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Tax Times Newsletter - January 2006

- Jay Schlichting

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

• Keeping an IRS audit under control
  • Challenge: The IRS selected me for a complete audit, both of my self-employment incomes and rental properties.
  • Solution: The Schlichting Group handled the audit on my behalf. The process took three months, with a great deal of detail and documentation required. The Schlichting Group worked closely with the IRS auditor, creating spreadsheets of expenses for each business activity from my financial statements and receipts.
  • Results: The final assessment was 75 percent below the original estimate of taxes due. In addition, the IRS limited the audit to one year - rather than expanding it to include other years, as can sometimes happen.
• Spreading payments over time.
  • Challenge: I failed to file tax returns for four years. When the IRS contacted me, it claimed that I owed thousands in back taxes.
  • Solution: In just two weeks, The Schlichting Group had prepared and filed my missing tax returns. They also negotiated a payment plan - even before the IRS had examined my returns.
  • Results: I was able to pay off my taxes over time. Plus, the entire matter was handled quickly, letting me move on with my life.

TOP NEWS

• Tax Protestor Convicted of Tax Evasion
       A well-known tax protestor in the Pensacola, Fla. area has been convicted on six counts of tax evasion.
       Ward F. Dean, a physician, was convicted of tax evasion for the years 1997 to 2002 and for his attempt to interfere with the administration of the Internal Revenue Code.
       Evidence presented at trial established that Dean, an outspoken tax protestor, had claimed no income for the years 1997 to 2002 when, in fact, he was paid approximately $1.3 million and owed over $300,000 in taxes. A retired Navy commander, Dean received a pension and other consulting income during the six-year period.
       Dean faces up to five years in prison and a $100,000 fine for each of the six felony counts on which he was convicted.
• Realtor Sentenced to 18 Months for Evasion
       A prominent real estate agent and broker in Bay Harbor Island, Florida, near Miami, was sentenced to 18 months in prison after pleading guilty to tax evasion.
        Angelo Pizzuto was also ordered to pay restitution to the IRS in the amount of $807,240.
       According to court records, Pizzuto was a real estate broker who often handled large development projects for foreign investors. Because investors came to the United States infrequently, Pizzuto was entrusted with their money to manage projects, including the hiring and paying of builders.
       Beginning in approximately 1999, Pizzuto used investor funds for his personal benefit and failed to disclose these funds as income. In total, Pizzuto used more than $2 million of investors' money to finance his own lifestyle, including the payment of rental cars, dinners, consumer goods, and even the purchase of real estate. By failing to report this income, Pizzuto failed to pay the IRS substantial taxes.
• Former Cop Sentenced for Tax Evasion
       Kelvin Ellis, 56, of East St. Louis, Ill., was sentenced to 21 months in prison, three years of supervised release and a $3,000 fine after pleading guilty to one count of income tax evasion.
       According to facts submitted at the time of the guilty plea, Ellis, a former East St. Louis cop, was employed as the Director of Regulatory Affairs for the City of East St. Louis, Ill. While employed by the City of East St. Louis, Ellis also worked as an independent consultant, advising local businesses in the area of public grants. During the years 2001, 2002 and 2003, Ellis had other sources of income as well. For the tax year 2001, Ellis failed to report income from his consulting work, along with other income. For the tax years 2002 and 2003, Ellis failed to file tax returns, even though he earned income during those years from the City of East St. Louis, his consulting work and other sources.
       The successful prosecution was a result of an investigation conducted by the IRS Criminal Investigation Division, the FBI, the U.S. Postal Inspection Service Criminal Investigations and the Illinois State Police.
   

THE ANSWER SPOT

• I'm behind on payroll taxes, and the IRS has visited my business. What should I do?
  The IRS acts very aggressively in payroll tax cases.  It's crucial that you act now to avoid both civil and criminal penalties.  Call today.
   

ASK THE EXPERTS

• My finances are a mess, an absolute mess. And my taxes? Even worse! I've done exceptionally well in real estate these past two years and used my profits to pay off debts I'd accumulated from previous failed business ventures. Now, after following bad tax advice from a neighbor, I'm discovering that my gains weren't tax-free. I'm in the hole $55,000 in back taxes, and there's no way I can pay it! I just got finished paying off my old debts. What can I do?
       I know how you feel. It's as if you thought you solved one problem only to discover the cure for the old problem has its own disease. But first, calm down. Things aren't nearly as bad as you might think. You have many options available to you.
       The first thing you should do is consult a qualified tax professional. He or she will review your previous tax returns to ensure that the $55,000 you believe you owe is the right amount. After all, why pay Uncle Sam any more than he legally deserves?
       Now, considering that you're saying you do not have the resources to pay the tax debt, the Offer in Compromise program is probably your best bet. Believe it or not, this program allows taxpayers to reduce their debt by pennies on the dollar! Why? Because over time the IRS has learned that working with taxpayers is a more effective way to collect taxes than beating down doors.
       Here's how the Offer in Compromise program works: Once your qualified tax professional knows exactly what you owe, he or she will approach the IRS with an offer of a reasonable amount that you can pay. Oftentimes, the IRS will accept an amount significantly less than the full amount, literally pennies on the dollar!
       It's really that simple, and it's a program more taxpayers would take advantage of if they knew it was available to them.
       Give me a call today. I know how to handle IRS troubles. I'm an IRS Problem Solver. For a free, no-risk consultation, call my office at 1-877-590-2500.

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