August 2007 - Tax Times Newsletter - The Schlichting Group

Tax Times Newsletter - August 2007
	Whether you would like to avoid the IRS, contact the IRS, settle with the IRS, or just want to refer a friend, relative or client, I would be happy to provide you or that special person you refer a no-obligation confidential consultation to explain every option available to them to solve their IRS problem. - Jay Schlichting
TOP NEWS Tax Fraud Promoter Gets 42 Months Following a three-week trial in Denver that resulted in his conviction on charges of conspiracy to defraud the United States and filing false tax returns, tax fraud promoter Robert N. Bedford, 60, of Seminole, Fla., was sentenced to serve 42 months in federal prison and three years of supervised release. The evidence established that Bedford provided legal and tax advice to his co-conspirators on how to circumvent IRS regulations and create false documents designed to disguise the movement of approximately $8 million dollars of unreported income to secret offshore accounts. According to evidence presented at trial, the scheme involved setting up shell corporations for businessmen that were used to conceal approximately $8 million in taxable income in secret accounts in the Turks & Caicos and other foreign countries from 1992 through 2001. Investment Co. CEO Faces Up to Five Years John J. Lawbaugh, the former chief executive officer of two Maryland investment companies, pleaded guilty to wire fraud, theft from a registered investment company and income tax evasion. “By abusing his authority as chief executive officer of two investment companies, Mr. Lawbaugh stole more than $1.2 million,” said U.S. Atty. Rod J. Rosenstein. “It is essential for us to protect investors in order to preserve public confidence in our financial markets.” According to the plea agreement, Lawbaugh was the chairman of the board, chief executive officer and majority stockholder of 1st Atlantic Guaranty Corporation from 1997 and chairman and CEO of SBM Certificate Company from July 2000 until August 2002, when he was removed by each company’s respective board of directors. Lawbaugh admitted that from August 1999 to October 2001, he misappropriated $1.26 million of 1st Atlantic and SBM funds and diverted those funds to unauthorized uses, including for his personal benefit and for the benefit of his family. He faces up to five years in prison and a fine of up to $250,000. Oil Exec Pleads Guilty to Evasion Oil executive Jack R. Durland Jr., formerly of Gulfport, Miss., pleaded guilty to federal income tax evasion. Durland served as vice president of Gulfport Oil & Gas and as vice president of T.J. Oil & Gas. For the 1999 tax year, he failed to report $55,000 in salary payments from T.J. Oil. For the 2000 tax year, he failed to report $5,000 in salary payments he received from T.J. Oil. Also for the 2000 tax year, Durland failed to report wages of $122,500 he received from Gulfport Oil & Gas. He faces up to five years in prison and a fine of up to $250,000. Doctor Hid From IRS $900,000 in Offshore Accounts A doctor in Northern California pleaded guilty to tax evasion and has agreed to pay the United States $900,000 in back taxes. Leroy Albert Lewis, of Danville, Calif., was charged with one count of conspiracy to defraud the United States and four counts of tax evasion. Under the plea agreement, Lewis pleaded guilty to one count of conspiracy. According to the indictment, for more than 10 years, Lewis, an oral surgeon, attempted to evade taxes on income he earned from his medical practice. Around 1995, he joined an organization in Denver called Tower Executive Resources. Tower assisted its members in evading federal income taxes, in part by providing a false invoicing scheme to offset income the members’ income earned. Lewis’ medical practice paid funds to Tower in exchange for bogus Tower invoices to substantiate huge false business expenses Lewis deducted on the medical practice’s returns. Tower then deposited the bulk of those funds into an offshore bank account, which Lewis controlled. Lewis faces up to five years in prison and a fine of up to $250,000. Lewis’ son, Roy Lewis, a dentist and also a member of Tower, was also charged in the same indictment. He was sentenced to serve 24 months. Couple Concealed Income Offshore Following an investigation by the Internal Revenue Service Criminal Investigation, Michael and Jan Watts pleaded guilty to one count of filing a false tax return. Michael Watts, 60, and Jan Watts, 54, formerly of San Martin, were charged with one count of income tax evasion. In a superseding information, prosecutors also charged the Watts with one count of filing a false tax return. Under the plea agreement, the Watts pleaded guilty to the charges in the superseding information. According to the plea agreement, in 1994, Michael Watts performed consulting work under the name of a sole proprietorship, Melbourne Enterprises. During this period, Jan Watts handled tax matters for herself and her husband. With Michael Watts’ knowledge, she funneled Melbourne’s income through an offshore corporation on Nevis, in the West Indies. Jan Watts failed to report $92,494.13 in income. The Watts have agreed to pay $1,000,000 for taxes owed for 1994 and other amounts owed to the IRS. They each face up to three years in prison and a fine of up to $250,000. Physician Charged with Concealing More than $1 Million in Income from IRS A federal grand jury indicted Ndubuisi Joseph Okafor, a 49-year-old doctor in Mitchellville, Md., on charges of tax evasion and filing a false federal tax return. According to the 13-count indictment, Dr. Okafor operated a medical practice called The Okafor Group, which provided primary care medicine in the Washington D.C. metropolitan area. The indictment alleges that from 1997 to 2005, Okafor evaded his taxes by reporting false information to the IRS and tax preparers regarding his personal income and the gross receipts from his medical practice; establishing sham corporations in the Bahamas to create false expenses and disguise personal income; and diverting money from his medical practice by writing checks from the corporate bank account for personal expenses. Okafor allegedly under-reported his income and taxes due, stating that his total income for the tax years 1999 through 2002 was $278,926 when in fact it totaled more than $1.3 million. Okafor faces up to five years in prison on each of the four counts of tax evasion and three years on each of the nine counts of filing a false tax return. Mover Charged with Income Tax Evasion Alan L. Homsy, 45, of Allston, Mass., pleaded guilty to two counts of filing file tax returns, eight counts of false and fraudulent claims for tax refunds and 18 counts of failure to collect and pay employment taxes. Homsy owned and operated moving companies, and evidence showed he failed to collect and pay the IRS more than $85,000 owed for income taxes withheld from employee wages and for employer FICA taxes owed on the employee wages. Mellon Bank Settles with IRS for $16.5 Million Lawsuit alleged Mellon employees destroyed more than 77,000 tax returns, vouchers and checks to disguise its failure to meet an annual filing deadline. Mellon Bank is the latest corporation to fall to an increasingly more aggressive and vigilant Internal Revenue Service. Mellon Bank has entered into a civil settlement agreement with the United States and has agreed to pay $16.5 million for civil damages and penalties under the federal False Claims Act. The United States’ civil False Claims Act claims are based on the April 2001 destruction of more than 77,000 tax returns and tax payments at the Mellon Client Service Center in Pittsburgh. In the civil settlement agreement, Mellon denies that it has any liability under the False Claims Act. In a prior agreement with the U.S. Attorney’s Office, Mellon accepted responsibility for the conduct of its employees, which constituted violations of federal criminal law. In that prior agreement, Mellon agreed to fully cooperate with the government in connection with the investigation into the 2001 document destruction. Mellon also agreed to amend its policies and procedures to strengthen its compliance and ethics programs and agreed to the appointment of a monitor to oversee Mellon’s corporate compliance program for three years. Eight former Mellon employees were charged in connection with the document destruction. Four have entered guilty pleas in their cases. In April 2001, Mellon held a Lockbox Depository Agreement with Financial Management Service, an agency of the U.S. Department of the Treasury for the benefit of the Internal Revenue Service to process tax returns, vouchers and checks received at its Pittsburgh lockbox facility. The checks were to be deposited in an IRS account, and the tax returns were to be forwarded to the IRS Service Center in Andover, Mass. Under the lockbox agreement, certain deadlines were required to be met, including the program completion date, which was midnight on April 29, 2001. Failure by Mellon to comply with the tax processing deadline would have constituted a breach of its contract with the IRS. At 3:11 p.m. on April 29, 2001, a Mellon vice president notified the IRS that Mellon had met the PCD deadline when, in truth, it had not. Mellon employees had concealed from the IRS and ultimately destroyed more than 77,000 tax returns, vouchers and checks it had received from taxpayers, all in an effort to deceive federal agencies about Mellon’s timely completion of the 2001 tax program. “This resolution of the United States’ civil claims represents an additional step in the Department of Justice’s campaign to restore corporate accountability,” U.S. Atty. Mary Beth Buchanan said in a statement. This isn’t the first large corporation to strike a deal with the IRS. Others include MasterCard, Merck & Co., Jenkens & Gilchrist, and the Hollywood Foreign Press Association, which organizes the Golden Globe Awards. THANK YOU! THANK YOU! Thanks to YOU, the word is spreading. Thanks to our clients and friends who graciously referred us to their friends, clients and relatives last month! We enjoy building our business based on the positive comments and referrals from people just like you. We just couldn’t do it without you! ASK THE EXPERTS Question: I’ve seen picket signs on the side of the road. I’ve heard of all the scams, and I’m not a sucker. I would never fall for one of those scams. In fact, I’ve never wanted to not pay the IRS. I wish it were as simple as not wanting to pay. As an independent contractor, I’ve made a substantial amount of money over the years. But owing to some bad tax advice, I’m in a bind. I’ve amassed a huge debt to the IRS and I recently lost my biggest client. I don’t know how I’ll pay the tax debt. What can I do? Answer: For what it’s worth, you should know your position isn’t unusual. Many businessmen who are fabulously successful accept bad tax advice, and by the time they realize they owe a large sum to the IRS, they are no longer making the same income that helped them dig so far into tax debt. But don’t worry. You have options. Since you know you owe the money and want to find a way to settle up, the IRS, believe it or not, will be more than happy to work with you. The IRS comes down hard on the ones who don’t want to settle up. For those who cooperate, the IRS can be lenient. One of your best options might the Installment Agreement. It works like a mortgage or a car payment or any other type of debt you pay off in installments. The first thing you should do is consult a qualified tax professional. He will analyze your previous returns, determine the exact amount you owe, and negotiate with the IRS a small monthly payment that will allow you to pay down your IRS debt without having to alter your lifestyle drastically. Additionally, it’s possible you could qualify for the Offer in Compromise program, which could reduce your IRS debt by pennies on the dollar. The IRS has found it to be more beneficial to work with those who owe taxes instead of chasing them for decades. Ask your tax professional about this program. We deal with problems like yours every day. We are IRS Problem Solvers. For a free, no-risk consultation, please call our office at 1-877-590-2500.
Tax Times Newsletter is an online Publication by The Schlichting Group Specialists in IRS Representation and Tax Preparation