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

Posted in California | Comments Off on What Didn’t They Understand About the Definition of “Uniform?”

California Revenues Below Expectations

Posted on December 9, 2012 by Russ

California Governor Jerry Brown promised that the new taxes that have gone into effect will balance the budget. Well, in November California revenues were $842 million below expectations, and California is $802 million under budget for the fiscal year (which began in July).

The problem for California is simple: Raising taxes causes people to change behaviors. That will be somewhat difficult initially (the income tax increase is retroactive for the entire 2012 tax year); however, 2013 is another story. While I do expect California’s April tax revenues to meet expectations, I doubt that many other months will do so. Also hovering in the background is the possibility of a $500 million bill to Gilbert Hyatt (the Nevada Supreme Court will decide that in the coming weeks).

Posted in California | 1 Comment

Why Rob Banks?

Posted on December 7, 2012 by Russ

Question: “Why do you rob banks, Mr. Sutton?”

Answer: “Because that’s where the money is.”

It’s debatable whether or not legendary bank robber Willie Sutton ever said that. However, the idea of only robbing something that has money is a good one (for the robber). Today, the question might be asked, “Why do you commit identity theft?”

Another gang of identity thieves was caught yesterday. From Long Beach, California comes word that eleven gang members were arrested. The investigation began as the result of a shooting. Investigators discovered that gang members had switched from violent crime to nonviolent identity theft and filing false tax returns. The reason is obvious to me: It’s an easy way of making an illegal income.

A large list of agencies was involved in yesterday’s arrests, including the Secret Service and the US Postal Inspectors. Noticeably absent from that list was the IRS Criminal Investigation unit. Clearly, tax fraud was committed but it took outside agencies (that is, outside of the IRS) to discover and prosecute the crimes.

True, those arrested may face federal charges (they were booked on state charges only yesterday), and those eleven alleged identity thieves are unlikely to be committing any more identity thefts anytime soon. However, until the IRS implements better procedures (such as the suggestions I made earlier this year), more and more criminals will attempt to commit this crime. That’s because there’s lots of money to be made here.

Posted in IRS, Tax Fraud | Tagged | 2 Comments

One Year In

Posted on December 6, 2012 by Russ

Nevada Flag

One year ago, I announced my move from, as Joe Kristan put it, “the perfumed air and divine weather of Orange County to the desert wastes of Nevada.” A friend asked me to expound on my move, both the good and the bad.

There isn’t much that’s bad for me to report on. My electric bill is painful in the summer; my July bill went up over 4000% [1]. I don’t have grass in my front lawn (but even in Irvine that was an issue). There’s nothing particularly old or historic to see in Las Vegas. When the historic relics are the old casinos such as the Golden Gate [2], historic items are few and far between.

There’s a lot, though, to love. I was told that I wouldn’t know my neighbors, that people aren’t friendly, and that it’s a transient community. I know my neighbors (who are very nice people), people went out of their way to introduce themselves, and while there are definitely transient neighborhoods (especially areas very hard hit by the housing bust), I live in a typical suburban neighborhood. I have a lot more house than I did in Irvine at a lot less cost. The cost of living here is less, and my state income tax bill is almost zero [3]. I’m reconnecting with friends who moved here, and I’m having fun.

The biggest surprise to me is that I’m doing far less driving than I used to. Las Vegas, like Orange County, is full of strip malls. Indeed, the area I live in (Summerlin) is modeled after Irvine. The Las Vegas valley is smaller, and the distances less. This ends up being a big saving. This is especially true when you add in the cost of gasoline; it’s $0.20 a gallon cheaper here than in California [4].

Knowing what I do now, would I have made the move? Absolutely–and maybe faster.

Notes:
[1] In Irvine, I rarely needed to run the air conditioning (I lived near the ocean which provided free air conditioning). I signed up for Southern California Edison’s air conditioning cycling program. That caused my summer electricity bills to fall by almost 90%. Here in Las Vegas, I have a larger home that must be air conditioned. In the summer, the air conditioning runs at all hours. I knew that I would have large bills…and it wasn’t a surprise.

[2] The Golden Gate Casino, originally the Sal Sagev, is Las Vegas’ first casino. It’s downtown at 1 Fremont Street. They have a great shrimp cocktail special ($1.99, though you must join their slot club for this price).

[3] Nevada has no state income tax. I will have to pay a small amount of Maryland income tax this year because of our Maryland office; it’s likely under $100.

[4] All gasoline is imported from other states into Nevada (there are no oil refineries in Nevada). Yet even including shipping costs you pay less for gasoline here than in California. The obvious (and true) conclusion is that state taxes drive up the cost of gasoline in California.

Posted in California, Las Vegas, Nevada, Taxable Talk | Comments Off on One Year In

Nominations Due for 2012 Tax Offender of the Year

Posted on December 4, 2012 by Russ

With just under a month to go before 2012 is complete, it’s time again for anyone to submit a nominee for the Tax Offender of the Year. To be considered for the Tax Offender of the Year award, the individual must do more than cheat on his or her taxes. It has to be special; it really needs to be a Bozo-like action or actions. Here are the past lucky recipients:

2011: United States Congress
2010: Tony and Micaela Dutson
2009: Mark Anderson
2008: Robert Beale
2007: Gene Haas
2005: Sharon Lee Caulder

Nominations are due by next Thursday night, December 29th.

Posted in Taxable Talk | 2 Comments

Chiropractor Will Adjust to ClubFed

Posted on December 4, 2012 by Russ

A Cadillac, Michigan chiropractor thought he had the perfect method of saving on taxes. He created two sets of books. One accurately reported his income and expenses; the other underreported income and overreported expenses. (I have always wondered if in some alternate universe there’s a tax evader who overreports his income and underreports his expenses. But I digress….) The chiropractor, Paul Kelly, provided his accountant with the books that showed the lower (incorrect) profits. He even used a second bank account in another name to attempt to match his purported income with his books.

For seven years this scheme ran (from 1999 to 2006). It’s unclear how the IRS discovered the tax evasion, but discover it they did. Back in August Kelly pleaded guilty to one count of tax evasion; he admitted that while he paid $23,601 in taxes his true liability was far higher. Today, he was sentenced to two years at ClubFed plus two years of probation. He must also make restitution of $279,145.

Posted in Tax Evasion | Comments Off on Chiropractor Will Adjust to ClubFed

Another South Carolina Politician Guilty of Tax Charges

Posted on November 26, 2012 by Russ

There must be something in the water in the Palmetto State: Yet another politician in South Carolina forgot about filing his taxes.

This time it was a Democrat, State Representative Harold Mitchell (D-Spartanburg) who claimed he just filed late. He had been accused of felony tax evasion; today he pleaded guilty to a misdemeanor charge of not filing his taxes timely. He’ll owe the amount of the tax due (just under $6,000) and court costs. His three-year sentence will be suspended provided he makes the payment (which he has promised to do).

South Carolina voters appear confident about Mr. Mitchell. He was reelected…without opposition.

Posted in South Carolina, Tax Evasion | 1 Comment

Can We Kill the Death Master File?

Posted on November 26, 2012 by Russ

Years ago, having the Social Security Administration publish a “Death Master File” was probably necessary. This may have been the only manner for various government agencies and insurance companies to learn that individuals had passed on.

Today, though, the information should only be disseminated to those who need it. Insurance companies should be able to subscribe to the list (as well as government agencies). However, is there any reason why John and Jane Doe need to have access to the list?

Well, one reason the Does need access is to commit identity theft: Three Utah men are accused of using the Death Master File for just that purpose. The men then created fake documents from phony employers to obtain tax refunds. The refunds reportedly were on the small side ($1,046 to $2,624). In any case, the IRS discovered the scheme and the men are now facing numerous charges of false claims, wire fraud, and aggravated identity theft.

While these three alleged identity thieves were caught, many more are finding the US government a great source of revenue while ruining the lives of innocent taxpayers. (Jason Dinesen, an EA from Indianola, Iowa, has run a story about a woman who is dealing with identity theft related to her late husband. This is almost certainly another case which stems from the Death Master File.) Identity theft makes the lives of victims miserable for years and is far too easy a crime for the thieves to commit. Ending the sale of information from the Death Master File would be a nice start to combating identity theft.

Posted in IRS, Utah | Tagged , | 1 Comment

Shameless Self Promotion

Posted on November 26, 2012 by Russ

When Tax Season is over, tax practitioners tend to go on vacation. That didn’t happen for me this year for a good reason:

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. The book is due out on December 26th.

Posted in Books, Taxable Talk | 2 Comments