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Tax Times Newsletter -  May 2010

- Jay Schlichting

We help real people with real tax issues - successfully.

TOP NEWS

• Data Shows Increase in Convictions in Tax Cases
       If you’ve put yourself in a situation for which you could be prosecuted on tax charges, there’s something you should know: Your chances of convictions are high today.
       There are not many situations scarier than being in tax trouble.  Whether you’re worried about the tax man knocking at the door or staring down at the pages of a tax evasion indictment, there are few legal situations worse in American life.
       Getting in trouble with the Internal Revenue Service can be a life-altering experience. That is an indisputable fact.  Even more troubling, data suggests you’re more likely to be indicted and convicted on tax charges today than you were five years ago.
       In fact, available data shows the Obama administration is just as aggressive in tax enforcement as the Bush administration was.  Using data from the Internal Revenue Service and the Department of Justice, the Transactional Records Access Clearinghouse (TRAC) at Syracuse University reviewed IRS referral and DOJ conviction numbers for tax cases in fiscal-year 2009 — Obama’s first year in office.
       What TRAC found should be eyebrow-lifting to those who suspected the Obama administration might go easier on tax cheats.  Tax case convictions in fiscal-year 2009 were on par with those in fiscal-year 2008, the Bush administration’s last year in office, and in fact there were 10 percent more convictions in fiscal-year 2009 than there were just five years ago.  The most frequently reported charges were “fraud and false statements” and “attempt to evade or defeat tax.”
       The takeaway for you, the taxpayer, should be obvious: Despite the alterations in policy and action that often accompany a new government, the Obama administration has chosen not to chain what has been an increasingly aggressive IRS over the previous five years.  What’s more, the odds are great that tomorrow’s enforcement will become even more aggressive.
       The primary reason: money.  For fiscal-year 2010, Congress increased the IRS’s enforcement budget to a record $5.5 billion — meaning more agents for more audits and more investigations.
       Of course, that extra money in the enforcement budget comes on top of the IRS’s recent agreements with credit card companies and Swiss banks to open up the account information for U.S. taxpayers who might be stashing cash overseas.
       These days, when it comes to tax enforcement, the IRS has a winning hand.  So why bet against the government when the stakes include your freedom and livelihood? There are plenty of examples of people who did bet against the government. They’ve lost.
       Just last month, a Florida man received a 51-month prison sentence for tax evasion, while across the country in California a bookkeeper received a 33-month sentence for wire fraud and evasion. Scared? Now might be a good time to call us.
   
• Danielle Steel’s Bookkeeper Gets Tax Sentence
       The bookkeeper for author Danielle Steel received a 33-month prison sentence for wire fraud and tax evasion. Kristy S. Watts, also known as Kristy Siegrist, was also ordered to pay $60,677 in restitution.  Watts, 48, of Tiburon, Calif., was charged with one count of wire fraud and four counts of tax evasion. She pleaded guilty on Sept. 24, 2009, to all five counts.
        According to court documents, Watts worked as a bookkeeper for author Danielle Steel for approximately 15 years. Watts was trusted with oversight of and day-to-day responsibility for Steel’s personal and professional financial management, including overseeing bank accounts and credit card statements, handling payroll, overseeing the petty cash operations, obtaining foreign currency for international travel and paying bills. While handling those duties, Watts devised a scheme to steal more than $760,000 from Steel. She did not report the money as income.
   
• Charge: Real Estate Agent Evaded Taxes
       A federal grand jury in Phoenix has indicted an Arizona real estate agent and broker for income tax evasion and willful failure to file tax returns, alleging she failed to report interest in a $1.3 million sale.  The indictment alleges Sue J. Taylor, also known as Janice Sue Taylor, 66, used her purported real estate brokerage, National Landbank, and purported real estate trusts to hide earnings from commissions and ownership interest in real property from the IRS. The indictment makes specific reference to a purchase and subsequent sale of land in which Taylor earned a $72,000 commission and had an interest in $1.3 million in proceeds from the sale, none of which was reported to the IRS.
       “We take tax evasion seriously and will work with the IRS and other relevant agencies to investigate and prosecute tax evaders,” said Arizona U.S. Attorney Dennis K. Burke in a statement.  Each conviction for income tax evasion carries a maximum penalty of up to five years in prison and a fine of up to $250,000.
   
• Newspaper Publisher Goes to Prison in Tax Case
       A Northern California newspaper publisher was sentenced to five months in prison and ordered to pay $75,000 in restitution after he pleaded guilty to filing false tax returns for 2000 to 2003.  According to the plea agreement, Harry Warren Green admitted to operating several newspapers in the San Francisco Bay Area, including the Clayton Pioneer, Brentwood Bee, Bethel Islander and the Oakley Herald. Green admitted in his plea that he underreported income he received while operating the newspapers.  Documents filed with the court also state that Green failed to account for all of the income received while operating those businesses, real estate commissions he received and income received from the sale of the Clayton Pioneer newspaper in 2003.
   
• Conn. Man Evaded Taxes for 30 Years
       A federal grand jury found Albert Holland, 70, of Sharon, Conn., guilty of tax evasion and filing false tax returns.  According to trial evidence, in 1998, the IRS notified Holland that he owed more than $1.4 million in unpaid taxes, penalties and interest dating back to 1979. In 1998, Holland made an Offer in Compromise with the IRS that claimed that he was only able to pay $120,000 of the debt.
       However, at the time Holland made the offer, he was involved in a lawsuit in which his partnership had demanded millions of dollars for services. In 1999, while Holland was challenging the IRS’s rejection of his Offer in Compromise, he and his partner settled the lawsuit for about $4.65 million.
       Rather than pay the IRS, Holland moved the judgment proceeds to an entity he formed in the name of his four children. That entity purchased a house in Kent, Conn., in which Holland and his wife lived.  Over the next five years, Holland rebuffed IRS attempts to collect the money owed, continuing to claim he did not have assets with which to pay his debt to the IRS.  He faces up to 11 years in prison and a fine of up to $100,000. He also will be required to pay back taxes, penalties and interest to the IRS.
   
• FLA. BUSINESSMAN GETS 51-MONTH SENTENCE
       John A. Gullett, of Parkland, Fla., was sentenced to 51 months in prison, to be followed by three years of supervised release, after being convicted on four counts of filing a false tax return. Gullett was also ordered to pay restitution of $255,000 to the IRS.
       According to court records, Gullett submitted false Form 1040 Individual Income Tax Returns, statements and documents for tax years 2002 to 2005. He underreported his gross receipts from 2002 to 2005 and filed the tax returns with the IRS knowing that the returns contained materially false information.
       Gullet contracted with the Broward County Police Benevolent Association (BCPBA) and the Dade County Police Benevolent Association (DCPBA) to solicit local businesses to buy advertisements in a book that Gullett published listing local businesses. The book was distributed to PBA members.
       In exchange, Gullett paid BCPBA and DCPBA between $3,000 and $5,000 per month and kept any funds he raised in excess of these amounts. Gullett failed to report about $3 million of income from 2002 to 2005. Gullett used these monies to purchase a personal residence in Parkland, Fla., and various luxury automobiles, including two Ferraris and a Lamborghini.
   
• CALIF. WOMAN FACES 50 YEARS FOR TAX REFUND AND CREDIT SCHEME
       A Tarzana, Calif., woman has pleaded guilty to federal tax charges, admitting that she filed more than 200 false tax returns with the IRS seeking more than $1.3 million in refunds based on fraudulently claimed First-Time Homebuyer Credits and Earned Income Tax Credits.  Kashawn Monique Savery, a real estate broker who until recently lived in Reseda, pleaded guilty to all 10 counts of making false claims.
       The IRS began investigating when the fraud detection center observed suspicious activity, including a group of 231 tax returns for the 2008 tax year that sought more than $1.3 million in refunds. The majority of the suspicious tax returns were filed from a computer at Savery’s condominium in Reseda.
       Savery pleaded guilty to fraudulently filing or causing to be filed 10 tax returns, five of which sought refunds based on the Earned Income Tax Credit, and five of which sought refunds based on the First-Time Homebuyer Credit. The criminal information alleges that the 10 tax returns sought nearly $68,000 in refunds. During a hearing, Savery admitted to being involved in more than 200 tax returns that sought more than $1.3 million in fraudulent refunds.  Savery faces 50 years in prison and a $2.5 million fine.
   
• COLO. WOMAN PLEADS GUILTY TO FALSE RETURN
       Terri Lynn Lucero, 50, of Alamosa, Colo., pleaded guilty to filing a false tax return. Lucero was an employee at the Housing Authority of Alamosa. From 2001 to 2004, she prepared 96 checks payable to Steve Lucero. Some of the checks were for work she and Steve Lucero did, but most represented embezzled money. The total was $168,949. All of the money should have been reported, but was not. Lucero faces up to three years in prison and a fine of up to $100,000.
   
• ASK THE EXPERTS:

  Question:  A friend told me I should be concerned about doing an Offer in Compromise. He said there are a lot of scams out there. How can I know if an Offer in Compromise is for me, and how can I know I’m not being scammed?

  Answer:  Your friend isn’t wrong about scams. Of course, scams are everywhere, in every industry. Every year around this time, right after people have filed their tax returns and begin to realize they’re in significant tax debt, the number of scams reported begins to rise. I’ll answer your question in two parts:
       First, determining whether the Offer in Compromise is for you is something you should do with the help and consultation of a qualified tax professional. Among your initial steps should be to determine whether you even qualify for the program. If you owe a substantial amount to the IRS and you now lack the means to pay that amount, you may qualify for the program.
       A qualified tax professional will analyze your previous returns, assess your current situation, and provide you with a determination of whether an Offer in Compromise would be good for you. If you are among those who qualify, an Offer in Compromise can reduce your tax debt significantly.
       Now, the second part: Scam artists often prey on those with tax troubles, particularly at this time of year. Some will even claim they have experience negotiating Offers in Compromise with the IRS. But most of these scam artists are fly-by-night operations using questionable marketing tactics.
       If you are indeed in need of tax advice, you should research the background of your tax professional: How many years in practice? Does he or she have references? Is he or she licensed? A member of professional associations? If you need tax help, make sure you find a qualified tax professional.

       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