Use EFTPS If You Use a Payroll Service

Posted on April 28, 2013 by Russ

Most payroll services are reputable. They help companies comply with the myriad of laws and regulations in payroll by preparing payroll checks, paperwork, and even sending the withheld payroll taxes to the IRS and state tax agencies.

Of course, where most won’t go the Bozo wing of payroll services happily head to. From Maryland comes the story of AccuPay. The payroll company is accused of failing to remit payroll taxes to the IRS and Maryland. After local police investigated, the company filed a Chapter 7 bankruptcy case. The owner of the firm refused to testify (citing the Fifth Amendment right against self-incrimination).

The stories read horribly, with some owners having to take out loans, and other firms perhaps going out of business. Yet there’s a way today to make sure your payroll tax company is remitting your taxes: EFTPS. It takes about two weeks to enroll (passwords will be mailed to you). Once you are enrolled, you can see your payroll tax remittances. There’s no reason to be a recurring victim of this kind of theft.

Senator Barbara Mikulski (D-MD) will be proposing a bill that would require payroll firms to register with the IRS and be bonded or certified by the IRS. I oppose this, because it’s not needed. Use EFTPS and you can see for yourself if your payroll taxes are making it to the IRS.

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Kudos to Kenneth Ryskamp

Posted on April 27, 2013 by Russ

Who is Kenneth Ryskamp? He’s a Senior Judge in the United States District Court for the Southern District of Florida. Judge Ryskamp was born in 1932, and has been a US District Court Judge since 1986 (and a Senior Judge since 2000). Why am I noting Judge Ryskamp? Because of a sentence he imposed on Thursday.

Mary Curran of Palm Beach, Florida inherited Swiss bank accounts from her husband. Those accounts had not been reported (and likely the interest not reported on tax returns). Her attorney, Roy Black, tried to get Mrs. Curran into the Offshore Voluntary Disclosure Program (OVDP) but her name had already been given to the IRS. She paid a large fine ($26 million); the Department of Justice brought criminal charges. She pleaded guilty to two false tax return charges. Judge Ryskamp wondered why:

Based on these facts, did it ever occur to the government to dismiss these charges. Instead, the government decided it had to make a felon out of this woman?

Judge Ryskamp gave Mrs. Curran one year of probation. Given Mrs. Curran could have faced six years at ClubFed, that sentence in itself was a huge win. But she got more good news a few moments later: The judge immediately revoked it! Her probation lasted all of five seconds. Judge Ryskamp noted:

This is really a tragic situation…It seems to me the government should have used a little more discretion.

The judge also suggested that Mrs. Curran request a presidential pardon, which he would endorse.

As Joe Kristan noted, the government goes after the accidental offenders with shotguns while slapping the wrists of some big-time offenders. Perhaps the IRS and DOJ will use some discretion in the future…but that’s probably asking too much.

News Coverage: Palm Beach Daily News, ABA Journal

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Bayern Munich Head Reports Self for Tax Evasion

Posted on April 21, 2013 by Russ

Uli Hoeness is the president of Bayern Munich. Who? Well, if you asked a resident of Bavaria this question, you’d get shocked looks–the same as you would get from a New Yorker asking about the Yankees. Bayern Munich is a soccer team in Munich. They’re very successful and already have clinched this year’s bundesliga. This New York Times story notes that the club just won their 13th straight game.

OK, I’m not a soccer fan. However, I am interested in cases of tax evasion and here’s one possible such case. Mr. Hoeness apparently has an issue with a Swiss bank account. Mr. Hoeness filed an amended tax return; the public prosecutor’s office is checking to make sure that the amended return is accurate. If the amended return is accurate, the penalties in Germany for filing the first ‘bad’ return can be lessened.

This is similar to US tax law in that the IRS (and Department of Justice) almost always take a much harder line on individuals that the government finds that have cheated on their taxes than on individuals who have voluntarily come forward.

Posted in International, Tax Evasion | Tagged | 1 Comment

IRS Gives Extra Three Months for Filing and Payments to Boston-Area Taxpayers; Massachussetts Deadline Should be the Same

Posted on April 17, 2013 by Russ

As I’m still not really working, here’s the press release from the IRS:

WASHINGTON — The Internal Revenue Service today announced a three-month tax filing and payment extension to Boston area taxpayers and others affected by Monday’s explosions.

This relief applies to all individual taxpayers who live in Suffolk County, Mass., including the city of Boston. It also includes victims, their families, first responders, others impacted by this tragedy who live outside Suffolk County and taxpayers whose tax preparers were adversely affected.

“Our hearts go out to the people affected by this tragic event,” said IRS Acting Commissioner Steven T. Miller. “We want victims and others affected by this terrible tragedy to have the time they need to finish their individual tax returns.”

Under the relief announced today, the IRS will issue a notice giving eligible taxpayers until July 15, 2013, to file their 2012 returns and pay any taxes normally due April 15. No filing and payment penalties will be due as long as returns are filed and payments are made by July 15, 2013. By law, interest, currently at the annual rate of 3 percent compounded daily, will still apply to any payments made after the April deadline.

The IRS will automatically provide this extension to anyone living in Suffolk County. If you live in Suffolk County, no further action is necessary by taxpayers to obtain this relief. However, eligible taxpayers living outside Suffolk County can claim this relief by calling 1-866-562-5227 starting Tuesday, April 23, and identifying themselves to the IRS before filing a return or making a payment. Eligible taxpayers who receive penalty notices from the IRS can also call this number to have these penalties abated.

Eligible taxpayers who need more time to file their returns may receive an additional extension to Oct. 15, 2013, by filing Form 4868 by July 15, 2013.
Taxpayers with questions unrelated to the Boston tragedy should visit IRS.gov, or contact the regular IRS toll-free number at 1-800-829-1040.

Meanwhile, the Massachusetts Department of Revenue has extended the deadline until at least April 23rd. The press release states, “The IRS is expected to provide details on the federal extension shortly. DOR will match whatever extension the IRS announces.”

Thus, for taxpayers living in and around Boston (and individuals impacted by the bombings, including participants and first responders), they should not owe penalties. Interest, however, is statutory and cannot be waived. The Boston-area tax deadline will be Monday, July 15th.

Posted in Massachusetts | 1 Comment

When a Day Late Isn’t a Dollar Short

Posted on April 16, 2013 by Russ

I’m in zombie mode — it’s midnight and the last of the work is done (for a short time). I’ll be out the rest of today (Tuesday). Tax Day is over.

One place where it’s sort of not over is California. The Franchise Tax Board had major computer issues with their website on Monday. The FTB announced that anyone who pays their tax on April 16th via the FTB’s webpay system (for individuals or for businesses) on April 16th will be considered to have made the payments on April 15th.

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Bozo Tax Tip #1: Don’t Be Suspicious!

Posted on April 11, 2013 by Russ

As I write this (in March), I just got off the phone with one of my clients. He just did very well in a poker tournament, and won just over $11,000. He took the money in cash (rather than a check) as he thought he was going to need the cash. He doesn’t, so he was wondering about making a cash deposit of over $10,000 as there would be a Currency Transaction Report issued.

I told him that a Currency Transaction Report isn’t anything to worry about it. The IRS gets so many of them that as long as you’re paying your taxes they’re not a big deal. Just smile as the bank teller fills out the extra paperwork.

On the other hand, if you break up your $11,000 transaction into two $5,500 deposits, you can get in trouble. Big trouble. A suspicious activity report (SAR) might be issued. The IRS doesn’t get as many of these, and almost all of them are investigated. And you will never know when one is issued.

You don’t believe me? Here’s a tale of woe that caused the downfall of a politician.

He was a prosecutor, and he used the Bank Secrecy Act (among other laws) to help send many individuals—primarily in organized crime—to prison. He then became Attorney General of his state, serving two terms in that office. He was then elected Governor.

But our public figure had a problem. He enjoyed the world’s oldest profession. While traveling to Washington, D.C. he used a service called the Emperor’s Club. He funded his nighttime activities by making multiple wire transfers of just under $10,000.

Come on, could a politician who used to use the Bank Secrecy Act actually get blindsided by the Act? Yes. Eliot Spitzer’s wire transactions were duly reported by North Fork Bank. That led to an IRS investigation which led to an FBI investigation which led to a governor becoming an ex-governor.

So if you want to send money, go big-time. Send more than $10,000. But whatever you do, don’t break up your cash transactions into smaller pieces to evade the reporting requirements. One day you might find two armed federal agents at your door, reminding you, “You have the right to remain silent….”

I hope you enjoyed this series of humorous posts. I’ll be back with normal content in one week.

Posted in IRS | Tagged , | 1 Comment

Bozo Tax Tip #2: Nevada Corporations

Posted on April 10, 2013 by Russ

A repeat follows, but it’s one again getting a lot of play due to business conditions in California. While I’m focusing on California and Nevada, the principle applies to any pair of states.

Nevada is doing everything it can to draw businesses from California. Frankly, California is doing a lot to draw businesses away from the Bronze Golden State. But you need to beware if you’re going to incorporate in Nevada.

If the corporation operates in California it will need to file a California tax return. Period. It doesn’t matter if the corporation is a California corporation, a Delaware corporation, or a Nevada corporation.

Now, if you’re planning on moving to Nevada incorporating in the Silver State can be a very good idea. But thinking you’re going to avoid California taxes just because you’re a Nevada corporation is, well, bozo.

Posted in California, Nevada | Tagged | 1 Comment

Bozo Tax Tip #3: Use a Bozo Accountant!

Posted on April 9, 2013 by Russ

Here’s another Bozo Tax Tip that keeps coming around. The problem is, the Bozos don’t change their stripes. In any case, here are some signs your accountant might be a Bozo:

– He’s never met a deduction that doesn’t fit everyone. There’s no reason why a renter can’t take a mortgage interest deduction, right? And everyone’s entitled to $20,000 of employee business expenses…even if their salary is just $40,000 a year. Ask the proprietors of Western Tax Service about that.

– He believes that the income tax is voluntary. After all, we live in a democracy, so we don’t have to pay taxes, right?

– Besides preparing tax returns, he sells courses on why the Income Tax is Unconstitutional or how by filing the magical $2,295 papers he sells you will be able to avoid the income tax.

– He wants you to sign over that tax refund to him. After all, he’ll make sure you get your share of it after he takes out his 50% of the refund.

– He believes every return needs at least three dependents, no matter whether you have any children or not.

If your tax professional exhibits any of these behaviors, it’s time to get a new tax professional.

Posted in Tax Preparation | Tagged , | 1 Comment

Bozo Tax Tip #4: Procrastinate!

Posted on April 8, 2013 by Russ

Today is April 9th. The tax deadline is just six days away.

What happens if you wake up and it’s April 15, 2013, and you can’t file your tax? File an extension. Download Form 4868, make an estimate of what you owe, pay that, and mail the voucher and check to the address noted for your state. Use certified mail, return receipt, of course. And don’t forget your state income tax. Some states have automatic extensions (California does), some don’t (Pennsylvania is one of those), while others have deadlines that don’t match the federal tax deadline (Hawaii state taxes are due on April 20th, for example). Automatic extensions are of time to file, not pay, so download and mail off a payment to your state, too.

But what do you do if you wait until April 16th? Well, get your paperwork together so you can file as quickly as possible and avoid even more penalties. Penalties escalate, so unless you want 25% penalties, get everything ready and see your tax professional next week. He’ll have time for you, and you can leisurely complete your return and only pay one week of interest, one month of the Failure to Pay penalty (0.5% of the tax due), and one month of the Failure to File Penalty (5% of the tax due).

There is a silver lining in all of this. If you are owed a refund and haven’t filed, you will likely receive interest from the IRS. Yes, interest works both ways: The IRS must pay interest on late-filed returns owed refunds. Just one note about that: the interest is taxable.

Posted in IRS | Tagged | 1 Comment

Bozo Tax Tip #5: Don’t Seal the Envelope!

Posted on April 7, 2013 by Russ

Given its tax time, you will likely find long lines at your local post office. Individuals are filing tax returns, so those who don’t efile must mail the returns. When you mail anything, you should seal the envelope; that’s especially true for anything with your social security number on it.

Yet here’s an unfortunately true story told to me by a fellow tax professional. One of her clients mailed his tax return to the IRS but forgot to seal the envelope. The return did make it to the IRS, but without page two of Schedule C. The first that the client found out there was a problem was when the IRS sent him a letter noting the omission. The second time he knew that there was a problem was when she found she was a victim of identity theft.

The client blames himself for his stupdity. This particular identity thief was caught, and the damage done to the individual who forgot to seal the envelope was minimal.

So when you file your tax return, do seal the envelope. Or better yet, use electronic filing and you can avoid the post office and this issue completely.

Posted in Taxable Talk | Tagged | 2 Comments