Wednesday, March 21, 2012

More Tales From the Over Regulated State - A Series

wherein tonight's episode can be called, "You Owe Us".

It's one thing to live in a state with income tax, as most folks do (and I don't).  You expect a tax bill and you budget to pay it.  But what do you do when you get taxed by a state you don't live in?  Worse yet, what if they just raid your bank account for the alleged tax - and make you pay for the privilege?

I was tipped in a private email from GardenSerf to two articles on Charles Hugh Smith's blog, "Of Two Minds".  In "Welcome to the Predatory State of California - Even If You Don't Live There"  Charles opens the story this way:
On March 14, he received a letter from the California Franchise Tax Board (the agency that collects income taxes) claiming that he owed $1,343 for the tax year 2006. This was the first notification he'd ever received of this claim. This was an interesting claim given that R.T.:

-- Did not reside in California in 2006

-- Did not file a State income tax return in California in 2006

-- Did not have any outstanding tax issues with California in 2006

-- Did no business in California in 2006

-- Owned no property in California in 2006
He goes on to say:
But the truly interesting part of the story is that the state took $1,343 out of R.T.'s Wells Fargo bank account on March 2, prior to notifying him of the claim. Wells Fargo charged R.T. $100 for handling the removal of his $1,343.  
Round about this point,  my chin was reaching almost record separations from my upper teeth.  By the next day, in Part 2 of the article, other folks had emailed to tell similar stories!
1. The old "you didn't pay a $25 filing fee, the fine is now $499 which we took from your bank account." Never mind you have the cancelled check endorsed by the state, proving they received it and cashed it; the Board of Kafkaesque Authority claims "we didn't get the check" and loots your account for the $499 (true story.)

2. "Fishing expeditions" where companies and citizens are dunned for taxes and fees they might owe, though there is no evidence they do in fact owe fees and taxes. I received many emails describing these fishing expeditions, for example, merely having a license is "evidence" that you must have unreported income.

3. Enforce all sorts of dubious claims, most importantly:

A. That anyone collecting a pension from work performed while residing in California is liable for California taxes on that pension, regardless of where they live;

B. Any income resulting from something invented in California must be reported as income in California, regardless of where the income is derived from or where the inventor now lives. [emphasis added - GB]
I read that as California claims that if you thought of something simply while passing through their state that they are owed income tax on it no matter where you set up shop to make money off your idea, or where you live.  What power!  Anyone who invents something that makes them enough money to stand out from the crowd had better hope it can never be shown that they went through California on a trip - or (I imagine) even just changed planes.  How can anyone prove where the creative spark occurred? 
Lest you think this far-fetched, please consider this report sent to me by correspondent J.J.: Will California Gamble in Las Vegas? The Stakes are High in the Gilbert Hyatt Case:

To summarize, the California FTB sued Gilbert Hyatt, an inventor of a microprocessor chip, for tax fraud. The FTB claimed that Mr. Hyatt did not file a return for the income derived from his invention. Mr. Hyatt claimed he was already a Nevada resident at the time he invented the chip; California claimed otherwise. Whether that case has merit is still to be decided and could lead to a recovery of around $50M for the FTB, including penalties and interest, which account for over 80% of the total.

The real issue, however, is the FTB’s misconduct in pursuing Mr. Hyatt in Nevada. According to Bill Leonard, a member of the California State Board of Equalization, as published in his newsletter:

Tax agents rummaged through his trash without warrants, visited business partners and doctors, and shared his Social Security Number and other personal information with the media. This is outrageous behavior and I call on the FTB to rein in their agents. What really galled me is the FTB testified in open court that this level of harassment was only a typical audit. If true, then the stormtroopers are alive and well at the FTB.
This case appears unusual. Most of them seem to be stealing money at a level where it just doesn't make sense to hire lawyers and fight to the death.  They take $500 and make you spend $2000 to get it back - most people give up and write off the loss.  Which is what they're counting on, of course.  

As usual, California is merely the first to do insane or corrupt things, and similar attempts are showing up around the country as bankrupt governments at all levels scramble to get more money.   This is banana republic stuff.  Welcome to the Fascist States of Amerika.


  1. I get a small monthly retirement check from having worked for the California Highway Patrol (for only ten years, not a full retirement). At first, they were able to charge income tax on that money, even though I was living in Oregon when I started collecting it. Then, the State of California was taken to court on the issue, and it was determined they could not collect income tax if you were no longer a resident. (They didn't make it retroactive, however ;-)

    Earning money placed into a retirement account while you were employed in CA was not the same as having income in CA, if you received that income when you were no longer a CA resident. It was nice not having to pay both OR and CA on that small income.

  2. Once enough "Law Enforcement" officers AND THEIR FAMILIES are rotting in hell, things will change. Not one minute before then, however. For it is THEY who are playing Praetorian Guard, in direct violation of their oath to the Constitution. And "their families" is their OWN Rules of Engagement...

    1. Correct.
      The *war* will be waged on your front door step by the soldiers stupid enough to be employed by the state to practice immoral behavior against you. When those soldiers start being killed one by one eventually the remainder will change their behavior and not one second before.

    2. Unless one is smart enough to take the war to the soldiers OWN homes. Free late-night cocktail delivery is, after all, in accordance with their OWN Rules of Engagement. And it doesn't disturb the neighbors until AFTER you leave...

  3. Two things should happen for every person in this country to stop the taking of money from account without your permission:
    1. Make sure you give the bank a security agreement wherein they must contact you before any money is taken from your account by any third party.
    2. DO NOT...DO NOT...DO NOT sign the signature card!

    1. No bank in the US will agree to such a thing.
      Banks are not on your side.

    2. Which are you referring to? 1 or 2?

      Also, why are you using a bank?

      Try a Credit Union.

  4. Spoke to this a couple of days ago via Zerohedge:

    Glad to see that you picked it up as well. The US seems to be hallowing out at an increasing pace.

  5. Interesting, from another standpoint. We had a checking account with SunTrust here in Florida. We closed the account and went with a local credit union. Over two months after the SunTrust account was closed, we got a bill from them for $224.64, which "includes a $30 Charge-Off Account Fee." Seems like we had a service which had an automatic renewal set-up, and over a month after we had closed the SunTrust account, but before we remembered to change the automatic renewal to the credit union account, the service billed SunTrust, and they paid the bill. From a closed account. Interesting.

    We have refused to pay the bill, and asked them why they would have paid out money from a closed account, and we're getting some run-around about the "government rules that MAKE them pay on contracts existing when the account was closed." IOW, since we never changed the payment information on the service, the bank was FORCED to pay the bill. The charge has now been turned over to a collection agency, but we have thanked the bank for giving us this free money. Since we are in Chapter 13 bankruptcy, they're going to have a hard time collecting.

    1. I closed an account with SunTrust in Cape Coral, FL in 2002 because they *lost* $7000 of my money and took 3 weeks to *find* it. 4 years later I moved to another state and tried to open an account with Fifth-Third and was told they cannot open an account for me because there are outstanding balances on a SunTrust account. SunTrust made an error when closing the account and a balance was due them and they never notified me. Then in 2004 Wachovia bought SunTrust and never notified me but rather blacklisted me with the banking industry. I had to pay $800 to a collection agency to unblacklist me so I could open a new bank account.

      The banks are increasingly making themselves unaccessible for smart people.

  6. “There is science, logic, reason; there is thought verified by experience.
    And then there is California.”
    - Edward Abbey

  7. SG,

    Had the #2 experience w/ Virginia awhile back & it was quite interesting. They informed me that since I had once resided there I owed them back taxes, should send same post haste, & if I had any questions I should use the 800# provided. Being the curious type, I rang them up & informed them that as I'd never been in/thru/over VA I had no idea what they were talking about & could they furnish me w/ more info. That caused the person on the other end a bit of confusion ("Are you SURE?") which was followed by a (ever so nahs) request for my BC/SSN#/DL#/VL#/Fed & state tax returns & utility bills from the period in question to "establish that you've never been here @ any tahm, okay?". I wasn't supposed to notice that my request for particulars was ignored but was supposed to comply and give up what they wanted like a good lil' feller. When I reiterated my request for the particulars that made up their contention before proceeding any further, the tone changed ever so subtly from Southern conversational (Hah, howr yu doin' today & how may ah help yu?) to the impatient one teachers reserve for impudent children & a restatement of what they wanted to "clear up this matter". A repetition of my request caused the 'lady' to become rather icy in demeanor & ask me if I was refusing to co-operate which could result in all manner of unpleasant financial, & quite possibly penal, consequences. Temptation is a turrible thing. There was quite a fight between my good side that wanted to be nice & try to reason w/ this functionary & settle their mistake in a civilized manner, & my 'bad' side that essentially wanted to declare MOLON LABE & wait for the cops to show up & try to send me to VA for trial on tax evasion/fraud, illegal frottage, unlicensed public nudity, & whatever else they could/would try to hang on me, & after proving my veracity I would file suit & have my very own state to play in. Long story short, after repeated requests for what they had, I was passed higher up the CoC where I used the 'nuclear option' & suggested that identity fraud might be behind this misunderstanding & perhaps they should get a description of the person they claimed I was & I would provide some limited bona fides. That possibility seemed to put a hitch in their bureaucratic gitalong, & facing the ever more obvious realization that they were dealing w/ someone who just might be right, is onery enough to take them to court, prove the BS nature of their case & expose the tactics they used & (GASP!) actually win, we came to an swift accomodation & after 2 more minor skirmishes (1 of which entailed my informing them that CA doesn't keep tax records over 5 years old & giving them the name/# of the person @ the FTB who told me so) our business concluded & I received 2 separate missives from VA confirming that I indeed owed them nada, that it was all a misunderstanding, that I no longer constituted a threat to the Commonwealth, was herewith restored to my previous status as a good/decent/honorable person & as such was welcome to visit VA anytahm.

    Not flippin' likely, hon.

    Cassandra (of Troy)

  8. I am surprised they let you go on the "unlicensed public nudity" thing...


  9. Atlas is right - Credit Unions are non-profit, member owned financial institutions that pay more, charge less (or nothing; free checks, free services)and don't act like insufferable swine when you do business with them. If every eligible person closed their BOA account and joined a CU, it would have an impact.

  10. Yeah, Cheesy, Atlas (and you) are both right about your local CU vs. the big banks. I need to follow my own advice on that.

    This comment thread has been so good, I haven't wanted to mess with it. Although I gotta say I got the biggest laughs out of Anon 3/22 11:15A (Cassandra of Troy).

  11. one of my family members recently had the California FTB STEAL $$ from her bank acct,
    completely unjustified!!
    fortunately, she was able to get her money back after a struggle - -
    there are many posts from other victims of the California
    Franchise Tax Board -
    Adrian Vance: The California Franchise Tax Board Steals
    Without Explanation, Notice or Apology

    by Stephen Frank on 08/18/2013 · Comments (88)


    also see
    Freedom Law School beats California's Franchise Tax Board for trying to illegally take money -

  12. Well I have received a notice from CA FTB which states that I have thirty days to either file or pay up. Somehow they say I sold 20k worth of stock one year. Which I did not. The notice is dated Jan 21. The due date is Feb 5. So much for my thirty days. I'm pretty sure the IRS would have noticed that I made this transaction. I am closing all my accounts by Feb 4th. I called and was given a thirty day extension, till Feb 28th. Yeah I did the math too. She said I could just set up payments for the 11k+m and I said why? I don't owe you anything. I don't know where you got this info but it is incorrect. The company that supposedly filed on me no longer exists, and the year that they also said I owed taxes for and filed to prove I did not, was not showing on their records. She then wanted to know did I still have accounts at this bank and that and what was my income? This fells very fishy and I need some help. I live in Virginia.

    1. Hope you've had some luck or positive changes to your situation.

      I've posted this comment (all comments to posts over two weeks old are moderated), but this thread is just short of two years old.

      Should you be back to see if anyone has answered, a more recent post on the subject is here. That one is also more than two weeks old.