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Tax Times Newsletter -  January 2010

- Jay Schlichting

We help real people with real tax issues - successfully.

TOP NEWS

• In 2010, IRS to Put Even More Heat on Tax Cheats
       If you thought the last couple of years were hard on tax cheats, wait until you get a look at the government’s plans for 2010.  Let’s be honest: It’s been a rough couple of years for tax cheats in the United States.
       For middle-class tax cheats, there was the ol’ Caribbean scheme. U.S. taxpayers living in the United States would stash their money in a Caribbean bank account, then link that bank account to a credit card they could use to pay for everyday expenses at home. It gave these taxpayers the tax-cheating luxury of having mad money the IRS didn’t know a thing about.
       Until, of course, the IRS found out. The government cut deals with the major credit card companies and obtained lists of people whose credit cards were linked to foreign accounts.
       Amnesty came first. Then came prosecutions of individuals for tax evasion.  For wealthy tax cheats, Switzerland has long been the scheme. With the right money and contacts, U.S. taxpayers could conceal hundreds of thousands, even millions, in bank accounts protected by a Swiss banking veil that guaranteed total secrecy.
       Until, of course, the IRS finally pierced that banking veil after threatening to prosecute Swiss bank UBS. Now the U.S. government is set to obtain the names of taxpayers who have been hiding their many greenbacks.  Amnesty came first. Now, those with Swiss accounts could face enormous fines and even prison time.
       As I said, it’s been a rough couple of years for tax cheats in our country.  The bad news for them: The pain ain’t over. Not yet.
       On Dec. 10, 2009, at the 22nd Annual George Washington University International Tax Conference, IRS Commissioner Doug Shulman made it clear that what has seemed like a bare-knuckled aggressiveness against tax cheats will only get more, well, bare-knuckled!
       The unprecedented agreement with the Swiss authorities we reached this past August regarding UBS account holders — and the response to the special offshore voluntary disclosure program — together represent an historic milestone,” Shulman told the audience. “They proved to the world — especially to account holders, promoters and banks — that we’re serious about our international efforts. We’re serious about piercing the veil of bank secrecy. And we’re serious about carrying forward the momentum to address offshore tax evasion.
       “We will be mining the 14,700 voluntary disclosures,” he continued, “for information to identify financial institutions, advisors, and others who promoted or otherwise facilitated U.S. persons hiding assets and income offshore and attempted to shirk their tax responsibilities at home.”
       Shulman promised increased budgets for compliance, the hiring of additional agents and a general sharpening of the IRS’s mighty sword.  “I think we’ve made some good progress this past year,” he concluded. “But we have a lot more to do.”
       Over the previous years, Shulman has proven he isn’t a man of empty promises.   If you’re cheating, maybe it’s time you stop. And maybe it’s time you finally get a tax professional to help you.
   
• Oops! Federal Workers Owe $3 Billion
       The Internal Revenue’s compliance department found trouble in the back yard. As of Sept. 30, more than 276,000 federal employees and retirees owe $3.04 billion in back taxes.
       Federal workers had an overall delinquency rate of 2.9 percent. The Department of Housing and Urban Development boasted the highest delinquency rate among employees at just over 4 percent.
       “It’s not right for a few to shirk their obligations, and it’s especially offensive that these tax delinquencies come from federal employees and contractors,” said Sen. Chuck Grassley of Iowa told the Associated Press.
   
• IRS Files Tax Lien for $33 Million
       The Internal Revenue Service filed a tax lien against Girls Gone Wild creator Joe Francis for $33 million.  The government alleges Francis, whose videos of shirt-lifting co-eds have made him wealthy, owes back taxes from 2001, 2002 and 2003.
       For Francis, this represents another battle in his ongoing war with the IRS. On Nov. 6, he was sentenced to time served and a year of probation after pleading guilty to two misdemeanor counts for filing false income tax returns and bribing jail workers. He was also ordered to pay nearly $250,000 in restitution.
       Francis, who told the celebrity news website TMZ.com that the IRS had seized more than $100 million in cash from his accounts, commented: “This is total retaliation for me beating them in court.”
   
• Florida Politico Guilty of Laundering, Tax Evasion
       A former Broward County, Fla., commissioner and county mayor pleaded guilty in December to conspiring to launder money and to filing a false tax return.
       During the plea hearing, Josephus “Joe” Eggelletion, 60, of Lauderdale Lakes, Fla., admitted to intentionally conspiring with others to assist in the laundering of money represented by FBI undercover agents as coming from a purported high-yield investment “Ponzi” scheme and to evade paying federal income taxes on the cash fees he received for laundering this money.
       More specifically, Eggelletion admitted that he introduced the FBI undercover agents to co-conspirators Ronald Owens and Joel Williams, who assisted the undercover agents in meeting with Bahamian attorney Sidney Cambridge to open a Bahamian bank account to launder their money. The undercover agents had represented to Eggelletion and others that the money originated from a high-yield investment fraud scheme.  Eggelletion faces up to five years in prison.
   
• Minn. Man Failed to Pay $332,162
       A federal trial jury in St. Paul, Minn., convicted a 53-year-old Minneapolis man of evading payment of at least $332,162 in federal income taxes owed for tax years 2002 to 2005.
       Steven Mark Renner was found guilty of four counts of tax evasion. According to court records, Renner diverted substantial funds from his business, Cash Cards International, between 2002 and 2005 to pay his personal living expenses as well as to make personal investments in coins, oil wells, art, stamps and vintage musical instruments. Renner also used CCI funds to promote his musical band, Stevie Renner and the Renegades.
        From 2001 to 2006, Renner owned CCI, an Internet-based stored-value card and money-transmission business, with locations in Minnesota, South Dakota and Hawaii. Although he was legally obligated to file federal income tax returns and pay all federal taxes owed, he failed to file his income tax returns for tax years 2002 to 2004 until March 5, 2006, the date on which he also filed his 2005 federal income tax return. Moreover, he failed to pay the $332,162 in taxes due and owing for those years.
       “Honest, hardworking taxpayers pay the price when others choose to evade their tax obligations,” said Julio La Rosa, Acting Special Agent in Charge of the IRS-Criminal Investigation Division’s St. Paul Field Office, in a statement.  Renner faces up to five years in prison.
   
• MAN FACES FIVE YEARS FOR TAX EVASION
       Terry L. Davis, 40, formerly of Winsted, Conn., and currently residing in Las Vegas, pleaded guilty to one count of tax evasion and one count of currency structuring.
       According to court documents, on May 1, 2008, Davis attempted to evade paying a large part of federal income taxes owed by filing a fraudulent individual return in which he stated his taxable income for the calendar year 2007 was $133,804, and with tax due and owing of $47,700, when, in fact, he had a taxable income of $784,537, with a tax due and owing of $287,388.  Davis has admitted that, for the tax years 2004 through 2007, he failed to pay a total of $463,623 in federal taxes.
       In addition, between 2005 and 2007, Davis knowingly structured cash transactions to evade the currency transaction reporting requirements of federal law, which require financial institutions to file a Currency Transaction Report (CTR) when an individual conducts a cash transaction of more than $10,000. For example, on consecutive days in December 2006, Davis made cash withdrawals from his account at People’s Bank in the amounts of $8,000 and $9,500 respectively.  Davis faces up to five years in prison and a fine of up to $250,000 on each count.
   
• DEL. MAN SOLD ILL-GOTTEN SOFTWARE, THEN DIDN’T REPORT TAXABLE INCOME
       A Delaware pleaded guilty to one count of mail fraud and three counts of tax evasion in an elaborate scheme to defraud computer maker Dell.
       According to court records, between 2005 and 2008, Ning Zhu, 32, of Newark, Del., defrauded Dell of approximately $102,000 by fraudulently obtaining software in connection with the purchase of personal computers.
       During the course of hundreds of transactions with Dell, Zhu, using multiple false names and addresses, claimed not to have received software that he had in fact received. Through this deception, Zhu obtained duplicate copies of the software, which he then sold unlawfully.
       On his tax returns, Zhu falsely stated that his income for 2005 was $4,603, and that the amount of tax due was $0. In fact, his taxable income for 2005 was $300,333, and the amount of tax due was $79,701. He made similarly false statements in 2006 and 2007, grossly underreporting his income from the sale of the ill-gotten software.
       On the mail fraud charge, Zhu faces a maximum up to 20 years in prison and a $250,000 fine. On each of the three tax evasion charges, he faces up to five years in prison and a $250,000 fine.
   
• BUSINESSMAN GUILTY OF FILING FALSE RETURN
       Jesus Mena, of Miami, pleaded guilty to filing a false income tax return for an S corporation for tax year 2003. Mena was the owner of Destiny Erectors, a construction company that provided labor for the installation of rebar. During the 2002 through 2004 tax years, Mena cashed checks for services Destiny Erectors rendered. These amounts were not included on the tax returns. He faces up to three years in prison.
  

• ASK THE EXPERTS:

  Question: New Year’s Resolution: I want to get rid of my tax debt! I owe a lot too. A LOT! Between a failed business and bad tax advice, I owe low six-figures. I don’t even have that much money! What can I do?

  Answer:  Yours is perhaps the best New Year’s Resolution I can even imagine. Eliminating your tax debt once and for all is one of the best things I think you can do — not only from the obvious financial perspective, but from a mental perspective as well. I’ve heard from clients time and time again how relieving it is to have the taxman finally off your back.
       So what should be your plan of attack be? The first thing you should do is consult a qualified tax professional. He or she will analyze your previous returns, current financial situation and other data and records to determine exactly how much you owe the IRS.
       Based on some of the facts you offered in your question, I would guess the Offer in Compromise program might be your best option. The Offer in Compromise is intended for taxpayers who, for whatever reason, are unable to pay their tax debt, even over time. This could be due to a failed business, illness, legal judgments — any numbers of reasons. But no matter the reason, if you as the taxpayer can prove to the IRS that you are unable to pay the debt, the IRS will in certain cases agree to an Offer in Compromise.
       This Offer in Compromise can effectively reduce your tax debt by pennies on the dollar, giving you a payoff amount that is not only substantially lower than the amount you owe but which is something you can realistically pay. I suggest you talk to your tax professional specifically about an Offer in Compromise. If, by chance, you do not qualify for the program, you have other options as well, including the Installment Agreement.

       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