Being Illegal - A California Cautionary Tale

Business By FromScratchSF Updated 23 Jan 2013 , 7:01am by howsweet

Spuddysmom Posted 16 Mar 2012 , 5:49pm
post #31 of 61

Recently, I dropped off some "thank-you" cookies for my DH's nurses. After seeing them, a caterer approached me(with her business card) about supplying her with cookies. I explained that I am only a hobby baker, cannot sell from my home while waiting for WA state cottage food law to do inspections. She gives me the ol' wink and nod and says, that's okay, my clients are high-end, you will make lots of money..just "donate" to me and I'll "donate" some cash to you... walked away wondering how crazy she must be to be willling to endanger her business by using someone unlicensed...
I think this is an interesting story, sorry for "Dave" and sorry in a different way for Maude... the IRS will make her life very difficult so it is hard to believe that a mentally healthy person would be willing to risk their wrath.

cms2 Posted 16 Mar 2012 , 6:24pm
post #32 of 61

Let's play charades...sounds like, rhymes with..lol....come on we're dying here icon_twisted.gif

BizCoCos Posted 16 Mar 2012 , 6:46pm
post #33 of 61

@ScratchSF, no, don't regret it, you may probably help a lot of new business owners or even established owners in the long run. I too am a trusting person but have learned over the years to see "the proof". bobby flay is a good example, yes, most people would run to do business with him, but in my career (non-cake), I learned that although Bflay may be innocent, his people might not have crossed all their t's. Again, as a matter of course, ask to see the proof.

costumeczar Posted 16 Mar 2012 , 6:53pm
post #34 of 61
Quote:
Originally Posted by FromScratchSF

I can say I'm regretting posting this thread to begin with, that's for sure.




Don't regret posting it, it's definitely something that people need to think about.

But you're right that if someone has product in a million places and had a lot of media exposure, it's likely that people wouldn't do as much checking as they'd do if it was someone unknown. My husband would make me check, but he's an auditor for a commercial finance company, so he sees that loads of companies that look totally financially sound are really skirting IRS laws, not paying into social security for their employees, etc etc. I probably wouldn't even think about it.

hesacat Posted 16 Mar 2012 , 6:56pm
post #35 of 61

hmmm...

soda = coffee
marshmallows = cupcakes?

FromScratchSF Posted 16 Mar 2012 , 7:05pm
post #36 of 61

The regret comes in because I can't give full details so it makes it even harder to say what I mean without just saying all that I know!

kakeladi Posted 16 Mar 2012 , 7:24pm
post #37 of 61

Please don't regret the posting. Even though I am no longer in business, or baking anymore, I for one would have done exactly as Dave did - not investigate but assumed everything was on the up and up w/Maude given her 'fame'. Yes, the Bflay line is exactly how I would think of things.

Annabakescakes Posted 16 Mar 2012 , 7:27pm
post #38 of 61

Add me to the list of peeps dying to know who in the hell is that stupid!!!

Cakery2012 Posted 16 Mar 2012 , 9:41pm
post #39 of 61

@SF no dont regret posting it . I think it should be taken as an examp

scp1127 Posted 17 Mar 2012 , 5:15am
post #40 of 61

This is slightly related, but it is mainly a story for those illegals out there and to those who don't pay taxes.

Several years ago I got a knock on the door and had my accounting books seized by the IRS. They already had my bank statements for the past few years without my knowledge. I and about ten people did business with a company charged with tax fraud. It ended up that my books actually confirmed his fraud and I spent two years (but only about twenty meetings) with federal prosecutors while they asked me every conceivable question about my business and accounting procedures. I then had to testify for two days about my accounting practices. In this investigation, they obviously looked at all of our business practices. Mine was the only one with not one penny out of place. The other witnesses had fines and penalties just because their books were needed for something else.

When I post about business practices or the Feds and their procedures, it is because while I was helping them, I picked their brains too. I learned so much from that experience.

So while those of you who have less than spotless business practices think you are above the law, you can get that knock on your door for something totally unrelated and find yourself knee deep in hot water with the IRS.

In my situation, the business I was dealing with was legit, but the tax returns were fraudulent.

costumeczar Posted 17 Mar 2012 , 12:49pm
post #41 of 61
Quote:
Originally Posted by scp1127

This is slightly related, but it is mainly a story for those illegals out there and to those who don't pay taxes.

Several years ago I got a knock on the door and had my accounting books seized by the IRS. They already had my bank statements for the past few years without my knowledge. I and about ten people did business with a company charged with tax fraud. It ended up that my books actually confirmed his fraud and I spent two years (but only about twenty meetings) with federal prosecutors while they asked me every conceivable question about my business and accounting procedures. I then had to testify for two days about my accounting practices. In this investigation, they obviously looked at all of our business practices. Mine was the only one with not one penny out of place. The other witnesses had fines and penalties just because their books were needed for something else.

When I post about business practices or the Feds and their procedures, it is because while I was helping them, I picked their brains too. I learned so much from that experience.

So while those of you who have less than spotless business practices think you are above the law, you can get that knock on your door for something totally unrelated and find yourself knee deep in hot water with the IRS.

In my situation, the business I was dealing with was legit, but the tax returns were fraudulent.




Yes, yes, yes. I don't have this experience myself, but as I said, my husband audits small companies that are high-risk, and need commercial finance loans instead of bank loans. He'll come home saying that he found out the owner of this or that one hasn't been paying payroll taxes, or that this one is behind on income taxes, and he's the one that found out. There was one that was working on two sets of books, too. They've had to go to court several times to testify about what they found so that the lending company that he works for wouldn't be involved in whatever fines were going to be involved.

scp1127 Posted 17 Mar 2012 , 8:20pm
post #42 of 61

One of my majors in college was accounting, so I have always known the consequences of not being on the straight and narrow of business. But those two years with the Feds was the best education I ever got in business. They were so nice and answered all of my questions because my books gave them what they needed to seize this person's property and charge him.

The first thing they do is match your tax returns against your bank accounts. This is before they come to see you. If you have more than a few birthday checks from Grandma, you have trouble. You know that 7 year rule for the IRS? Well, if they find even one penny of fraud, they can then go back to the "day you were born". to look for fraud. That is a direct quote.

All they found in my books were multiple recordings of business transactions that did not appear in the defendant's books. This gave them the ability to not only charge the man, but to also go deeper and farther back.

So you can't use your bank account. Read further to see why cash isn't safe either.

Another tidbit from thr Fed prosecutors: Almost all tax evaders are turned in by their customers. So when you accept only cash, your customers have a good idea about what is going on. They buy from you, but they resent it. They pick up the phone and report you. My ex-husband was doing some cash deals in his business. We were already divorced but he reported much lower on his tax returns than actual income and that affected my child support. On two different occasions, people who worked with him called me and told me because they were irritated about his unfair business practices. I didn't turn him in, but my daughter's college is being paid by him voluntarily.

People who pay taxes and work witin the law concerning licensing get irritated by those who cheat.

step0nmi Posted 17 Mar 2012 , 8:40pm
post #43 of 61
Quote:
Originally Posted by FromScratchSF

The regret comes in because I can't give full details so it makes it even harder to say what I mean without just saying all that I know!




and you're saying a lot! icon_rolleyes.gif I would be cautious as to let out anymore info and it might make you more involved than you want to be when stuff goes down icon_wink.gif

johnson6ofus Posted 25 Mar 2012 , 12:27pm
post #44 of 61

Regarding "Bobby Flay" and "Maude"... remember, that is how Bernie Madoff scammed millions. "He too big to be illegal...." icon_eek.gif And if you read stories about his "business", he actual used that type of "proof".

We should all be reminded why good , legal and "straight as an arrow" business practices may save us some day! Great post- but I did and dying for the details...

Sparklekat6 Posted 30 Mar 2012 , 11:57pm
post #45 of 61

Can we know yet? ::insert big hopeful puppy dog eyes here:: icon_smile.gif

FromScratchSF Posted 31 Mar 2012 , 12:13am
post #46 of 61

Nope. Sorry. This may take months before it comes out.

JWinslow Posted 31 Mar 2012 , 12:48am
post #47 of 61

SF, I really appreciate your post. As I am a home baker and constantly have people wanting to pay me - it helps me stick to my guns until I am. I have had people shove checks in my face which I have given back. Maybe it's just me, but as much as Food cottage Laws will most likely be my best start, I also think they have the potential of complicating so much because the rules vary. Still researching.... I am currently reading the PA codes.

JWinslow Posted 31 Mar 2012 , 12:59am
post #48 of 61

I meant to type Cottage Food Laws - sorry

DragonFly2333 Posted 11 Aug 2012 , 5:19am
post #49 of 61

Ok....4+ months since you last posted.....are we any closer to getting the name?

Pearl645 Posted 12 Aug 2012 , 1:55am
post #50 of 61

Hmph. What a situation.

howsweet Posted 13 Aug 2012 , 2:36am
post #51 of 61

Only an idiot or insane person wouldn't pay taxes.

jason_kraft Posted 13 Aug 2012 , 2:39am
post #52 of 61
Quote:
Originally Posted by howsweet

Only an idiot or insane person wouldn't pay taxes.



Correction: only an idiot or insane person would evade taxes. Many very smart people legally avoid taxes on a regular basis.

howsweet Posted 20 Aug 2012 , 3:31am
post #53 of 61

Is that a joke? We were talking about tax evasion weren't we?

jason_kraft Posted 20 Aug 2012 , 3:37am
post #54 of 61
Quote:
Originally Posted by howsweet

Is that a joke? We were talking about tax evasion weren't we?



Yes, which is why I corrected your statement.

howsweet Posted 20 Aug 2012 , 3:45am
post #55 of 61

Huh? You don't think people knew what I meant? Holy cow...

DragonFly2333 Posted 21 Jan 2013 , 5:56am
post #56 of 61

we are approaching a year since you started this thread.....dropping a name yet?

FromScratchSF Posted 21 Jan 2013 , 4:15pm
post #57 of 61

Nope, sorry.  as it turns out lawyers have talent and the person got into a very large commercial kitchen.  the website still says their product is located in stores but I know it's not.  Anyway, I will not be adding the name of the person or the business to this thread.  Sorry!

FromScratchSF Posted 21 Jan 2013 , 4:16pm
post #58 of 61

But thanks for keeping watch!

-K8memphis Posted 21 Jan 2013 , 4:22pm
post #59 of 61

wow scary

 

but i sure as shooting would have asked for all the financials involved for any amount of investment

 

that is exactly one of the best reasons to me to not piggy back or rent someone else's kitchen/business

 

if i am renting how can i be sure they are solvent, legal or tax abiding

 

well i'd find out if they are legal because i would be inspected before launching and i know the different fire & health inspectors ask for licensing

 

but i still would not know if they are above board

 

sure though i've imagined 'renting' a kitchen and showing up to work and having my stuff padlocked in because they din do their taxes

yortma Posted 21 Jan 2013 , 5:02pm
post #60 of 61

Thank you OP for posting that excellent cautionary example. Most posters may have less to lose, but any legal actions could be ruinous or at the least a major headache.   As rare and unlikely as the mot serious consequences may be for smaller scale bakers, it is still appropriate to be educated.   Each person must then decide for themselves if and how to use the information. Thanks!

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