He Fought The IRS, and the IRS Won

Posted on August 23, 2009 by Russ

I really wanted to title this piece He Fought the Law, and the Law Won, but that just wouldn’t be true. Wiley Kuyrkendall doesn’t believe that the IRS can collect income taxes. I’ve gone over such tax protester arguments in the past, but they really don’t bear much thought; they’re as phony as three dollar bills.

But Mr. Kuyrkendall decided to go one step further. He sued the IRS for $1.1 Billion alleging that Congress didn’t have the authority to impose an income tax, and the IRS couldn’t collect a tax. Back in January 2006 his lawsuit was dismissed with prejudice—the judicial equivalent of “You’re not just wrong, you’re dead wrong.”

Mr. Kuyrkendall perhaps should have kept in the shadows. Since he didn’t believe in the income tax he didn’t file tax returns. Did I mention he earned $800,000 from 2002 through 2005? And that once he filed his lawsuit someone at the IRS was bound to look for his non-existent tax returns?

Mr. Kuyrkendall was found guilty in Jackson, Mississippi last week of not filing tax returns. He’ll likely get to visit ClubFed…and have to pay his back taxes.

Posted in Tax Evasion | Comments Off on He Fought The IRS, and the IRS Won

Moving Your Cash Receipts to an ATM Won’t Strip Away the Income

Posted on August 21, 2009 by Russ

Unless Congress exempts income, it’s taxable. Cash income is just as taxable as checks or credit cards. As I reported last December, one enterprising Minnesota strip club owner didn’t think that was the case. He was wrong.

As Joe Kristan noted, Larry Kladek stocked the ATM in his club with his cash receipts. All went well until the IRS found out. He pleaded guilty last year to tax evasion; he was just sentenced to 20 months at ClubFed.

Posted in Tax Evasion | Comments Off on Moving Your Cash Receipts to an ATM Won’t Strip Away the Income

When a Fee Is a Tax

Posted on August 21, 2009 by Russ

San Diego has had budget problems for many years. One step that San Diego used to balance its budget was ruled an illegal tax this pat week by a court.

San Diego charges a collection fee on its business tax. The city says its to cover mailing and handling costs. Fees don’t need approval by voters; taxes do. Two landlords filed a lawsuit claiming the fee was an illegal tax (the fee was never approved by San Diego voters).

The Court agreed with the landlords, noting:

Whereas before the enactment of the Resolution a portion of the Business Tax proceeds were necessarily expended on the cost of administering the Business Tax program and collecting the tax, the imposition of the levy raised funds to pay for those costs, thereby permitting all of the Business Tax proceeds to be deposited in the general fund for expenditure on any and all governmental purposes. Thus, in practical effect, the levy is an increase in the Business Tax and therefore an increase in a general tax.

The Tax Foundation filed an amicus curiae brief on the case, and they were pleased with the ruling.

“San Diego wanted more revenue. Rather than just going to voters, they chose to play this definitions game,” said Joseph Henchman, tax counsel for the Tax Foundation in Washington, D.C., which filed a brief in support of getting rid of the fee. “To us, it’s such an obvious issue of trying to mislabel something that is clearly a tax.”

Posted in California | Comments Off on When a Fee Is a Tax

Perhaps It Was The 300 Million Witnesses….

Posted on August 21, 2009 by Russ

Joe Kristan (Roth Tax Updates) brought news of my favorite tax evader, Richard Hatch, to my attention. It seems that Mr. Hatch believes the only reason he was imprisoned was that he was gay.

Well, I beg to differ. When 300 million witnesses get to see you win $1 million and you decide not to pay taxes on it, bad things will happen. Add in evading tax on $300,000 of income from a radio broadcast, and you have a recipe for ClubFed. And to top that off, at trial evidence comes out that he filed a tax return that his accountant told him not to file.

Even Perry Mason couldn’t have gotten Hatch off.

Posted in Tax Fraud | Tagged | Comments Off on Perhaps It Was The 300 Million Witnesses….

The Next California Bomb: Pensions

Posted on August 20, 2009 by Russ

From Mish comes a report of problems with pensions in California. This isn’t a surprise; our liberal state legislature increased pension benefits when times were good. Unfortunately, things aren’t so good today.

“I don’t want to sugarcoat anything,” Ron Seeling, the CalPERS chief actuary said as he neared the end of his comments. “We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) … unsustainable pension costs. We’ve got to find some other solutions.”

There’s really no choice: Benefits will need to decline in some manner or every government body will be declaring bankruptcy. This is a disaster that’s definitely going to rear its ugly head in coming years.

Posted in California | Comments Off on The Next California Bomb: Pensions

Getting a Bang for the Buck

Posted on August 17, 2009 by Russ

I’m not a fan of earmarks, but it’s how Washington works (unfortunately). Taxpayers for Common Sense and opensecrets.org have provided a list of earmarks out of this Congress.

For those who lobby, some got lots for their bucks. The University of Alabama spent $360,000 but received $40.55 million. That money will be used for two projects: $30 million for an interdisciplinary science and engineering teaching and research corridor and $10.55 million for weather research in the Gulf of Mexico.

Mississippi State University, the University of Mississippi, and the University of Mississippi Medical Center cleaned up. Together, they spent $440,000 in lobbying but they got back nearly $36 million.

Loma Linda University Medical Center was the biggest California winner. They spent $255,000 but did get back $2.8 million to be used in their space radiation health research program.

There were some losers. Texas A&M University spent a whopping $770,000 but only got back $500,000 in earmarks; Texas Tech spent $565,000 but they too received only $500,000 in earmarks. The Nature Conservancy, though, was the biggest loser. The non-profit spent $1.31 million but only received $445,000 in earmarks.

One day, hopefully in the near future, we will see all earmarks vanish. I can always dream.

Posted in Legislation | Comments Off on Getting a Bang for the Buck

Death of Global Prosperity

Posted on August 16, 2009 by Russ

No, I’m not implying by the title of this post that we won’t return to good economic times. Rather, I’m commenting on the death of an outrageous tax fraud scheme.

Back in November 2007 I wrote about the conviction of Global Prosperity co-founder David Struckman. The Global Prosperity scheme was simple. Just return your social security cards to the government, and you won’t have to pay taxes; the 16th Amendment was never ratified; and the IRS can’t collect taxes in any of the fifty states (only in U.S. territories and possessions). Amazingly, 44,000 individuals fell for this bunch of hogwash.

All of the above is, of course, as phony as a $3 bill. If you are ever told any of these “truths” turn the other way—fast. Dan Evans’ Tax Protester FAQ is an excellent source on these bogus arguments.

In any case, another co-founder of Global Prosperity, Daniel Andersen, is nearing the completion of his two-year term at ClubFed. The Justice Department asked and received an injunction against Mr. Andersen from promoting any fraudulent tax schemes.

As usual, if it sounds too good to be true it probably is. Global Prosperity’s schemes were just that.

Posted in Tax Fraud | Comments Off on Death of Global Prosperity

Fake Employers Leads to Real Prison

Posted on August 16, 2009 by Russ

I try to save my clients money on their tax returns by finding legitimate deductions that they’re entitled to. Unfortunately, not everyone in my profession cares about legitimate.

I wrote about Anthony Pendleton last February. Mr. Pendleton’s clients did get refunds. However, Mr. Pendleton’s methods were out of the Bozo tax professional’s guide: imaginary employers, phony W-2s, and fake educational expenses. Mr. Pendleton, who was a former IRS employee, should have realized his scheme was doomed from the start.

Mr. Pendleton was tried in Los Angeles and he was found guilty of conspiracy to defraud the United States through the filing of the false tax returns. He’ll almost certainly find his way to a real ClubFed facility when he’s sentenced in November.

Posted in Tax Fraud | Comments Off on Fake Employers Leads to Real Prison

A Golden Evasion

Posted on August 16, 2009 by Russ

You are allowed to pay your employees in cash. But if you do that you still must withhold (and pay) your Trust Fund (payroll) taxes.

One enterprising individual came up with the idea of paying employees in gold and silver coins. If those individuals are employees, you still have to withhold taxes. But what if you claim they’re independent contractors; after all, there is no withholding on contractors. That’s fair game, but you better make sure they really are independent contractors and not employees.

It gets messier when it turns out the individuals paid in coins almost all immediately converted them to cash. And all were independent contractors, including individuals who were working for companies that were payroll clients of our enterprising individual. And somehow the conversion process is what exempted the wages from withholding.

If you can’t understand how that’s legal, I understand. It sounds to me like fraud and a bunch of sham transactions.

Robert Kahre came up with this plan. It worked well for a while. Unfortunately, the government discovered this and charged Mr. Kahre with 57 counts of tax evasion, real estate fraud, and failure to withhold taxes from employees; he was found guilty by a Las Vegas jury on Friday. (Three other individuals were found guilty of related crimes.) Mr. Kahre faces 296 years and a fine of up to $14 million. Given that the total wages involved is $120 million ($25 million to his own employees and $95 million for employees of client companies), he will almost certainly find his way to ClubFed this November when he’s sentenced.

The moral to this story is simple. If you pay your employees with checks, cash, gold, or silver, make sure the government gets its share.

Posted in Tax Evasion | Comments Off on A Golden Evasion

A Ponzi Gamble

Posted on August 16, 2009 by Russ

Jeffery Tuggle, of Lynchburg, Virginia, promised investors returns of between 30 and 40 percent. That in itself should have been a warning to investors. But it apparently wasn’t. Supposedly the money came from paying attorney’s clients their settlement monies early; the interest would be paid by the attorneys when they received their actual settlements.

Mr. Tuggle pleaded guilty last week to two counts of tax fraud, and an additional count each of wire fraud and failing to file a tax return. He’ll be spending some time in ClubFed and will probably owe a fine (which it’s unlikely he can pay).

United States Attorney Julia Dudley noted, “Mr. Tuggle used trust and the promise of high returns to steal money from hard-working, innocent people. He did all this so he could gamble. He gambled away the savings of his victims. He gambled away their futures and the futures of their children.”

One of my favorite sayings is that if it sounds too good to be true it probably is. Mr. Tuggle’s “Advanced Fee Investment Opportunity” was really a Ponzi scheme. Somehow 19 very gullible individuals lost over $400,000. If you are offered such a wonderful investment opportunity, run, don’t walk, in the other direction.

Posted in Tax Fraud | Comments Off on A Ponzi Gamble