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.

Posted in Tax Evasion | 1 Comment

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.

Posted in Tax Fraud | Comments Off on Another Survivor Tall Tale

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.

Posted in Tax Fraud | Comments Off on Two Years at ClubFed for ex-IRS District Director

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

Posted in Tax Evasion | Comments Off on Don’t Brag When You’re Committing A Crime

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.

Posted in Legislation | Comments Off on Don’t Worry, We’re From the Government

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.

Posted in Legislation | Comments Off on Californians, Your Taxes Just Increased

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

Posted in Legislation | Comments Off on Taxes Are For Little People

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.

Posted in California, Nevada, Texas | Comments Off on California, Nevada, and Texas

Unlikely Duo of Lawsuits Could Impact Illinois

Posted on August 26, 2009 by Russ

Rocky Wirtz is a folk hero among Chicago’s long-suffering hockey fans. After his father, William (Bill) Wirtz, passed away in 2007, he changed the Blackhawks’ philosophy. Suddenly, the laughable losers turned into winners, and the Blackhawks played in the Western Conference Finals last year.

Mr. Wirtz also owns a liquor distributorship in Chicago. It’s not a little business–it’s a $1.5 billion company. And so when Illinois lawmakers decided to balance its budget partially by hiking liquor taxes, he was annoyed. Well, more than annoyed. He’s challenging the liquor tax hike on grounds that it violates the state’s constitution by covering disparate subjects.

Mr. Wirtz is also challenging Illinois’ new video poker law. In theory, come mid-September there should be video poker terminals in bars and taverns throughout Illinois. Hogwash, says Aaron Jaffe, chair of the Illinois Gaming Board. While the state legislature approved the video poker terminals, they didn’t fund any of the needed personnel or the $75 million needed to just implement the program. So if there’s no court order stopping the program it’s likely that video poker is still months away.

But Mr. Wirtz is challenging the gaming expansion, too. He claims that the expansion violates federal gambling law. Mr. Wirtz’s attorney is asking for an immediate injunction.

Meanwhile, the AFSCME has filed a lawsuit to stop Illinois from laying off 2,600 state workers. The union argues that under their collective bargaining agreement, layoffs must be negotiated.

One thing is certain: Expect lots more labor unrest as state budgets shrink. That’s a conclusion that everyone involved can agree with.

Posted in Illinois | Comments Off on Unlikely Duo of Lawsuits Could Impact Illinois

Another Don’t Try This at Home Story

Posted on August 23, 2009 by Russ

Back in July 2007, the IRS demanded that Richard M. Arnold of El Reno, Oklahoma, pay back taxes in the amount of $317,000. This wasn’t his first brush with the IRS; back in 1999 the IRS filed a $300,000 lien on his property.

Most of us, when we have tax problems, will work with the IRS, hire reputable representation, and attempt to resolve the problems. While it’s possible that Mr. Arnold did this (the news story isn’t clear on that), he did one thing that was sure to cause grief if discovered. He used an entity he created in Panama to purchase a $78,000 SUV in Oklahoma.

Let’s see how bad this is. Offshore companies, assets moved offshore, hiding assets from the IRS…well, I think you get the idea. Mr. Arnold pleaded guilty last week to the charge of concealing property upon which levy was authorized for the purpose of evading or defeating the assessment or collection of federal taxes. He’ll be sentenced later this year and could get three years at ClubFed.

If you get into tax trouble realize that taking money you’ve moved offshore and purchasing luxury items is a good way of getting in deep trouble.

Posted in Tax Evasion | Comments Off on Another Don’t Try This at Home Story