The Trial Begins

Posted on January 16, 2008 by Russ

Opening arguments were heard in Ocala, Florida in the trial of Wesley Snipes. Prosecutors called Snipes a tax evader, and that he didn’t pay $35 million in taxes from 1999-2004 according to this Fox News story. Prosecutor Robert O’Neill told the jury, “The defendants Snipes, Kahn and Rosile willfully agreed to defraud the United States of revenue it was due.”

But that’s not how the defense views it. Robert Bernhoft, one of Snipes’ attorneys, said that Snipes was willing to pay his back taxes once he heard from the IRS. Another of Snipes’ attorneys, Daniel Meachum, said that Snipes had been duped by bad financial advisers.

Ah yes, Mr. Meachum. He’s the attorney that Snipes axed for “poor representation” last year. As Joe Kristan noted, he reappeared on Tuesday:

“So who shows up at his lawyer’s table yesterday but Daniel Meachum? From the A.P. report:

“‘…Snipes now has two choices: keep Meachum off the case or waive his previous claims of ineffective counsel. Waiving the claim might prove to be a problem if Snipes were convicted, since that could provide fertile ground for a possible appeal.’

“…It makes it look as though the prior ‘firing’ may have been just a cynical delaying tactic.”

I guess the defense chose waiving the claim, as Mr. Meachum was present today. In any case, tomorrow brings the first evidence and testimony in the case. Who knows, maybe Mr. Meachum will be asked to disappear again?

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Proposition 93: Term Limits

Posted on January 15, 2008 by Russ

Proposition 93 on California’s February 5th ballot would change the current term limits structure. While it would lessen the overall amount of time a politician could stay in office, it would lengthen the amount of time one could spend in either the State Assembly or State Senate. The proposal was orchestrated the current Speaker of the Assembly and the current President Pro Tem of the State Senate.

Guess what—unless this measure passes they’ll be termed out of office at year-end. The current dysfunctional nature of Sacramento (and how much the current leadership in Sacramento has caused that to happen) will definitely impact how I will vote on this measure. Make up your own minds and vote on February 5th.

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Snipes: Day 1

Posted on January 14, 2008 by Russ

Day 1 of the Wesley Snipes trial has come and gone in Ocala, Florida. Jury selection began but did not conclude today.

The day began for Mr. Snipes in a prayer service. At an Ocala church Mr. Snipes was joined by 22 pastors and 150 friends before the trial began at 9:30 a.m. local time. Mr. Snipes is accused of making a false income tax return and not filing his tax returns for several years.

Then jury selection began. Judge William Terrell Hodges first read off a list of prosecution witnesses: accountants, investigators, and the like. Jurors are always asked if they know a witness (the goal is an unbiased jury). Then the attorneys for Mr. Snipes read off their witness list. Tax experts, they weren’t: movie director Spike Lee, actor Woody Harrelson, actress Goldie Hawn, newscasters Tom Brokaw, Barbara Walters, and Diane Sawyer, and former boxer Muhammad Ali.

Though jury selection was supposed to finish on Monday it hadn’t when court adjourned for the day. Jury selection will likely conclude on Tuesday; opening arguments will also likely be heard then.

Finally, thesmokinggun has a contribution today. They present a convenient chart showing his income and at what level you have to pay taxes. The second through fourth pages show some sort of legal document Mr. Snipes filed in Orange County, Florida (Orlando). I can’t figure it out, and neither could thesmokinggun.

The defense estimates that the trial will last about a month. It should be interesting….

News Stories: AP, Orlando Sentinel

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IRS Releases a Not-So Frivolous Announcement

Posted on January 14, 2008 by Russ

Every year the IRS releases a list of positions that will be considered frivolous under Section 6702 of the Internal Revenue Code. Today, the IRS issued Notice 2008-14. There are some new positions that will be considered frivolous:

  • (9)g. The Ninth Amendment exempts those with religious or other objections to military spending from paying taxes to the extent the taxes will be used for military spending.
  • (11) Only fiduciaries are taxpayers, or only persons with a fiduciary relationship to the United States are obligated to pay taxes, and the United States or the Service must prove the fiduciary status or relationship.
  • (14) A taxpayer who is employed on board a ship that provides meals at no cost to the taxpayer as part of the employment may claim a so-called “Mariner’s Tax Deduction” (or the like) allowing the taxpayer to deduct from gross income the cost of the meals as an employee business expense.
  • (25) A taxpayer may claim the section 6421 fuels tax credit, which is limited to gasoline used in an off-highway business use, even though the taxpayer did not purchase and use gasoline during the taxable period for which the credit is claimed for an off-highway business use. Also, if the taxpayer claims an amount of credit that is so disproportionately excessive to any (including zero) business income reported on the taxpayer’s income tax return as to be patently unallowable (e.g., a credit that is 150 percent of business income reported on Form 1040) or facially reflects an impossible quantity of gasoline given the business use, if any, as reported by the taxpayer.

The penalty for filing a frivolous return is $5,000. As a reminder, the IRS notes,

“Returns or submissions that contain positions not listed above, which on their face have no basis for validity in existing law, or which have been deemed frivolous in a published opinion of the United States Tax Court or other court of competent jurisdiction, may be determined to reflect a desire to delay or impede the administration of Federal tax laws and thereby subject to the $5,000 penalty.”

There are 43 positions listed in the notice; I only copied the “new” positions for the 2007 tax filing season. As I’ve said repeatedly, there is an income tax and you must pay it or suffer the consequences.

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It Begins

Posted on January 14, 2008 by Russ

Wesley Snipes goes on trial today, facing charges of tax evasion, failing to file tax returns, and filing a false claim for an income tax refund. The TaxProf Blog has a post with links to the various media coverage of the trial; Joe Kristan also has a report on Snipes’ use of the 861 defense (and its likely failure).

As there are developments I’ll continue to post on United States v. Snipes.

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A Typo on Schedule CA

Posted on January 13, 2008 by Russ

There’s a typographical error on Schedule CA for Form 540. This is the form used by Californians to adjust their income and deductions from their federal tax returns to California’s.

The form mailed to California residents has an incorrect reference on side 2, line 38:

Line 38 currently reads:

38. Federal itemized deductions. Add the amounts on federal Schedule A (Form1040), lines 4, 9, 13, 19, 20, 27, and 28.

Line 38 should read:

38. Federal itemized deductions. Add the amounts on federal Schedule A (Form1040), lines 4, 9, 15, 19, 20, 27, and 28.

The instructions on page 56 of the Resident Booklet for Schedule CA (540) contain the correct line number reference.

Note that the online version of the form is correct (as are all other versions). The software that I use calculates the value on line 38 correctly.

News Story Here

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Trash, Paper, Taxes, and the Mob

Posted on January 13, 2008 by Russ

Last week Ronald Lupica was sentenced to 15 months at ClubFed plus restitution for defrauding ARC, a Connecticut trash company, and not reporting the $1.4 million he and a confederate stole on their tax returns. Besides the $1.4 million owed to ARC, another $249,111 (plus interest) must be paid to the IRS. Just a simple case of fraud and tax evasion, right?

Not exactly. The article in the Connecticut Post notes that ARC’s owner, James Galante, is under indictment on federal racketeering charges. Mr. Galante allegedly got his funding from the Genovese crime family (aka the Mob).

And this all comes from the most benign of ideas: recycling paper. Sometimes good ideas lead to bad results.

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Maryland Tax Increases Are a Go

Posted on January 11, 2008 by Russ

Yesterday, Judge Thomas F. Stansfield dismissed the lawsuit challenging Maryland’s $2 billion tax increase. “Although the Court is inclined to agree with the Plaintiffs regarding the reprehensible nature in which the Legislature conducted itself, the remedy they seek in redress is too drastic a notion to accept,” the judge said.

The five Republican lawmakers and the Carroll County (MD) businessman who brought the suit will decide today whether or not to appeal the decision.

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Ex-GSA Official in Holiday Case Pleads Guilty

Posted on January 10, 2008 by Russ

Dessie Nelson, the ex-GSA official who sent various contracts (illegally) to Michael Holiday (after receiving bribes) pleaded guilty to accepting bribes and tax evasion.

Mr. Holiday and other contractors forwarded over $100,000 in bribes of cash, vacations, and other items to Ms. Nelson. She then recommended Holiday’s company for lucrative government contracts.

Ms. Nelson will be sentenced in June. Mr. Holiday will be sentenced on January 23rd.

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Freedom and Privacy Through ClubFed

Posted on January 10, 2008 by Russ

AP reports that four individuals who promoted an alleged tax evasion program were arrested. The Department of Justice alleges that the four, Joseph Oquendo Saladino, Richard Allen Fuselier, Marcel Roy Bendshadler, and Michael Sean Mungovan (A.K.A. “Cajun Mike”) sold a program that cost the Treasury $7.5 million in tax losses. Their programs were offered through the “Freedom and Privacy Committee.”

While the US Attorney’s office in Portland, Oregon didn’t identify the specific programs (AP noted, “No details about the program were available, but federal prosecutors said it was not computer software.”), it’s easy to find out. Just go to their still operating website (but probably not for long), and click on “products/services,” and you see this page. Here’s some of the snake oil products they offered:

– For just $4,595 you can buy “Common Law Court Litigation.” As that webpage shows, you get to litigate in a “common law court.” Hey, they’ve gotten stays of actions (but I don’t see information as to how permanent and long-lasting those stays were). I wonder if the four arrested individuals will petition to have their cases heard in the “common law court” rather than the US District Court. (Hint: There is no such thing as a “common law court.”) Remember, they “…will report more as we continue to litigate and as we complete litigation in the Supreme Court of the United States.” I wouldn’t hold your breath.

– For just $1,095 you can buy the “Affidavit/Statement Program.” As they note on this web page, “United States law, at 26 U.S.C. Section 6011(a)i, allows you to file a Return or a Statement….” They’re correct. But you do have to have your forms compliant….At least this page notes, “FPC urges all its members to pay all taxes and to file all returns as required by United States law.” Oh, I almost forgot to mention that besides the $1,095 you have to pay them 25% of any refund you receive over $1,000.

I think you get the idea. There’s also a church program, an LLC program, and “Criminal Litigation Assistance.” I know four individuals who need that right now.

If you’re interested in these programs, I wouldn’t wait around. They’re not likely to be available for much longer. (I assume the US Attorney will ask for the website to be shut down and/or have a large disclaimer posted on it.)

Seriously, it’s amazing that “more than 1000 returns” were prepared using the Freedom and Privacy Committee’s products. But I guess people will do almost anything to avoid taxes except working with reputable tax preparers. As for the five accused (one is still at large), they’re looking at very lengthy stays at ClubFed if convicted of Conspiracy to Defraud the United States.

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