Friend with massive tax debt is getting married. Train wreck coming?

[SlickyBoy]

A serial fornicator friend of mine is finally tying the knot, with a stereotypical western white woman in her mid 30s who works a high paying job in big tech (one of the FAANG companies).

He just turned 40. Career and money for him has been sporadic, and he demonstrates over the top narcissistic tendencies (I stress that last bit does not mean he's a bad person). They are both spiritual basket cases coming from formerly protestant families with modern secular lifestyles. Each has a therapist and a prescription or two.

I've attributed him getting married to his inner voice telling him he's running out of options. Of course, for her, a mid-30s career woman is already nearly out of options in terms of family formation, so the train wreck risk factor is already high.

But it gets worse - I found out quite by accident that he owes a massive amount of money to the IRS (American tax authorities) to the tune of about a quarter of a million dollars, with some more owed to state tax authorities. The thing is, I don't think his fiancee knows. She's not hurting for cash, but just the same if they get married and file a joint tax return, that tax debt will become attached to her in some respects. Knowing who he is, she has zero idea as he's not told her about the numerous judgments against him.

I'm not about to get involved, but situations like this still frustrate me. He's gliding through life thinking the IRS is never going to catch up to him and his cavalier attitude could take down others around him.

Just wanted to air it out - any thoughts appreciated.

 

[Pointy Elbows]

Yeah, best stay off the tracks. He should tell her, but I understand you staying out of it unless you're asked.

I've been audited a few times, but never with much behind, just accounting disagreements. Came out with money back once. He won't enjoy the audit.

I had a now-deceased friend that was cavalier with the IRS. He kept blowing off the auditor, stalling, etc. One day the guy called him and told him to get to the office asap and settle up. So my buddy, being who he was, drove straight to his bank to withdraw as much as possible. In that 15 minute window, all of his finances were locked up. Only money he had was cash in his wallet. His banker told him "nothing we can do, you better get to the IRS office."

If he is that far behind, then he's probably made some real money at times past. Time to sign a Power of Attorney to his accountant and clam up.

Edit - One thing I learned is that most IRS auditors are NOT Certified Public Accountants. It is usually their Supervisor that is a CPA. My accountant was far more competent on all technical matters than any auditor I've had. Also, my 60+ year old accountant had a direct line to the local Supervisor's office (they had consulted many times before) and could get through the confusing stuff pretty quick.

In recent years, there is also a kind of "taxpayer's clearing house" that is supposed to help represent the individual's interest and argument to the IRS. This is a federally funded function. I haven't really used it, so don't know how good it is, but it might at least buffer some things for him.

 

[magaman]

A serial fornicator friend of mine is finally tying the knot, with a stereotypical western white woman in her mid 30s who works a high paying job in big tech (one of the FAANG companies).

He just turned 40. Career and money for him has been sporadic, and he demonstrates over the top narcissistic tendencies (I stress that last bit does not mean he's a bad person). They are both spiritual basket cases coming from formerly protestant families with modern secular lifestyles. Each has a therapist and a prescription or two.

I've attributed him getting married to his inner voice telling him he's running out of options. Of course, for her, a mid-30s career woman is already nearly out of options in terms of family formation, so the train wreck risk factor is already high.

But it gets worse - I found out quite by accident that he owes a massive amount of money to the IRS (American tax authorities) to the tune of about a quarter of a million dollars, with some more owed to state tax authorities. The thing is, I don't think his fiancee knows. She's not hurting for cash, but just the same if they get married and file a joint tax return, that tax debt will become attached to her in some respects. Knowing who he is, she has zero idea as he's not told her about the numerous judgments against him.

I'm not about to get involved, but situations like this still frustrate me. He's gliding through life thinking the IRS is never going to catch up to him and his cavalier attitude could take down others around him.

Just wanted to air it out - any thoughts appreciated.

Yes. Major train wreck coming. Just the first paragraph alone told me most of what I needed to know. I would stay way clear unless this guy is like your absolute best friend but even then all I would do is give him the best advice you can and it’s on him to take it and do better for himself and the new wife. You don’t want to be involved in this mess when it blows up.

 

[eradicator]

I see your point but it’s not your problem. If he asks your advice sure tell him what you think but otherwise you don’t want to be talking to either of them about this.

 

[PolishCalifornian]

It sounds like you are hoping to help him avoid this one, big, catastrophic mistake. Given the apparent series of mistakes he has been making for decades, the best you can do is pray for him. Even Jesus befriended sinners, but he didn't enable their sinning, maybe some tough love by creating some distance is the best you can do to help him. In my experience people like these aren't interested in unsolicited advice.

 

[Nordwand]

A serial fornicator friend of mine is finally tying the knot, with a stereotypical western white woman in her mid 30s who works a high paying job in big tech (one of the FAANG companies).

He just turned 40. Career and money for him has been sporadic, and he demonstrates over the top narcissistic tendencies (I stress that last bit does not mean he's a bad person). They are both spiritual basket cases coming from formerly protestant families with modern secular lifestyles. Each has a therapist and a prescription or two.

I've attributed him getting married to his inner voice telling him he's running out of options. Of course, for her, a mid-30s career woman is already nearly out of options in terms of family formation, so the train wreck risk factor is already high.

But it gets worse - I found out quite by accident that he owes a massive amount of money to the IRS (American tax authorities) to the tune of about a quarter of a million dollars, with some more owed to state tax authorities. The thing is, I don't think his fiancee knows. She's not hurting for cash, but just the same if they get married and file a joint tax return, that tax debt will become attached to her in some respects. Knowing who he is, she has zero idea as he's not told her about the numerous judgments against him.

I'm not about to get involved, but situations like this still frustrate me. He's gliding through life thinking the IRS is never going to catch up to him and his cavalier attitude could take down others around him.

Just wanted to air it out - any thoughts appreciated.

As you've already said, stand well clear. Whatever you do, don't say anything to her as if she realises that you knew, you'll be as guilty, in her eyes, as he is.

 

[Viktor Zeegelaar]

It sounds like you are hoping to help him avoid this one, big, catastrophic mistake. Given the apparent series of mistakes he has been making for decades, the best you can do is pray for him. Even Jesus befriended sinners, but he didn't enable their sinning, maybe some tough love by creating some distance is the best you can do to help him. In my experience people like these aren't interested in unsolicited advice.

In fact, a trainwreck could be to the benefit of this person. Exactly what he needs, sad as it is. Stories like these though make you realize what a mess the secular world is. Moreover, why marry if you're secular? What's the upside of it? I don't see any reason for secular people to marry to be honest.

 

[SlickyBoy]

In fact, a trainwreck could be to the benefit of this person. Exactly what he needs, sad as it is. Stories like these though make you realize what a mess the secular world is. Moreover, why marry if you're secular? What's the upside of it? I don't see any reason for secular people to marry to be honest.

This is what had me thinking the worst. Given the sporadic nature of his work history and her golden handcuffs job at Big Tech, he probably sees this marriage as a financial jackpot. He incorrectly assumes the IRS thing will never come to hit him.

The IRS debt came from a business he had where he was paid to consult, probably receiving payment in large checks from the prime contracting company for a large enterprise. The idea is supposed to be you pay taxes on that amount but he didn't get the memo and treated it like a large regular paycheck.

I actually got a call from a credit card company mistakenly asking me about a debt that was his. I let him know about the call, he said he basically just shut his operation down and never bothered paying the debt.

Even after I told him he'd probably be able to negotiate a lower amount, pay it and get it off of his credit report, he acted like "Nope, nothing to worry about - the company is shut down, there's nothing there; no money." Ohhhkay.....

It would be one thing if he declared bankruptcy and got a judgement releasing him from all debts of the business, but he just folded operations and somehow thinks there's no debts to worry about, including taxes. So, his personal credit is probably trashed but she's got a big pile of money from being well paid - especially through covid work from home.

He still has a decent paying job from what I understand, but whenever they make a major financial decision these skeletons will walk right out of the closet. Not my problem, but not something I like to see happen to someone unsuspecting either.

 

[Blade Runner]

Speaking in the realm of this issue, what general number do you think these people even bother coming after? Or is it a combination of an inquiry and a guy being in a fairly high tax bracket? I'm always curious what comes back to people that doesn't immediately smack some idiot in the IRS (or their computer) in the face, such as a big gambling win report, or something ...

 

[Pointy Elbows]

I actually got a call from a credit card company mistakenly asking me about a debt that was his. I let him know about the call, he said he basically just shut his operation down and never bothered paying the debt.

Say what? How on earth did they mistake his debt for yours? Most debts are tracked by social security number or Federal EIN...

Were you in business with this man at any point? Or did he get ahold of your SSAN somehow?

Bankruptcy court is usually the only place to avoid creditor debt (but it doesn't protect against tax debt). You can't just close up shop, stiff your vendors, and go to work elsewhere without consequence.

 

[Pointy Elbows]

Speaking in the realm of this issue, what general number do you think these people even bother coming after? Or is it a combination of an inquiry and a guy being in a fairly high tax bracket? I'm always curious what comes back to people that doesn't immediately smack some idiot in the IRS (or their computer) in the face, such as a big gambling win report, or something ...

My gut instinct is they are looking to get at least 10k back per audit, implying a higher tax bracket or multiple years of hidden income. Their algorithms compare lots of metrics, which then flags your filings, which then gets a cursory review, then they make a call to open an audit or not.

It can change a lot by administrative guidance set at federal level. If you own a small business and declare a large pay-cut in a given year, it will often trigger a review. I've had 50% down years and it seems like these are the years I'm more likely to get audited than are the good years. I think they are convinced I'm hiding income. Usually, I just hired someone and have yet to receive profit from their service (think a high end sales rep in a niche industry). Either that, or I had to replace old, beaten equipment and had a lot of depreciation (accelerated in some cases).

If you depreciate a lot of hard assets, that gets attention. Of course, lots of cash deposits or withdrawals will trigger a review. I don't gamble, so don't know about windfall triggers.

In Slicky Boy's friend's case, it sounds like he just took his consulting earnings, failed to report the income (and pay taxes on it), and figured he would skip. Unfortunately for him, his customers filed a 1099 report to the IRS, declaring their payment to him. If his personal report does not contain EVERY 1099 sent by every client that paid him, then that is a BIG flag. That's all speculation, but it seems to line up.

Edit - Another thing that gets a lot of IRS attention is when you are the only person that handles your business' money. If you are a one man shop, then obviously that is unavoidable. But the opportunity for you to hide income goes up a lot, as many business owners will simply hold back cash payments (steak dinner tonite!). If you have multiple points of sale, with multiple people creating deposits, then the odds that you are under-reporting income goes down. Odds go up that you are subject to employee theft - but that is your problem, not the IRS'. Also, if you ONLY receive cash payments, then that is a flag. If you receive checks, credit cards, etc., then that reduces likelihood that you are hiding much.

 

[SlickyBoy]

In Slicky Boy's friend's case, it sounds like he just took his consulting earnings, failed to report the income (and pay taxes on it), and figured he would skip. Unfortunately for him, his customers filed a 1099 report to the IRS, declaring their payment to him. If his personal report does not contain EVERY 1099 sent by every client that paid him, then that is a BIG flag. That's all speculation, but it seems to line up.

This is exactly it - he didn't get audited, I don't think, or he'd probably be less cavalier about the whole thing. I suspect he under reported or completely did not report the income, so the IRS and the state tax authorities sued and got multiple judgments. I ran across those judgments doing other unrelated legal research about a year ago.

From what little I know about tax judgments, for the IRS to reach the personal assets of the individual behind a corporation (his business entity was a C corp), they have to follow the state laws for piercing the corporate veil. That means once they can prove enough flaws in the corporation (example - not filing corporate documents on time, not having annual reports and meetings, etc.) they can sweep away the legal fiction and go right to the assets of the individual. I know for a fact he was very lax about all of that, so I suspect it's only a matter of time before they can proceed with going after his house and whatever else can be seized and auctioned. He never declared bankruptcy and I don't think he understands why it's an important distinction from just running away.

As for how the credit card company got my info, yes, we did some work together and at one point I had a credit card for his company, but rarely used it, and only for business. One day I get a call and the first thing the guy says it that I'm not responsible for the debt but he's having trouble reaching my friend. The amount of money wasn't even all that much - about $4k - and should have been easy to negotiate. But even after talking to my friend about it he acted like they couldn't touch him. For a small business to get a credit card it usually depends upon the credit history of the business owner, so this will negatively affect his personal credit.

I also found out he didn't pay some legal bills for work by a law firm, one run by a mutual friend of ours. I confronted him about that too, and he swears he paid the whole thing, on time. I believe the law firm, but no point in arguing, he knows what he did and did not do.

Finally, the past month or so he's been sending me random screen shots of him supposedly making tons of money on day trades. WTF? He subscribes to some service that's little more than a get rich quick scam to convince people they can buy a lambo after six months of day trading. The guy running it has a sordid history of questionable businesses and no real indicator of trading acumen.

As someone with experience in the markets, the trades where my friend claimed huge profits were easily recognized as highly unlikely or flat out impossible (I checked the numbers). The behavior was bizarre - he's never shown any interest in the markets at all but now sends screen shots as if he's Jordan Belfort.

It's yet another wrinkle to a narcissistic trend that doesn't seem to be mitigating with age. Again, it's not my problem, but it's still very unpleasant to witness.

 

[Pointy Elbows]

Train wreck, indeed. Having lost judgements already and still avoiding paying the man... Maybe he can work out a payment plan. The Feds would rather keep him alive and making money than crush him out in one turn.

Still, if he avoids it all, then he'll wake up some day with his accounts locked up. Financial institutions simply get served a notice by the Feds to freeze an account, and it is done immediately. No negotiation. The government may be slow, but the wheels don't stop.

Good thing you got away from him when you did, biz wise. Collection agencies/firms are now asking for ALL kinds of contact info. I turned an account to collections this year and they wanted contact info on friends, family, other vendors, ex-wife... The guy is a problem customer and I was happy to unload him, but was surprised at how aggressive they were.

 

[SlickyBoy]

Train wreck, indeed. Having lost judgements already and still avoiding paying the man... Maybe he can work out a payment plan. The Feds would rather keep him alive and making money than crush him out in one turn.

Still, if he avoids it all, then he'll wake up some day with his accounts locked up. Financial institutions simply get served a notice by the Feds to freeze an account, and it is done immediately. No negotiation. The government may be slow, but the wheels don't stop.

Good thing you got away from him when you did, biz wise. Collection agencies/firms are now asking for ALL kinds of contact info. I turned an account to collections this year and they wanted contact info on friends, family, other vendors, ex-wife... The guy is a problem customer and I was happy to unload him, but was surprised at how aggressive they were.

My business relationship was brief and limited, so way the credit card people can legitimately come after me. It's the IRS bullet I am glad I dodged. If my names were on any official documents or anything showing controlling interest, I'd probably be screwed too.

Now that you mention it, I am wondering how much longer the IRS will wait to start taking action against the defunct corporation and come after his assets. There are already liens against the defunct business entity. Once they get past the corporate veil, the next step would be a levy on everything they can reach - bank, vehicles, real property, etc. There are rules they have to follow and time limitations, but I would be surprised if they let go, given the amount owed.

I got curious and checked the court records - lo and behold, the credit card company also tried to take him to small claims court a year or so ago. The records show they tried to serve him twice, once electronically and once by sheriff at his address, but both times the reason listed was "moved" or "not living there." I know for a fact he still lives at the same address, so I don't know how he dodged the in person summons - unless maybe his fiancee is in on the scam and lied about him no longer being at that address?

I hope that isn't the case, but if so, well, they're made for each other - to hell with both of them.

 

[Pointy Elbows]

Dodgy small business customers (mostly contractors) are a specialty of mine!

I've had customers that re-incorporated 3 or more times in 10 years. Sometimes, they drag in a new "Partner," get him to sign the personal guarantees with vendors, run up a tab, and stiff the new guy. I've twice seen brothers do this to each other! Of course, they do the same thing with taxes. Everybody is a partner when the money is coming in. Everybody disappears when it's time to pay the bills.

You dodged a bullet, staying out of any interest other than as an employee with a card. Good for you.