Go Phish.

Posted on February 27, 2006 by Russ

One of my clients called me this morning and asked about an email he received, purportedly from the IRS. I told him that, in general, the IRS doesn’t send out emails. The email he received told him that he had a “small” refund coming, and to click on a hyperlink to enter in some “minor” personal information to get the refund.

It’s a phishing scam. According to snopes, this has been around for a year or so. The Washington Post ran a story on this last week. And the IRS itself has issued its own warning.

So don’t click on the link. Never give out your social security number, bank account information, or other personal information to a website. Because if it sounds too good to be true, it probably is.

Posted in IRS | 1 Comment

People Who Live In Glass Houses…

Posted on February 25, 2006 by Russ

Do you remember when Intuit and H&R Block sued each other? Well, H&R Block now has some egg on their face.

H&R Block admitted that they made some miscalculations on their own tax returns. They were only off by $32 million on their state income tax filings.

Of course, $32 million is a drop in the bucket for H&R Block. But announcing a tax miscalculation when you’re in the tax preparation business in the middle of tax season is too good to pass up (for me).

Posted in Tax Preparation | 1 Comment

Offshore Trusts Shelters Snare Another Victim

Posted on February 25, 2006 by Russ

I keep saying that if it sounds too good to be true, it probably is. Offshore trusts formed just to shelter income tax sound too good. For Michael Diesel of St. Marys, Kansas, they were.

On the advice of Aegis Co., a now discredited Illinois vendor of offshore trusts, he invested in the scheme to avoid taxes. He was convicted of three counts of filing false income tax returns. Diesel faces up to three years in prison and fines of $250,000 on each count when sentenced in May.

Posted in Tax Evasion | 1 Comment

We’ve Heard the Last of Irwin Schiff

Posted on February 25, 2006 by Russ

Irwin Schiff won’t be muttering “There is no income tax” to his gullible victims clients anymore. The 78-year old Schiff was sentenced yesterday to 13 years in prison. He must also make restitution of $4.2 million. Schiff, during his sentencing, still claimed that there is no income tax.

He’ll have the rest of his life to think that one over.

Posted in Tax Evasion | Tagged | Comments Off on We’ve Heard the Last of Irwin Schiff

Happy Birthday

Posted on February 22, 2006 by Russ

George Washington, the father of our country, was born February 22, 1732 (274 years ago) in Westmoreland County, Virginia. Our first President, Washington didn’t have to deal with an Internal Revenue Bureau (or Service).

Unfortunately, our school-age children no longer get to celebrate a holiday dedicated to this leader. Instead, we have the bastardized “Presidents Day,” celebrating both Abraham Lincoln and George Washington. Both men deserve their own day—there can be holidays where schools are open, after all.

Additionally, in February this blog is celebrating its one-year anniversary. While I’d love to say that the tax code is now simplified, and fewer people are evading their taxes, and California has started to decrease regulations and attract businesses, the more things change, the more they stay the same.

Posted in Taxable Talk | Comments Off on Happy Birthday

Must I Go To the Nearest Library?

Posted on February 21, 2006 by Russ

The Tax Court also looked at whether an attorney must go to the closest law library for research. In the case, the petitioner lived fairly close to Southwestern Law School in Los Angeles. However, he preferred the law library at Chapman University in Orange, about 25 miles further than Southwestern. Did the petitioner go to Chapman because it had better facilities or because it was close to his family?

The Tax Court ruled for the petitioner on this issue. “Upon the basis of the record in this case, we find that the primary purpose for petitioner’s trips to Chapman Law School Library was to conduct legal research for his business clients, and, therefore, said travel is directly connected to petitioner’s business. Petitioner’s visits to his family, if such visits occurred, were a secondary consideration.”

Case: Berge v. Commissioner, T.C. Summary 2006-29

Hat Tip: TaxProf Blog

Posted in Tax Court | 1 Comment

Changed His Address…

Posted on February 21, 2006 by Russ

What happens when you don’t file your tax return, the IRS sends you notices to two different addresses (but you’ve moved), and then the IRS tries to put a lien on you? Today, the Tax Court ruled on such a case.

The petitioner last filed a tax return in 1997. Based on paperwork that the IRS received, the IRS believed that the petitioner owed taxes, mainly from a capital gain. The IRS sent out notices to the petitioner, but he had moved. The IRS then assessed the tax that they thought was owed. After still not being able to reach the petitioner, they put a lien on some of his assets.

The petitioner, in early 1994, finally contacted the IRS. He had never received any of the notices. He requested a hearing with the IRS, and then went to Tax Court. The questions the Tax Court faced were, (1) Since the taxpayer did not notify the IRS of his move, could the taxpayer dispute the tax and lien; (2) If he could, then did the taxpayer owe tax?

The Tax Court ruled that the taxpayer could indeed dispute the lien and tax, because he never received the documents. The taxpayer was also able to prove that he actually had a capital loss rather than a capital gain and did not owe tax.

There’s a caution here, though. It’s much, much easier to file your taxes on time and not go through the hassles that this taxpayer went through. It’s cheaper, too.

Case: Sherer v. Commissioner, T.C. Memo 2006-29

Posted in IRS, Tax Court | 4 Comments

A $399,878,100 Error

Posted on February 20, 2006 by Russ

Budgeting at the local (municipal, county, and township) level usually begins with the treasurer/tax collector telling the board here’s how much money we’re going to receive this year in property taxes based on the property valuation. The board then comes up with a budget. (Yes, I’m simplifying the process; however, this is essentially what is done.)

In Porter County, Indiana, someone made a typographical error on the valuation of a house in Valparaiso. Instead of the $121,900 it’s really worth, that unknown individual typed in $400,000,000. Typos happen all the time; usually there’s a process in place to check for things like that. I would have expected if the assessed valuation increased by $400,000,000 that someone would have looked to see what triggered it. They would have noticed that a house’s value increased just a bit; someone would investigate and the typo would be corrected.

But that didn’t happen. And all the agencies–cities, counties, school districts, etc.–budgeted based on the erroneous figure. The owner of the house decided not to pay taxes based on the $400,000,000 assessed valuation.

Now many, if not all, of the government agencies impacted by this will have to have layoffs. All because of a typographical error that should have been caught if proper budgeting analysis were done, and all of the agencies involved notified of the error.

News Story: CNN

Posted in Property Taxes | Comments Off on A $399,878,100 Error

Chasing Daylight

Posted on February 19, 2006 by Russ

“But in this world nothing can be said to be certain, except death and taxes.” — Benjamin Franklin

As a tax accountant, I know that’s true. For Eugene O’Kelly, that was true in a very sad way. He was the head of KPMG in the US. In May 2005 he went to a neurologist. He was told he had just a few months to live.

Mr. O’Kelly (and his wife) wrote a superb book, Chasing Daylight. Last December, the publisher of this book asked if I would write a review. I said yes, even though I knew the book would arrive during tax season. Boy, am I glad I did.

This is a wonderful book, even given the morbid subject nature. Mr. O’Kelly leads us on his journey, and shows us how he made the most of his very limited time on this world.

I could say a lot more about the book. As an author of a book, with a second book soon to come out, I know how difficult is to write any book. This book rings true, from start to finish. I have a hard time imagining myself writing such a book, and I think we’re blessed that Mr. O’Kelly wrote a text that can show all of us how to enjoy our final days.

Posted in Books | 2 Comments

Mr. Divorce Finally Sentenced

Posted on February 19, 2006 by Russ

Back last July I wrote about Mr. Divorce, Demetrious Eugenios, who went through his own divorce and hid his assets from the IRS. His ex-wife found out, didn’t like it, and told the government. He was convicted last July. Sentencing has been postponed on several occaisions.

Last Wednesday Eugenios found out his fate. According to this article in the Hollister (CA) Free Lance, Eugenios was sentenced to 30 months in prison, and must make restitution of $1.2 million.

Divorce just doesn’t pay. And hiding a Porsche from your ex-wife and the IRS is worse.

Posted in Tax Evasion | 1 Comment