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Tax Times Newsletter - January 2009

- Jay Schlichting

We help real people with real tax issues - successfully.

TOP NEWS

• Celebrity lands in tax trouble - Average Joes As Likely to Face Tax Trouble:  You read in newspapers about big-name celebrities caught violating U.S. tax law. But beware: You’re at risk too.
       That story always finds a way into your newspaper or your favorite news website.  After all, who hasn’t read about Brazilian race-car driver and “Dancing with the Stars” winner Helio Castroneves?
       The 33-year-old faces trial in Miami on charges he failed to report $5.5 million in income from 1999 to 2004.
       That’s news — a good topic for the water cooler.  But celebrities such as Castroneves are simply individuals among the thousands of people who land in trouble with the IRS every year.
       You read about folks like Castroneves, but it’s important to remember there thousands of folks just like you who face life-changing charges because they decided to cheat a little on their taxes.  Average people are having tax troubles and facing prosecution, even prison time time, nationwide.
       For example:
  • Las Vegas attorney Mark A. Lobello will spend the next 15 months in a federal prison for trying to avoid paying $140,000 in income taxes.
  • Thomas Rikki Farr, 66, of Scottsdale, Ariz., was a businessman whose clients were in Hong Kong. He has three months on Lobello, after having been sentenced to 18 months in prison after evading hundreds of thousands of dollars in taxes.
  • Thomas B. Parker, 64, and his wife Margaret A. Parker, 65, of Vidor, Texas, could spend three of their next retirement years behind bars. A jury found them guilty of evading more than $100,000 in taxes.

       You read all about Castroneves. But you didn’t read about these people, did you?  And don’t be fooled: It’s not just the people who evade six figures or more who get caught.
        The small-timers are also facing prosecution. Every year, hundreds of middle class people across the country are indicted for filing a false tax return.  Now that we’re in 2009, the IRS’s aggressive enforcement policies are unlikely to change. In fact, they are likely to become more aggressive.
       Take, for example, what IRS Commissioner Douglas Shulman said of enforcement during a recent speech.  “Think of a detective working a case who may employ everything from eyewitness accounts, physical evidence, paper trails and the cooperation of law enforcement officials in other states,” Shulman said. “That’s similar to what we’re doing with the following tools (of enforcement).”
   

• Tax Shelter Trial Nets Convictions of Three in New York
       Three men were convicted following a ten-week jury trial in Manhattan that addressed the design, marketing and implementation of tax shelters.
       John Larson, 57, a former senior manager at KPMG, and Robert Pfaff, 58, a former partner at KPMG, were the founders of Presidio Advisory Services, which purported to be an “investment advisor” for various tax shelter products. R.J. Ruble, 63, was a partner at the law firm of Brown & Wood.
       From at least 1998 to 2000, Larson, Pfaff and Ruble were involved in the design, marketing, and implementation of a tax shelter known as BLIPS. The defendants represented that BLIPS could be used to completely eliminate either the capital gains or ordinary income of tax shelter clients who had at least $20 million in income in that year, effectively purporting to eliminate millions of dollars in taxes.   Each man faces up to five years in prison.
   
• Feds: Ohio Doc Tried to Conceal $950,000
       An Ohio physician has been charged with trying to conceal more than $950,000 in income. A federal grand jury indicted Dr. Dominic Joseph Maga, 60, of Dayton, charging him with tax evasion and willful failure to file income tax returns on his taxable income of more than $220,000 per year for the past four years.
       Maga is an emergency room doctor employed at Grandview Medical Center and Southview Hospital, both located in Dayton. The nine-count indictment includes four counts of tax evasion for attempting to conceal his income of $260,078.85 in 2003, $255,369.89 in 2004, $240,287.91 in 2005 and $220,996.40 in 2006.
       Each count of tax evasion is punishable by up to five years in prison and a fine of up to $250,000.  The indictment also alleges five counts of willful failure to file an income tax return for the years 2002 through 2007. Each count is punishable by up to one year in prison and a fine of up to $100,000. If convicted, Maga’s sentence would also include payment of all taxes due plus penalties and interest, as well as the costs of prosecution.
   
• Man Admits to Fraud, Income Tax Evasion
       A former Wayne, N.J., resident who operated a mortgage and real estate business pleaded guilty to tax evasion, admitting he failed to report to the IRS nearly $836,500 of income — a portion of which represented proceeds from fraudulent mortgage transactions.
       Russell Mainardi, 51, of Hyland Mills, N.Y., admitted he permitted mortgage loans to be made to borrowers based on false information submitted to the banks. He then directed commissions and proceeds from the real estate transactions to a company bank account that he used to hide the income from the IRS.
       Mainardi pleaded guilty to a one-count information charging tax evasion. He faces up to five years in prison and a $250,000 fine.
   
• Int’l Businessman Did Not Report Thousands, Now Headed to Prison
       An international businessman will spend the next year and a half behind bars after failing to report hundreds of thousands of dollars in income.
       Thomas Rikki Farr, 66, of Scottsdale, Ariz., was sentenced to 18 months in federal prison for willfully filing a false income tax return. Farr will also be placed on one year of supervised release upon his release from federal custody.
       When Farr pleaded guilty in June 2008, he acknowledged that on his 2004 tax return, he reported $3,820 for total income when in fact he had received $743,346 in additional commission income from his association with Zylux Acoustic of Hong Kong.
       Farr also admitted that he knew he was required to disclose this income on his 2004 tax return, but he knowingly and intentionally omitted it. Farr also acknowledged that, in 2005, he received $385,356.58 in additional commission income from his association with Zylux Acoustic which should have been reported on his 2005 tax return.
   
• Las Vegas Attorney Gets 15 Months in Prison for Evasion
       A Las Vegas lawyer who previously pleaded guilty to tax evasion and willfully failed to file federal income tax returns or pay any taxes for a five-year period was sentenced to 15 months in federal prison.
       Mark A. Lobello was indicted by the federal grand Jury in November 2006. According to court records, Lobello handled business disputes, personal injury lawsuits and divorce matters. From 1997 and 2001, Lobello earned more than $600,000 in income but failed to file federal income tax returns or pay any federal income taxes for the those years, even though he owed the IRS more than $140,000. Lobello also attempted to conceal his income from the IRS by dealing in cash and mixing business funds with personal funds.
       “Everyone, including attorneys like Mr. Lobello, has a duty to comply with federal tax laws and has an obligation to file accurate tax returns and timely pay their taxes,” said Nathan J. Hochman, Assistant Attorney General of the Justice Department's Tax Division, in a statement. “If they violate these laws, the consequences are severe — indictment and criminal prosecution, being branded a felon for the rest of their lives, significant prison time, and the requirement to pay back all the taxes plus steep penalties and interest.”
   
• Texas Couple Guilty on Tax Charges
       Thomas B. Parker, 64, and his wife Margaret A. Parker, 65, were each found guilty of seven counts of filing false tax returns and five counts of failure to file a tax return following a two-day jury trial. The couple caused a potential tax loss to the government of $106,564.
       According to court records, the Parkers filed amended U.S. Individual Income Tax Returns for 1993, 1995, 1996, 1997, 1998, 1999 and 2000 in which they falsely represented they had no taxable income, they owed no taxes, and sought a refund. They also failed to file tax returns for 2002, 2003, 2004, 2005, and 2006. They were indicted by a federal grand jury on June 25, 2008.  They each face up to three years in prison and a fine of up to $100,000.
   
• Ariz. Man Fined $20,000 for Tax Evasion
       Darrell Forest May, 58, of Phoenix, was sentenced to five years of probation and fined $20,000 after pleading guilty to tax evasion. From July 2000 to December 2005, May attempted to evade the payment of income taxes for tax years 1998, 1999 and 2000. To conceal his income and evade payment of taxes, among other ways, he filed false W-4 forms in which he claimed “exempt” status and did not use bank accounts levied by the IRS. In all, May evaded $98,770 in taxes.
   
• Livestock Sales Mean Tax Trouble in Neb.
       Melvin Buckley, 77, of Gothenburg, Neb., was fined $30,000 and sentenced to five years of probation for filing a false income tax return for the year 2001. Buckley was charged with filing a false income tax return for 2001 by reporting sales of livestock from his ranch business which he reported to be $191,441 when, in fact, the sales were determined to be approximately $393,142.
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• ASK THE EXPERTS:

  Question:  Things aren’t going well. I maxed out my credit cards to be able to give my kids the type of Christmas they’re used to having. All the while, I felt dread. That’s because I owe a huge amount to the IRS — about the same amount I expect to make in total income in 2009. What can I do?
  Answer: First of all, don’t panic. Put that dread to the side as best you can.
       Now, I’m not sure how you came to amass so much in IRS debt, but it really doesn’t matter. You need to know you have options.  The first thing you should do is consult a qualified tax professional. He or she will analyze your current financial situation, previous tax returns and other records to determine exactly how much you owe the IRS. After all, why be in a position in which you’re obligating to pay yourself even a penny more than you owe?
       Although I don’t know the particulars of your situation — these are things you’ll want to discuss with your tax professional — I suspect there is a good chance you qualify for the Offer in Compromise program.  This program is designed for people who, for whatever reason, are absolutely incapable of paying off their tax debt. Under this program, you and your tax professional will negotiate with the IRS a final settlement amount that will retire your tax debt once and for all. Oftentimes, this settlement amount to pennies of the dollar of your tax debt.
       Honestly, for those who qualify, it’s that simple. The Offer in Compromise program can be a powerful tool in helping you finally wipe out that tax debt — and rid yourself of that awful dread.
       I solve IRS problems like yours every day. I’m an IRS Problem Solver. For a free, no-risk consultation, please call our office.

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