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Tax Times Newsletter - December 2007

- Jay Schlichting

We help real people with real tax issues - successfully.

TOP NEWS

• New Year’s Resolutions Await Naughty Taxpayers:  As 2007 comes to an end, it’s a good time to consider whether you need to turn your tax life around. Are you cheating? Could you be facing jail time?
       Ken Jenne was once one of the most powerful politicians in Florida.  An influential Democrat, Jenne was a longtime commissioner in Broward County, a former state senator, and sheriff of the Fort Lauderdale-based Broward County Sheriff’s Office.
       But Jenne experienced a hard fall from grace: This year, federal authorities indicted Jenne for mail fraud and tax evasion for a scheme to enrich himself by obtaining money from two vendors who were doing business with the Broward County Sheriff’s Office.
       After pleading guilty to the charge, Jenne will spend the next year behind bars.  In the end, tax charges took down the powerful politician and lawman.  Another powerful man, former New York City police commissioner Bernard B. Kerik, a protégé of presidential candidate Rudolph W. Giuliani, also faces tax charges.
       It’s no secret: The Internal Revenue Service and U.S. Attorney’s Office are particularly aggressive in prosecuting tax violators.  As the year comes to end, perhaps you should be asking yourself two questions: Am I cheating on taxes?  Will I be next?  And remember, the powerful are not the only targets of tax investigations and prosecutions.
       Consider:
  • Robert Frank Hanna, the owner and operator of Newport Tux and Uniform in Newport Beach, Calif., pleaded guilty to evading the payment of his federal taxes. He owed the IRS $356,459.
  • Leroy Albert Lewis, a doctor in Danville, Calif., pleaded guilty to concealing $900,000 in income in offshore banks as a way to evade taxes.
  • Nuclear engineer Mark M. Kaushansky, 56, of Monroeville, Penn., received 15 months in prison and was fined $20,000 after pleading guilty to eight counts of personal and corporate tax evasion, resulting in a tax loss of $63,000.
  • Snezana Berbic, 39, of Wethersfield, Conn., was sentenced to 12 months and one day of in prison after she pleaded guilty to one count of making a false statement on a federal individual income tax return and one count of assisting another person in the preparation of a false federal individual income tax return.

  Enforcement is up. Prosecutions are up. Jail time is up.
       The government has been aggressively cracking down for several years on tax crimes and will continue to prosecute those taxpayers who are devising ways to avoid their obligations to Uncle Sam.
       If you are engaging in illegal behavior — underreporting your income, using trusts, sending money to offshore accounts — you could be next on the list. Happy New Year!
   

• Calif. Civil Rights Attorney Guilty of Evasion
       Venice civil rights attorney Stephen G. Yagman was sentenced to 36 months in federal prison for attempting to evade more than $100,000 in federal income taxes and committing bankruptcy fraud.
       U.S. Dist. Judge Stephen V. Wilson said he imposed a “serious sentence” after being “shocked” by Yagman’s testimony in court, which was “so transparently untrue in so many areas.”
       A federal jury convicted Yagman in June, finding him guilty of 19 felony counts — one count of attempting to evade the payment of taxes, one count of bankruptcy fraud and 17 counts of money laundering. On a defense motion following the trial, Judge Wilson later acquitted Yagman on six of the money laundering counts.
       “In this case, in my view, justice was done,” Judge Wilson said today. “The jury was right.”  Yagman had $158,000 in tax debt, including penalties and interest.
   
• Mass. Man Evaded $2 Million Tax Bill
       A Newton, Mass., man received one year in prison for every million of the $2 million in income taxes he evaded.  Robert D. Epstein, 61, pleaded guilty to charges that he failed to report as income approximately $5,952,000 in money that Epstein secretly removed from his law partnership. By failing to record the money he took from the partnership, Epstein evaded approximately $2,225,000 in federal income taxes.
       He was sentenced to two years in federal prison, to be followed by three years of supervised release. During the period of supervised release, Epstein is required to assist the IRS in its collection of unpaid taxes.
   
• Business Owner Kept Payroll Taxes
       A Missouri man was charged with failing to pay employment taxes after he had collected them from his employees. 
  Paul Scott King Jr. was an officer of two corporations, Nurses Now LLC and Ichor Health Services. According to the indictment, King deducted and collected from the total taxable wages of the corporations’ employees income taxes and did not pay them to the IRS. The amounts owing, according to the indictment, is $127,302 for Nurses Now LLC and $5,017 for Ichor Health Services, Inc.
       “A substantial portion of the total tax gap, the difference between what is owed and what is paid, is believed to involve employee withholdings,” stated James D. Vickery, Special Agent in Charge of IRS Criminal Investigation. “Criminal Investigation continues to support IRS efforts to enhance employment tax compliance.”
       If convicted, King faces up to five years in prison for each count.
   
• Calif. Man Gets Record Penalty in Tax Evasion Case
       The owner of Oxnard, Calif.-based Haas Automation was sentenced to two years in federal prison for orchestrating a scheme in which tens of millions of dollars in bogus expenses were put on the company’s books in an attempt to avoid the payment of more than $34 million in federal income taxes.
       Gene Francis Haas, 54, of Camarillo, Calif., was ordered to begin serving on Jan. 14, 2008. Haas has already paid a $5 million fine.
       As part of a plea agreement, Haas agreed to sign “closing agreements” for tax years 2000 and 2001 and to pay all outstanding taxes, plus penalties and interest. In court, it was revealed that Haas has paid more than $70 million to the government to resolve his tax issues for the two years he defrauded the government — a record amount.
       “Mr. Haas has now paid the government more than twice the amount of taxes he attempted to avoid paying,” said United States Attorney Thomas P. O’Brien. “This huge monetary penalty, as well as the two-year prison term, should reassure law-abiding citizens that tax evasion can and will be rooted out, and that there are significant ramifications for those who attempt to cheat the government.”
   
• Healthcare Worker Used Names of Family, Mentally Challenged to File False Returns
       Kimberly Martello, 36, of Thomasville, Ga., formerly of Torrington, Conn., pleaded guilty in New Haven to one count of filing a fraudulent income tax return and fictitious W-2 wage and tax statement for tax year 2003.
       According to court documents, Martello filed 23 false income tax returns, fabricated false W-2 wage and tax statements, and claimed false tax refunds for tax years 2002, 2003 and 2004.
       Martello filed these false returns and claims for refunds in the names of family members, friends and associates without their authorization, and directed the IRS to pay the refunds directly to her.
       Four of the false refund claims were filed on behalf of two persons under Martello’s care while she was employed as a healthcare worker for the mentally challenged.
       The total amount falsely claimed by Martello was $48,591. As a result of this fraudulent scheme, Martello received $9,608, which she is required to pay back to the IRS.  She faces up to five years in prison and $250,000 fine.  This case was investigated by the Internal Revenue Service Criminal Investigation Division.
   
• FLA. MAN KEPT MONEY HE WAS SUPPOSED TO TURN OVER TO IRS
       Robert Kenneth Dromm, of St. Petersburg, Fla., was sentenced to 48 months in prison after pleading guilty to one count of tax evasion.
       According to court records, Dromm owned Pay Plus Payroll Administrators, which collected funds from its corporate clients and agreed to file payroll tax returns with the IRS and pay to the IRS its clients’ payroll taxes. From 1999 and 2004, Dromm embezzled the funds by engineering a scheme through which he used the money for personal purposes. In all, Dromm embezzled almost $3 million in this manner and ultimately evaded the payment to the IRS of approximately $1.6 million in employment tax funds.
   
• CHIROPRACTOR EVADED $120,000 IN FEDERAL INCOME TAXES
       Stephen J. Short Jr., of Vero Beach, Fla., was sentenced to 11 months in prison and ordered to pay $47,000 in restitution after being convicted of four counts of willfully failing to file his income tax returns.
       Short, the owner of Short Chiropractic, failed to file federal income tax returns for the tax years 2000 to 2004, court records showed. Short’s total tax loss due and owing was more than $120,000.
   
• CONN. WOMAN JAILED FOR NOT REPORTING ALIMONY
       Maria Rullo, 45, of New Fairfield, Conn., was sentenced to 30 days in federal prison for filing a false tax return. According to court documents, Rullo failed to report alimony income and certain other income on personal tax returns she filed with the IRS. In all, Rullo agreed to pay over $30,000 to the IRS for material omissions to her returns filed for the 2001 to 2004 tax years.
   

ASK THE EXPERTS

Question:  If I am not eligible for the Offer in Compromise program, can I enroll an Installment Agreement? And if so, how does it work?

Answer: The answer: Yes.  The Offer in Compromise program is for taxpayers who, for whatever reason, have amassed a tax debt that they cannot pay under any circumstance. Taxpayers who do qualify for the program can have their tax debt reduced by pennies on the dollar.
     However, there are strict criteria for qualification and some people who have tax problems may not qualify for the program. For these taxpayers, there is the Installment Agreement.
     It’s pretty simple: For taxpayers who have tax debt that they cannot afford to pay off with a single check, the Installment Agreement is available. It allows taxpayers to pay off their tax debt over time by making monthly payments to the IRS that work similarly to a car payment or mortgage. The idea is to allow American taxpayers to pay off their debt without forcing them to lose their homes or pull their children out of college.
     After years of chasing deadbeat taxpayers with little success, the IRS discovered that gentler programs such as the Installment Agreement can actually be more effective than hard-nosed tactics.
     You may indeed qualify for the Installment Agreement. To find out, the first thing you should do is consult a qualified tax professional. He or she will analyze your returns to determine exactly what you owe and then set up a meeting with an IRS agent to discuss your case.
     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