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Tax Times Newsletter - May 2008

- Jay Schlichting

We help real people with real tax issues - successfully.

TOP NEWS

• Even the Beautiful and Famous Pay Taxes:
  The life of a celebrity can be hard.
       Ignoring the hefty paychecks and the clout to get on the top of a restaurant reservation list, celebrities have it rough.  They’re stalked by crazy fans.
       They’re stalked by paparazzi feeding their not-so-flattering images into a celebrity culture that has made even C-stars fodder for shows like TMZ.  And they’re also stalked by the Internal Revenue Service, which in recent years has shown it has no reverence for stardom.
       U.S. celebrities these days have been in the news for tax troubles as often as they have been for adopting children from faraway lands.  Indeed, in our celebrity-crazed society, celebrity tax troubles are as good a story as the next Britney meltdown.
       Consider this: Celebrity-obsessed TV show Access Hollywood recently put together a list of some of the beautiful and famous who ran into taxing situations with Uncle Sam.  Among those who made Access Hollywood’s list:
  • Richard Hatch, the conniving nobody who became a somebody when he won the first season of CBS’s hit show Survivor, is now serving time in the big house for evading taxes. Hatch was convicted of failing to report the $1 million in prize money he received for winning Survivor. So he’ll be surviving in a jail cell until 2009.
  • Marc Anthony, J-Lo’s hubby, failed to file returns with the IRS from 2000 to 2004, during which time he earned $15.5 million from his recordings and performances. He was ordered to pay $2.5 million in back taxes, though he was not charged with a crime.
  • Wesley Snipes, the actor who wore long canines as he vanquished evil vampires on screen, didn’t report to the IRS two contracts he received worth more than $10 million. He was convicted of three misdemeanor counts of failing to file a tax return.
  • Joe Francis, who produces the ubiquitous Girls Gone Wild videos, was charged with claiming more than $20 million in phony tax deductions for his companies.

       Unlike popular culture, the IRS doesn’t treat celebrities any differently than it treats you or the wealthy executive on the other side of town.  And, indeed, the IRS has only become more aggressive — for everyone.
       Whether you’re an average person, a celebrity or a celebrity hopeful, it’s no time to be on the wrong side of the tax law. Just ask those who made Access Hollywood’s list.
   

• School Board Prez Sent to Jail, Fined
       A former school board president in California was sentenced after pleading guilty to tax evasion.  Dirk Fulton, 53, of Benicia, received five months in prison, five months of home detention, two years of supervised release, and was ordered to pay $115,000 in restitution and a $28,000 fine.
       According to prosecutors, Fulton had requested that following his prison and home confinement he be allowed to serve a shorter, one-year period of supervised release. But the judge denied that request, citing letters he received from the community. In particular, one letter writer point out the circumstances of Fulton’s resignation from the school board ultimately led to an expensive special election for taxpayers.
       Additionally, in his sentencing papers, Fulton cited his public service on the Benicia City Council and as president of the school board. Responded U.S. Atty. McGregor W. Scott: “Dirk Fulton was in a position to know that public institutions cannot function unless people pay their taxes. He did not do his duty. He lied to his government and kept money to which he was not entitled.”
   
• Gov’t: Land Investor Did Not Report $45m
       The owner of the San Francisco-based Brugnara Corp. has been charged with filing false tax returns and failing to report more than $45 million in gains from real estate sales.
       According to the indictment, Luke D. Brugnara is the sole owner and shareholder of Brugnara Corp. and Brugnara Properties I, II, III, IV, V and VI (Brugnara Properties). During the tax years 2000, 2001 and 2002, Brugnara sold four properties in San Francisco and one in Las Vegas. But he failed to report capital gains of $45.6 million from those properties.
       If convicted, he faces up to three years in prison and a fine of up to $250,000, plus restitution.
   
• Calif. Tax Protestors Guilty of Evasion
       Tax protestors in California were found guilty by a federal jury.  Kathryn Hanes and Madonna Hanes were charged with conspiracy to commit tax evasion and tax evasion. During the trial, the government presented evidence that both defendants used “tax protestor” tactics to commit tax evasion for the tax years 1996 to 2000.
       According to the indictment and evidence introduced at trial, Kathryn Hanes and Madonna Hanes mailed frivolous letters to the IRS claiming, among other things, Kathryn Hanes was not a U.S. citizen and the IRS had no authority or jurisdiction to collect income tax from her.
       Trial evidence showed, between 1996 and 2000, Kathryn Hanes earned hundreds of thousands of dollars from her chiropractic business, “Biophysics Chiropractic,” which she operated in San Diego. She then sent the business profits to the personal bank account of Madonna Hanes, who then used this “tax-free” money on their personal expenses, which included multiple vacations to Maui, Hawaii.
   
• Businessman Faces Embezzlement, Tax Evasion Charges
       A California businessman was charged with four counts of tax evasion for the years 2001 to 2004 and for embezzlement of employee pension plan accounts.
       According to prosecutors, Patrick Neal Young, 40, was the former operating officer of Plyco Foundation Vents, of Waterford, Calif. From 2000 to 2004, he allegedly embezzled about $710,389 from Plyco for his own use. He used the embezzled Plyco funds to purchase a home in Oakdale, landscape his yard, buy automobiles, travel, including a trip to Europe, and for other personal expenses.
       In May 2003, Young requested that certain employee benefit accounts be closed because the employees were no longer working for the business. In truth, however, some of the employees were still working for Plyco. The money from those accounts was sent to Young, who then did not remit the pension funds to the employees who were entitled to them.
       Young also did not report the money as income on his federal tax returns. The tax evasion and embezzlement of pension benefit counts carry a maximum of five years in prison and a fine of up to $250,000. The mail fraud count carries a maximum of 20 years in prison and a fine of up to $250,000.
   
• LA. Politician Pleads Guilty to Evasion
       Joseph Anthony Impastato, a former St. Tammany Parish, La., councilman, 36, pleaded guilty to two counts of an indictment that dates back to Hurricane Katrina.
       The two charges to which Impastato admitted guilt included federal bribery through illegal solicitation and receipt of payments in connection with a Hurricane Katrina debris removal contract and making false statements in his 2001 federal income tax return.
       Specifically, within two weeks following Hurricane Katrina, Impastato obtained an Omni-Pinnacle debris removal contract on behalf of Diane Mauberret and her son, Lee Mauberret, both of whom who resided in Lacombe, La., and were constituents of Impastato.  Impastato then required payments.
       Impastato admitted that in April 2002, he electronically filed a 2001 income tax return which falsely reported that he had received a total income of about $34,000, when in truth and in fact his taxable income amounted to $52,000. His willful failure to report this $18,000 on his tax return resulted in a material false statement to the IRS.  As a result of the plea agreement, Impastato faces a mandatory two-year federal prison term.
   
• Dentist Tried to Evade Income Taxes
       Gerald M. Dortch, a dentist in Illinois, received a six-month prison sentence following his conviction for tax evasion. He will also serve a three-year term of supervised release, with the first six months to be spent on home detention.
       In addition, he was ordered to perform 240 hours of community service and pay $127,103 in restitution.
       During his guilty plea, in which he admitted to tax evasion for the years 2001 to 2003, Dortch indicated he operated Lincoln Place Dental in Belleville, Ill., and deposited some business checks into his personal account to avoid taxes. Dortch self-prepared his tax returns for the years 2001, 2002 and 2003, omitting about $346,825 in income.
   
• 27-Year-Old Faces up to 5 Years in Prison
       Nicole Brown, 27, of Minneapolis, pleaded guilty to one count of false claims for tax refund and one count of aiding and abetting false claims for tax refund.
       According to Brown’s plea agreement, she prepared federal individual income tax returns for various individuals. Brown included false information, such as false Form W-2 information. The total loss was $198,136, the total of claims she made for others and herself. She faces up to five years in prison.
   
• Boca Raton Man Pleads Guilty to Tax Charge
       James H. Batmasian, 61, of Boca Raton, Fla., pleaded guilty to one count of willfully failing to collect and pay employment taxes of employees for his Boca Raton company. As part of the plea, Batmasian admitted that he failed to collect and pay more than $253,513 in FICA taxes from 2001 2003. Batmasian also agreed to pay prior to sentencing the outstanding taxes and to file amended tax returns with the IRS for the years 2001 to 2003.
   
• ASK THE EXPERTS:

  Question: According to the news media, the Internal Revenue Service has been becoming more aggressive with taxpayers. So how does the Offer in Compromise fit in if the IRS is so aggressive these days?
  Answer: It’s hard to understand, isn’t it? At the same time the IRS has become more aggressive with tax cheats and debtors, the tax-collecting agency also has a program like the Offer in Compromise, which seemingly goes easy on taxpayers.
       Let me explain: For years, the IRS tried hard-as-nails collection tactics. They worked for some taxpayers. Others just continued to hide, running from their debt and forcing the IRS to throw more and more money at trying to collect from them.
       The Offer in Compromise doesn’t make the IRS soft. Far from it. In fact, the Offer in Compromise actually allows the IRS to collect more from taxpayers. In some cases, as the IRS has discovered, taxpayers simply can’t pay their debts — no matter how many times an agent knocks on the door. What the Offer in Compromise does is allow taxpayers to settle their tax debt once and for all and with an amount they can actually pay.
       For taxpayers who want to settled up and end their tax nightmare, the Offer in Compromise is the perfect solution. If you are one of the thousands of U.S. taxpayers unable to pay your tax debt, the first thing you should do is consult a qualified tax professional. He or she will analyze your previous returns, determining exactly how much you owe, and then discuss an Offer in Compromise with an IRS agent.  If you qualify, the Offer in Compromise can reduce your current tax debt to pennies on the dollar.
       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