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Tax Times Newsletter -  February 2010

- Jay Schlichting

We help real people with real tax issues - successfully.

TOP NEWS

• IRS Enforcement to Get Priority, Big Bucks in 2010
       Congress is sending another $12.2 billion to the IRS this year. Most of the money will be used for enforcement. It’s time to watch out.  The United States Congress is finally putting, to use the old cliché, its money where its mouth is.
       That is to say, while Congress has always had a loud bark regarding tax cheats, its members haven’t always been eager to spend money on the bite.
       That changed in the fiscal-year 2010 omnibus spending bill. During appropriation, Congress allocated $12.2 billion to the IRS. The majority of that money is intended to go toward enforcement. This year, the IRS’s enforcement budget will be a record $5.5 billion.
       Concerned?  You should be.  Among the main reasons why can be found in the previous fiscal year. Even before this $12.2 billion budget infusion, the IRS was firing on all enforcement cylinders.  Collections in fiscal year 2009 were $48.9 billion — the third-most collected all decade. What’s more, the IRS had 21,059 revenue officers and special agents on the streets in 2009 — 339 more than were employed in 2008.
       But that’s not the worst of it. Fiscal year 2009 saw 1.425 million examinations of individual tax returns — the most seen all decade. The IRS also filed more than 3 million levies and nearly 1 million liens — also the most seen all decade.
       It doesn’t take Sherlock Holmes to read the writing on the tax wall: If fiscal year 2009 was among the most productive enforcement years for the IRS, fiscal year 2010 — with the extra $12.2 billion from Congress — should be nothing short of extraordinary.  This new enforcement will likely affect all economic strata in the United States, from the nation’s wealthiest to Average Joes.
       Already, IRS Commissioner Doug Shulman has announced the creation of a specialized unit to focus on wealthy Americans with complex business organization and international operations whose legal mechanisms may “mask aggressive tax strategies.”
       This new unit, no doubt, is intended to piggyback on the IRS’s success in piercing the Swiss banking veil and exposing for the first time U.S. taxpayers who were hiding assets and money in Switzerland to avoid tax obligations.  Despite this new unit, an examination of federal cases show the IRS and the Department of Justice are still more than willing to go after middle-income taxpayers.
       Recent cases range from the owner of a New Jersey mortgage business who allegedly did not declare $836,500 in income to an Ohio radio host who allegedly did not file taxes and who earned only $17,945 in 2006.
       If you’re still skeptical the IRS will go after you, it’s also important to remember that the U.S. government is facing a continued recession and rising deficits. While the federal government may be loath to raise taxes, Uncle Sam is showing himself to be eager to get what he’s already owed.
       Now is probably one of the most dangerous times to be cheating on your taxes. The IRS has shown some leniency on those who come forward. Maybe it’s time to come clean on your taxes once and for all.
   
• Rabbi Gets Two Years for Tax Scheme
       The Grand Rabbi of Spinka, a religious group within Orthodox Judaism, was sentenced to two years in federal prison for orchestrating a tax evasion scheme that prosecutors called “an astonishingly complex and sinister enterprise.”
       Grand Rabbi Naftali Tzi Weisz, 61, of Brooklyn, New York, pleaded guilty last summer to a criminal conspiracy charge in which he admitted to working with others to obstruct the IRS by soliciting charitable donations to Spinka-related organizations with secret promises to refund donors the vast majority of the money they “donated.”
       With Weisz’s sentencing, a total of seven individuals have been convicted and sentenced for working together to obstruct the IRS and to operate an unlicensed money-transmitting business.
   
• N.J. Man Didn’t Report $836,000
       A former Wayne, N.J., resident who operated a mortgage and real estate business pleaded guilty to tax evasion, admitting that 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 that he knowingly 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.  He faces up to five years in prison and a fine of up to $250,000.
   
• ‘Intelligent Alternative’ Radio Host Charged with Failure to File Tax Returns
       Louis A. Wolk — a.k.a. Louie Free, a.k.a. Louie B. Free — was charged in Ohio with three counts of failure to file tax returns.  Wolk was self-employed as a radio host, doing business as The Louis Free Radio Program, a.k.a. Free Radio Ltd., a.k.a. Louie Free Radio. Wolk billed his program as “The Intelligent Alternative: Brain food from the heartland.”
       Wolk allegedly failed to file tax returns despite the fact that he had gross income in the amount of $74,150 for calendar year 2004, $46,810 for calendar year 2005 and $17,945 for calendar year 2006.  If convicted, Wolk’s sentence will be determined by the court after review of factors unique to this case, including the defendant’s prior criminal record, if any; the defendant’s role in the offense; and the characteristics of the violation.
   
• Ariz. Couple Tried to Evade Taxes
       A federal jury returned guilty verdicts against a Sedona, Ariz., couple who operated a drug and alcohol rehabilitation center in that city.  Dr. William Howard Steiniger, 65, and his wife, Diane Goulder Steiniger, 52, operated Desert Canyon Treatment Center from 1998 until December 2008. They were each convicted of one count of conspiracy to impede and impair the Internal Revenue Service and four counts of tax evasion.
       During the four-day trial, testimony established that from as early as 1997 to at least August 2007, the Steinigers conspired to defraud the United States and to defeat the IRS in its attempts to assess and collect income tax. This was accomplished by the Steinigers’ funneling of their substantial incomes into sham entities which they created.
       William Steiniger’s earnings from Desert Canyon were directed to a sham trust which he called National Career & Life Institute, while Diane Steiniger’s income was directed to Flair International Ltd., which she set up as an International Business Company in the Central American nation of Belize. Trial testimony was that the Steinigers evaded assessment and payment of more than $390,000 in federal income tax from 2002 to 2005. Neither defendant paid any federal income tax from at least 1997 through 2005.
       Each of the five counts against the couple carries a maximum sentence of five years in prison and a $250,000 fine.
   
• LAS VEGAS MAN GETS MORE THAN 15 YEARS FOR TAX CHARGES
       Robert Kahre, the owner of six construction businesses in Las Vegas who paid employees over $100 million in cash wages as part of an elaborate scheme to defraud the IRS, was sentenced to more than 15 years in prison.
       “Citizens who pay their fair share of taxes can rest assured that the Department of Justice will continue to utilize all of its resources to prosecute those who choose to cheat and promote fraud,” said John A. DiCicco, Acting Assistant Attorney General of the Justice Department Tax Division, in a statement.
       Following an over three-hour sentencing hearing, visiting U.S. District Judge David A. Ezra, of the District of Hawaii, sentenced Robert Kahre to serve 190 months in federal prison, followed by three years of supervised release and ordered him to pay over $16 million in restitution to the IRS. Judge Ezra also ordered that Kahre, who has been free on a personal recognizance bond since he was arrested in 2005, be immediately taken into the custody of the U.S. Marshals Service.
       “This kind of conduct is simply not acceptable in the United States,” said U.S. Attorney Daniel Bogden. “Individuals who ignore the federal tax laws by engaging in schemes to defraud in order to enrich themselves at the expense of others will be prosecuted.”
   
• RUSSIAN NATIONAL RECEIVES PRISON FOR TAX REFUND SCHEME THAT NETTED $136,000
       Maxim Maltsev of Russia, and who resided in San Diego from May 26, 2006, to Sept. 27, 2006, was sentenced to 18 months in federal custody and ordered to repay $136,000 to the Internal Revenue Service. Maltsev was charged in a sealed indictment with one count of conspiracy to defraud the United States regarding claims. He pleaded guilty in July 2009.
       According to his guilty plea, Maltsev admitted that he was part of a conspiracy to obtain federal income tax returns requesting refunds before they were electronically filed with the IRS.
       The conspirators then changed the bank account information on the returns to divert the refund payments from the taxpayers to accounts opened for that purpose by members of the conspiracy. To that end, Maltsev opened bank accounts at four banks in San Diego. Approximately 65 federal income tax refund payments, totaling around $105,000, were illegally diverted to the accounts opened by Maltsev.
       Maltsev also convinced three friends to participate in the scheme, running the total loss to the IRS to $136,000. Those funds were withdrawn by debit, check cards and ATM withdrawals.
   
• LAWYER FACES PRISON, DID NOT REPORT INCOME
       David Thomas, 55, Killingworth, Conn., pleaded guilty to one count of filing a false tax return. Thomas, an attorney, was retained by the Cedar Island Improvement Association to provide legal assistance. Thomas received $120,977 from the association. However, for the tax years 2004 and 2005, he failed to report the $120,977 he received. Thomas faces up to three years in prison and a fine of up to $100,000.
   

• ASK THE EXPERTS:

  Question:  Like others who have written in questions to you, I have significant tax debt. I am interested in the Offer in Compromise option, but you have said one must qualify for this option. What if I don’t qualify?

  Answer:  That’s an excellent question — one to which every person who has tax debt and is considering an Offer in Compromise should understand the answer.
       You’re right in saying you must qualify for the Offer in Compromise — that is to say, not everyone is eligible. For those who do not know, the Offer in Compromise program allows taxpayers with significant tax debt to negotiate settlement amounts with the IRS that often come to a small percentage of what they owe. Here’s the important part: To qualify for the program, the IRS must believe you do not have a reasonable ability to pay your debt in full, even over time.
       This is the situation for many people with tax debt. Their debt may be related to a failed business, poor tax advice, or rising and unexpected costs in their lives, such as medical costs. In short, these are people whose financial situations have changed so drastically they will not be able to pay their tax debt.
       But the Offer in Compromise isn’t the only option. For those with tax debt who do not qualify for the Offer in Compromise program, a good option is the Installment Agreement. Under this agreement, the taxpayer works out a payment plan with the IRS that eliminates the tax debt over time. This is similar to a monthly car payment — a large enough payment to pay off a significant debt over time but not so large that it will adversely affect your lifestyle.
       Whether you are interested in an Offer in Compromise or an Installment Agreement, you should first consult a qualified tax professional in your area.
       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