Another $0.02 For Your Thoughts

Posted on March 20, 2007 by Russ

If you use the postal service, it will cost you $0.41 for first class mail beginning on May 14th. The good news? You will be able to buy a “forever” stamp. The new “forever” stamp will be able to used for first class postage…forever.

The “forever” stamp will not be available in rolls (to discourage businesses from using it), nor will postage meters be able to use it. But you will be able to buy books and sheets of the stamp.

Being the cynic that I am, let’s move forward to June 2009, when the Postal Service governors raise the postage rate to $0.43, effective on August 1, 2009. Do you think there will be a sudden shortage of “forever” stamps at that time?

News Story: USA Today

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Whither State Tax Revenues?

Posted on March 18, 2007 by Russ

A very interesting article from Reuters on the possibility of a decline in state tax revenues. Reuters speculates on (1) lower capital gains revenues, in states such as California, and (2) declining real estate values, in other coastal states (such as New Jersey) impacting tax collections.

As to California, real estate is not likely to be a major factor in state tax collections. Property tax is paid to each county, and mostly stays with the county and cities within each county. However, the issue to watch is the impact of stock options.

Stock options were, in my opinion, the reason why California tax collections increased in 2006. I suspect that taxes from stock options will not increase in 2007 from 2006 (and likely will decrease). This is just speculation based on a small sample size; however, we will get a much clearer picture by the end of April (when the Franchise Tax Board releases collection numbers for April).

In any case, it will be an interesting April and May for budget writers at the state, county, and local levels.

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Clear as Mud

Posted on March 18, 2007 by Russ

If I told you that there was a trial attracting a media circus in Chicago, you might wonder about my intelligence. Except for stories in the two daily Chicago newspapers (the Chicago Tribune and the Chicago Sun-Times), this trial might not even be happening. While I have reported on this trial (most recently, on Monday), the Register and the Los Angeles Times have been silent.

It’s the Conrad Black trial. As the Tribune reports, the jurors have been selected (but the names aren’t being released), and the trial will begin on Monday.

While the trial isn’t making news in the United States, it’s big news north of the border. Hordes of Canadian media have descended on Chicago to cover the trial. As this story from the Edmonton Sun notes, it’s going to be tough sledding for the jury. How would you like to be a juror and be faced with understanding the complexities behind mail fraud, tax fraud, and all the other charges that the defendants are accused of?

Well, I will continue to cover the trial. Because a good media circus makes for some fun during tax season.

Posted in Illinois, Tax Fraud | Tagged | 1 Comment

$6.8 Million and 10 Years

Posted on March 15, 2007 by Russ

Back in November I wrote about the Ozbay family of Schenectady, New York. They didn’t commit one piece of tax fraud. No, they committed lots of tax fraud. They didn’t pay income tax, they structured their transactions, and they didn’t pay withholding taxes to the government that they withheld from their employees.

Ziya Ozbay is the first of the four Ozbays to be sentenced. He got ten years at ClubFed and he must surrender $6.8 million of his ill-gotten gains. Ziya was found guilty along with his son-in-law, Yalcin Ozbay (he will be sentenced on April 13th). Mustafa Ozbay, Ziya’s brother, pleaded guilty along with Mustafa’s son, Birol Ozbay. Birol will be sentenced on March 28th and Mustafa on April 26th. (News story here.)

Meanwhile, in White Plains, New York, Duane Howell has probably prepared his last tax return for a client. The 72-year old Howell pleaded guilty yesterday to conspiring to obstruct the IRS, preparing false tax returns, and obstructing the IRS.

Mr. Howell falsified expenses on the partnership returns of his clients, adding phony expenses that reduced the liability for his clients. It’s not a bad way to attract clients—if you can get away with it. Personally, I don’t recommend it as the consequences can be disastrous. For Mr. Howell, he faces up to eight years at ClubFed according to this story.

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Plenty of Fraud to Pass Around the Table

Posted on March 12, 2007 by Russ

Well, it’s time for an uber-post. We’ve got plenty of fraud to share, with two practitioners in trouble, an IRS agent, what should be a circus of a trial, and a pilot that may be grounded.

First up comes one from the internal affairs department. An IRS agent is accused of evading $21,000 in taxes. He also allegedly offered other taxpayers by selling deductions from a company that coincidentally shares the same address as the agent. Harry Wilner could face 15 years at ClubFed if he’s found guilty, according to this story.

Meanwhile, in Chicago, a CPA has pleaded guilty to three counts of preparing false tax returns. Pepito Guinto added phony medical deductions, charitable contributions, and unreimbursed business expenses to some of his clients (a reported 57 of 4780). His brother, Pablo, has also allegedly committed the same crime. He, though, has fled the United States and is reported (by this news story) to be in the Visayas. Pepito will likely serve three years or so at ClubFed.

Staying in the Windy City, the trial of Conrad Black will soon begin. As I reported last year, Black faces multiple counts of tax fraud, mail fraud, wire fraud, money laundering, obstruction of justice, and RICO. As this news story notes, “It has just about everything a good drama should – power, money, allegations of corruption, a lord and lady of the realm and a self-perceived knight in shining armour who’s standing up for his damsel in distress.” I’ll keep you updated as the trial, scheduled to begin on Wednesday, moves along.

Moving now to South Carolina, a CPA is alleged to have forgotten something important: paying his state income tax. Rex Wicker, of Pawley’s Island, is accused of not paying $18,000 in taxes according to this story. If true, he’s certainly not setting a good example….

Finally, a pilot for FedEx is in trouble for allegedly filing false tax returns from 2000 – 2004. Michael Mason, of Cordova, TN, is accused of not filing tax returns during the years in question. According to this news story, the indictment accuses Mason of having income of over $1 million in each of those years, and using nominee bank accounts to hide his income. He faces a minimum 30 years at ClubFed if convicted on all counts.

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Hatch Heads Back to Court

Posted on March 12, 2007 by Russ

Survivor winner, but court loser, Richard Hatch had his appeal heard in Boston last Thursday. Hatch, convicted on multiple counts of tax evasion, is now serving his four-plus year prison term.

Hatch is arguing that he should have been able to present the argument that he had a deal with CBS and the producers of Survivor—a don’t ask don’t tell deal. They would pay his taxes and he wouldn’t tell about “deals” and cheating that happened on the television show. Hatch and his attorneys are asking for a new trial. CBS denies Hatch’s claims. The government counters that Hatch’s attorney could have asked this question during the trial but they didn’t.

The appeals court ruling will probably come out this summer.

News Story: Fox News

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Wal-Mart Fails the Pesticide Tax

Posted on March 9, 2007 by Russ

California has a lot of taxes. One of the taxes that most individuals are not aware of is the pesticide tax. As the DPR notes, “California assesses a fee on all pesticide sales, levied at the point of first sale into the state. A “mill” is equal to one-tenth of a cent. This “mill assessment” is 21 mills, or 2.1 cents per dollar of sales. Mill assessment revenues are placed in a special fund used to support the State’s pesticide regulatory program.” Of course, the retailers pass this tax on to consumers, but that’s another story for another day.

Wal-Mart used to be able to avoid this tax. California changed the law in 2005 so that “big box” retailers can’t avoid the tax by having corporate offices in another state. California requires all sellers of pesticides to pay the tax.

Wal-Mart’s bill? $1.2 million: $1.09 million from the mill tax, and $110,000 in interest and penalties (according to ISSA). Wal-Mart is pledging to work with the DPR, and given Wal-Mart’s push for positive public relations, I’m sure that will be the case.

Given California’s looming budget deficit, a million here and a million there can add up.

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Complaining Will Get You Trouble…When You’re Guilty

Posted on March 6, 2007 by Russ

Last year I wrote about David Richardson of nearby Huntington Beach. Mr. Richardson was indicted on five counts of tax fraud (filing false claims), after filing multiple phony refund claims. But what made Mr. Richardson special was what he did when he didn’t get his tax refunds. As I said last year,

“But I do like what he was then alleged to have done. The indictment charges that Mr. Richardson filed a complaint with Congressman David Drier relating to the delay in payment of his allegedly falsely claimed refunds. He also is alleged to have sent a check for $1,990,000 to the IRS that showed amounts of withholding…except that is alleged never to have happened. Oh, the check bounced, too. Now these actions show some chutzpah.”

Mr. Richardson was convicted in November. He got the bad news today: five years at ClubFed, and restitution of $286,345. He’ll have five years of supervised release when he gets out of ClubFed, too. His chutzpah will likely soon be a thing of the past.

News Story: Orange County Register

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In The News…

Posted on March 6, 2007 by Russ

CCH’s Federal Tax Weekly has an article on the Tschetschot case. My comments are included in the article. There were two major surprises in the decision:

– The IRS conceded that Mrs. Tschetschot was a professional gambler even though she earned $49,000 in wages. This is contrary to the stance that the IRS has taken in most cases and bodes well for part-time professional gamblers.

– It is unusual to read a Tax Court decision where the Court basically asks Congress to change the law.

You can find the article on page 102 of the March 1, 2007 edition of Federal Tax Weekly.

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The FTB Does Something Smart

Posted on March 5, 2007 by Russ

I’ve criticized California’s Franchise Tax Board on several occasions. However, I am going to praise them when they deserve it, and this is one of those times.

The FTB, in the past, has assessed late payment penalties when payments on some e-filed returns were not remitted with the return (on returns with a balance due). The FTB will be sending out refunds for some taxpayers, for tax years 2002-2005, where:

  • The return [was] e-filed

  • At least 90 percent of the tax due [was] paid by the original return due date.

  • The remaining amount due [was] paid within 21 days after we accept the return.

The FTB correctly notes that you are supposed to fully pay your taxes by the due date of your return (not 90% of your taxes). But the FTB has realized that the payment won’t always accompany the return, and is rectifying a problem.

As far as we can tell, none of our clients are impacted by this issue. However, if you think you are, please contact our office so we can review your situation.

FTB Notice

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