In a rare show of bipartisanship, Democrats and Republicans plan on introducing joint legislation to allow Americans to claim a tax deduction for charitable contributions to Haiti earthquake relief in 2009 though the deductions are made in 2010. I expect this legislation to pass by early February.
However, I do not expect conforming legislation to pass in California because of the current budget crisis.
If you really, really want to go to ClubFed for committing tax evasion, do what Tom Daugherty of Fort Myers, Florida did. Mr. Daugherty, a commercial real estate broker, bought $2.19 million of cashier’s checks from Orion Bank. He also paid $53,000 in overdraft fees from the bank. When a bank employee asked why he was doing this, Mr. Daugherty apparently told the truth. “I’m hiding the money from the IRS,” is what he apparently said.
That didn’t work so well. My Daugherty will be pleading guilty this Wednesday to tax evasion.
The Wall Street Journal editorializes on Friday that Oregon is at the tax crossroads. The Oregon Legislature, dominated by Democrats, voted to increase the state’s top personal income tax bracket to 11% from 9%; they also voted to increase the state’s business income tax to 7.9% from 6.6%. Signatures were gathered and a mail election is underway on whether or not these tax increases actually go into effect.
The Journal notes,
In the last budget, the Democratic controlled state legislature doled out a $259 million pay raise to the government work force, even as the state was facing a near $1 billion deficit. In the last three years, the state has added 25,000 new public employees while losing 40,000 private sector jobs. The union TV ads say the tax hikes are needed to preserve schools, roads and public services.
The 11% income tax rate will make Oregon’s income tax about twice as high as the national average. Businesses in Portland can move across the Columbia River to Vancouver, Washington and pay zero income tax. Oregonians used to argue they didn’t have to pay a state sales tax. But the current tax proposal imposes a first-ever “gross receipts tax” on certain retail and wholesalers. This is a disguised sales tax.
The days of unlimited tax and spend are ending. The election in Massachusetts is demonstrating the anger of Americans towards the Democrats’ tax and spend proposals. We’ll have to wait a couple of weeks to see if Oregonians send a message to their legislature about increasing taxes in a recession.
The IRS has come out with its annual list of tips in choosing a tax professional:
1. Check the person’s qualifications Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
2. Check on the preparer’s history Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys.
3. Find out about their service fees Avoid preparers that base their fee on a percentage of the amount of your refund or those who claim they can obtain larger refunds than other preparers.
4. Make sure the tax preparer is accessible Make sure you will be able to contact the tax preparer after the return has been filed, even after April 15, in case questions arise.
5. Provide all records and receipts needed to prepare your return Most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.
6. Never sign a blank return Avoid tax preparers that ask you to sign a blank tax form.
7. Review the entire return before signing it Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
8. Make sure the preparer signs the form A paid preparer must sign the return as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.
My usual rule of thumb holds: If it sounds too good to be true, it probably is.
Tax protester Ed Brown received 63 months for tax evasion. You may remember that he decided to barricade himself in his New Hampshire home, fill it with weapons, and tell the government to go somewhere else. As Joe Kristan notes, “Armed holdouts are poor tax planning.” Mr. Brown got 37 years for the weapons charges. Joe Kristan has more.
If you’re ever accused of a criminal offense, and you’re under bond (bail), you should show up at your trial. If you don’t, you are certain to find yourself in even worse trouble. Add in allegedly committing tax evasion and making up your own US debt instruments and your trouble is likely to multiply. Such is the case for two Ohio dentists.
Of course, we should start at the beginning. Dr. Bruce Mrusek of Maineville, Ohio and Dr. Bradley Brennecke of Pleasant Plain, Ohio were audited in 2004. The results of that audit aren’t available, but a criminal probe opened following the audit. That in itself says all we need to know.
The problems of the dentists were deep. First, the dentists allegedly transferred assets into their wives’ names to hide them from the IRS. They then allegedly sent phony documents to the IRS to pay their 2002 – 2004 taxes. Now, they didn’t send $1,000, or $10,000, or even $100,000 or $1 million in fake payments.
They allegedly each sent over $19 billion in phony payments. According to a Department of Justice press release, the documents were labeled as “‘Secured Promissory Notes’ to the U.S. Department of the Treasury as purported payment of their tax debts.” They then asked for $9.6 billion of refunds. That takes chutzpah.
Unfortunately for the dentists, the IRS and Department of Justice lack much of a sense of humor regarding payments of fake money. They were indicted on tax evasion, conspiracy to defraud the IRS, and passing fictitious instruments. Dr. Mrusek was also accused of filing false business tax returns. They were released on bond, with the trial set to start on Monday.
But the dentists didn’t show up for their trial. The US Marshals office had no trouble finding the dentists, and they were arrested. They found their way to court today.
The dentists face very lengthy prison terms if found guilty, fines in the millions, and restitution.
Mold inside a building can be a major health issue. Unfortunately, California’s Board of Equalization is housed in such a building. The 24-story building is in a prime, downtown Sacramento location. But leaks and mold abound, and the $15 million that would have fixed up the building has grown into $68 million today. Assemblyman Dave Jones (D-Sacramento) and Senator George Runner (R-Lancaster) are carrying a bill to move the BOE and for the BOE to sell or lease the building.
Of course, would you want to buy a 24-story building filled with mold?
In July 2006 I reported on David Carruthers. Mr. Carruthers needed to fly from London to San Jose, Costa Rica. No nonstops were available, so he flew through DFW. The 2-hour layover ended up being 33 months. Mr. Carruthers happened to be an executive at BetOnSports.com, an Internet sportsbetting company. While that was legal in the United Kingdom and Costa Rica, it was (and is) illegal in the United States.
Mr. Carruthers was arrested. His plea bargain deal finally concluded last week; he was sentenced to 33 months at ClubFed for violating federal wagering laws (primarily the Wire Act). Since Mr. Carruthers’ arrest online gambling hasn’t slowed down, but online gambling executives no longer fly through US airports.
Convicted felon and former (and possibly soon-to-be) Congressman James Traficant hit the airwaves. Mr. Traficant was on the radio in Cleveland. While he still hasn’t decided which Congressional race he’ll enter, he did call himself a “bitter man.”
CQ Politics said his targets included everything from the current administration and Congressional leadership, the Federal Reserve, foreign aid, and the Tax Code. Mr. Traficant would like to abolish the IRS and replace our current Tax Code with a flat tax.
As my friend Scott, a resident of Youngstown, continues to state that Traficant will win, we’re likely to hear his trademark “beam me up” in the future. There will be at least one very entertaining Congressional race in Ohio this year.
Sometimes you just don’t need to embellish a story. The former Education Dean of the University of Louisville pleaded guilty last Friday to nine charges of embezzlement and tax fraud. Robert Felner embezzled $1.7 million from the University of Rhode Island, and followed that up by embezzling $570,000 from the University of Louisville. He tried to embezzle another $270,000 from Louisville, too. He did manage to pilfer $88,000 from the Rock Island, Illinois County Counsel on Addiction.
Adding to his problems, he forgot to pay $490,000 to the IRS. Scott Cox, Mr. Felner’s attorney, noted, “They had a very strong tax case against him.”
Mark Hebert, a spokesman for the University of Louisville, told the Associated Press, “I don’t think there are a whole lot of tears being shed on the University of Louisville campus today. He blew it.”
Mr. Felner’s plea bargain calls for him to serve 63 months at ClubFed, and make restitution of $2.2 million to the Universities and County Counsel.
