Is the Tax Haven Era Ending?

Posted on September 1, 2009 by Russ

Angel Gurria argues in the Guardian that it is, and bank secrecy will soon be a thing of the past. He notes, correctly, that even Liechtenstein has been signing agreements. Indeed, the principality announced today that it and Germany have signed an agreement.

Max Hohenberg, a spokesperson for the government of Liechtenstein, told the AP, “It’s an agreement based on OECD standards, meaning upon request and on an individual basis.” The agreement will allow Germany to request information on individuals suspected of tax evasion. The agreement goes into effect in 2010. Liechtenstein has also recently signed agreements with the US and the UK.

Meanwhile, the Organization for Economic Cooperation and Development (OECD) invited representatives from 100 governments to a meeting in Los Cabos, Mexico on September 1st and 2nd. The meeting is on Transparency and Exchange of information. We’ll have to wait and see if anything comes of it.

There has been a change in the plans, though. An uninvited visitor, Hurricane Jimena, has decided to also pay a visit to Los Cabos. The OECD has moved the meeting to Mexico City from the southern tip of Baja California.

As for Mr. Gurria’s argument, time will tell if the tax havens are truly ending or if they’ll just find new locations.

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Wrangling Rangel

Posted on August 30, 2009 by Russ

Congressman Charlie Rangel (D-NY) remains in trouble. But will anything come of it?

Mr. Rangel is Chairman of the House Ways and Means Committee, and is a powerful force among Democrats in Washington. However, his tax abuses are legion and, according to the New York Post, getting longer. Sure, there’s a House Ethics Committee investigation, but neither the Post nor I think anything will come of it (except a slap on the wrist).

Democrats campaigned quite successfully in 2006 and 2008 on charges of Republican corruption. It’s almost certain that the shoe will be on the other foot in 2010 (and probably 2012) unless something is done. In this case, having a tax cheat in charge of the committee that writes tax legislation will give the GOP plenty of self-written advertisements next year. Democrats would be wise to have Mr. Rangel step down as Chairman of the Ways and Means Committee. It doesn’t appear likely to happen.

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Yet Another Trust Fund Tax

Posted on August 30, 2009 by Russ

If you’re an executive of a company and having monetary troubles, it’s tempting to both hide that fact and to not pay your “Trust Fund” taxes. Trust Fund taxes are the payroll taxes you collect (from withholding) and match and pay to the IRS. If you want to get in trouble with the government, just don’t remit them. You’ll have trouble faster than I can type this paragraph. That’s not the first time I’ve given this advice, and it won’t be the last. Yet here’s another case where this allegedly occurred.

World Health Alternatives was a medical staffing company located near Pittsburgh, Pennsylvania. The company was publicly traded, and apparently doing well.

But that was allegedly a facade built on fraud. The government accuses Richard McDonald of fraud and tax evasion. He allegedly pocketed $2.2 Million the company received from selling stock (rather than have the funds go to the company). He’s also accused of falsifying company records regarding $2.3 million of unpaid payroll (Trust Fund) taxes. Finally, he’s also being accused of not filing tax returns from 2003 to 2005 when his income was between $430,000 and $3.2 million each year.

Needless to say, Mr. McDonald is looking at a very lengthy stay at ClubFed if found guilty of all the charges he faces. He’ll be arraigned this coming week.

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Another Survivor Tall Tale

Posted on August 30, 2009 by Russ

No, I’m not going to have anything in this post about Richard Hatch. Instead, we’ll head to the Great White North (Canada) where an entrepreneur with a checkered past decided to try his hand at developing a Survivor show.

“David Martin” came up with the idea in 2004 of a back-country hike/race, with contestants going from Buttle Lake to Mount Washington (via Mount Albert Edward) in British Columbia. His race did get at least 29 contestants…and 29 individuals who had to be rescued by search and rescue teams. The report of the incident is rather terse:

10 Comox Valley and 18 Campbell River SAR members responded to rescue the participants of a Survivor Canada Hike on Mount Albert Edward. The hikers were apparently dropped off and were to complete a hike to Buttle Lake. The participants sustained numerous minor injuries and were not equipped to be out overnight. A total of 27 individuals were escorted out of the trail system by ground and another 2 were flown by helicopter to Raven Lodge where they received medical attention.

Needless to say, the show didn’t get picked up. But Mr. “Martin” did; it turns out he was really Ronald Morrison, wanted for skipping parole (on a fraud charge). He has served the remainder of that sentence.

Anyway, Mr. Morrison was accused this year by Canada Revenue Agency of filing false tax returns. According to Canada’s version of the IRS, Mr. Morrison used the names of individuals he had been in touch with and created returns for each of them. Amazingly enough, all of those returns had refunds. Not so amazingly, all of the money refunded made its way to Mr. Morrison’s bank accounts. And even less amazingly, the CRA discovered the tax fraud (sooner or later, the CRA would wonder why there were two returns for some individuals). Mr. Morrison was charged with 15 counts of claiming a false refund and two counts of forgery. He was being tried; this past week he pleaded guilty. It appears he’ll have another chance to visit a Canadian penitentiary.

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Two Years at ClubFed for ex-IRS District Director

Posted on August 27, 2009 by Russ

Jesse Cota was a District Director for the IRS. After he left the IRS he went to work for Renaissance, the Tax People. That wasn’t a good choice of employer. It may have been lucrative financially for Mr. Cota for a while (he did earn $300,000) but the methods that he espoused weren’t the best.

Renaissance was a multi-level marketing firm. There’s nothing wrong with that. Renaissance sold a product called “The Tax Advantage System.” Well, if they were teaching Americans how to better prepare returns, that would be a good thing. However, as Cota admitted when he pleaded guilty to defrauding the government out of $1.3 Million, the program was, “…designed to sell illegal tax deductions through false and misleading representations.” Oops.

He was sentenced today to two years at ClubFed.

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Don’t Brag When You’re Committing A Crime

Posted on August 27, 2009 by Russ

One of my favorite websites is the Bozo Criminal of the Day. Every so often we get to see a story about a particular dumb criminal who decides to do something dumb:

From Papillion, Nebraska, comes the story of a group of teenage bozos who decided to throw what they called a “history making party.” They listed all the details on their facebook page…Guess it never occurred to them that the police read facebook, too. The party was busted and nine minors were charged with alcohol possession.

That’s the entry for April 29th of this year. And there have been dumb criminals using YouTube, too.

Well, not only are police departments using social media, but tax departments are, too. The Wall Street Journal has a story today noting that state tax departments read MySpace and Facebook.

Hint: If you’re going to evade taxes, don’t brag about it on the Internet. Even better, don’t evade taxes in the first place.

HatTip: April15.com

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Don’t Worry, We’re From the Government

Posted on August 27, 2009 by Russ

Perhaps no scarier line has ever been uttered than the title of this post. And if ObamaCare passes, there will be yet more fun for those of us in the tax profession.

Declan McCullagh is reporting that the new ObamaCare legislation contains language that may make you just a bit uneasy:

Section 431(a) of the bill says that the IRS must divulge taxpayer identity information, including the filing status, the modified adjusted gross income, the number of dependents, and “other information as is prescribed by” regulation. That information will be provided to the new Health Choices Commissioner and state health programs and used to determine who qualifies for “affordability credits.”

Section 245(b)(2)(A) says the IRS must divulge tax return details — there’s no specified limit on what’s available or unavailable — to the Health Choices Commissioner. The purpose, again, is to verify “affordability credits.”

Section 1801(a) says that the Social Security Administration can obtain tax return data on anyone who may be eligible for a “low-income prescription drug subsidy” but has not applied for it.

This language, if adopted in the final bill, would mean that it would be incredibly easy for individuals who shouldn’t have access to our tax returns to have access to them. I guess the Democrats in Congress don’t like the idea of privacy.

This is yet another reason that I’m not in favor of ObamaCare.

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Californians, Your Taxes Just Increased

Posted on August 27, 2009 by Russ

California’s tax brackets are indexed for inflation. Normally, the marginal tax brackets go up each year. But 2009 is anything but a normal year.

The Franchise Tax Board announced the new brackets, and deflation is the name of the game. Tax brackets will fall, and that means if your income is the same in 2009 as 2008, the amount you will pay to California just went up. And that’s besides the tax increase that came in February by bad budget #1.

Don’t worry, Democrats in the state legislature haven’t given up trying to pass even more tax increases.

I’ll have a lengthy post about 2009 California tax brackets and related items in a couple of weeks.

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Taxes Are For Little People

Posted on August 27, 2009 by Russ

That’s the gist of the famous line uttered by Leona Helmsley. She ended up spending time at ClubFed. It appears that philosophy is shared by the Chairman of the House Ways and Means Committee, Charles Rangel (D-NY).

Mr. Rangel amended his 2007 disclosure report to note an account at the Congressional Federal Credit Union of at least $250,000; stock at PepsiCo and Yum Brands; and real estate in New Jersey that he undervalued. You might say he “Missed it by that much,” as he initially reported that it was worth between $6,511 and $17,900; the amended report notes the true value as between $45,423 and $134,700.

Now news comes out that besides just slightly undervaluing his property he ‘forgot’ to pay his property taxes on that property. Yes, the back taxes are only about $160 but it’s the principle of the matter.

Oh, Congressman Rangel has quite a bit to do with taxes. All tax legislation in Congress must originate in the House Ways and Means Committee. So a gentleman who has plenty of problems reporting and paying his taxes is responsible for the writing of tax policy in the United States. Makes you feel comfortable, right?

Mr. Rangel should resign his position as Chair of the Committee but the chances of that happening are somewhere between slim and none.

Hat Tip: Don’t Mess With Taxes, Instapundit

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California, Nevada, and Texas

Posted on August 26, 2009 by Russ

A California State Assemblyman is upset with the ads that the Nevada Development Corporation is running. California is golden, and Nevada is silver. Why would any business leave? Here’s Assemblyman Jose Solorio’s (D-Anaheim) response:

Before I comment on that, there’s also a great op-ed piece in the Dallas News about the difference between California and Texas. One state is gaining business and one is, well, issuing IOUs. Hint: California isn’t the golden state in comparison to Texas.

As for Assemblyman Solorio, he may want to watch these two short spots.

It’s one thing to say, “California is great.” Can Assemblyman Solorio deny that it costs far more for a business to operate in the Golden State than it does in the Silver State? Unfortunately, everything in the Nevada Development Authority’s advertisements is true.

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