Yes, it’s time for my annual vacation. I’ll be back on August 6th; however, I’m heading out of town on August 7th for the remainder of that week on a business trip so posting will likely be light until August 13th.
If you need a fix on the California budget mess, I urge you to go to the Flash Report. They’ll keep you up to date on the budget.
If you need a tax fix, try any of the tax bloggers listed on the blogroll on the right.
I’m leaving tomorrow for a ten-day vacation. Will California’s legislature have a budget by the time I return?
Republicans in the State Senate want a balanced budget. State Senator Tom Harman (R-Huntington Beach) told the Flash Report, “Senate Republicans have placed on the table for consideration by the Democrats a plan that reduces the operating deficit to zero.” That’s what the Republicans want.
The GOP budget proposal has cuts—cuts in welfare spending, cuts in unfilled positions in state government, and cuts that do not impact education, public safety, and environmental programs.
However, the Democrats don’t like these cuts. They hit Democratic constituencies, so they oppose them. However, for any budget to pass the legislature, it must have a 2/3 vote in each house. Though the Democrats have a majority in each house, they must get Republican votes to pass a budget.
The GOP is united, and part of this stems from a silly stunt that State Senate President Pro Tem, Don Perata, did. He locked the entire State Senate in the chamber for 30 hours, figuring that by doing so he would force two Republicans (the number needed to defect to pass the budget) to join with the Democrats.
It backfired.
Meanwhile, in coming days we will see more impacts in California. I don’t know if we will see a state government shutdown (such as occurred earlier this year for a few days in Pennsylvania or last year in New Jersey). This will hurt government workers.
California does need to look at the budget and view it honestly. A balanced budget is required under the state constitution. It would be nice if our legislators in Sacramento actually obeyed the law.
As to the chance there’s a budget on August 6th (when I return), I think the odds are still even money.
Following in your father’s footsteps can be a very good thing. However, when you’re following your father into (potentially) prison for tax evasion, that’s not a good thing at all.
Let’s first talk about the father, David Pflum. The elder Mr. Pflum thought he found two very useful books, “The Great Income Tax Hoax” and “How Anyone Can Stop Paying Income Taxes.” Then the IRS got involved. They issued summonses and subpoenas, seeking records showing that Mr. Pflum earned an income and owed income tax. Mr. Pflum was indicted for not filing a federal income tax return (three counts) and not paying federal employment taxes (eight counts). He admitted in court that he didn’t file the taxes. He was found guilty on all 11 counts. He appealed, and lost. Oh, Did I mention that Mr. Pflum followed the advice of Irwin Schiff, who (like Mr. Pflum) is now residing at ClubFed? And, yes, the tax evasion involved the usual suspects—trusts set up specifically to avoid taxes. (Hint: They don’t work.)
We now turn to the son, Gregory Pflum. Mr. Pflum the younger was indicted last year. He was warned by the IRS that not paying taxes doesn’t work. Unfortunately for him, from 1998 through 2003, he didn’t pay taxes. He had the opportunity to file those returns (albeit late, with penalties and interest). Instead, when he was contacted by the IRS he gave the agents tax protester materials.
Mr. Gregory Pflum pleaded guilty to one count of attempting to evade taxes by not filing a return. Though he faces up to five years at ClubFed, he will probably receive a shorter term.
Sometimes, you shouldn’t follow your father’s advice.
We received an email regarding the post we did on Ace Tire & Parts. The owners of Ace are accused of violating federal employment laws and have each pleaded guilty to one count of tax fraud.
In any case, we were asked the following:
“just read your article. where did you get your information for bozo scheme failed? what makes you think these guys are going to club fed? what do you know about pa tax laws with regard to this case? isn’t this a rather common practice among small businessmen across the country? give me your thoughts.”
Well, as to where I got the information, it was published in multiple places, including the Pittsburgh Post-Gazette. I think they’re going to prison because of the nature of their crime. These individuals robbed what are called “Trust Fund” accounts. When I wrote, “And the DOJ and IRS really, really don’t like violators of employment tax laws.” And that’s what they did, to the tune of somewhere between $400,000 and $1,000,000.
As to whether this is a common practice, definitely not. Anyone who thinks that most small business owners steal from employment tax trust fund accounts needs to think that through. Do you really believe that most small business owners are tax cheats? Thankfully, most Americans do pay their taxes, and most business owners correctly forward the employment taxes they collect to the government.
California is still without a budget, and the battle will not end until Wednesday at the earliest. The State Senate recessed Saturday with Republicans refusing to budge.
California requires a 2/3 vote in each house of its legislature to pass the budget. While Democrats have a sizable majority, they must get some Republican votes in each house. The Assembly approved the budget with a few Republicans crossing over. However, the State Senate has not.
To date, legislative aides and state contractors have felt the biggest sting from the battle in Sacramento. However, it will likely start impacting more as the days go on. A good source for the Republican viewpoint is the Flash Report Blog.
State Senator Bob Dutton (R-San Bernardino) told the Flash Report Blog, “This budget must have a zero-deficit.” Given that the budget has a $5 Billion operational deficit, it looks like when I head on vacation next Saturday there won’t be a budget.
Please don’t try this yourselves.
You have a successful business (in this case, Ace Tire & Parts of Coraoplis, Pennsylvania). You decide that you don’t have to pay payroll taxes; instead, you’ll make your employees checks payable to “Cash” and as reimbursements for nonexistent expenses. Your controller agrees to this highly illegal scheme. You save on payroll taxes and your employees avoid income taxes.
The two owners of Ace Tire & Parts, Richard & John Schwartz, and the controller, Richard Connell, all pleaded guilty to one count of tax fraud. Given that the tax loss to the IRS was between $400,000 and $1 million, the three are looking at about three years at Club Fed and, I assume, restitution to the IRS. And I wouldn’t be shocked if the Commonwealth of Pennsylvania looks at this crime, too.
For the record, this kind of fraud rarely goes undetected. And the DOJ and IRS really, really don’t like violators of employment tax laws.
The Western Tax Service method of preparing tax returns is different. Customers love the high refunds. Of course, the deductions claimed on Schedule A were almost all either false or overinflated. Did I mention that Western’s proprietor is at ClubFed and will also have to serve time in California?
The Department of Justice is alleging that a Washington, D.C. tax preparer followed the Western Tax Service method. Donald Roberts ran X-Press Refund Tax Service and has been indicted on one count of conspiracy and 22 counts of assisting in the preparation of false tax returns. Mr. Roberts allegedly overstated Schedule A deductions such as charitable contributions and unreimbursed employee business expenses. He’s also accused of using incorrect filing statuses and phony education credits on returns.
Mr. Roberts is looking at an extended stay at ClubFed if he’s found guilty on all charges. By the way, if you happen to have used X-Press Refund Tax Service, you will likely be audited as the IRS will undoubtedly be looking to have the bad returns corrected.
DOJ Press Release
I used to reside in Tulare County, located in California’s Central Valley. It’s prime agricultural land. It’s also one of the poorest counties in California. And the county will need to find $327,000.
The Dinuba Redevelopment Agency is funded through property taxes paid by various businesses in Dinuba. Unfortunately, the Tulare County Assessor misclassified some businesses in 1998. The error was discovered in 2004, and corrected. The Dinuba Redevelopment Agency asked that the error be fixed retroactively (so that the agency would receive $327,000); the county refused.
Dinuba took the case to court, and lost in Tulare County Superior Court. They appealed, and won at the 5th District Court of Appeals. Tulare County then appealed to the California Supreme Court; that court upheld the appeals court decision.
So it is important to check your property tax bills…both for the counties sending them to taxpayers and for taxpayers receiving them.
