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Tax Times Newsletter - May 2005

- Jay Schlichting

SUCCESS STORIES
We help real people with real tax issues - successfully.

• Paying off a multi-year tax bill
  • Challenge: Over a period of 11 years, I wracked up a tax bill of about $650,000.
  • Solution: The Schlichting Group took on my case. They kept the IRS at bay and started negotiations.
  • Results: The IRS accepted an offer in compromise. They took the equity in my home, which was $93,000, and absolved me of any remaining debts.
• Kissing expensive IRS penalties goodbye
  • Challenge: Because of financial circumstances beyond my control, my software development company was forced to make delinquent payroll tax deposits for two quarters. The IRS assessed penalties of almost $17,000.
  • Solution: The Schlichting Group presented my case before the IRS.
  • Results: Thanks to their convincing arguments and tough negotiations, The Schlichting Group was successful at getting the penalties removed.

TOP NEWS

• Water District Manager Jailed on Tax Charge
       The assistant general manager of the Northridge Water District, in Northern California, was sentenced to 21 months in prison after pleading guilty to tax evasion.
       Jerry Allen Ness, 62, of Sacramento, was also ordered to pay a fine of $5,000 and to serve supervised release after his prison term. Ness admitted as part of his plea that during this tenure as the NWD assistant general manager, he issued compensation for unused sick leave and vacation pay to its employees through accounts payable rather than payroll. As a result, no federal income taxes were withheld from this compensation, and no Form 1099s or other notifications were issued to the IRS. During that same period, Ness received approximately $119,627 in vacation "buy-back" payments and bonuses from NWD.
       In total, during this three-year period Ness successfully evaded paying approximately $36,143 in federal income taxes.
       In addition, Ness also admitted to participating in a scheme to defraud NWD by having NWD pay for personal purchases, which he charged to a water district credit card.
• State Marshall Pleads Guilty to Tax Charge
       A Connecticut state trooper has pleaded guilty to tax evasion, admitting that he underestimated income he received for the years 1997, 1998 and 1999.
       John B. McGuire, a 62-year-old former Deputy Sheriff in New London County and currently a State Marshal, pleaded guilty to a federal charge of making and subscribing a false tax return.
       According to court records, during the years 1997, 1998 and 1999, McGuire provided professional services in connection with legal proceedings, including serving legal papers and carrying out wage executions and evictions. McGuire underreported this income for those years, resulting in a tax loss of $45,803.
       "Individuals who are sworn to uphold the law have a special responsibility to [pay taxes]," said U.S. Attorney Kevin J. O'Connor
• Mother and Son Charged in Tax Refund Scheme
       A mother and her two sons in Jacksonville, Fla., have been charged with operating a tax-refund scheme from a Florida prison.
       William Michael Koster, 31, Rolando Rafael Valencia, 25, and their mother, Noris Mercedes Keller, 54, have been charged with conspiracy to defraud the Internal Revenue Service and multiple counts of filing false claims for income tax refunds. They face up to 95 years in prison and a fine of up to $4.5 million.
       According to the indictment, from February to September 2003, Koster, Valencia and Keller operated a scheme to obtain fraudulent income tax refunds by preparing and filing false federal income tax returns in the names of Florida inmates. The indictment alleges that Koster, who was then an inmate at Okeechobee Correctional Institution, obtained the names and social security numbers of other inmates. Valencia then filed false tax returns with the IRS using the information Koster provided.
       In all, the indictment alleges, the defendants sought nearly $100,000 in fraudulent tax refunds.

THE ANSWER SPOT

• I don't mind paying the taxes, but don't want to pay the penalties and interest. Can we get rid of that?
  Yes! Under certain circumstances, the IRS will abate penalties and the interest on the penalties.  To do this, you must establish "reasonable cause."  We can help determine if you qualify.
   

ASK THE EXPERTS

• C'mon, the Offer in Compromise program sounds too good to be true. You could owe thousands of dollars to the IRS, and the government will simply reduce the debt substantially? Is it even available to average taxpayers?
       Answer: First, no, an Offer in Compromise is not too good to be true. In fact, every year taxpayers who aren't able to pay their debt negotiate Offers in Compromise that amount to mere pennies on the dollar. Secondly, there's no such thing as an "average taxpayers," as everyone's financial and tax situation differs. The better question is: Is the Offer in Compromise available to me and my neighborhood? The answer: Yes!
       To understand why the Offer in Compromise isn't too good to be true, you must first understand the IRS's position: Imagine having to chase down taxpayer after taxpayer to pay back taxes, using valuable man hours and resources for pursuits that often have zero results. Enter the Offer in Compromise. Using this, taxpayers can settle debts for pennies on the dollar - and the government won't have to chase down that taxpayer any longer.
       But there are a few other issues you should understand about an Offer in Compromise. For one, the government is going to make darn sure that you are qualified - that is, that you cannot pay the debt you owe. The IRS will review your finances carefully, and although an agent won't have any problem with your sending a child to college, he might raise an eyebrow at your driving a $100,000 car.
       In a nutshell, here's what would happen: After a qualified tax professional reviews your returns and finances, he will submit an Offer in Compromise to an IRS agent. That likely will either be accepted or negotiated, and - bingo! - you've settled your tax debt for an amount you can afford.
       I deal with problems such as yours every day. I'm an IRS Problem Solver with years of experience dealing with the IRS. I think you'll find much of the IRS-related stress you currently feel will be alleviated with one visit. For a free, no-risk consultation, please call my office toll free at 1-877-590-2500.

Tax Times Newsletter is an online Publication by
The Schlichting Group
Specialists in IRS Representation and Tax Preparation