A client, whose business we helped a few years ago came back with an interesting problem; they had a trial concerning EDD, employees (non-existent) and Taxes the Government claimed they owed. The client had previously requested our assistance in this matter, however, as many of you know, we do trials, not tax work.
Our client, under our advice, hired a firm that concentrated their work in tax law. Unfortunately, the tax law firm was unable to convince the auditor and EDD of the truth regarding our client’s positions. The Government made erroneous determinations that, our client had employees, that our client failed to report these employees, that our client failed to pay taxes for these employees, that our client failed to withhold unemployment insurance payments on behalf of these employees, and of course the demand for interest payments and penalties. In short, the Government was demanding close to $200,000.00 for non-existent employees.
Due to the impasse, trial was set. Our client lost confidence in the tax firm and hired to “do the trial.”
The Tax firm created a 10-volume file, thousands of pages, for the court, mostly redundant and contradictory filings. The Administrative Law Judge was not happy with our client; and prior counsel’s attempt to “bury the court” with paper.
Our client was in the unenviable position of having to prove a negative; that the people identified by the Government were not employees. Unlike most cases where the government wishes to take your property, the burden shifted once the government made its findings. We had burdened to prove the government’s allegations were wrong. The trial started with two major problems for us; the judge was not at all happy with the 10 volumes of paperwork submitted by prior counsel and the presumption that the government was correct. In essence, we came into trial with the presumption of guilty and we had to overcome the court’s bias in favor of the government.
Working diligently to get through the ten files containing thousands of pages of documents, we were able to cull the evidence down to approximately 150 pages of exhibits. Along with the testimony of our clients, tax records and the 150 pages of exhibits; our clients prevailed over the government’s case.
We proved that the government’s case was based on conjecture, assumptions and plain old fairy tales concerning the phantom “employees.” We overcame the shifted burden and proved to an Administrative Law Judge that our clients were correct. We proved there were no employees therefore the taxes claimed were not owed. Since there were no employees; no penalties could be imposed. We had proven the negative. All it took was hard work, a concise trial, and concise exhibits. Burying the court with paper was not and never is the winning strategy.
Once again assisted a client in their battle against the government. If they are from the government, they probably are not showing up to help you. Call on a team that has shown; you can fight “City Hall.”
Once again, a great trial win for our clients and . Don’t be intimidated by the government, but don’t fight them on your own. Contact to see if we can help.