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Can anyone help me understand the implications of the Business Tax papers I've just received from the City of Oakland? I've taught private lessons and small group classes since 1985. I've paid my state and federal taxes religiously (and exhorbitantly), as well as a licensed tax preparer, who I've assumed was watching over my tax liabilities. Suddenly I've gotten papers from the City of Oakland saying they found me through my tax payment to the state,and that I need to send them the amounts of gross receipts for all years I've done business in Oakland so they can send me my bill for back taxes and penalties. I am in a terrible state of alarm, living very close to the bone, as I do, to be with my child. Does anyone have a helpful thought for me to be focusing on? They want the papers back from me in A WEEK.
One huge question for me: in one place on the form they ask specifically about gross receipts for 2000 to 2003, so I thought perhaps I could limit my responses to those years. But in another place it asks for the Business Start Date. Can I put 2000 anyway?--that is the year I organized my teaching into its present form. But even though it's a very different business in practice from what it was before, the business name has been the same since the beginning. Is it really possible that they would have me pay taxes back to the 1980's? Or for seven years if there's some kind of limitation? Is there any possibility that I'm not actually liable for this? Does it seem odd that my tax preparer would never have mentioned such an obvious omission from my state and federal taxes?--I assume that all relevant years would have to be re-calculated to take into account a whole new set of tax payments, for example. Am I scaring myself for no reason? For good reason?
Thanking anyone in advance for thoughts or advice.
Another Oakland Small Business
Best of luck!! - in the same pot
Yes, the tax rate is low, but there is $60 minimum tax (basically on the first $1 of gross receipts), there is a 25% penalty if you 2 months late to pay, there is a requirement to prepay it for one full year, and there is a no-maximum interest charged on tax and penalty @ 1% per month, forever till you paid. And yes, you can have a loss and owe tax on every dollar of your gross receipts - because it's not an income tax, it's a gross receipts tax on business.
Which brings me to my next point. If you, as you say, used services of a licensed CPA, then your contract definitely did specify which tax returns were being prepared. The universe of different taxes (all required to be filed and paid every year!) is so vast, no professional would ever enter into a contract to take care of all your possible tax liabilities. Do you file your use tax return every year with the state? What about business property tax return with the county (not personal, not real property)? There is such great variety of who could impose taxes on you, that it is unreasonable to blame your tax preparer for not having done what you never hired them to do.
And the answer to you last question - no, you will not need to redo any of your past year's tax returns. As a cash basis taxpayer, you will deduct whatever amount of Oakland business tax you pay, in the year you pay this tax (not in the year FOR which you pay this tax). Penalties are not deductible.
Not in the business of preparing city business tax returns,
Maria Ku, CPA
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