Gambling Addiction Costs Ice Winery Head

Posted on February 26, 2012 by Russ

Something I didn’t know until recently is that wine grapes are grown in all 50 states. They’re also grown in Ontario, Canada. One winery head dipped into the till because he liked to gamble.

From St. Catharines, Ontario, comes the story of Charles Pillitteri, head of the the Pillitteri Estates Winery. Mr. Pillitteri apparently liked to gamble, and back in 2004 and 2005 Mr. Pillitteri reached into the company’s cash and took $439,102 and $951,508 (Canadian Dollars). The Canada Revenue Agency found out, and the company was fined the amount of the back taxes: $122,031 and $202,510 for 2004 and 2005. The company has paid the fines assessed when Mr. Pillitteri pleaded guilty to tax evasion.

Mr. Pilliteri no longer gambles according to this news report. Connie Slingerland, the CFO and the sister of Mr. Pillitteri, told the National Post, “We’re very proud of what we do…. This happened a long time ago, and all the measures have been put in place for it not to happen again.”

The specialty of Pillitteri Estates Winery is ice wines; the grapes for the wines are frozen on the vine, picked, and then crushed while still frozen. It sounds like the perfect thing to try during a Las Vegas summer.

Posted in Canada, Tax Evasion | 1 Comment

Pensions for All? California Legislator Introduces Mandatory Pension Bill

Posted on February 26, 2012 by Russ

Every time I think the Bronze Golden State has reached a new low, I have to remember that I should never overestimate the intelligence of the California legislature. Kevin De Leon (D-Los Angeles) has introduced a bill that requires any business with five or more employees to have a defined benefit pension plan. Employees would contribute around 3% of their wages into the plan; employers would be allowed to make voluntary contributions. The plans, though, would be mandatory to California businesses.

The unintended consequences of passage of this bill are simple. First, would employer contributions remain voluntary for long? I doubt it. And that leads to the second consequence: Fewer employers in California. Why would any business expand in high-cost California where regulation after regulation is put upon it when they can expand in a lower cost environment (such as Nevada or Texas). This leads to the final consequence: Fewer employees in California.

I also have to wonder if the Democrats in Sacramento have ever taken a course in basic economics.

Posted in California, Pensions | Comments Off on Pensions for All? California Legislator Introduces Mandatory Pension Bill

IRS Commissioner Fails Reading Comprehension

Posted on February 21, 2012 by Russ

Our Tax Code is needlessly complex. Still, there are portions that are straightforward. Take Section 7803(c):

(3) Responsibilities of Commissioner

The Commissioner shall establish procedures requiring a formal response to all recommendations submitted to the Commissioner by the National Taxpayer Advocate within 3 months after submission to the Commissioner.

Now, that seems very straightforward to me: If the National Taxpayer Advocate (Nina Olson) make a recommendation, the Commissioner (or someone he assigns) must respond within three months. There are no ifs, ands, or buts.

Until now. From Tax Analysts (via Joe Kristan/Roth Tax Updates):

IRS Commissioner Douglas Shulman has no plans to respond in writing to National Taxpayer Advocate Nina Olson’s taxpayer advocate directive (TAD) on the IRS offshore voluntary disclosure program (OVDP) despite a statutory requirement that taxpayer advocate recommendations be responded to within 90 days, Olson said February 17.

Now, if one of my clients has 90 days to respond and ignores the IRS, he loses. If I ignore my responsibilities (if I have 90 days to respond to something), I will have committed malpractice and (rightly) be sanctioned. But according to Commissioner Shulman, the law only applies to him when he wants it to apply to him.

Joe Kristan has more.

Posted in IRS | Comments Off on IRS Commissioner Fails Reading Comprehension

Clubhouse Manager Strikes Out

Posted on February 21, 2012 by Russ

Well, that headline was easy to write. From Queens, New York, comes the story of Charlie Samuels. Mr. Samuels was the clubhouse manager of the New York Mets. He also had itchy fingers: Mr. Samuels stole memorabilia from the Mets, including a complete set of 1986 World Series jerseys. He also padded his expense accounts. Finally, along the way he forgot to pay income tax on his ill-gotten gains. After being arrested last May he pleaded guilty today in a plea bargain deal to possession of stolen property and state tax fraud.

Mr. Samuels is expected to receive probation. He was also ordered to make restitution: $21,000 to the New York State Tax Department, $15,000 to the New York City Finance Department, $15,000 to the Queens District Attorney, and $24,955 to the Mets. Mr. Samuels’ attorney noted that in the end he was “only” in possession of $50,000 of stolen memorabilia, not the $2.3 million he was originally accused of having. Still, that was $50,000 too much.

Posted in New York, Tax Evasion | Tagged | Comments Off on Clubhouse Manager Strikes Out

Businesses Act Based on Taxes (Will Liberals Change their Policies?)

Posted on February 19, 2012 by Russ

In what might be an “I told you so” moment, Haas Automation of Oxnard, California (northwest of Los Angeles) is growing and needs to expand. They began the planning for a $20 million new building and all seemed well.

And then Governor Brown and the Democrats who control Sacramento started debating tax increases. Not will there be an increase, but which increase should pass. Businesses don’t like that, and Haas put a stop to the new building.

Let’s see what California offers in comparison to, say, Nevada and Indiana (which just became a “Right to Work State”). California does have a well-trained workforce, and for machine tools it’s likely better than Nevada. Indiana might meet that quality of workforce (there is a lot of automotive industry work done in Indiana).

Now, let’s examine the disadvantages: California is a regulatory nightmare; Nevada and Indiana aren’t. Wages in California are higher than Nevada and Indiana. California is the opposite of a Right to Work State while Nevada and Indiana are Right to Work States. Nevada has no state income tax while Indiana is in the middle of the pack for income taxes; California has one of the highest income tax structures in the United States. This news story notes that other states are offering free land, interest-free loans and savings on property tax. California offers none of that.

Perhaps the California legislature might ask themselves what would happen if they keep driving successful businesses out of state…because their actions are doing just that. Or perhaps they think that businesses don’t act rationally? If that’s what they do believe, they are wrong: Businesses don’t want to move, but if they must they will. Businesses do act rationally, and if it is prohibitively expensive to expand in California they’ll expand elsewhere.

One other unrelated point: I’m glad to see that Haas Automation has recovered from the actions of its founder. For those who don’t remember, Gene Haas was my Tax Offender of the Year for 2007. They just produced their 125,000th CNC Machine; that’s a remarkable feat for the company.

Posted in California | Tagged , | Comments Off on Businesses Act Based on Taxes (Will Liberals Change their Policies?)

Remember Gilbert Hyatt? (An Update)

Posted on February 19, 2012 by Russ

One of the blogs I read, How Appealing, posted a link to this story on California’s attempt to ban video games featuring “murder and mayhem” from being sold to children cost the Bronze Golden State $2 million.

That’s nothing.

There’s a case that’s still waiting to be heard at the Nevada Supreme Court that’s cost California taxpayers many millions, and has the potential to cost the state over half a billion (yes, $500,000,000). The Franchise Tax Board’s appeal of Gilbert Hyatt’s lawsuit is waiting a date to be set for oral argument. It’s been stuck in this status for over a year (the last change noted in the online tracking system for the case was on February 4, 2011). I don’t know what the average wait time is, but most likely later this year this case will be heard.

If the appeal is heard here in Las Vegas (the Nevada Supreme Court holds sessions in Carson City and Las Vegas), I plan on attending…some day (hopefully in 2012).

Posted in California, Nevada | Tagged | Comments Off on Remember Gilbert Hyatt? (An Update)

I Have to Get a Magic Printer of my Own

Posted on February 17, 2012 by Russ

If only we could take a charitable donation made in, say, 2001, and by using a magic printer we could magically change the receipt date to 2011. Imagine all of the donations we could suddenly recycle. Ignoring the illegal nature of this, consider the numerous other applications of such a magical printer outside of tax: No more typographical errors; we could change answers on exams after we got them back; and we’d never have another losing sports bet.

Of course, such a printer doesn’t exist.

So that brings us to a news release from the Department of Justice. Maria Teresita Viray, a tax preparer from Reseda, California (in the San Fernando Valley area of Los Angeles), told her clients that she had such a magical printer. From the Department of Justice press release: “The complaint states that Viray told one customer that she had a special printer that allowed her to change the dates and amounts on charitable contribution receipts.” Added to her problems was allegedly creating phony deductions…and that the IRS discovered this. The Department of Justice was successful in obtaining an injunction prohibiting her from preparing any more tax returns.

If you happened to be one of the “thousands” who used Ms. Viray, you may receive a “Dear Valued Taxpayer” letter informing that your return is being audited; Ms. Viray was ordered to provide a list of her clients to the government.

Finally, this is yet another story of how regulation and mandatory continuing education will prevent such fraud. Well, not really: Ms. Viray appears to have been registered with CTEC (the California agency that regulates non-EAs, non-CPAs, and non-attorney who prepare tax returns). Yet the government lost an estimated $45 million from Ms. Viray’s alleged shenanigans. I leave the obvious conclusion to you….

Posted in IRS | Tagged | Comments Off on I Have to Get a Magic Printer of my Own

A Poll Tax–No, That’s a Pole Tax in Illinois?

Posted on February 16, 2012 by Russ

Leave it to the Land of Lincoln for an inventive way to raise money. Illiniois State Senator Toi Hutchinson (D-Olympia Fields) is sponsoring a $5 per person pole tax. The tax would impact strip clubs. The strip clubs are not amused. The Chicago Tribune reports:

We wouldn’t want that,” said Tiffany Winkler, manager of the Chicago club Pink Monkey.

The Admiral Theatre is “strongly opposed to the proposed pole tax,” said Sam Cecola, the North Side club’s director of operations.

I remember that Texas implemented a similar pole tax; the Texas Supreme Court ruled it constitutional though the case is still being litigated. Expect a similar battle if Illinois moves toward a pole tax.

Posted in Illinois | Tagged | Comments Off on A Poll Tax–No, That’s a Pole Tax in Illinois?

The Dirty Dozen

Posted on February 16, 2012 by Russ

It’s time for the Dirty Dozen. No, not the movie; rather, the IRS’ annual listing of the worst tax scams.

On top of the IRS’ list is identity theft. It is a major problem, and the IRS is trying to stop it. The IRS does have a special unit dealing with identity theft.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the special identity theft page at www.IRS.gov/identitytheft.

Second on the IRS list is phishing. The IRS never sends unsolicited emails to taxpayers. As the IRS notes,

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

You can find the rest of the list here. Remember, if it sounds too good to be true it probably is.

Posted in IRS, Scams | Comments Off on The Dirty Dozen

Another California Tax Preparer Ignores Her Continuing Education

Posted on February 15, 2012 by Russ

I say that because of news that comes from the small (California) Central Valley town of Livingston. The Department of Justice announced that Nohemi Villarreal Noriega of Patterson has been arrested on charges of tax evasion and structuring. Ms. Noriega is accused of not paying her own taxes of $167,000 from 2006 – 2008. But there’s more:

In addition, the indictment charges that Noriega structured more than $1 million of withdrawals from her bank accounts in amounts designed to avoid filing Currency Transactions Reports, which might have disclosed her unreported income.

Note that all California tax preparers have to be registered with CTEC (or be a CPA, EA, or attorney). Registration and continuing education didn’t stop Ms. Noriega from allegedly violating two laws nor did it stop Ms. King (a post from earlier this week). Having all tax professionals register with the IRS won’t change things…but it will establish another bureaucracy in Washington.

Posted in Tax Evasion, Tax Preparation | Comments Off on Another California Tax Preparer Ignores Her Continuing Education