  • Betty The Restauranteur

    Some of you may recall my venting about "Betty," one of our local restaurant owners, a couple years ago. In the grand scheme of things, little has changed, but I wouldn't be writing a new post if I didn't have new things to vent about.

    So here's a quick recap: Betty owns a restaurant named after herself in the town where I work. The restaurant is barely hanging on. Betty neglects to forward the taxes she withholds from her employees' paychecks to the IRS, so she has multiple tax liens against her. And it is against her personally, since she owns the business and real estate directly, without being incorporated to protect herself from the consequences. She continues to maintain a small balance in her checking account. In the past year or so, she has maintained enough of a balance to make her payments for the restaurant loan, but we frequently have to turn away her employees who wish to cash their checks because there's insufficient funds in the checking account.

    The current round of WTF started with Betty and her husband's home loan maturing last month. It has a balloon payment due, and we would normally do a balloon renewal for another 5 years and amortize the payments such that it pays off on schedule. However, Betty and her husband were behind on their real estate taxes, and they didn't have insurance. So I sent Betty and her husband an application for the balloon renewal (we do it almost as if it were a new loan) along with a letter listing the things we needed in order to renew the loan: proof of insurance, proof that the real estate taxes were paid, and 2 years of tax returns for proof of income.

    Betty brought me a partially-completed application, a receipt for her paid real estate taxes (no idea where she found the money), and her 2010 tax return. She said it was the last tax return that was done and that her accountant was still working on the 2011, 2012, and 2013 taxes. I contacted her accountant, hoping he would be able to provide me with at least some information. He provided the extension filings for the tax returns and provided the forms from 2011 showing the husband's income from his logging business. He had received nothing more recent than that, but he offered to provide me with tax forms showing their gambling winnings at the casino. I declined, since I can't use that for proof of income. He said he was still waiting for some information from Betty to complete her 2011 taxes. The 2010 tax return shows a net loss on the restaurant of over $20,000 and over $8,000 on the husband's logging business. I can understand writing off everything you can for tax purposes, but I can't support the loan with that!

    Despite Betty's financial situation, I had an application for a balloon renewal to process, so I pulled their credit reports. I was expecting a difference between their credit reports because the business and its tax liens were in Betty's name, but it was even more stark than I expected. The husband's credit score is in the 800s (practically perfect) while Betty's is in the mid 500s (not quite the lowest I've ever seen, but close). Nearly $40,000 worth of federal and state tax liens plus multiple late payments on credit cards are pulling down Betty's credit score. If this was a new loan, we wouldn't go any farther. This would be more than enough to turn them down.

    Since some portion of their income theoretically comes from the restaurant business, I want to mention here the status of that loan. The payments have been current since we set them up on automatic payments (as mentioned in the thread I linked at the top). About a year ago, she finally got insurance. But she has let the real estate taxes go unpaid. Since it's commercial property, it goes tax forfeit faster than her house would. If she doesn't pay all her back real estate taxes (about $6,000 worth), the county will take the restaurant and sell it off to pay the real estate taxes. A few weeks ago, we sent her a pre-foreclosure letter warning her that if she doesn't pay the real estate taxes, we have to start foreclosure proceedings. I got confirmation today that she doesn't read her mail when I mentioned the letter and she acted surprised. We've been sending her letters every month for a year reminding her how much she owed and that the property was going to go forfeit next year.

    I went over all this information with Goodhair, and he instructed me to do a 90-day extension. We move the maturity date out 90 days, giving them enough time to purchase insurance on their house and get their tax returns completed. I prepared the documents and made an appointment with Betty and her husband to come in this morning at 9:00. At 10:00, I left her a voicemail asking her to reschedule. She called me back to say she didn't realize she had to work , and she'd be in at 1:00. At 1:40, she finally strolled in and signed the documents. No sign of her husband. I went over what she needed to do for us to do a longer renewal, plus went over the situation with the restaurant. She asked me not to tell her husband that the IRS is taking payments out of her checking account, nor that the restaurant is going to go tax forfeit next year. I gave a non-committal answer. I won't tell him anything about her checking account (since he's not on it), but real estate taxes are public record. I'll only be telling him what he could find out if he cared to go to the county website and look it up. She said she'd send him in to sign the documents for the house loan extension. We'll see when he shows up.
    "I look at the stars. It's a clear night and the Milky Way seems so near. That's where I'll be going soon. "We are all star stuff." I suddenly remember Delenn's line from Joe's script. Not a bad prospect. I am not afraid. In the meantime, let me close my eyes and sense the beauty around me. And take that breath under the dark sky full of stars. Breathe in. Breathe out. That's all."
    -Mira Furlan

  • #2
    Quoth Ghel View Post
    I went over all this information with Goodhair, and he instructed me to do a 90-day extension.
    I wonder why, it sounds like you need to foreclose and be first in line to try and grab whatever assets there are.

    I truly feel for the employees, one has to wonder why they stick around. You screw with my paycheck and I am history!

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    • #3
      Maybe the only employees left are ones willing to be paid "under the table."
      Supporting the idiots charged with protecting your personal information.

      Comment


      • #4
        Wow, Kitchen Nightmares vibe...

        It makes me wonder what the food's like at her place. Say what you like about Kitchen Nightmares being a bunch of fakery, they do at least cover some of the common problems failing restaurants have, and this place reads like a checklist of the worst. Owner doesn't keep spouse apprised of the business's true financial situation. Owner is up to her arrears in liens. Owner is screwing with employees' paychecks to stay afloat. No insurance...

        I'd be willing to bet that the food is crap.

        Comment


        • #5
          Quoth Ben_Who View Post
          Wow, Kitchen Nightmares vibe...I'd be willing to bet that the food is crap.
          Even if it wasn't, I'd bet the ticked-off employees and ex-employees have spread the word about Betty's questionable business practices. Some folks might stay away out of principle.

          But you're probably right about the food quality. She probably takes monetary shortcuts with the food as well ("low-tide clam chowder" comes to mind ).
          I don't have an attitude problem. You have a perception problem.
          My LiveJournal
          A page we can all agree with!

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          • #6
            I'm not familiar with that phrase, so I searched the urban dictionary.

            Would it be related to the urban dictionary's NSFW definition of 'clam chowder'?
            Seshat's self-help guide:
            1. Would you rather be right, or get the result you want?
            2. If you're consistently getting results you don't want, change what you do.
            3. Deal with the situation you have now, however it occurred.
            4. Accept the consequences of your decisions.

            "All I want is a pretty girl, a decent meal, and the right to shoot lightning at fools." - Anders, Dragon Age.

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            • #7
              Quoth Seshat View Post
              I'm not familiar with that phrase, so I searched the urban dictionary.

              Would it be related to the urban dictionary's NSFW definition of 'clam chowder'?
              Before the last hack, we used to have a poster here, The1JimmyK, who worked at an awful seafood restaurant where the owner cut a lot of corners. "Low Tide Clam Chowder" came about when the owner decided to use non-dairy creamer in the soup instead of real cream. The result tasted just as nasty as it sounds, as well as being an unappealing shade of grey.
              I don't have an attitude problem. You have a perception problem.
              My LiveJournal
              A page we can all agree with!

              Comment


              • #8
                Betty neglects to forward the taxes she withholds from her employees' paychecks to the IRS, so she has multiple tax liens against her.
                I really hope I'm wrong on this...>_< I know the employer portion (half, iirc) of the payroll taxes are Betty's responsibility, but aren't employees ultimately held liable for their portion if the IRS can't get it out of the employer?
                "For a musician, the SNES sound engine is like using Crayola Crayons. Nobuo Uematsu used Crayola Crayons to paint the Sistine Chapel." - Jeremy Jahns (re: "Dancing Mad")
                "The difference between an amateur and a master is that the master has failed way more times." - JoCat
                "Thinking is difficult, therefore let the herd pronounce judgment!" ~ Carl Jung
                "There's burning bridges, and then there's the lake just to fill it with gasoline." - Wiccy, reddit
                "Retail is a cruel master, and could very well be the most educational time of many people's lives, in its own twisted way." - me
                "Love keeps her in the air when she oughta fall down...tell you she's hurtin' 'fore she keens...makes her a home." - Capt. Malcolm Reynolds, "Serenity" (2005)
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                Comment


                • #9
                  Quoth XCashier View Post
                  Before the last hack, we used to have a poster here, The1JimmyK, who worked at an awful seafood restaurant where the owner cut a lot of corners. "Low Tide Clam Chowder" came about when the owner decided to use non-dairy creamer in the soup instead of real cream. The result tasted just as nasty as it sounds, as well as being an unappealing shade of grey.
                  OH YES! I remember that now!
                  I wish I'd just asked instead of looking up the urban dictionary.


                  Erik: For her employees' sake, I hope not. But I fear that your interpretation of IRS law is correct.
                  NOTE: I am not a lawyer, tax assessor, nor even American. Not even in the sense of being a citizen of any country on the American continents. However, I'm pretty sure I've heard the same as Erik, from people who it's happened to.
                  Seshat's self-help guide:
                  1. Would you rather be right, or get the result you want?
                  2. If you're consistently getting results you don't want, change what you do.
                  3. Deal with the situation you have now, however it occurred.
                  4. Accept the consequences of your decisions.

                  "All I want is a pretty girl, a decent meal, and the right to shoot lightning at fools." - Anders, Dragon Age.

                  Comment


                  • #10
                    Dear Lord; please let Erickei be wrong.

                    Oh, the legal troubles that will cause (for all involved).
                    I might be crazy, but I'm not Insane.

                    What? You don't play with flamethrowers on the weekends? You are strange.

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                    • #11
                      The most distressing thing to me is her attempts to hide the real situation from her husband, shows how far in denial she is about the mess that's growing exponentially larger and larger beneath her, one hopes HE isn't lying to HER about HIS status, each hoping to lean on the other when the big bill they can't pay/borrow their way out of hits the ledger.
                      - They say nothing good happens at 2AM, they're right, I happen at 2AM.

                      Comment


                      • #12
                        Quoth Gilhelmi View Post
                        Dear Lord; please let Erickei be wrong.
                        Sorry, but he's correct. The one earning the income, employees in the OP, are responsible for the taxes ultimately. Yes, they can set up an offer in compromise or even take the matter to a tax court.
                        FWIW, the "employer half" of which Eric speaks is, in fact, the social security and medicare taxes that match the amounts withheld.
                        If I were in such a situation, I would contact the taxpayer advocate to work on a solution...or at least get the crosshairs moved towards Betty. As she has not filed for several years, she is on the IRS radar, already. Come to think of it, the employees will need to look into the state counterpart. What state are you in, Ghel?
                        Last edited by taxguykarl; 11-18-2014, 03:14 PM.
                        I'm trying to see things from your point of view, but I can't get my head that far up my keister!

                        Who is John Galt?
                        -Ayn Rand, Atlas Shrugged

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                        • #13
                          What really sucks in this situation is that Betty may be deducting taxes from her employees' pay and not submitting the funds to the IRS. This means that the employees are going to get royally screwed at tax time because, in essence, they are going to get dinged twice for taxes - once by Betty deducting taxes and second by the IRS.

                          I once worked for an employer that was having a hell of a time paying bills and their staff - I got to the point where when I got paid I would head directly to their bank just after they did their daily deposit in order to ensure I would receive my pay. This after two paycheques bounced and my bank refusing to honour any further cheques from my employer. My boss threatened to fire me if I kept getting my cheque cashed as soon as they did their deposit because it was causing them to miss more payments! I told them that I needed to pay shit too, and that unlike them I didn't own my own house or have money coming in from other sources. They gave me my notice of termination during the Christmas holiday and tried to tell me, after being there for 18 months, that I didn't know how to do my job, and on my employment papers they put down that I had quit...um yeah. They closed six months later with several employees owed mega-bucks in pay. The writing was on the wall long before that, and I kept telling people to jump ship. Of course there were a few people that held out until the bitter end and never got paid what they were owed, to the tune at least a month's worth of pay each.
                          Last edited by KuariKaydrith; 11-18-2014, 03:35 PM.

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                          • #14
                            Where's Robert Irvine when you need him??
                            Skilled programmers aren't cheap. Cheap programmers aren't skilled.

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                            • #15
                              Quoth taxguykarl View Post
                              Sorry, but he's correct. The one earning the income, employees in the OP, are responsible for the taxes ultimately. Yes, they can set up an offer in compromise or even take the matter to a tax court.
                              I double checked with my boss (CPA) because that sounds crazy to me and he said that while yes, the IRS could do that, odds are they won't and if they did you could probably get it dropped in appeal. I've never heard of it actually happening and I've had several clients get behind on their payroll taxes. When payments are made, they are always applied to the trust taxes (the employee paid portion that the employer is holding "in trust" for the IRS) first, and then to the employer portion.

                              What a nightmare that would be!
                              TANSTAAFL

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