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Tax Times Newsletter - June 2008

- Jay Schlichting

We help real people with real tax issues - successfully.

TOP NEWS

• New IRS Commissioner Committed to Enforcement
       Here’s some bad news for taxpayers who thought the IRS’s increasingly aggressive enforcement tactics would end in the near future: Those tactics won’t end any time soon.
       The reason is simple. The Internal Revenue Service now has proof that tough-as-nails enforcement is increasing tax revenues.
       According to recently released statistics, the total U.S. income tax in 2006 increased 10.6 percent to $1 trillion, and total tax liability rose 10.3 percent to $1.1 trillion, compared to 2005 numbers.
       What’s more, in a recent speech to the American Bar Association, IRS Commissioner Douglas Shulman didn’t mince words.  “One thing I want to make clear is that during my tenure at the IRS, I will continue to support a strong enforcement program,” he said.  Shulman plans to stay aggressive in areas where the IRS has already flexed its enforcement muscle.   In his own words:
  • Abusive tax shelters: “As these cases have shown, we are entering a new phase of dealing with tax shelter issues. In the first phase, the IRS aggressively rooted out abusive tax shelters and brought some significant cases. In the next phase, a number of taxpayers acknowledged that participating in these shelters was a mistake and settled. In this new phase, we have pursued those holdouts who chose not to settle and the cases are working their way through the courts. The government has won the overwhelming majority of these cases.”
  • Crackdown on corporate noncompliance: “The public has a right to expect that large corporations be good corporate citizens and meet their compliance obligations.”
  • Audits of nation’s high-income taxpayers: “Over the next several years, we will need to continue to do more research so that we can target non-compliance and ensure that we are using our resources effectively and efficiently.”
  • Movement of money across borders: “The cross border migration of capital and people has made this a more integrated world and the IRS needs to ensure it has the tax administration capabilities to deal with the fast pace of change.”

  A lot of talk, right? Maybe.  But given that aggressive enforcement by the IRS helped boost tax revenues by 10 percent in just one year, don’t be too certain Shulman is boasting.  He’s likely saber-rattling.
   

• Personal Trainer Faces 10 Years
       A Boca Raton, Fla., personal trainer has pleaded guilty to a $7 million human growth hormone scheme and tax fraud.  Patrick Bronder admitted his participation in a scheme to illegally distribute human growth hormone and commit income tax evasion for calendar year 2001. At sentencing, Bronder faces a maximum sentence of 10 years in prison and a fine of $500,000.
       From April 2001 to June 2002, Bronder sold drugs to a pharmaceutical wholesaler for more than $6.8 million. During the same period, Bronder received additional compensation of $325,000 from the same pharmaceutical wholesaler for the sale of prescription drugs. Bronder instructed the wholesaler to send more than $3.3 million in payments to a bank in the Bahamas. He then brought the money back to the United States by making more than 3,000 ATM withdrawals — a scheme intended to conceal the income from the IRS.
  He faces up to 10 years in prison and a fine of up to $100,000.
   
• CEO Sentenced for Laundering, Evasion
       A North Andover, Mass., man was sentenced to three years of probation for money laundering and filing a false tax return.  Frank P. Magliochetti, 50, must spend the first six months of his probation in home confinement, pay a $50,000 fine and $330,000 of restitution, and forfeit $1 million.
       According to government evidence, Magliochetti, while in 2002 president of Med Diversified Inc., a home health care company that was then publicly traded on the American Stock Exchange, he laundered $330,000 in funds that he had converted from Med Diversified in order to conceal the source of those funds. In addition, Magliochetti filed a false tax return for 2002 in order to conceal the source of those funds and on that tax return falsely identified those funds as a capital gain.
   
• N.C. Exec Charged with Tax Conspiracy
       A North Carolina corporate executive has been charged with tax conspiracy.  From January 2005 to January 2008, James O. McLamb Jr., 41, of Raleigh, North Carolina, and others collected and withheld federal taxes from individual employers on behalf of employees, then prepared false and fraudulent documents to mislead the IRS, causing Castleton to unlawfully retain these federal taxes instead of remitting them to the IRS.
       “The mission of the IRS is to apply the tax laws with integrity and fairness to all,” said IRS Special Agent in Charge Charles E. Hunter. “This means all taxpayers should pay their fair share. Large corporations and their officers are not above this.”  He faces up to five years in prison and a fine of up to $25,000.
   
• Liquor Store Owner Did Not Report $100,000 in Income
       A Connecticut man who did not report more than $100,000 in income has received three years of probation. He must serve the first six months in home confinement.  Gurdev S. Kaura, 55, of Naugatuck, Conn., also must perform 150 hours of community service during his term of probation.
       According to court records, during 2005, Kaura owned and operated Fairfield Wine and Liquor, a liquor store in Waterbury, Conn. Kaura was also employed as a maintenance worker for Pratt and Whitney in East Hartford, where he received W-2 wages.
       Kaura signed and filed a false federal tax return. In the return, Kaura falsely represented that his total taxable income was $8,136 when, in fact, his total taxable income was $123,812, the difference resulting primarily from his willful failure to report approximately $117,330 of proceeds from his liquor business. This resulted in a tax loss of $32,955 to the Internal Revenue Service.
       As part of the resolution of this matter, Kaura has agreed to forfeit $87,431 and pay an additional $67,249 in monies due and owing on the tax return, which includes approximately $33,000 of outstanding interest and civil penalties.
   
• COLO. Insurance Agent Evaded Taxes
       Cindy L. Beyersdorf, 47, of Northglenn, Colo., was sentenced to five years of probation and 300 hours of community service for filing a false federal income tax return.  She was also ordered to pay $51,684.97 in restitution to the IRS.  Beyersdorf was indicted by a federal grand jury pleaded guilty to the charge.
       A licensed insurance agent in Colorado, Beyersdorf owned and operated Horizons Insurance, a sole proprietorship. According to the plea agreement, Beyersdorf signed and filed an individual tax return for calendar year 2001 that falsely represented the gross receipts from the operation of Horizons Insurance as $14,888 when in fact the gross receipts were $87,878.
       Beyersdorf further acknowledged that her 2002 and 2003 tax returns similarly understated Horizons Insurance’s gross receipts and admitted that her criminal conduct caused a tax loss greater than $30,000.
       “It is important for people to have confidence that when they pay their taxes, their neighbors and competitors will do the same,” said Terry L. Stuart, Special Agent in Charge of the IRS-Criminal Investigation, Denver Field Office.
   
• Indy Woman Receives 24 Months: Tax Scheme
       Tinisha Robinson, 32, of Indianapolis, Ind., was sentenced to 24 months in prison after pleading guilty to tax charges.  From January 2003 to May 2007, Robinson paid people in the Indianapolis area for use of their Social Security numbers and addresses. She then filled out a tax return in the person’s name with false W-2s and other documentation and filed that with the IRS, claiming a refund due, usually for about $2,000. When the refund check arrived, the person would sign it over to Robinson for a nominal fee of $200 to $300.
       About $67,000 of these fraudulent refunds were traced directly to bank accounts in Robinson’s name. Twenty-nine returns and accompanying W-2s were false, and many of the people used as conduits for the false return scheme corroborated the details of the scheme.
   
• MISS. Woman Filed False Tax Return
       Patricia A. Burnett, of Jackson, Miss., was sentenced for filing a false tax return in 2003. Burnett was sentenced to serve three years of probation, including a six-month term of home confinement. “We should not expect the honest taxpayer to foot the bill for those who hide income from the IRS,” IRS Special Agent in Charge Michael J. De Palma said.
   
• Ala. Woman Gets 33 Months Tax Charges
       Beverly Ann Byers, 46, of Leeds, Ala., was sentenced to 33 months in prison and ordered to pay $249,454 in restitution to her former employer, Plateau Construction Company. As the bookkeeper for Plateau, she mailed 44 letters containing unauthorized company checks to herself and to pay her personal bills. These checks totaled $249,454, and she failed to report approximately $90,576 of the embezzled funds on her 2004 income tax return.
   
• ASK THE EXPERTS:

  Question:   I owe a substantial amount in back taxes to the IRS, and the two programs I keep hearing and reading about are the Offer in Compromise and the Installment Agreement. What’s the difference?
  
  Answer:  The difference is enormous, and determining which program is right for you will depend entirely on the amount you owe to the IRS and your current financial situation.
       No matter which program is right for you, the first step you should take is to see a qualified tax professional. He or she will analyze your previous returns to make sure you are not obligating yourself to pay the IRS even a penny more than you owe. After all, why should you go in negotiating with Uncle Sam holding a hand that isn’t even yours?  Now, here’s the deal on the programs:
       The Offer in Compromise is available for taxpayers who, for whatever reason, amassed a serious amount of debt and now lack the financial means to pay it off. Instead of having to chase down the taxpayer for decades on end, the IRS can use the Offer in Compromise program. This allows the IRS and the taxpayer to come to an agreement on a settlement amount that will eliminate the tax debt once and for all. This settlement amount often is for pennies on the dollar, and you should have a qualified tax professional with you to negotiate this.
       For those who don’t qualify for the Offer in Compromise, the Installment Agreement allows indebted taxpayers to come to an agreement with the IRS that allows them to pay down their tax debt over time. Think of it like a car payment: a substantial but not life-altering monthly payment that over time will take care of your debt.

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