War Tax Proposal DOA

Posted on October 4, 2007 by Russ

Three Congressmen proposed on Monday a war surtax—a measure that would increase income tax rates from between 2% and 15% (the top tax bracket would become 50% if enacted). The move is a publicity stunt that has no chance of passage.

Even Speaker Nancy Pelosi (D-CA) is against the measure. In an election year, raising taxes is a sure way to raise your opponents’ vote totals. Democrats David R. Obey of Wisconsin, John P. Murtha of Pennsylvania and Jim McGovern of Massachusetts are very much in the anti-war section of the Democratic party, and would like to bring all the troops home immediately.

Along with Charlie Rangel’s proposals to increase taxes, measure like this will do much to help the Republicans in 2008. Don’t expect anything like this to become law until a Democrat is in the White House.

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Evade, and then Skip Out

Posted on October 4, 2007 by Russ

Karen and Charles Petersen of Nowthen, Minnesota were indicted back in 2005 for tax evasion. The government alleged that they hid their income in a trust, and then used the trust to pay personal and business expenses. After they were convicted in March 2006, the couple decided to evade the sentence by becoming fugitives.

That worked for a while, but US Marshals caught the couple in December. Yesterday, Karen Petersen found out her sentence (her husband passed away before sentencing): 15 months, restitution of $181,500 in tax (plus penalties and interest), and a $7,500 fine.

When you become a fugitive, judges tend to be quite strict when sentencing. Ms. Petersen may have had a few months extra of freedom, but she paid with a tougher sentence.

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Bozo Fraud Gets Real Jail Time

Posted on October 4, 2007 by Russ

I must admit that I laughed when I read this story. From Canton, Georgia comes the tale of Larry Black. Mr. Black decided to set up a booth at a check-cashing store in suburban Atlanta. He said he was a CPA. He then took the personal information he obtained, and filed phony tax returns where he got most of the refunds, and his clients got small amounts.

What was his take? A measly $46,000. Oh, and 15 months at ClubFed, plus likely restitution to the US Treasury. It hardly seems worthwhile….

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Dallas City Hall Scandal Features Tax Evasion

Posted on October 1, 2007 by Russ

A 166-page indictment was unsealed today in Dallas charging 16 individuals with bribery, receiving kickbacks, and tax evasion. The individuals, including State Representative Terri Hodge (D-Dallas), former Mayor Pro-Tem Donald Hill, and others face long terms at ClubFed if convicted on all counts.

The investigation, according to this report in the Dallas Morning-News, began 27 months ago when Mr. Hill’s then City Hall office was raided by federal agents. US Attorney Richard Roper described the scheme as a “complex bribery and extortion scheme.”

Mr. Hill told the Morning-News that he, and the others, are innocent. “We’re not guilt of any of the things alleged here…We’re just going to prepare for the fight.”

The tax charges are listed in counts . Mr. Hill is accused of not timely filing tax returns from 2001-2004, and failing to file in 2005 & 2006. His evasion allegedly totals over $200,000. Darren Reagan is accused of evading over $100,000 in taxes. (The more serious charges are the bribery, extortion, and fraud charges.)

All-in-all, the Dallas political scene received a jolt today. It will be interesting to see what comes of this.

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Michigan: Jobs Leave, Taxes Rise

Posted on October 1, 2007 by Russ

When an economy is having problems and jobs are leaving your state, the normal thing to do is to help businesses. Michigan has other ideas.

The Detroit Free Press’ headline screams, “Chaos averted with deal to raise income tax, add tax to services.” What does that mean for residents of Michigan?

Directly, your state income tax rate has just increased from 3.9% to 4.35%. Additionally, services will now be subject to the 6% state sales tax.

Indirectly, Michigan has just become an even less competitive state for businesses. Why would anyone in their right mind locate a business in the state where the only sure thing is big government?

“Chaos” may have been averted, but the people of Michigan will be long-term losers because of this budget. Interestingly (but not surprisingly), all but one of the Democrats in Michigan’s state senate voted for the tax increase, and all but three Republicans voted against it.

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Unaccountable Business Services?

Posted on October 1, 2007 by Russ

Another alleged bozo tax preparation firm has apparently been put out of business. From Gilbert, Arizona (suburban Phoenix) come the story of Accountable Business Services.

If you’ve read this blog before, and have noted the tale of Western Tax Service, this may look familiar. Accountable Business Services prepared tax returns and appeared to have a good business; the firm prepared somewhere between 5,000 and 7,000 returns annually according to news reports. The firm allegedly got most of its business through referrals; clients noted that they allegedly received large refunds and elimination of tax debt.

Sound too good to be true? The Arizona Department of Revenue and the Arizona Attorney General think it was.

They’ve charged eight individuals with fraud and forgery and allege that the firm bilked Arizona out of $10 million in taxes. The owners, Alfred and Cheryl Decker, face up to 46 1/2 years in prison if convicted on all the counts that they each face.

Meanwhile, if you happen to have been a customer of Accountable Business Services, you can expect to receive a friendly letter from the Arizona Department of Revenue. Yes, if your tax returns were wrong, you will owe the tax and interest. And as Arizona shares information with the IRS, expect a similar ‘Dear Valued Taxpayer’ letter from the IRS, too.

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Traylor Gets Probation

Posted on October 1, 2007 by Russ

Earlier this year I noted the sad tale of Robert “Tractor” Traylor, the former NBA player with Milwaukee, Cleveland, Charlotte, and New Orleans. On Friday, Traylor was sentenced to three years probation for aiding and assisting in the preparation of a false tax return.

Traylor could have received up to 14 months at ClubFed. Traylor does have to submit any untiled tax returns to the IRS within 90 days. Traylor now plays professionally in Puerto Rico.

News Story Here

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Another Bozo Tax Preparer Out of a Job

Posted on September 27, 2007 by Russ

Having had to deal with a few refugees from Western Tax Service, I’ve seen the damage that a bozo tax preparer can do. But this story is, well, ridiculous.

>From Oronogo, Missouri, comes the story of Carrie Shafer. Ms. Shafer owned her own tax service, TC’s Taxes, from her home in Oronogo. She prepared 1,475 tax returns between 2002 and 2004. There was just one major problem here: Almost all of the returns were false or fraudulent.

Like Western Tax Service, Ms. Shafer never saw a deduction she wouldn’t take for her customers, even if they didn’t have that deduction. Medical, dental, charitable, and business expense deductions were just some of her favorites. And after she was told she was under investigation she continued to prepare returns that had false deductions, and provided false information at audits! That’s either chutzpah or stupidity…or both.

Ms. Shafer pleaded guilty to 40 counts of tax fraud earlier this year. She received three years at Club Fed, and she has already been barred from preparing tax returns in the future. Her customers have already likely received “Dear Valued Taxpayer” letters from the IRS; they’ll have to pay the true amounts owed with interest. Remember, if it sounds too good to be true, it probably is.

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Put Not Your Trust

Posted on September 27, 2007 by Russ

I just finished re-reading Murder by the Book. Written in the 1950’s by Rex Stout, the Nero Wolfe novel deals with four deaths and what a certain book (“Put Not Your Trust”) has to do with them. If you’ve never read Stout, do so—he’s a wonderful author, and the books written many years ago are still eminently readable.

Coincidentally, two sham trusts crossed my email in-basket this evening. From Kenai, Alaska comes yet another dentist who allegedly decided that a sham trust was a good way to cut his taxes. Here’s the alleged scheme according to the Department of Justice.

The accused, Glenn Lockwood, formed a professional corporation. No problem so far. Then he allegedly contracted his services to an Irish company. That company allegedly leased his services to a Nevada company which, in turn, allegedly leased his services back to his own corporation. Of course, the money took a much more convoluted path, with offshore accounts, Nevada real estate development, and sham trusts supposedly thrown into the mix. The DOJ alleges that the loss to the Treasury is $575,000 for tax years 2000-2003. Mr. Lockwood will face four counts of tax evasion, and is looking at ClubFed if found guilty.

Meanwhile, in North Carolina, the DOJ has filed a civil lawsuit accusing two men of creating sham trusts to help customers evade taxes. The accused, Alexander Klosek and Bryan Noel, allegedly targeted wealthy and elderly individuals and attempted to get them to sell their homes and other major assets into sham trusts. It appears to be a pretty big alleged crime; the DOJ estimates the loss to the Treasury at $55 million. The DOJ has asked for an injunction to stop the individuals from selling any more trusts. And you can be fairly certain that a request for their customer list will soon follow so that the IRS can send a heartwarming “Dear Valued Taxpayer” letter to Klosek’s and Noel’s customers.

In the end, the best kinds of sham trusts are the ones you read about in novels. They cost you $5.95 or so for a paperback. The crimes described above, if proved, could lead to much larger penalties.

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Western Tax Service Raises Its Head…Again

Posted on September 26, 2007 by Russ

In February 2006, I wrote about the “end of the sage” for Western Tax Service. Western Tax Service, for those who don’t remember, had inventive but illegal methods for getting refunds for its’ clients: phony deductions for employee business expenses, false charitable deductions, fake deductions for tax payments, and other similar shenanigans. Back then, Samuel Joseph DeAngelo pleaded guilty to defrauding the IRS and aiding and assisting in the filing of false tax returns.

Mr. DeAngelo was finally sentenced on Monday. He received 51 months at ClubFed. Also sentenced on Monday was Erin Cordes, another tax preparer for Western; Cordes received one year of probation. Joe Shields will be sentenced in mid-October.

By the way, the total tax revenue lost to the US government in the Western Tax Service scam was $15,458,732. That’s a lot of fraud.

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