The Supreme Court heard arguments in Kentucky Department of Revenue v. Davis today. The Scotusblog has a good discussion of the arguments that were made today.
The case, as I’ve mentioned before, is on whether or not states can favor their own municipal bonds and grant them tax-exempt status while not granting tax-exempt status for out-of-state municipal bonds.
A decision will likely not be announced until early in 2008.
Robert Beale is the former CEO of a computer parts company. He believed that God, the US Constitution, and ‘tyrannical political societies’ were good reasons not to pay taxes. Tax authorities begged to differ, and alleged that he hid his salary from taxes by calling himself a “consultant.” He was arrested on five counts of tax evasion (allegedly evading taxes on $5.6 million) and one count of conspiracy to defraud the United States. He was released on bail with a trial date set in Minneapolis for August 2006. The trial, though, didn’t occur because of a difficulty: The accused didn’t show up. When that happened he became a fugitive.
The US Marshal’s Service tracked him down in Orlando, Florida. Mr. Beale was carrying a false passport and other phony identification. He’s had one count of failure to appear for his trial added to the list of charges he faces. He’ll have a bail hearing soon, though I suspect that the chance that he gets bail is zero. Eventually, he’ll find his way back to Minneapolis for trial. An associate has already been tried an sentenced to 43 months at ClubFed for tax evasion and aiding and abetting Mr. Beale; Mr. Beale is likely looking at a lengthy stay at ClubFed if convicted on the charges.
News Story: MSNBC
Two similar cases made the news on Wednesday; two government officials involved in tax trouble because of other crimes they are alleged to have committed.
First, from Huntsville, Alabama, a former director at the Redstone Arsenal is accused of taking kickbacks and has been charged with fraud, bribery, and tax evasion. Michael Cantrell is charged with taking $1.6 million in kickbacks according to US Attorney Alice Martin. “Cantrell corrupted his leadership position by taking $1.6 million in kickbacks to allow certain contractors to perpetrate a massive procurement fraud scheme,” according to Ms. Martin.
According to the AP report, Ms. Martin has said that Mr. Cantrell is cooperating with the investigation and that further arrests are expected. Mr. Cantrell faces one count of conspiracy to commit bribery, two counts of bribery and one count of personal income tax evasion. He faces up to 40 years at ClubFed plus fines and possible disgorgement of kickback proceeds.
Meanwhile, from Madison, Wisconsin comes the story of former Overture Center Director Robert D’Angelo. Mr. D’Angelo is accused of 15 charges of mail fraud, 15 charges of wire fraud, four charges of money laundering, and four charges of tax fraud. Trial has been set for February.
Mr. D’Angelo ran two side businesses while heading the Overture Center for the City of Madison. He allegedly ran the side businesses out of city offices (which would violate city policies), and allegedly ordered city employees to help him with his businesses. Additionally, he allegedly used the city’s telecommunications equipment in his businesses, and allegedly had city employees send emails and faxes for his side businesses.
Adding potential insult to injury, Mr. D’Angelo also allegedly didn’t report any of the income from his side businesses on his tax return (which would be tax fraud, if proven). Needless to say, he’s looking at a lengthy stay at ClubFed if he’s found guilty.
Here in Orange County we have our own fraud/kickback case making news. Sheriff Mike Carona has been accused of taking bribes and allegedly intimidating witnesses. No tax charges, though…at least for now.
In partnership with committed adult volunteers, girls develop qualities that will serve them all their lives, like leadership, strong values, social conscience, and conviction about their own potential and self-worth.
That’s straight from the website of the Girl Scouts of the USA, and there’s one former adult volunteer who will likely indeed be committed…to ClubFed.
Holly Barnes of Pace, Florida decided to commit tax fraud and claim some false tax refunds from the IRS. She needed some identities, and chose girls in her Girl Scout troop. She had them sign false medical release statements (which had a place for their social security numbers), and she had all she needed.
So she went on her Bozo scheme, and received $87,000 in tax refunds from the IRS. She continued to file false refund claims even after she was under investigation. Even being charged with 15 counts of identity theft and 19 counts of tax fraud didn’t stop her from trying to cash a check two days before her original hearing date! And shoplifting at the local Navy Exchange. That’s hubris, stupidity, or both.
Wednesday, Ms. Barnes pleaded guilty to all counts in a Pensacola, Florida courtroom. She asked to be released for a couple of days, but the judge had other ideas. “You received the benefit of the court’s trust with the understanding that you would not violate the law,” Judge Casey Rodgers told her. “It’s unfathomable to me … that what [the Assistant US Attorney] has represented to the court might have taken place.”
Assistant US Attorney Stephen Preisser told the Pensacola News-Journal “The long and short of it is Miss Barnes has violated the conditions of her release.” She also pleaded guilty to a new felony theft charge for shoplifting merchandise from the local Navy Exchange.
Ms. Barnes will be held until her sentencing in January. She faces up to 230 years at ClubFed.
News Stories: Pensacola News-Journal, Emerald Coast.com
How would you like to do business in a state where taxes are going up, yet your customers are leaving? And not only are tax rates rising, the state has implemented a tax on services. Welcome to Michigan.
Michigan’s new budget has a myriad of tax increases. As I earlier reported, the state income tax increased from 3.9% to 4.35% and the sales tax will now be imposed on services—that’s a 6% tax, plus the cost in time and money for businesses to comply with the tax.
The taxes were implemented to balance Michigan’s budget. Apparently the legislature in Michigan (and the state’s governor) haven’t heard about the Laffer curve. When tax rates decrease, tax revenues tend to increase.
Meanwhile, business owners in Michigan are fuming. The Detroit Free Press is reporting that Michigan business owners have begun collecting signatures to have a vote on repealing the new sales tax next November. Oakland (Michigan) County Executive L. Brooks Patterson told the Free Press, “The governor is not in a position to dictate. She’s not entitled to revenue neutrality. Spending is going up. They don’t need that much money here.”
Unfortunately, most state legislatures don’t believe in cutting spending to balance the budget. Sometimes it takes the people to remind the legislature who they serve. Perhaps Michigan residents will awaken. After all, it’s supposed to be government by the people, of the people, and for the people, not for the bureaucrats.
Food and food ingredients are defined as substances that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value.
So reads the Iowa Department of Revenue’s policy on what is food. Why is this important? Because the Iowa Department of Revenue decided (apparently in 2006) that pumpkins are mainly sold for decoration, and that sales tax should apply on those pumpkins sold for decoration but not on those sold for food.
I can just imagine a conversation at a supermarket in Des Moines. “Mrs. Smith, are you buying that pumpkin to eat or for decorating your front porch on Halloween?”
And what would the Iowa Department of Revenue think about someone who bought a pumpkin for both decorating and for food? Tax only half the pumpkin?
Yesterday, stories about the tax began circulating on the Internet and mass media (Google News showed 287 stories on the topic).
Luckily, some sanity has hit Iowa. Governor Chet Culver announced, “It has come to my attention that a policy change made in December of 2006 – before I took office – is resulting in this ridiculous pumpkin tax. I have directed the Department of Revenue to do the common-sense thing and suspend collection of this tax and offer refunds to consumers or retailers who have been affected.”
If you’ve ever tried for a government contract, you know that there’s plenty of paperwork involved. For example, you have to disclose any past fraud convictions. If you don’t, you could find yourself facing even more problems.
That’s allegedly what Richard Hudec, Jr. of Naples, Florida did. Back in 2001 he was released from prison after serving time for bank fraud, mail fraud and aiding and abetting. He was also facing civil judgments from New Jersey, the IRS, and various companies that he had allegedly defrauded.
Now, if you’ve been convicted of fraud, and you’ve even served time at ClubFed, you know that disclosing that on your paperwork might negatively impact your chances of getting a government contract. And what government contract was Mr. Hudec attempting to get? His wife purchased Holiday International Security, Inc., and changed the name to USProtect. USProtect apparently got some government contracts as the company provided security at 120 federal installations through a GSA (General Services Administration) contract.
How did USProtect get the contracts? Well, one method that they allegedly used was bribery. The former owner, Michael Holiday, pleaded guilty to bribery and tax evasion. Mr. Holiday used bribes to a former GSA official to secure contracts in California and Maryland.
Indeed, Dessie Nelson of Oakland, California has been charged with receiving over $100,000 in bribes and a cruise from Mr. Holiday. And tax evasion for not declaring the income from the bribes.
As for Mr. Hudec, he’s been charged with concealing material information and tax evasion. He allegedly did not report over $500,000 of income from USProtect that he received on his 2002 tax return.
There are some things it’s just impossible to do. One of those is to sign a tax return when you’re dead. Of course, the Tax Code allows for a deceased individual’s final return. The individual who signs the return is usually the spouse or the Executor/Administrator of the Estate, and that individual signs noting their authority.
But what if you have no authority, and get the not-so-brilliant idea of filing tax refunds for some individuals who won’t complain? After all, if they’re dead they’re not going to call the IRS. Unfortunately, someone else might just prepare that return…like the actual former spouse. Or worse, the taxpayer might have died in a previous year. And even the IRS might wonder why a dead man filed a tax return.
Well, someone actually did just what I described. Candy Atohi, formerly of Linwood, New Jersey, decided to file 28 tax returns claiming refunds for individuals who were dead. She also filed a tax refund for herself that was wrong and another phony refund claim for her sister. All told, she sought over $100,000 in refunds that she wasn’t entitled to.
Ms. Atohi pleaded guilty last week to one count of of making a false claim for a refund and one count of knowingly transferring without legal authority the identity of a deceased individual. She’ll likely spend some time with the people who reside at ClubFed and have to make restitution.
This is one scheme that was truly Bozo, and Ms. Atohi is a likely nominee for our 2007 Tax Offender of the Year.
Various tax agencies are giving relief to individuals, businesses, and organizations impacted by the brush fires in Southern California.
The IRS announced today that they will extend various deadlines for taxpayers impacted by the disaster:
Taxpayers in the Presidential Disaster Area –– consisting of Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura counties –– will have until Jan. 31, 2008, to file returns, pay taxes and perform other time-sensitive acts.
The extended deadline applies to items due on or after Oct. 21, 2007, when the fires began, and on or before Jan. 31, 2008. This includes the federal withholding tax return, Form 941, normally due Oct. 31, and the estimated tax payment for the fourth quarter, normally due Jan. 15.
In addition, the IRS is waiving the failure to deposit penalty for employment and excise deposits due on or after Oct. 21, 2007, and on or before Nov. 5, 2007, as long as the deposits are made by Nov. 5, 2007.
The Franchise Tax Board is letting impacted taxpayers obtain free copies of their tax returns.
“If taxpayers impacted by the fires need copies of state tax returns to replace lost or damaged ones, they should complete Form FTB 3516, Request for Copy of Tax Return. Print “Southern California Wildfires 2007” in red at the top of the request. Disaster victims receive free copies of tax returns.”
The FTB may issue other relief at a later date.
Any client impacted by the disaster should contact us when they have a chance. You may be eligible for a Casualty Loss deduction. The casualty loss can be taken by either amending your 2006 return or by taking it as part of your 2007 return. Which is right will depend on your tax situation.
And let me end this post with a heartfelt thanks to the firefighters and other emergency personnel who battled the fires. The Santiago fire burned just a few miles north of my home and office. Today, I drove to Foothill Ranch along the 241 Toll Road. The fire burned to the toll road…and even burned a little brush on the south side of the highway. A grove of avocado trees was damaged. The fire burned the hills all around the community of Foothill Ranch. Yet the homes and businesses of Foothill Ranch appeared to have escaped damage.
Back in March, I ran a post titled, “Be Afraid. Be Very Afraid.” I asked the question, “Did anyone really believe that with a Congress controlled by Democrats we would be looking at lowered spending and/or a decrease in taxes?”
The answer has been clear from day 1, and it came more into focus today. Representative Charlie Rangel (D-NY), chairman of the House Ways & Means Committee, proposed sweeping tax legislation today. The legislation, which has no chance of being enacted into law in its current form (see below), would:
– Lower the top corporate tax rate from 35.0% to 30.5%;
– Eliminate LIFO (last-in, first-out) accounting for inventory;
– Defer deductions of foreign subsidiaries of corporations until funds are repatriated into the U.S.;
– Eliminate the Alternative Minimum Tax (AMT) after 2007;
– Add a 4% surtax on incomes above $150,000 (single)/$200,000 married filing jointly (MFJ);
– Add an additional 0.6% surtax on incomes above $500,000;
– Increase the Earned Income Credit, and the Child Tax Credit; and
– Have a one-year patch for the AMT.
The devil is in the details, of course, and I haven’t seen them. And since except for the last part of the bill (the one-year patch), this bill will not be signed into law in this legislative term (the term ending in 2008), it just gives a flavor of what might be if we have a Democrat in the White House in 2009.
Why am I harping on this? Because of what’s not mentioned in this legislation. Many of the Bush tax cuts will expire (beginning in 2009). Ask your legislators whether they will vote to extend them. The legislation introduced today implies that they’re dead (at least in the view of Congressman Rangel). We’re looking at a $200 Billion stealth tax increase!
Much of this legislation seems good to me. For example, I’m all for simplifying the Tax Code. However, a major issue—one which Democrats seem to ignore—is that if you increase the tax rate, the tax collected tends to decrease (the Laffer curve). This is definitely the case when this occurs on the wealthy. Indeed, because of the prevalence of S-Corporations and LLCs, much of the income of the “wealthy” is actually business income. If taxes increase on business income, business owners have far less incentive to innovate and provide additional jobs.
One day the American people will realize that a simple flat tax system is the way to go. Until then, be afraid.
Link to New York Times article here
