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Tax Times Newsletter - April 2009

- Jay Schlichting

We help real people with real tax issues - successfully.

TOP NEWS

• IRS to Give Offshore Tax Cases ‘Priority Treatment’
  
  Internal documents reveal IRS has made offshore tax evasion its highest-priority target; investigators will focus on unreported income - The memo sent to examination staff of the Internal Revenue Service was clear.
       Investigators should make sure offshore tax cases “receive priority treatment.”  Indeed, internal documents released by the tax-collecting agency, coupled with public comments from IRS Commissioner Doug Shulman, leave little doubt the government will focus the brunt of its enforcement efforts on taxpayers who use offshore bank accounts to hide income.
       In anticipation of this newly aggressive tax enforcement, the IRS is offering temporary amnesty to those taxpayers hiding money overseas. Taxpayers who come forward will face fines, penalties and interests — but the IRS will waive all criminal charges, Shulman announced recently.  “This is a chance for people to come clean on their own,” said the IRS commissioner.
       The rank-and-file investigators of the IRS, meanwhile, have received memos pushing them toward investigating more thoroughly taxpayers who use offshore bank accounts.
       “Offshore cases sent to the field are work of the highest priority,” said an IRS internal documents. “Examiners should utilize the full range of information gathering tools in properly developing offshore issues with special emphasis on detecting unreported income. This includes interviewing taxpayers, making third-party contacts and timely issuing summonses to taxpayers and third parties.”
       The emphasis on offshore accounts comes at an opportune time for the IRS. For the first time, U.S. officials have successfully pierced the secrecy veil of banks in Switzerland, where many wealthy Americans hide money.
       Earlier this year, Switzerland agreed to cooperate more on tax evasion cases due to an IRS investigation and lawsuit concerning UBS.
       UBS, the largest bank in Switzerland, has agreed to provide the U.S. government with the names of those it suspects of using its accounts to evade paying taxes in the United States. The agreement came after UBS agreed to pay $780 million to settle an investigation of its activities.
       From 2002 to 2007, UBS helped American clients evade as much as $300 million a year in taxes, prosecutors allege.
       Those using Swiss banks to evade income taxes aren’t the only ones who risk being caught by the IRS, however.
       Earlier agreements with credit cards companies have given the IRS unprecedented information about taxpayers who use a credit card linked to offshore accounts, such as in the Caribbean. A common tactic for tax cheats has been to funnel money to an overseas account, link the account to a credit card, and then pay all expenses in the United States using that credit card.
       Now that Swiss banks are cooperating and credit card companies are providing records, there’s no safe place to hide your money. It’s time to come forward.
   
• Marion Barry Owes $277,000 in Back Taxes
       Prosecutors allege Washington, D.C., Council member and former Mayor Marion Barry has failed to pay more $277,000 in back taxes.
       In a recent court filing, prosecutors told the court the politician had not made a tax payment during a period in which he took a Jamaican vacation and ran for re-election to the Ward 8 council seat.
       “There is no excuse for the defendant’s failure to make payments to the District of Columbia because, during this six-month period, the defendant nevertheless had enough time and money, for instance, to take a six-day vacation in Jamaica in Sept. 2008 as well as to run for re-election as a council member,” prosecutors told the court.  In 2006, Barry received three years of probation for not filing tax returns from 1999 to 2004.
   
• Tenn. Attorney Charged with Evasion
       Thomas E. Cowan Jr., 64, of Elizabethton, Tenn., has been indicted by a federal grand jury on one count of income tax evasion and three counts of failure to file income tax returns.
      According to the indictment, Cowan, an attorney, attempted to evade a large part of the income and self-employment taxes, penalties and interest due to the United States for tax years 1993 to 1997. The indictment alleges that Cowan failed to file income tax returns with the IRS each year and failed to pay any income tax due and owing for those years. Additionally, the indictment states that Cowan concealed his true income and assets by diverting income checks into the checking account of a family member, cashing checks, depositing earned income and making personal payments to and from his law firm’s trust account, and using nominees to conceal the ownership of assets from the United States.
       The indictment also charges Cowan with failing to file federal income tax returns with the IRS for 2002, 2003 and 2004. In each of those years, the indictment states, Cowan had gross income totaling $112,677.78, $72,412.63, and $50,971.83, respectively.
   
• If Convicted, Penn. Man May Spend 12 Years in Prison on Tax Charges
       John C. Gedekoh III of Belle Vernon, Penn., was indicted by a federal grand jury in Pittsburgh on charges of filing false tax returns.
       According to the indictment, Gedekoh knowingly filed false federal income tax returns for the years 2002 to 2005 by understating his gross receipts by $223,161.81. The IRS Criminal Investigation Division conducted the investigation leading to the indictment in this case.  If convicted, Gedekoh faces up to 12 years in prison and a fine of up to $1 million.
   
• Woman Did Not Pay $1.5m, Gets 41 Months in Prison
       A San Antonio, Texas, woman was sentenced to 41 months in federal prison and ordered to pay $1.5 million in restitution to the IRS for her role in a fraudulent tax scheme.
       In addition to the prison term, United States District Judge Fred Biery ordered that Terrell Diamond be placed under supervised release for a period of three years after completing her prison term.
       According to court records, Diamond, along with her now-ex-husband and co-defendant, William Diamond, conspired to defraud the IRS in the assessment and collection of more than $1.5 million in employment taxes due and owing from November 1996 to June 2003.
       The employment taxes owed pertained to temporary employment agencies owned and operated by the Diamonds, including Ameriforce and Primo Labor.
       On April 24, 2008, Diamond pleaded guilty to one count of conspiracy to defraud the IRS. William Diamond pleaded guilty to the same charge on February 29, 2008. William, who faces up to five years in federal prison, is scheduled to be sentenced in May.
   
• MODULAR HOME BROKER HID $406,000 IN TAXABLE INCOME, FACES 3 YEARS IN FEDERAL PRISON
       The owner of Factory Direct Modular Homes in Brick, N.J., pleaded guilty to tax charges for underreporting the business’ income for tax years 2002 and 2003 by about $406,000.
       Janice Pfefferkorn, 54, who also went by the name Janice Morton, pleaded guilty to a two-count Information charging her with two counts of filing a false
  federal tax return.
       According to court records, as a broker for a modular home manufacture, Pfefferkorn would typically collect a 10 to 20 percent deposit from modular home buyers. Final payments were due to the modular home manufacturer upon delivery of the home, at which time the manufacturer would pay FDMH a commission on the sale. Pfefferkorn understated the gross receipts of FDMH by cashing a large number of business checks and then deposit only a fraction of the proceeds back into the FDMH business bank account.
       The total tax loss to the IRS is $125,000 for tax years 2002 and 2003. IRS Criminal Investigations discovered the underreported taxes after following up on leads the tax-collecting agency received.
       Pfefferkorn faces up to three years in prison and a fine of up to $100,000.
   
• N.C. UNDERREPORTED INCOME BY $1.5 MILLION
       John Patrick Armstrong, 45, of Raleigh, N.C., was indicted for tax evasion relating to individual returns for the years 2002 to 2004.
       The government alleges Armstrong underreported his income from 2002 to 2004 by $1.5 million. In addition to the tax evasion charges, Armstrong is cited with failing to disclose his interest in or authority over financial accounts in a foreign country for the years 2002 to 2004.  He faces up to five years in prison and a fine of up to $100,000.
   
• BUSINESSMAN FACES MULTIPLE TAX CHARGES
       Daniel L. French, of Akron, Ohio, was charged with three counts of attempting to evade his personal income taxes and two counts filing false income tax returns for a solely-owned corporation he operated in Macedonia, Ohio.
       The first two counts allege French filed false returns for the years 2002 and 2003, which listed deductions for corporate payments that were in fact disbursements for personal benefit. These disbursements are alleged to be checks to a fictitious entity whose bank account French controlled under that name. He was also charged with attempting to evade his taxes for 2004 by failing to file an income tax return.
   
• OHIO MAN DID NOT REPORT $2.4 MILLION IN COMMISSION INCOME
  Mark J. Zokle, 43, of Sandusky, Ohio, was charged with failing to file federal income tax returns on $2.4 million in income. The information alleges that in 2001, 2002 and 2003, Zokle worked as an independent sales representative for TEMO Sunrooms, of Clinton Township, Mich., and earned commission income of $862,463.89, $756,980.77, and $794,067.64, respectively, in those years but failed to file tax returns.
   

• ASK THE EXPERTS:

  Question:  Give it to me straight, please. I have substantial tax debt. What is the Offer in Compromise, and how do I qualify?
  Answer:  Like you, I’ll get straight to the point: the Offer in Compromise is an IRS program that can reduce your tax debt significantly.  Really.
       This is how it works and why it exists: If you owe a substantial amount of tax debt that you cannot, for whatever reason, pay off in the future, you can negotiate with the IRS to accept a settlement offer that will eliminate your debt once and for all. Oftentimes, as I mentioned, this amounts to pennies on the dollar. The reason the IRS offers this program is simple: Following years of chasing down deadbeat taxpayers, the tax-collecting agency learned that a kinder, gentler approach can be a more efficient way of collecting taxes. In the end, the IRS theory goes, the government will collect more of what it’s owed by being flexible with taxpayers willing to come forward and settle their debts.
       Now, whether you qualify is ultimately going to be an answer given to you by the person who analyzes your previous returns and current financial situation. For that reason, if you have substantial tax debt, I recommend you consult with a qualified tax professional as soon as possible. He or she will take a look at your current situation and see what program works best for you.
       If you do indeed qualify for the Offer in the Compromise, you and your tax professional would set up an appointment with an IRS agent and discuss the terms of your settlement agreement. That’s where you can effectively reduce your debt by a significant amount. However, keep in mind that even if you do not qualify for the Offer in Compromise, you have other options available.
       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