“First Lady” of Tax Fraud Indicted for Fraud

Posted on December 20, 2012 by Russ

We have a late entry for the 2012 Tax Offender of the Year. Rashia Wilson bragged on her Facebook page, something that many individuals do. But it’s what she said that likely got her in trouble. According to the Tampa Bay Times, Ms. Wilson said,

“I’m Rashia, the queen of IRS tax fraud,” Wilson said May 22 on her Facebook page, according to investigators. “I’m a millionaire for the record. So if you think that indicting me will be easy, it won’t. I promise you. I won’t do no time, dumb b——.”

She may have been correct: It took a little over six months for her to be indicted.

Technically, she hasn’t been indicted for tax fraud. The 57 counts she and her boyfriend, Maurice Larry, face include conspiracy, wire fraud, filing false tax returns, theft of government property, and aggravated identity theft. The pair are looking at very lengthy terms at ClubFed if found guilty of all charges. The government is also seeking a money judgment in the amount of $1,176,787.00; that’s how much the pair allegedly profited from their scheme.

This is not Ms. Wilson’s first brush with law enforcement. She was arrested in September on a weapons charge.

While this alleged tax fraud ring is based in Florida, it apparently may have received information on identities in California. A story in the San Francisco Chronicle noted that 931 Berkeley residents may have had their identities stolen by this ring. The Chronicle story also notes that Ms. Wilson hosted “tax fraud parties” that allegedly raised more money than drug dealing.

A hint to those who want to begin a life of crime: Don’t brag about it on Facebook. Yes, law enforcement does read the Internet.

Posted in Florida, Tax Fraud | Tagged | 1 Comment

A Two-Week Tax Season?

Posted on December 20, 2012 by Russ

Acting IRS Commissioner Steven Miller reiterated his warning of a very late opening to tax filing season. In a letter sent to Ranking Member Sander Levin of the House Ways and Means Committee (and sent to Chairman Dave Camp, and Senators Baucus and Hatch), Commissioner Miller noted:

As I stated in my letter dated November 13, 2012, the IRS has maintained the programming of its systems assuming that the AMT [Alternative Minimum Tax] will be patched as it has been in previous years. I also indicated that if an AMT patch is not enacted by the end of this year, the IRS would need to make significant programming changes to conform our systems to reflect the expiration of the patch. In that event, given the magnitude and complexity of the changes needed, I want to reiterate that most taxpayers may not be able to file their 2012 tax returns until late in March of 2013, or even later.

This situation would create two significant problems: lengthy delays of tax refunds and unexpectedly higher taxes for many taxpayers, who will be unaware that they are newly subject to AMT liability. Moreover, if Congress were to act at some point next year to enact a new AMT patch, the time and substantial expense necessary for the IRS to reprogram its systems to reflect expiration of the patch would ultimately be wasted.

In my previous letter, I estimated that more than 60 million taxpayers might be prevented from filing their tax returns while we are reprogramming our computers. This figure includes those who would be subject to additional tax as well as those who would be required to perform the calculation to determine if the changes in thresholds and credit ordering rules affect their tax liability. As we consider the impact of the current policy uncertainty on the upcoming tax filing season, it is becoming apparent that an even larger number of taxpayers — 80 to 100 million of the 150 million total returns expected to be filed — may be unable to file.

This has gotten little publicity in the media, but is likely going to be a huge issue if it comes to pass. We shall see….

Hat Tip: Roth Tax Updates

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Locking in Gains

Posted on December 20, 2012 by Russ

While the “fiscal cliff” negotiations continue at Washington’s normal pace (i.e. the speed of molasses rolling uphill), there are some certainties. Tax rates are going up next year. In most years, tax professionals advise clients at year-end to speed up deductions and defer income. Not this year!

You may wish to consider locking in capital gains. Let’s assume you own 100 shares of Acme, purchased 10 years ago at $10 per share. Today, Acme is trading at $50 per share, so you have a theoretical profit of $4,000. Assume you sell the shares today and buy 100 shares of Acme tomorrow. You will lock-in your capital gain of $4,000 (less commission) at today’s lower capital gains rates; future profits, though, will be subject to the higher capital gains rates that are coming (and the additional Obamacare taxes on investment income). One worry that doesn’t exist in this situation are the “wash sale” rules; those only apply when you have a loss.

This is not for everyone, though. Reasons why individuals might not want to do this include:

– Planning on selling this many, many years from now;
– Stock will be held and passed on to children (or other descendants), allowing for “step-up” in basis;
– Stock price likely to fall in future months;
– Can’t afford to pay any tax this year; and
– Various other reasons.

Again, this is just a possible strategy you may wish to discuss with your tax professional and stock advisor.

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Spain Targeting Poker Players

Posted on December 19, 2012 by Russ

Governments are looking far and wide for revenue, and high-profile poker players are certainly a target. I’ve previously reported on efforts by Germany; it appears Spain is joining the action.

The Spanish tax agency, La Agencia Tributaria, has reportedly looked at online databases of poker players to find individuals who have not reported all of their income. The agency supposedly used the Hendon Mob Database to find Spanish poker players who weren’t forthcoming with the agency.

No names were noted in the brief report on Spanish language poker website poker-red.com. Of course, if you happen to have been a winner and are a citizen of Spain, I’d talk to a profesional de impuestos soon.

Hat Tip: PokerNews

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“Tax Guys” Get Taxing Result

Posted on December 19, 2012 by Russ

Sometimes you get a better result (tax-wise) if your income is higher. That’s because of refundable credits like the Earned Income Credit. Now, I can’t change a client’s income so that they will qualify for a credit; your income is whatever it is. Unfortunately, not everyone is ethical.

Let’s head to Michigan, where Chad Chertos and Gregory VanDyke had a business called “The Tax Guys” or “Integrity Tax.” The latter name may have been reflective of the legal name of the business but it appears not to reflect how their business was conducted. Back in October the pair was indicted on charges of conspiring to defraud the United States and presenting false claims. Today, Mr. Chertos pleaded guilty to the conspiracy charge. This news story states that Mr. VanDyke was also going to plead guilty.

The method allegedly used by the pair was to inflate income so that they would qualify for tax credits; they allegedly charged a percentage of the refund as their fee. Charging a percentage of a refund is specifically prohibited by Circular 230 (the governing document for the conduct of tax professionals). The Department of Justice stated that the defendants had some clients sign blank tax returns!

In any case, the pair will likely spend some time at ClubFed. They both will need to make restitution of just over $240,000 each.

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CAF System Maintenance from Christmas to New Years

Posted on December 17, 2012 by Russ

For tax professionals, be advised that the IRS Centralized Authorization File (CAF) System will be down from Christmas through New Years for routine maintenance. This means that tax professionals will be unable to pull transcripts or other information from 6:00am EST on December 26th until 6:30am EST on January 3rd. Calls to the Practitioner Priority Service will likely require faxing a copy of the authorization on file.

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Fiscal Cliff Deal Near?

Posted on December 17, 2012 by Russ

CBS News is reporting that a fiscal cliff deal may be reached by mid-week. Here is the report from Major Garrett of CBS:

We shall see. Presumably, an AMT patch is part of the negotiations.

Hat Tip: Hot Air

Posted in Legislation | 1 Comment

What Happens When Cigarette Taxes go Through the Roof?

Posted on December 16, 2012 by Russ

While Alan Greenspan noted, “Whatever you tax, you get less of,” the New York legislature seems to not understand. In one of the least shocking reports I’ve seen, the New York Association of Convenience Stores (NYACS) noted that the state is losing $1.7 billion of tax revenue each year and 6,700 jobs because of cigarette tax evasion. Why would this be?

New Yorkers who can buy cigarettes elsewhere. The study found that many are buying cigarettes from surrounding states, military bases, Indian reservations, and duty free shops. Add in smuggling from low-tax states (there’s undoubtedly a black market) and you have tax avoidance.

Meanwhile, Cook County, Illinois (Chicago) is conducting cigarette raids to enforce the $2 county cigarette tax. A picture is coming into my mind, that of prohibition, where organized crime prospered when alcohol was banned. I’m sure the similarities are just superficial…or maybe they’re not.

Of course, the NYACS would like New York to begin raids like those in Chicago; after all, convenience stores that are obeying the law stand to sell more cigarettes than most other locations. Still, the unintended consequences of increased taxes are obvious to most of us.

Posted in Illinois, New York | Tagged | 1 Comment

Ref Fouls Out

Posted on December 12, 2012 by Russ

Last year I reported on the rather brazen scheme of some referees at New York’s Chelsea Piers. Instead of reporting their $40 income per game, they decided to commit identity theft and use false names for reporting their income. This isn’t the identity theft that normally makes the news–fraudsters using someone else’s identity to obtain a tax refund. Rather, this was a scheme to avoid paying taxes on income the referees clearly earned. And this wasn’t a one-time thing: The scheme ran for twelve years.

It was judgment day yesterday in Manhattan. Peter Iulo was one of the individuals who committed the fouls, er, crimes. Besides his involvement with the referee scandal, he also elected to not file his own tax returns. That didn’t sit well with Judge Barbara Jones: He was sentenced to two years at ClubFed and must make restitution of $80,000. All told, the four individuals involved in the scheme must make restitution totaling $200,000. As always, it’s far, far easier to just pay the tax you owe…but that thought rarely occurs to the Bozo mind.

Posted in New York, Tax Fraud | 1 Comment

What Didn’t They Understand About the Definition of “Uniform?”

Posted on December 10, 2012 by Russ

California law requires parcel taxes to be uniform for every parcel. That means a parcel of 0.1 acres and a parcel of 10 acres must be charged the same tax. It seems simple, right?

Well, back in 2008 voters in the Alameda Unified School District (near Oakland in the East San Francisco Bay region) approved Measure H. That allowed a parcel tax, of $120 on residential property. However, commercial properties were charged a sliding scale. Smaller properties were charged $120; however, some larger properties owed $9,500 per year.

A property owner filed a lawsuit claiming the tax on larger commercial properties should be limited to the $120 per year. He lost at trial but appealed the decision. The appellate court reversed the decision, so for now uniform is back to its original meaning. Unless the decision is overturned on appeal (I do expect the Alameda Unified School District to appeal to the California Supreme Court), the school district will have to refund most of the $18 million it collected.

Unfortunately, there’s a dark cloud on the horizon. As the court noted,

We are well aware that we are being called on to interpret statutory language enacted in a different economic era and in the wake of two of the most far-reaching tax constraining measures ever passed by the state electorate (Propositions 13 and 62), that the state has since faced crippling economic conditions, and that school districts and other local governmental entities are more dependent than ever on the revenues from special taxes. The courts, however, cannot recalibrate the taxing power statutorily delegated to local entities; any adjustment in that regard must be made by the state Legislature.

Given that Democrats now have a super-majority in the California legislature, I expect uniform to be a thing of the past in the near future.

News Story: San Francisco Chronicle
Hat Tip: Tax Foundation

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