Once Bitten, Twice Shy

Posted on July 10, 2014 by Russ

Back in January 2007, Frederick John “Rick” Rizzolo was sentenced to a year and a day at ClubFed for his part in conspiring to defraud the IRS. Mr. Rizzolo was the owner of the Crazy Horse Too, an ‘adult entertainment facility’ (aka a strip club) here in Las Vegas. According to the DOJ press release from 2007,

According to the court records, beginning in approximately January 2000 and continuing through 2005, Rizzolo, The Crazy Horse Too, and its employees, conspired to defraud the United States by impeding and obstructing the IRS in the assessment and collection of income and employment taxes. Dancers at the Crazy Horse Too were independent contractors who were required by the club to pay about 15 percent of their earnings to the club as a fee for the opportunity to dance. The club’s managers then distributed these monies to certain male employees, including floormen, bouncers, bartenders, and shift managers as supplemental income, but failed to report or maintain records of these monies. The employees subsequently under-reported the amount of the cash salary payments they received to the club’s bookkeepers. Management of The Crazy Horse Too delivered inaccurate records to the club’s accountant, resulting in the preparation of inaccurate quarterly financial reports and tax returns, and provided inaccurate W-2 forms to certain employees, which the employees used to file false individual income tax returns. Management of The Crazy Horse Too, including Rizzolo also filed quarterly federal employment tax returns which under-reported the true amount of earnings received by the conspirators in order to conceal the fraud. By failing to report or record the cash payments to the club’s employees, the owners of The Crazy Horse Too and the participating employees evaded and failed to pay approximately $400,000 in FICA taxes and Medicare taxes owed to the IRS on the unreported compensation.

The defendants were also required to make restitution of $1.73 million to the IRS and $10 million to a customer deliberately injured at the club in 2001. Mr. Rizzolo allegedly had ties to organized crime. And so the story ended…except it’s now 2014 and I’m reporting it.

That’s because this morning’s Las Vegas Review Journal trumpeted the arrest of Mr. Rizzolo on tax charges. Mr. Rizzolo was charged with two counts of attempting to evade and defeat the payment of tax. From the US Attorney’s Office press release:

The indictment alleges that beginning on about June 28, 2006, and continuing to May 31, 2011, Rizzolo allegedly attempted to evade the payment of approximately $1.7 million in employment taxes that he owed for 2000 to 2002, and $861,075 in income taxes he owed for 2006, by concealing and attempting to conceal from the IRS the nature, extent and location of his assets, by making false statements to IRS employees, and by placing funds and property in the names of nominees and beyond the reach of process.

You remember that restitution to the IRS? It apparently hasn’t happened.

Mr. Rizzolo’s pleaded not guilty today. He was released on his own recognizance with trial set for September 15th here in Las Vegas.

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Deliberately Not Following the Rules Would Get Me in Trouble, But Not Ms. Lerner

Posted on July 10, 2014 by Russ

The IRS scandal continues to percolate. Yesterday and today we discover that Lois Lerner may have printed out some of her emails. And that she deliberately used an instant messaging system so that her communications wouldn’t be discovered.

President Obama, do you still believe there’s not a smidgen of corruption?

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Pop Goes the Tax Fraud

Posted on July 6, 2014 by Russ

Here’s a potpourri of tax fraud to end your holiday weekend. First, we head to Albany, New York, where former rapper “Prime Minister Pete Nice” (aka Peter Nash) didn’t like paying state income taxes. There’s a problem with that: You don’t get a choice as to whether or not you do so. The Albany County District Attorney prosecuted Mr. Nash for not filing his 2009-2011 New York tax returns; he pled guilty to a misdemeanor charge of failing to file a tax return. He’ll be sentenced next month. It’s also likely that the IRS will call on him; he hasn’t filed his federal returns.

Francisco R. Legaspi was found guilty of tax fraud back in 1993. He was never sentenced for his crime; he fled to Canada. Mr. Legaspi decided to post on Facebook. Yes, the authorities read Facebook. The Bureau of Diplomatic Security found Mr. Legaspi. The Royal Canadian Mounted Police arrested him; he has been extradited back to the United States. He’s been arrested for failing to appear for his sentencing. And, yes, he still will be sentenced for the original tax fraud conviction.

Finally, Charles Loewen will be spending 37 months at ClubFed. The former NFL player (he played for the San Diego Chargers from 1980-1984) was sentenced last week for filing a false income tax refund claim. Mr. Loewen created his own documentation (which was phony) in attempting to obtain a $2.4 million refund. He also filed tax returns stating he had no income when his business did have income.

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IRS Didn’t Tell a Court About the Missing Lerner Emails

Posted on June 29, 2014 by Russ

Eventually, we will know exactly what happened with the IRS scandal. For now, little pieces continue to drip out. One of the most recent concerns the missing Lois Lerner emails.

I had forgotten that Judicial Watch had filed a Freedom of Information Act lawsuit against the IRS demanding all communications regarding the IRS’s review of 501(c)(4) applications, and related matters. The IRS has been slowly releasing some emails and documents to Judicial Watch.

But the IRS forgot to mention that Lois Lerner’s emails have gone to the ether in any of the status conferences held on the case since they allegedly vanished. The IRS knew in February of the loss, but didn’t bother to mention it in any of the status conferences (including the February conference). While doing that once could be an oversight, it’s apparently been three times. Judge Emmett Sullivan of the US District Court for the District of Columbia will get to hear the IRS’s excuse reasoning on July 10th. Pass the popcorn….

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There’s No Trust Like a Sham Trust

Posted on June 29, 2014 by Russ

My dentist loves me…well, he loves my teeth. Years of orthodontia and ice hockey combined with some interesting genetics has helped my dentists make money off me. One local dentist decided to make money in a different way.

Dr. Leslie Kotler is a cosmetic dentist in nearby Henderson. He found some tax advisors who believed that a phony trust is a good way of avoiding tax. (It is, until you get caught.) Dr. Kotler had a large tax debt to the IRS; he used a sham to hide his assets along with a bankruptcy petition to delay the IRS. Dr. Kotler pleaded guilty to one felony count of tax evasion related to the $437,456 he owes the IRS.

Dr. Kotler does have one thing going for him when he is sentenced in November: He has agreed to cooperate with the US government as they attempt to stop individuals involved with creating the phony trusts. The Las Vegas Review Journal noted that three individuals have been named in a civil complaint; those individuals may have a lot more to worry about in the future.

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FBAR Deadline Is June 30th, but It’s Not a Midnight Deadline

Posted on June 26, 2014 by Russ

Almost every tax deadline is a postmark deadline. If your return is postmarked by midnight of the deadline day it’s considered timely filed. If you file it electronically, and it’s filed by midnight, it’s timely. Of course, with every rule there’s an exception. That exception is definitely the FBAR.

The FBAR–Report of Foreign Bank and Financial Accounts–must be electronically filed. It’s due on June 30th and there are no extensions. So if I file it by midnight local time on June 30th I’m fine, right?

My software company says no. Here’s the message they sent me:

As a reminder, taxpayers that are required to report foreign bank and financial accounts must file Form 114 electronically by June 30th, and the returns must be either Accepted or Accepted with Errors by midnight, June 30th. We strongly recommend that 114 returns be filed no later than 6PM in your time zone to allow for agency processing. FinCEN does not recognize an e-postmark to timely filing, unlike the IRS. Additionally, there is no extension of time to file 114 FBAR returns.

So I took a look at an FBAR I submitted this past week:

Yes, it took over two days to accept the FBAR…and that’s what I’ve been seeing consistently. Assuming my software company is right, that means the true deadline for FBARs is Saturday…which I find hard to believe. I doubt a court would look at an FBAR filed on June 30th (during normal hours) as untimely but who knows? I’ve seen too many strange things with the FBAR this month.

My advice is simple: File the FBAR asap–it at all possible by Saturday. You’re likely fine if you file it by 6 pm in your time zone on Monday, but the penalties are ridiculous on this. As an aside, I searched the FINCEN website, their FAQs on the FBAR, and the IRS website pages on the FBAR to see if I could find any confirmation of what my software company said. I couldn’t; unfortunately, that doesn’t mean it’s not true.

Posted in FINCEN | Tagged | 3 Comments

IRS Ignores AICPA & NAEA; Court Likely Destination for IRS’s New “Annual Filing Season Program”

Posted on June 26, 2014 by Russ

The National Association of Enrolled Agents sent the IRS a letter stating that they didn’t like the idea of a voluntary tax preparer regulation program. (Full disclosure: I’m a member of the NAEA.) The NAEA pointed out that there’s already a voluntary preparer regulation program–Enrolled Agents.

The AICPA sent an even stronger letter saying much the same thing. The AICPA noted that there’s no statute allowing the program, it will be looked at as an end run around Loving v IRS, that the IRS didn’t comply with the Administrative Procedure Act, and that the proposal is arbitrary and capricious.

The IRS’s response? Instead of calling it “voluntary tax preparer regulation,” let’s throw a new name on it: Annual Filing Season Program. That will win hearts and minds over…

I expect the IRS’s next destination for this program is a District Court in the District of Columbia. The AICPA got it absolutely correct: The IRS has no legal justification for this program.

All of this reminds me of something from my days in high school where I was on the debate team. Every proposal had a “self-perpetuating program” of some sort. And that’s just what the bureaucracy at the IRS has done: They took the RTRP program, slapped a new label on it, made it voluntary, and voila, it must be legal. This looks to me to be a self-perpetuating program.

In Loving, the Court held that the IRS overstepped it bounds. The IRS’s stick is that you won’t be listed in an IRS master-database of tax professionals if you don’t sign up for this new program. If I’m an unenrolled tax preparer doesn’t sign up, isn’t it discrimination? The IRS has no right to discriminate against me, right? And that would be the case.

All-in-all, this appears to be a program that’s going to die in court again. I don’t know if the Institute for Justice will be fighting it, but it sure looks like the AICPA will. This has not been the best of weeks for the IRS.

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Lerner Appears to Have Targeted Iowa Senator Grassley

Posted on June 25, 2014 by Russ

In the IRS scandal news of the day, we learned today that Lois Lerner apparently targeted Senator Chuck Grassley (R-IA) and his wife for an audit. In an email, Lois Lerner wrote,

Is this the one where we got the copy to Grassley? Did he get one to me?
Looked like they were inappropriately offering to pay for his wife. Perhaps we should refer to Exam?

Of course, there’s nothing to see there. Nor is there anything to see here:

The Daily Signal has learned that, under a consent judgment today, the IRS agreed to pay $50,000 in damages to the National Organization for Marriage as a result of the unlawful release of the confidential information to a gay rights group, the Human Rights Campaign, that is NOM’s chief political rival.

“Congress made the disclosure of confidential tax return information a serious matter for a reason,” NOM Chairman John D. Eastman told The Daily Signal. “We’re delighted that the IRS has now been held accountable for the illegal disclosure of our list of major donors from our tax return.”

Yeah, there’s not even a smidgen of corruption (not). Of course, President Obama said earlier this year just that–that there is not even a smidgen of corruption:

Of course, we’re going to find out quickly how that DOJ investigation is going. Uh, the DOJ isn’t investigating the clear violation of the law of the leaking of the donor list of NOM. Well how about the DOJ investigation of the IRS scandal? My reply is simple: What investigation? There hasn’t appeared to be one from day one.

Yes, there’s nothing to see here:

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Koskinen Channels His Inner Nixon

Posted on June 24, 2014 by Russ

Those of us who are old enough remember this:

That is the late President Nixon who stated he was not a crook.

Well, last night we had part two of Koskinen Goes to Capitol Hill. He was in front of Darrell Issa’s committee. There were two very interesting exchanges. First, we have Congressman Jim Jordan’s exchange:

There isn’t much to add to that exchange.

Next, here’s Congressman Trey Gowdy’s exchange:

Another point that came out is that the IRS apparently hasn’t looked at the backup tapes (which may or may not still exist). Commissioner Koskinen couldn’t say why that didn’t happen.

At least he wasn’t as smug as he had been. Of course, it came out yesterday that Commissioner Koskinen has been a big donor to the Democrats….

The IRS continues to look hyper-partisan, and that’s not a good thing for anyone.

Addendum:

This morning we discover that the IRS broke did not follow the law:

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Online Gambling Addresses (Updated for 2014)

Posted on June 22, 2014 by Russ

Note: This list has been superseded by the 2015 list. You can find it here.

With the United States v. Hom decision, we must again file an FBAR for foreign online gambling sites. An FBAR (Form 114) is required if your aggregate balance exceeds $10,000 at any time during the year.

There’s a problem, though. Most of these entities don’t broadcast their addresses. Some individuals sent email inquiries to one of these gambling sites and received politely worded responses (or not so politely worded) that said that it’s none of your business.

Well, not fully completing the Form 114 can subject you to a substantial penalty. I’ve been compiling a list of the addresses of the online gambling sites. It’s presented below.

Note: This list is presented for informational purposes only. It is believed accurate as of June 22, 2014. However, I do not take responsibility for your use of this list or for the accuracy of any of the addresses presented on the list.

The list is in the cut text below.

If anyone has additions to the list feel free to email them to me.

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