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.

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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

Sweden Goes After Poker Players…For Real

Posted on November 21, 2012 by Russ

The Swedish tax agency, Skatteverket, sent police into some poker players’ homes across Sweden on Tuesday. Under Swedish law gambling winnings within the European Economic Area are not taxed; however, gambling winnings from outside the European Economic Area are taxable. It appears that many poker players were not filing their income tax returns. While some online poker sites are not taxable, many others are. It also can get confusing with some sites: PokerStars.com is outside of the EEA while PokerStars.eu is within the EEA. PokerStars.eu wasn’t formed until 2012, so many Swedish players playing on PokerStars likely owe back taxes.

This should not have been a surprise to any Swedish players. Back in 2008 I reported on Skatteverket’s use of “spiders” to find poker players. Governments move very slowly, so the fact that it took four years for results is not surprising.

Skatteverket sent a letter to poker players; a copy of it was published in Swedish in Poker Magazine. Players were given until December 10th to respond with documentation for 2008 – 2011.

Hat Tip: Pokerfuse

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IRS Announces 2013 Standard Mileage Rates

Posted on November 21, 2012 by Russ

This morning the IRS announced the 2013 standard mileage rates. The rates are up one cent per mile from 2012 (except for charitable mileage, which is set by a statute). The new mileage rates are:

$0.565 per mile for business miles driven;
$0.24 per mile for medical or moving purposes; and
$0.14 per mile for miles driven in service of charitable organizations.

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Squeezy and Illinois

Posted on November 19, 2012 by Russ

Sometimes you can’t make this stuff up. The video (below) is a real video from Governor Quinn of Illinois:

Governor Quinn gives an excellent history of pensions but I notice there’s something missing from the video: solutions. Perhaps it’s because Illinois legislators and Governor Quinn promised that the 66% tax increase of 2011 would solve the problem. It didn’t. Illinois had $8 billion of unpaid bills when the tax increase was passed; there are $8 billion of unpaid bills today. Pensions ate up the tax increase.

There’s an editorial in the Chicago Tribune that notes that some Illinois legislators want to borrow money to pay for pensions. That’s a great solution: Let’s eliminate one debt problem by substituting another debt problem!

There is only one solution: Fundamental reform of the pension system. It’s going to be politically ugly: Democrats’ major interest group, public employee unions, will not like the results (pensions will be cut; that’s the only way out of the problem). Governor Quinn likens pensions to promises, and that they can’t be changed. Here’s a helpful hint to Illinois politicians: The taxpayers and companies that are resident in your state can leave to a far more friendly tax location. Sure, your income taxes aren’t that high (yet), but you’re sure heading in the wrong direction. If I were an executive with an Illinois-based business, I would be looking at other states. As I noted yesterday, moving a business is disruptive. Unfortunately, if you’re on a ship that’s struck an iceberg it’s time to head to the lifeboats. Illinois struck an iceberg called pensions. There’s still time to fix the hole but it’s now a more than $90 billion problem.

Chicago is a great city, and Illinois was a great place for my childhood. However, there are fifty states in the United States and Illinois appears to be following California into a cycle that will cause businesses that can leave to leave and for taxpayers to be caught in a cycle of ever-increasing taxes.

Posted in Illinois, Pensions | Comments Off on Squeezy and Illinois

Phoenix Woos California Businesses

Posted on November 18, 2012 by Russ

“For every action, there is an equal and opposite reaction.” That’s Sir Isaac Newton’s Third Law of Motion, something I learned in physics years ago. It’s also true about what happens when taxes increase. Options that businesses would rather not look at become things businesses start considering.

For years I’ve noted that as California increases taxes, businesses start looking at moving to Las Vegas, Denver, and Phoenix. Shock of shocks, with Proposition 30 passing in California, the Greater Phoenix Economic Council decided that now is a good time to actively pursue California businesses. Yes, Phoenix’s summer climate is brutal (just like Las Vegas), but there’s a good workforce, low taxes and regulations, and plenty of housing.

A hint to California: As you continue making the state more and more hostile to businesses, businesses are forced to react. No business wants to move (it’s expensive and disruptive), but like my business that moved last year, eventually the desert wastes of Las Vegas or Phoenix start looking really attractive.

Posted in Arizona, California | 1 Comment

I’m Glad I Didn’t Say Which Christmas

Posted on November 14, 2012 by Russ

Back at the end of July came news that the US Department of Justice had settled with PokerStars and Full Tilt Poker on civil claims, and that players would be paid back. I wrote,

When will players be repaid? If you are outside of the US (and this is determined by your residence on June 29, 2011), you likely will be repaid no later than November. If you are in the US, this remains unclear, but I’d expect you to be repaid before Christmas.

I was wrong.

I was expecting the DOJ to treat this differently from a ‘standard’ remission case, given that all the money was on hand and there was a complete list of who needed to be repaid. I was wrong: The bureaucratic procedure will be followed.

Yesterday, John Pappas, Executive Director of the Poker Players Alliance met with officials from the DOJ. A full statement from Mr. Pappas regarding the meeting is available. The gist of it is that is:

Our third objective was to get a sense of timing. Unfortunately, completion of a refund claims process is a long way away.

I now expect this to take many more months, perhaps more than one year for players to be repaid. Unfortunately, a realistic time-frame is 12 to 18 months from now. It could take less time if all the stars align, but it could take longer if something goes wrong. Poker players will be dealing with “bureaucracy at work.”

While what’s below isn’t the process, from a poker player’s perspective it might as well be. It’s definitely an example of how bureaucracy functions most of the time.

“The 2011 Purdue University Rube Goldberg machine shattered the world record for most steps ever successfully completed by such a machine. In 244 steps the ‘Time Machine’ traces the history of the world from Big Bang to the Apocalypse before accomplishing the assigned everyday task of watering a flower. The record has been sanctioned by the Guinness Book of World Records and the World Records Academy.”

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FTB Appeals Gillette Decision

Posted on November 14, 2012 by Russ

As expected, California’s Franchise Tax Board has appealed the Gillette decision to the California Supreme Court. (The FTB’s Tax Practitioner Liaison sent an email notifying tax professionals of the appeal.) The California Supreme Court does not have to take the case but is likely to. Most likely, the case would be heard in the Spring of next year with a decision sometime over the summer.

Posted in California | Tagged | 1 Comment