File: Youssef didn't report tax returns

This story was updated on Oct. 18, 2012.

State Senate candidate Josh Youssef did not file federal income tax returns for at least four years and, as of February, owed the IRS $60,000, according to court records unsealed yesterday at the Monitor's request.

Those records also show a "significant net operating loss" for Youssef's computer repair company, Same Day Computer, which he describes on his campaign website as "the largest computer repair and upgrade franchise system in the Northeast."

Youssef, a Laconia Republican, is campaigning on his record of starting and growing small "Main Street" businesses. Same Day Computer's net operating loss was $107,372 in January and $81,471 as of February, according to the unsealed records.

Those records are part of Youssef's divorce file, and they are the most recent financial affidavits he has filed. The records also show that Youssef owes his company $5,000 and his parents $200,000.

Youssef declined yesterday to explain why he did not file tax returns between 2004 and 2008, as he indicated in his financial affidavits. When asked, he replied in an email, "The tax returns are all filed with the IRS."

He also said by email that his company's net operating loss and debt to his parents are "not a dispositive indicator of any kind of responsibility or irresponsibility" in managing a business.

"My business is not in debt - not even one penny, with the exception of a small vehicle loan," Youssef wrote. "My business has sustained accounting losses as a result of such accounting events such as depreciation of assets. There is a stark difference between debt and losses."

Youssef, however, has said in court records that his company has no assets beyond "incidental tools and furnishings." And he did not claim any depreciation expenses on his tax returns from 2006 to 2009, according to court filings.

When asked to help a reporter understand his accounting explanation, Youssef said he couldn't.

"I am not qualified as an accountant so it would be inappropriate to offer any material insight into accounting details," he wrote. "All accounting for my company has been conducted by qualified tax professionals."

Youssef is competing for the District 7 Senate seat against Democrat Andrew Hosmer of Laconia, who is the general manager of AutoServ in Tilton. The District 7 seat represents Franklin, Laconia, Andover, Belmont, Boscawen, Canterbury, Gilford, Northfield, Salisbury and Webster.

The Monitor asked Laconia's district court to unseal Youssef's financial affidavits because he is running for elected office and has repeatedly refused to discuss the details of publicly available court records that indicate he owes the IRS and his 8-year-old son thousands of dollars.

Youssef is not accused of missing child support payments. Instead, a judge ruled in March that Youssef has been under-reporting his income as the court was calculating his child support obligation. Judge James Carroll concluded that Youssef was using his business to cover personal expenses and noted that in four years, Youssef claimed nearly $40,000 in ATM withdrawals as business expenses.

"The court questions the size of the ATM withdrawals for strictly business purposes," Carroll wrote in March. "Said representations undermine (Youssef's) business claims and they further call into question (his) calculation and characterization of his income."

Carroll ordered Youssef to pay his son an additional $17,000 in child support to make up for the under-reported income. Youssef is not disputing that temporary child support order. According to court records, Youssef had disputed pending court orders to release additional financial information about his business so the court can calculate his income and issue a final child support order.

The Monitor filed a motion to unseal Youssef's affidavits in late August. Youssef and his attorney, Jonathan Springer of Portsmouth, objected. The court was scheduled to hear arguments on the matter this week until Youssef and his attorney agreed to release the records. The Monitor received them yesterday afternoon.

In March 2009, Youssef told the court he had not filed a tax return since 2003. In September of that year, he updated the record and said he had filed a return for 2008. But attorney Ed Mosca, who represents Youssef's ex-wife, has disputed that in court. Mosca has argued in court that Youssef didn't start filing tax returns until 2011.

The IRS began garnishing Youssef's wages in January, according to the records.

Youssef declined yesterday to say what initiated the garnishment by the IRS. He also noted that his recent financial affidavit was filed in February, eight months ago. But he declined to say whether he still owes money to the IRS, and if so, how much.

"It is not uncommon for a business owner to find him or herself in a position where he or she owes more than estimated in taxes," he wrote. "I am compliant with the IRS and there are no unresolved issues between them and myself."

The Monitor also asked Youssef how voters should reconcile his company's "net operating losses" and his personal debt with his campaign credentials as a successful businessman and job creator.

"Your suppositions of 'debt' are nothing more than suppositions," Youssef wrote. "My business model and deployment is very successful. Success in a faltering economy such as this does not always equate to large profits. Many businesses are struggling to stay afloat. My business is fighting against a rising tide. I intend to play an instrumental role in repairing the economic problem so all New Hampshire businesses will obtain some relief."

The paper also asked Youssef how voters should view the $200,000 he owes his parents in light of his campaign pledge to be fiscally responsible if elected and to ensure the state lives within its revenues without increasing taxes or going into debt.

"Anyone who has purchased a home, real estate, vehicle or any other significant asset assumes debt," he wrote. "I have done a lot of business with my parents and we will presumably continue to do a lot of business. We love and care for each other and trust each other with our financial interests, therefore we have found it expedient to assist each other in our financial pursuits."

(Annmarie Timmins can be reached at 369-3323, atimmins@cmonitor.com or on Twitter @annmarietimmins.)