A Lowe Blow

Posted on February 20, 2013 by Russ

I know the headline is a bad pun, but I couldn’t resist. Former NBA star and current Utah Jazz assistant coach Sidney Lowe was arrested on Monday on state tax evasion charges. Lowe is accused of not filing North Carolina tax returns from 2009 through 2011. The charges are misdemeanors, but as Wesley Snipes can tell you, jail time is still possible with such charges. Lowe is a North Carolina resident, so his income is subject to North Carolina tax.

The Deseret News (of Salt Lake City) reports that Mr. Lowe will continue with his coaching duties. The Salt Lake Tribune printed Mr. Lowe’s apology to the team and fans: “This is a personal matter that I take very seriously. I am working very hard to get the issue resolved in a timely manner and I am cooperating fully with all parties involved.”

Mr. Lowe faces a March 19th court date in Winston-Salem, North Carolina.

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Could Tax Accountants Have Caused California’s Revenue Surge?

Posted on February 20, 2013 by Russ

California budget officials couldn’t figure out where the extra $5 billion in tax revenue came from in January. As this Los Angeles Times article asks, was this an accounting anomaly? Governor Jerry Brown’s administration now believes it was a timing issue.

Many businesses increased dividend payouts and other income into last year because of federal (and California) tax hikes. Many individuals (at the urging of tax accountants like me) make their fourth quarter estimated tax payment at the end of December rather than in mid-January to lower their tax bill; state income tax paid is deductible on federal income tax. The same is true for corporations (state income tax they pay is deductible on federal income tax).

While I do believe that some of the income isn’t timing related–Californians didn’t have time to make changes to their spending habits due to the late (in the year) passage of California’s tax hike–most likely much of it is just tax revenue coming in early. And there’s still the $500 million judgment in the Gilbert Hyatt case; that decision by the Nevada Supreme Court could come at any time.

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Jackson’s Fall Includes Tax Charge

Posted on February 17, 2013 by Russ

I was going to put in a line in this post, “Will the first Chicago politician who is honest, forthright, and not corrupt please stand up?” However, I realized that there must be some politician in the Windy City who is honest (at least some of the time). The last three governors of Illinois all went to prison (and it’s equal opportunity corruption: both Republicans and Democrats). Joining them will be former Congressman Jesse Jackson, Jr. and his wife, Sandi (a former Alderman in Chicago).

Mr. Jackson resigned last November from Congress; Ms. Jackson resigned in January from the Chicago City Council. Both are pleading guilty: Mr. Jackson to conspiracy and Ms. Jackson to filing a false tax return. They pleaded guilty on Friday.

The scheme apparently had them using “business” credit cards (here, business is their re-election campaign) for personal expenses. As this blog has highlighted numerous times in the past (and will likely do numerous times in the future), you can’t put personal expenses on a business return. And we’re not talking nickel and dime purchases; the total is $582,772.58. Add in filing false campaign reports and you have problems.

There’s even a tie to Las Vegas. Mr. Jackson has a greed to forfeit $750,000 plus a host of memorabilia; much of that memorabilia was purchased from Antiquities of Nevada, a store here in Las Vegas. If you follow US Treasury auctions, you soon will be able to buy a football signed by several presidents, an Eddie Van Halen guitar, Bruce Lee memorabilia, and a lot more. But I digress….

I’m a native of Chicago and love the city. I’m a fan of the Blackhawks and Cubs. That said, the corruption in Chicago is something I don’t miss.

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Eight Years and Counting

Posted on February 17, 2013 by Russ

I’ve been writing this blog now for eight years. A lot has changed in tax since I started, some for the good and some for the bad. I’ve had fun writing this, and my goals remain the same for the next eight years: To enlighten readers about tax issues impacting my clients (generally, related to gambling and small business owners) and other tax issues that I think are interesting and/or important.

One of my favorite sayings about tax is that it’s a combination of common sense and arcane rules. I try to have fun with this blog because tax is, to be honest, a dry topic. It’s also not much fun for most individuals; tax separates money from your wallet. It may be the price of civilization, but it’s not a fun price to pay. Thus, I try to have fun with the topics I cover.

So at eight years and eight days, happy belated birthday to my blog.

Posted in Taxable Talk | 1 Comment

“There Is No Income Tax” Fails Again to Win in Court

Posted on February 17, 2013 by Russ

Charlie Brown, move over; we have a new “winner” for trying the same thing over and over again and expecting different results. Randy Barker doesn’t think that tax laws are constitutional. He claimed a refund on his 2008 taxes of almost $1 million after claiming that amount was withheld from his taxes. His 2008 return showed $1.48 million of interest income and that amount of withholding. According to the Department of Justice, “Randy Barker was able to conceal the fraudulent nature of the interest income by filing documents on a separate tax database.”

The Barkers got their refund and spent the money on a house in Chico, California (their home town), and other personal items. They got to enjoy it for about three years; they were indicted last July. Last week, Mr. Barker was convicted of filing a false income tax refund claim. He’s looking at up to ten years at ClubFed, restitution, and up to a $250,000 fine. If you’re looking for a home in Chico, I suspect I know one that will be on the market soon.

Yes, Virginia, there is an income tax and you must pay it…and it is constitutional.

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Nevada Looks to Tax Online Poker Tournaments

Posted on February 14, 2013 by Russ

A brief story in the Las Vegas Review-Journal noted that the chairman of the Nevada Gaming Control Board, A.G. Burnett, proposed that online poker tournaments be subject to tax (on the net profit of the tournament). This bill, Senate Bill 9, is a favorite to pass. Note that this is a tax on the company running the tournament, not on the players. Something I didn’t realize is that casinos in Nevada do not have to pay state tax on live poker tournaments.

Separately, Nevada Assembly Majority Leader William Horne (D-Las Vegas) proposed that the online gambling registration fee be increased to $1 million from $500,000 and that the cost of renewing be increased to $500,000 from $250,000. However, Republican Governor Brian Sandoval does not support the increase. It’s probable a compromise will end up being reached on the fees.

Nevada’s legislature meets once every-other-year for just 120 days.

Posted in Gambling, Nevada | 1 Comment

IRS to Accept Returns with Depreciation Sunday; Valentine’s Love for Education Credits

Posted on February 8, 2013 by Russ

The IRS announced today that they will begin accepting returns with depreciation (Form 4562) on Sunday, February 10th. This means that most business returns and many sole proprietor’s returns that have been on hold will be able to be filed Sunday.

Additionally, the same IRS announcement noted that returns with education credits (Form 8863) will be accepted beginning on Valentine’s Day, Thursday, February 14th.

The IRS also announced that the other returns on hold will be accepted no later than the first week of March.

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What “Out of Pocket” Means

Posted on February 8, 2013 by Russ

About ten years ago, I enjoyed one night at the hospital. The bill was only $17,000 (before discounts). My share of the bill was $0, so my medical expenses from that hospitalization were zero. If you don’t spend the money, you can’t deduct it.

Dave Fazio has a cautionary tale on what out-of-pocket medical expenses mean for one of his clients.

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Shameless Self Promotion

Posted on February 6, 2013 by Russ

I finally received my copies of my new book, Tax Strategies for the Small Business Owner. While Amazon has had the book for a month, my publisher, APress, now has it in stock.

Tax Strategies for the Small Business Owner

What’s in Tax Strategies for the Small Business Owner? The book is a practical guide to taxes, emphasizing what a small business owner needs to know whether or not he or she prepares his own taxes. Here’s the description of the book:

Tax Strategies for the Small Business Owner: Reduce Your Taxes and Fatten Your Profits will help the small business owner increase profits while feeling more comfortable dealing with taxes. It begins by looking at the often overlooked critical decision small business owners face when they start a business: the choice of business entity. The book then examines all the deductions that a business owner can take legally to reduce taxes. It also provides advice business owners need to make good tax-related decisions: Should I lease or buy? Should I hire an employee or outsource the task? How much will buying a building reduce my taxes and for how long?

Many people freeze up when they are forced to prepare or even think about taxes. Some receive a notice from the IRS and put it aside: They’re too scared to open it! Yet taxes for the most part follow common sense rules. You just need to know what they are and how they affect your decisions. In this book, readers will learn about the different business entities, the different taxes you must deal with (primarily income taxes), documentation procedures, how to work with a tax professional, how to handle an audit, and, in general, how to use the U.S. Tax Code to your advantage. Among other things, readers learn to take full advantage of tax benefits and avoid potholes hidden in things like:

  • Startup and ongoing expenses
  • Cost of goods sold
  • Depreciation
  • Payroll
  • Retirement plans

In short, Tax Strategies for the Small Business Owner will not only help you relax when you deal with your taxes—it’ll show you how to use tax law to your financial benefit.

What you’ll learn:

  • How to choose a business entity that’s right for your business.
  • The requirements for deducting expenses.
  • What you can deduct (and what you can’t).
  • How to fund your retirement with help from the business.
  • Using depreciation rules to reduce taxable income.
  • Having benefit plans (medical and retirement) while complying with tax laws.
  • How to take the tax implications into account when making strategic business decisions.
  • What to do when you hear from the IRS.
  • How to determine whether you need a tax professional to assist you.

Who this book is for:

Taxes for the Small Business Owner is designed for owners of small to medium-sized businesses and aspiring entrepreneurs—millions of people in the U.S. This practical guide on taxation is designed for those who want to lower their tax bills by maximizing deductions. It will appeal to any owner or manager who wants to pay less tax—legally.

You can purchase the book directly from the publisher, APress at this link. You can also buy the book from Amazon.com and other outlets.

Posted in Books, Taxable Talk | 1 Comment

Trust Attorney Showed No Trust

Posted on February 6, 2013 by Russ

Kenneth Hoesch was an attorney in Zeeland, Michigan. Mr. Hoesch specialized in trusts and estates. This is definitely an important specialty area; the correct application of trusts can increase the amount of money that flows to beneficiaries and decrease the money lost to federal and state estate and inheritance taxes. Unfortunately, Mr. Hoesch had other ideas.

Bluntly, he embezzled from the trusts to the tune of between $800,000 and $900,000. A third of the funds were stolen directly from trust accounts meant for beneficiaries (including charities). The remaining two-thirds was stolen from a pre-disbursement account. With interest, the balance due is now $1.295 million.

A potpourri of federal agencies and the local sheriff’s department investigated Mr. Hoesch. He was indicted and pled guilty last year to mail fraud and tax evasion (yes, the money he stole should have been on his tax return). He was sentenced today to 6 1/2 years at Club Fed. He also must make restitution to the victims and to the IRS (he owes nearly $212,000 to the IRS).

It’s very important that if you have trusts that the trustees be trustworthy. Having multiple trustees may not be feasible, but make sure you check references and review the accounts. Thankfully, it’s rare to see a trust attorney falling into distrust.

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