Politicans in Tax Trouble Heading to ClubFed

Posted on January 31, 2010 by Russ

Nicholas Blase was the mayor of Niles, Illinois for nearly 50 years. Niles is a suburb just northwest of Chicago. Growing up, I was in Niles Township; had my parents remained in the Chicagoland area, I would have attended Niles West High School. And Mr. Blase was the mayor of Niles while I lived in nearby Lincolnwood.

Mr. Blase, “a longtime suburban Democratic Party powerbroker,” according to the Chicago Sun-Times, acting like many Chicago area politicians. He told business owners to pay up or get out. And pay they did to a friend’s business firm. Mr. Blase got 25% as a commission. Somehow, the illegally gotten gains managed to avoid his tax returns.

Mr. Blase was charged in 2006 with mail and tax fraud. He pleaded guilty last year. He was sentenced on Friday to a year and a day at ClubFed.

Meanwhile, another political scandal is ending in Philadelphia. Howard Cain was the top political aide to Democratic State Senator Vincent Fumo. Mr. Fumo was found guilty last year on 137 corruption counts. (The government is currently appealing Mr. Fumo’s 55 month sentence as too lenient.) A key witness in Mr. Fumo’s trial was Mr. Cain. Mr. Cain, though, had his own tax troubles. He admitted that he didn’t report $400,000 in tax (on $1.6 million of income) to the IRS. Mr. Cain was sentenced to ten months at ClubFed. He must also make restitution of $1,021,499.

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Nevada Thanks Oregon

Posted on January 30, 2010 by Russ

The Nevada Development Authority was thrilled this week when Oregon voters passed a pair of “Tax the Rich” initiatives. The two tax increases will raise the personal income tax rate to 11% on individuals making $125,000 or more ($250,000 if married filing jointly). The other tax increase is on businesses: the $10 minimum corporate income tax has been replaced with a $150 minimum tax, or 0.1% of gross revenues in excess of $500,000. The measure was sponsored by public employee unions.

How many businesses will want to expand in Oregon when they can move to Washington (with no individual income tax, though there is a business tax) or Nevada (with no personal or corporate income tax)? How many business owners will see these tax increases and lay off individuals? As the Tax Foundation said, you can’t tax the guy behind the tree. This tax increase will make Oregon less competitive and will cause the state to lose jobs in the middle of a recession.

The Chairman of Nike calls these tax increases a death spiral. He’s dead-on accurate.

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How Stupid Can the Democrats in our Legislature Be?

Posted on January 30, 2010 by Russ

The answer is very, very stupid.

On a party line vote, the California State Senate passed a health care bill that would cost $200 billion. The legislation will undoubtedly be vetoed by Governor Schwarzenegger. Meanwhile, as I reported earlier California is lurching towards running out of money by April 1st…again.

But don’t worry, Democrats in Sacramento have a new idea for raising revenue: banning free parking. If California weren’t in such sad shape (and I wasn’t a Californian) this would be hilarious.

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A Cardinal in Tax Trouble

Posted on January 26, 2010 by Russ

The Arizona Cardinals didn’t make it to this year’s Super Bowl. But Safety Antrel Rolle has made it into the news today.

Forbes is reporting that Rolle has sued the IRS in US Tax Court. Mr. Rolle was recently audited, and his audit was held in Sacramento rather than in the Los Angeles area (where his advisors were). He is claiming that the IRS violated his due process and didn’t follow the Taxpayer Bill of Rights.

Underlying the Tax Court case is an audit that apparently didn’t turn out so well for Mr. Rolle. Mr. Rolle is a resident of somewhere. His tax return said Fair Oaks (a suburb of Sacramento). Or maybe it was a light industrial park in Granada Hills (a section of Los Angeles in the San Fernando Valley). He gave substantial donations to churches. One church’s address was in a copy shop maildrop…”We’re not even open on Sundays,” a worker joked to Forbes. Another church’s address is a dermatologists office. Mail sent to the address of his business in Chandler, Arizona (a suburb of Phoenix) is returned as “undeliverable;” that address apparently doesn’t exist. Given the dollar amounts involved (charitable contributions in the millions, income discrepancies in the millions, etc.), I can see how the audit might have turned very unpleasant.

In any case, Mr. Rolle will, eventually, get his day in Tax Court. His attorney is annoyed that Forbes was able to read the complaint. As Forbes noted, Tax Court records are public documents. This case figures to be quite entertaining.

Hat Tip: Tax Prof Blog

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What’s More Important: Paying Your Taxes or Buying the Lamborghini?

Posted on January 26, 2010 by Russ

John Gullett, a contractor in Parkland, Florida, came up with a good idea. He contracted with the Broward County and Dade County Police Benevolent Associations to solicit local businesses for advertisements in a book listing local businesses. He had to pay each of the associations about $4,000 per month. Still, business was good; he apparently made over $3 million between 2002 and 2005.

He put the money he made to good use: a couple Ferraris, a Lamborghini, and a home in Parkland. One thing he forgot to do was to pay the Internal Revenue Service. His tax returns for 2002 through 2005 omitted $3 million of income. It became a problem when the IRS figured this out; he was arrested last year and faced four counts of filing a false tax return. He was found guilty on all counts last Friday.

If he had paid the IRS, he might have only been able to afford the Lamborghini and not the Ferraris. Still, had he done so he’d still have the Lamborghini and be a free man.

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An Early Nominee for Tax Offender of the Year

Posted on January 26, 2010 by Russ

It’s only January, and we already have a truly Bozo story to report. We start with a gentleman named “P.M.” who prepared a fraudulent tax return. P.M. apparently prepared the return for the girlfriend of one Orlando Nunn. Mr. Nunn and his girlfriend were apparently going to split the proceeds. Via Joe Kristan and Citypages comes the following:

But apparently Nunn’s girlfriend thought she didn’t get her fair share. She told 21-year-old Nunn about it, and Nunn went for revenge: He and two other men paid a visit to P.M. at his girlfriend’s home and tried to rob him. Nunn allegedly waved a .45-caliber pistol around and told everybody to “get on the floor as this was a robbery and to get on the floor and get out their money as they know what time it is,” according to the complaint. P.M. grabbed the pistol from Nunn, and shot him dead.

The shooting will likely be classified as self-defense, so P.M. won’t get in trouble over that. Unfortunately for him, sooner or later the IRS will come knocking. As for the boyfriend, he’s no longer able to complain about the size of the refund.

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Schwarzenegger Versus the Unions

Posted on January 26, 2010 by Russ

Governor Schwarzenegger is taking on unions with his final budget. Steve Maviglio, a Democratic strategist, told the Los Angeles Times, “It’s a continuing jihad against organized labor. The governor thinks public employee unions are Enemy No. 1.” So what does the Governator want to do? He wants to cut the number of government employees, shrink pay, and cut future pension costs.

Let’s look at what happens if you or I have a business, and revenues decline. Let’s assume that we can’t increase prices (while an individual sale would be for a larger amount, we would overall lose business due to a declining number of sales). We’d be forced to cut expenses. Except in the short-term, we can’t afford a deficit.

What Governor Schwarzenegger wants to do is what’s needed: cutting expenses. Attempting to raise taxes (a solution that is available for the government) is not a good option in California. Taxpayers in the Bronze Golden State already pay among the highest taxes in the country. Increasing business taxes will just drive more businesses out of state. The last several years have seen budgeting by gimmicks. I am thrilled that Governor Schwarzenegger is looking at actually cutting expenses.

Added to this is the news that while revenues have grown by 24% in the last decade, state pension costs have grown by 2000%. It doesn’t take a rocket scientist or a tax accountant to know that this is not sustainable. Unfortunately, it’s likely that Democrats in Sacramento won’t be able to figure this out.

Of course, Democrats in Sacramento are almost certain to reject Schwarzenegger’s measures. If they can propose other methods of cutting costs that equal what Governor Schwarzenegger has proposed—and when I say cutting costs, I mean without accounting and budgeting gimmicks—fine. I just don’t see that happening. I also see the almost certain likelihood of budgetary gridlock in Sacramento.

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Troubles in the Land of Lincoln

Posted on January 26, 2010 by Russ

I’m a native of Illinois, and most of my relatives still reside there. Unfortunately, the home of the Cubs is having a multitude of tax troubles.

First, unemployment in the state is now over 11 percent (11.1% to be exact). Fewer people working leads to less tax collected.

Second, Illinois has changed how property taxes are collected. The first installment is due on March 2, but it’s not 50% of the tax. It’s now 55% of the tax (with 45% due late in 2010) thanks to a change in Illinois law. It’s a way for local government to make money off of our money instead of us having it to live off of.

Of course, politicians in Illinois are scrupulously honest, forthright, and have never ever been known to lie, cheat, or steal, right? Oh yes, the trial of disgraced former governor Rod Blagojevich will be late this summer.

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Donations to Haiti Relief Via Online Gambling Websites

Posted on January 26, 2010 by Russ

I’ve received quite a few inquiries asking about making a donation to Haiti earthquake relief via an online gambling website. Here’s the latest:

An online poker site is saying that if I transfer funds to a specific account, they’ll use the money for earthquake relief in Haiti. Would such contributions be tax deductible?

The answer is no: Contributions made through an online poker website are not tax deductible.

In order for a contribution to be tax deductible, you need proof of the donation: A canceled check or a credit/debit card receipt (or a charge listed on your credit card statement). Congress just last week authorized “texting” contributions that are delineated on your cellular phone bill as allowable charitable contributions for Haitian earthquake relief. But a contribution via an online gambling website does not meet that standard.

You do not obtain a receipt. Yes, you may show a record of the transfer to the specific Haiti Earthquake Relief Account, but in the eyes of the IRS (and Congress, which wrote the law) that’s not good enough.

I don’t mean to discourage such charitable contributions; earthquake relief in Haiti is a good cause. However, if you make a contribution via an online gambling website don’t expect to be able to deduct the contribution as a charitable donation on your tax return.

President Obama signed the legislation that allows you to take allowable charitable contributions for earthquake relief in Haiti on either your 2009 or 2010 tax returns. Remember, you can’t take them twice. Also, it’s likely that most states will not conform with this legislation.

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Government 2, Democrat 0, Republican 0

Posted on January 24, 2010 by Russ

Roger Corbin was a founding member of the Nassau County (Long Island, New York) Legislature. He was arrested last year and accused of filing false federal tax returns and lying to agents of the FBI and IRS. He allegedly received $226,000 from developers—checks made out to “Cash”—and deposited them in his personal account. He then allegedly ‘forgot’ to include them on his tax return. He compounded this by then allegedly lying to government agents.

His attorney, Thomas Liotti, told the Associated Press that he will plead guilty to tax evasion on Monday. Mr. Liotti, a Democrat, was defeated in his re-election bid last fall.

Across the Hudson River, another politician is in trouble. Leonard Kaiser, the former Republican mayor of North Arlington, New Jersey, and the former executive director of the Bergen County Utilities Authority and the Meadowlands Commission, pleaded guilty to tax evasion. Mr. Kaiser’s wife also pleaded guilty to a similar charge.

Mr. Kaiser’s troubles stemmed from his 2002 re-election bid. Mr. and Mrs. Kaiser wrote checks from their 2002 campaign fund to Mrs. Kaiser for “salary.” However, New Jersey law doesn’t allow personal use of campaign funds, and the payments weren’t disclosed on campaign financing documents or on their tax returns. Given that the total income involved is $30,000, a minimal sentence is likely.

Public servants indeed.

Posted in New Jersey, New York, Tax Evasion | 1 Comment