An ex-employee of a large real estate development company has filed suit against his former employer, alleging that the company used an illegal tax shelter process. The man in his suit claims that the California company owes over $500 million in tax debt. Once the company was alerted of the debt, the man alleges that the company instructed him and other employees file false documents to make it look as if the company had more debt than assets.
The suit alleges that the falsification of documents was done so that the company could attempt to negotiate a settlement with IRS officials. The new allegations arose after the man filed a civil suit last month, alleging that the company had violated labor laws and was involved in racketeering. The updated claims come in the form of an amendment to the original complaint filed last month.
Meanwhile, the company alleges that the man's suit is baseless. A spokesman for the company stated that he believes that the suit was filed to shelter the man from his own wrongdoing. It is unclear whether the company has filed a formal reply to the allegations.
Mounting tax debt can pose serious challenges for California businesses. Despite such debt appearing to be an impossible challenge to overcome, there may be ways for a business to take proactive measures to address the issue, while continuing to operate the business. Companies facing such a situation may benefit from seeking advice as to what options may be available to them. By constructing a plan on how to eliminate tax debt, a company can ensure that its financial well being is protected, while also satisfying the requirements of the IRS. It remains to be seen what effect, if any, the pending lawsuit will have on claimed obligations due for back taxes.
Source: San Jose Mercury News, "Seenos accumulated $500 million IRS tax debt, former business partner says," Matthias Gafni, Aug. 20, 2012