Don’t Go to Lawrence Siegel to Have Your Taxes Done

Posted on November 15, 2015 by Russ

There are good tax preparers, bad tax preparers, and then there’s Lawrence Seigel. Mr. Siegel, who resigned from the California bar in 1994 and lost his CPA license in 1997 after being convicted of tax evasion (among other crimes) also faces a 20-count criminal complaint “…charging him with Medi-Cal fraud, grand theft, forgery, identity theft, financial dependent adult abuse and tax evasion.” The US Department of Justice filed a civil action against him, and he was a no-show for the court date last Monday.

As for what Mr. Siegel is alleged to have done, he supposedly has impersonated California attorneys, used multiple aliases, and proposed tax fraud schemes. From the DOJ press release:

Siegel falsely advised his customers, typically high earners who own profitable businesses, that they can establish companies in another state, usually Nevada, then treat their California home as an out-of-state corporate office. Siegel claimed that doing so would transform a vast array of non-deductible personal expenses into tax deductible business expenses, according to the complaint. The complaint details how Siegel boasted about this tax fraud scheme in e-mails, including one where Siegel falsely claimed that his customers are entitled to free housing as tax-free compensation from their out-of-state companies and that “[t]he housing can [b]e luxurious and cost thousands a month” because “[t]here is an assumption that corporations don’t waste money.”

Well, housing can be expensive in California. That said, personal expenses aren’t deductible.

For example, the complaint states that Siegel deducted on one couple’s tax returns purchases at Tiffany & Company, Royal Caribbean Cruise Lines, Louis Vuitton and Princess Cruise Lines. Siegel allegedly attempted to conceal these fraudulent deductions from the Internal Revenue Service (IRS) by lumping them together and reporting them as large expenses for “supplies” or “medical records and supplies.”

It’s great if you can get away with it. Mr. Siegel appears to be lucky to have escaped a federal indictment, given that he is also accused of providing false documents to the IRS and lying to IRS officials. In any case, Mr. Siegel, if found, faces trial in California on that criminal complaint.

As a reminder, if it sounds too good to be true it probably is. No, you can’t deduct personal expenses if you run them through a corporation. And while I wish I could take a deduction for the cruise to New Zealand and Australia that I took last year, I also know the law–and you just can’t do that.

Posted in Tax Fraud | 1 Comment

Colorado Voters to Get the Chance to Add 10% Payroll Tax for Single-Payer Health Insurance

Posted on November 15, 2015 by Russ

Colorado voters will get the chance to add a 10% payroll tax next year to fund universal health insurance. The 10% payroll tax–which is on top of all other federal and state taxes–would be on employees pay. Self-employed individuals would owe 10% of their net income (presumably their Schedule C income).

Of course, one has to wonder if Colorado voters will approve a plan to tax themselves in this manner. Proponents say that, “ColoradoCare would slash administrative costs of private insurance and negotiate bulk rates for pharmaceuticals.” Really? The government will be more efficient than private industry? Let’s just say I have my doubts.

In any case, I suspect that voters will look at a 10% tax increase and say, “You must be kidding.” This will certainly drive anti-tax voters to the polls next year.

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The Real Winners of the World Series of Poker (2015 Edition)

Posted on November 10, 2015 by Russ

Nine individuals came to Las Vegas over the last three days to compete for the championship at the World Series of Poker (WSOP). Who would be the lucky winner? And who really got to keep the money?

Last year the winner was London, so to speak. Most of the participants hailed from the United Kingdom (well, resided there) to save on taxes. The United Kingdom does not tax gambling winnings and the US-UK Tax Treaty exempts gambling winnings from taxation. This year, only one of the participants escaped paying tax on his winnings; he is not from the UK.

It’s back to normal this year. As you will soon see, the big winner, almost doubling the amount of the after-tax winnings of the “winner,” was the Internal Revenue Service. The IRS collected $8,467,091 out of the $24,806,976 awarded at the final table (34.13%).

One other note: I do need to point out that many of the players in the tournament were “backed.” Poker tournaments have a high variance (luck factor). Thus, many tournament players sell portions of their action to investors to lower their risk. It is quite likely that most (if not all) of the winners were backed and will, in the end, only enjoy a portion of their winnings. I ignore backing in this analysis. Now, on to the winners.

Congratulations to Joe McKeehen of North Wales, Pennsylvania. The professional poker player dominated play at the final table. He came in with the chip lead and never relinquished it and never looked challenged. For finishing first out of 6,420 entrants (each of whom paid the $10,000 entry fee) he won $7,683,346. As a professional poker player, he’ll owe self-employment tax along with his federal income tax ($3,073,240), Pennsylvania state income tax ($235,879), and the local township (North Wales Boro) Earned Income Tax ($76,833), a total of $3,385,952 (44.07%). He’ll get to keep an estimated $4,297,394 of his winnings.

Finishing second was Joshua Beckley of Marlton, New Jersey. Mr. Beckley won $4,470,896 for his second place finish. His percentage tax burden is higher than the winners at 46.56%; that’s because New Jersey is decidedly not a low-tax state. Still, he’ll end up paying $2,081,719 in tax.

Neil Blumenfield of San Francisco finished in third place. In most years the 61-year old former technology executive would have been the oldest player at the final table. However, he was eclipsed this year by a 72-year old! Still, it makes me feel pretty good about my future poker prospects. Mr. Blumenfield was one of two amateurs at the table, so he’s not impacted by self-employment tax. However, he resides in California, so his tax burden is the largest of any of the Americans at 46.86%. I estimate he will keep just $1,805,764 of the $3,398,298 he won (losing $1,592,534 in tax).

In fourth place was Max Steinberg of Las Vegas. Mr. Steinberg, the only one of the nine individuals who had previously won a WSOP bracelet (for winning an event at the WSOP), is a professional Daily Fantasy Sports and poker player. He may be looking to relocate after Nevada effectively ended DFS within the Silver State. Of the individuals who owe income tax, Mr. Steinberg faces the lowest tax rate (40.99%). That’s because while he will owe federal income tax and self-employment tax (totaling $1,072,055 of the $2,615,361 he won), Nevada does not have a state income tax.

Ofer Zvi Stern of Herzliya, Israel, finished in fifth place. Mr. Stern works in the technology industry in Israel and is an amateur gambler. The US-Israel Tax Treaty does not cover gambling, so Mr. Stern loses 30% of his winnings $573,427 of $1,911,423) to the IRS. Gambling income is taxed in Israel. While Mr. Stern should get a tax credit for the tax he paid to the IRS, he’ll still owe an additional $326,679 to the Israel Tax Authority–a total tax bite of 47.09%.

Thomas Cannuli of Cape May, New Jersey, finished in sixth place. Mr. Cannuli is a professional gambler, so he owes income tax to the IRS and New Jersey and self-employment tax. While he won $1,426,283 for finishing sixth, after taxes of $640,287 (44.89%) he’ll only get to keep $785,996.

Pierre Neuville, a retired businessman from Knokke-Heist, Belgium, finished seventh. Mr. Neuville was the oldest November Nine participant (he’s 72) ever. While he finished in seventh place by pre-tax winnings, Mr. Neuville finished in fifth place by after-tax winnings. The US-Belgium Tax Treaty exempts gambling winnings from US taxation, so Mr. Neuville owes nothing to the IRS. Belgium doesn’t tax gambling winnings of amateur gamblers, so he owes nothing to Belgium. That will likely soften the blow of being the third person eliminated at the final table.

The eighth place finisher was Federico Butteroni of Rome, Italy. Mr. Butteroni only played two hands at the final table, and his second hand ended his tournament. While he won $1,097,056, he’ll only get to keep $571,566 (a tax bite of 47.90%). The US-Italy Tax Treaty exempts gambling winnings from US taxation, so none of his winnings were withheld for the IRS. However, Italy does tax gambling winnings from non-European Union countries. (There is current litigation regarding taxes owed for winnings within the E.U., but it appears that, for the present, such winnings are not subject to taxation.) The tax appears to be a flat 47.90%. Mr. Butteroni faces the highest tax bite by percentage of any of the final table participants.

Patrick Chan of Brooklyn, New York was knocked out on the second hand of the final table. Unfortunately for Mr. Chan, he did not add anything to the $1,001,020 he took home in July. He only gets to keep an estimated $545,614 of his winnings (45.49%) because he owes federal income tax, self-employment tax (he is a professional poker player), state income tax, and New York City income tax.

Here’s a table summarizing the tax bite:

Amount won at Final Table $24,806,976
Tax to IRS $8,467,091
Tax to Agenzia delle Entrate (Italy) $525,490
Tax to New Jersey Division of Taxation $493,422
Tax to Franchise Tax Board (California) $425,550
Tax To Israel Tax Authority $326,679
Tax to Pennsylvania Department of Revenue $235,879
Tax to New York Dept of Taxation & Finance $102,605
Tax to North Wales Boro $76,833
Total Tax $10,080,122

That’s a total tax bite of 42.95%.

Here’s a second table with the winners sorted by their estimated take-home winnings:

Winner Before-Tax Prize After-Tax Prize
1. Joe McKeehen $7,683,346 $4,297,394
2. Joshua Beckley $4,470,896 $2,389,177
3. Neil Blumenfield $3,398,298 $1,805,764
4. Max Steinberg $2,615,361 $1,543,306
7. Pierre Neuville $1,203,293 $1,203,293
5. Ofer Zvi Stern $1,911,423 $1,011,317
6. Thomas Cannuli $1,426,283 $785,996
8. Federico Butteroni $1,097,056 $571,566
9. Patrick Chan $1,001,020 $545,614
Totals $24,806,976 $14,153,427

While Pierre Neuville finished in seventh place, he ended up in fifth place based on his after-tax income. Unlike all of the other winners, Mr. Neuville gets to keep all of his winnings. It’s always nice when your after-tax income equals your before-tax income.

Last year, the IRS didn’t finish in first place. This year, the IRS was back in its normal spot: first place. The $8,467,091 it will receive exceeds the first place prize of $7,683,346 by 10%. As I noted before, it’s just less than double the after-tax winnings of the actual winner. That’s because we all know that the house (the IRS) always wins.

Posted in Gambling | 8 Comments

DFS Gets the Boot in New York

Posted on November 10, 2015 by Russ

New York State’s Attorney General, Eric Schneiderman, sent a letter to DraftKings and Fan Duel ordering them to cease offering their Daily Fantasy Sports (DFS) wagers games to New Yorkers. According to both ABC and ESPN, Attorney General Schneiderman sent a letter to both companies calling contest entries “wagers.”

“Our review concludes that DraftKings’/FanDuel’s operations constitute illegal gambling under New York law,” Schneiderman wrote in the letter, obtained by ESPN’s David Purdum and Darren Rovell, and ABC News.

The two sites are apparently going to fight this action.

“Fantasy sports is a game of skill and legal under New York State law,” FanDuel said in a statement. “This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, coworkers and players across the country. The game has been played — legally — in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal.”

DraftKings said they will look at legal options. (UPDATE: After I first posted this, there is a report that DraftKings will fight this.)

Let me state something that should be obvious to anyone who partakes in DFS: It’s gambling. Sure, it’s skillful gambling, but as I wrote in February 2014 it meets the criteria of what gambling is. And it is quite likely that FanDuel will be proven wrong under New York law.

The problem is that New York and many other states look at whether there’s an element of chance. Sure, skill predominates but there’s no way to honestly state there’s not an element of chance in DFS.

New York is definitely not going to be the last state where DFS gets the boot. I suspect Florida (where an Attorney General opinion makes legal DFS dubious at best) and Texas (where the politicians think gambling is a huge sin) are additional states in deep trouble.

What should DFS players do if they want to continue enjoying DFS? You should call your state representatives now. State legislators do listen to the public. And state legislators can absolutely influence what other elected politicians (e.g. state Attorney Generals) do.

Additionally, DFS players should consider keeping only the amount of money they need on the sites. The New York Attorney General statement used the words “criminal activity” to describe DFS. While I am hopeful that the DFS sites use segregated trust accounts, neither DraftKings nor FanDuel has confirmed that they do. It’s better safe than sorry, and that’s a good course of action today. (UPDATE: With the news that DraftKings will (apparently) fight this action, I now strongly advise that individuals keep just the minimum amount necessary on each site. I suspect that criminal charges are in the near future, and seizure of bank accounts is now a real possibility. The New York Attorney General will look at DraftKings’ continuing to operate in New York State as a slap in the face.)

DFS is in deep trouble, and the most likely outcome is a regime very similar to the current state of online poker in the United States–four to six states where DFS is legal. This doesn’t have to be how it winds up, but the arrogance of how the companies have been perceived to act (and are continuing to act) along with how gambling is traditionally regulated in the US makes that the most probable result.

UPDATE #2: Here is a link to a New York Times article that includes the letters to FanDuel and DraftKings. (Link to FanDuel letter; link to DraftKings letter. Note that the letters have basically identical content.) These letters warn that if the two sites do not cease operations, they will be subject to prosecution under various New York statutes. If these sites continue to operate in the face of the New York Attorney General notice, things are likely to get very ugly very fast.

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About 9,000 Businesses Left California During Good Economic Times

Posted on November 10, 2015 by Russ

Yesterday a friend sent me a link to Joseph Vranich’s report on businesses leaving California. I should know: I’m one of the 9,000 businesses that did so.

Mr. Vranich analyzed business relocations from 2008-2014. He identified 1,510 “disinvestment events”–companies leaving the Bronze Golden State for brighter horizons. Mr. Vranich notes that for every one company that publicly leaves, at least five others have left. Mr. Vranich also excluded all but primary employers,

…[W]hose customers are nationwide or worldwide (such employers bring wealth into a community.) All “secondary employers” (which exchange wealth already in a community) such as retail stores, restaurants, dry cleaners, beauty salons, nurseries – an inexhaustible list of enterprises – are excluded.

While some of these business closings and relocations are local businesses that just service locally, today with the Internet a business in Nevada and elsewhere can service clients anywhere in the world. Yes, you can only go to a restaurant locally or get your hair done where you are, but many other service businesses are no longer geographically constrained. This, too, likely causes an understatement of the impact of business relocations.

And things aren’t likely to get better for California:

Finally, California is considering imposing a broad set of new taxes, tax extensions and fees on businesses in 2016 and 2017 – a “tsunami” that may trigger the worst demands on private-sector finances ever organized by the state’s politicians. It is highly likely that one result will be an increasing number of disinvestments in California in favor of greener domestic or international pastures.

A factor that Mr. Vranich didn’t consider is what will happen during the next economic downturn? California today relies largely on capital gains taxes from very wealthy individuals (and individuals receiving stock options) for state revenues. The next time there’s an economic downturn, that source of income will decline, almost certainly very substantially. Given the mindset in Sacramento, that’s likely to result in even higher taxes and regulations rather than starting to actually make California a place that businesses want to locate in.

Posted in California | 1 Comment

Cleveland Loses on Monday (and They Didn’t Even Play)

Posted on November 9, 2015 by Russ

Pity the poor Cleveland Browns. Last Thursday they lost to the Cincinnati Bengals 31-10. This morning, the City of Cleveland lost at the US Supreme Court, 2-0. The Supreme Court refused, without comment, to hear Cleveland’s appeal of their “Jock Tax” after its taxation scheme was ruled unconstitutional by the Ohio Supreme Court.

Former NFL players Jeff Saturday and Hunter Hillenmeyer had filed separate challenges to the City of Cleveland’s “Jock Tax.” As I previously noted,

Mr. Saturday’s case was the more egregious of the two. During 2008 “More than 72,000 other souls attended the Colts’ dismal 10-6 victory over the Browns.” Mr. Saturday didn’t step foot in Cleveland; he was injured and attended physical rehabilitation in Indianapolis. Mr. Saturday contended that Cleveland has no authority to impose its tax on the income of a nonresident who did not work within Cleveland’s city limits during the taxable year.

Yes, Cleveland’s regulation held that a player who was on the roster but didn’t set foot in Cleveland owed the tax. The Ohio Supreme Court used common sense (and constitutional law) to sack Cleveland.

Hunter Hillenmeyer, the former linebacker with the Chicago Bears, actually set foot in Cleveland. He challenged how Cleveland calculated the tax. Every other jurisdiction uses a duty days method, but Cleveland used a games played method. Cleveland was penalized for that:

Hillenmeyer’s statements were corroborated by the affidavit testimony of Cliff Stein, senior director of football administration and general counsel for the Chicago Bears. Stein confirmed that under the NFL standard player contract and from the time that Hillenmeyer joined the Bears in 2003, he was required to “provide services to his employer from the beginning of the preseason through the end of the post-season, including mandatory mini-camps, official preseason [sic] training camp, meetings, practice sessions, and all preseason, regular season, and post-season games.” Stein also stated that “[t]he compensation Hillenmeyer receives from the Bears is paid for all of these services and not only for games played” and that “[f]ailure to comply with these contractual requirements would subject Hillenmeyer to termination pursuant to Paragraph 12 of his NFL Player Contract and/or fines under Article VIII of the Collective Bargaining Agreement.”

Many former (and current) NFL players will be filing refunds with the Central Collection Agency, the agency that administers the income tax for Cleveland. The statute of limitations is three years (from the due date), so 2012 – 2014 returns are open for refund claims. Cleveland will likely lose about $1 million in income annually because of the change and could lose another $2 million in refunds. Of course, they shouldn’t have had the unconstitutional scheme in the first place.

And yes, it is time to say “Wait ’til next year” if you’re a Browns fan.

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Chaka Fattah, Jr. Guilty of Tax and Fraud Charges

Posted on November 8, 2015 by Russ

Chaka Fattah Jr., son of Democratic Congressman Chaka Fattah Sr. (D-PA), was found guilty on Friday of 22 of 23 tax and fraud charges. As the Department of Justice press release notes,

Between 2005 and 2012, Fattah Jr.: made false statements to banks to obtain loans; made false statements to banks and the Small Business Administration (SBA) to settle loans for less than what was owed; filed false federal income tax returns; failed to pay federal taxes; and stole from the Philadelphia School District, which had received federal funds for its operations.

His father, Chaka Fattah Sr., is under indictment on separate racketeering charges filed earlier this year.

Chaka Fattah Jr. is scheduled to be sentenced in February. He’s looking at a “substantial term” at ClubFed.

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Time Running Out on the Miccosukee Tribe’s Battle with the IRS

Posted on November 4, 2015 by Russ

I have sympathy when taxpayers battle the IRS over legitimate issues. Indeed, I’m all for fighting the IRS when they’re (imho) wrong. However, fighting quixotic battles when you are wrong isn’t a good idea. The Miccosukee Tribe in Florida is in that position.

The Miccosukees operate a successful casino near Miami. The tribe itself is exempt from taxation (it’s a sovereign nation). However, the members of the tribe are not exempt from taxation when they receive income related to the casino. And therein lies the issue.

Beginning in 2012 (or perhaps even earlier) the IRS was wondering why payments to tribe members weren’t being reported (on information reporting forms) and taxes withheld. The IRS sent requests to the tribe, and eventually summonsed material from the tribe and the tribe’s financial institutions. The tribe fought the summonses claiming sovereign immunity. The tribe lost the battles, most recently with this decision in June. (It’s unclear if the tribe has since provided this information to the IRS.)

Meanwhile, approximately 20 tribe members were sent Notices of Deficiency by the IRS pertaining to distributions from 2000-2005. The tribe members filed Tax Court petitions in 2013. As best as I can tell, no case related to this has yet been decided.

Separately, the IRS issued tax, penalties and interest on the non-withholding withholding (that is, the money that the IRS thinks should have been withheld by the Miccosukee tribe). The IRS issued a lien and levy notice. The Miccosukee Tribe had a Collection Due Process hearing. When asked to provided financial information the tribe refused. The tribe lost the Collection Due Process Hearing and then filed a Tax Court petition.

The tribe disputed both the underlying liability and the collection activity (the latter, as an abuse of discretion). In May 2014 the Tax Court used an order for summary judgment against the Miccosukee tribe on the underlying liability. Because the tribe had an opportunity to dispute the underlying liability at Appeals, the Court ruled that the tribe could not dispute it in the Tax Court case.

The Tax Court held a trial in March, and ruled today that the levy was not an abuse of discretion.

It is clear from our review of the record that the SO [settlement officer] verified that the requirements of applicable law and administrative procedure were followed and that in sustaining the filing of the NFTLs and the proposed levy the SO properly balanced “the need for the efficient collection of taxes with the legitimate concern of * * * [petitioner] that any collection action be no more intrusive than necessary.” Petitioner did not raise any valid challenge to the appropriateness of the NFTL filings and the proposed levy. Furthermore, petitioner did not submit the financial information necessary for the SO to consider an installment agreement. There is no abuse of discretion when a settlement officer declines to consider collection alternatives under these circumstances…see also sec. 301.6330-1(e)(1), Proced. & Admin. Regs. (“Taxpayers will be expected to provide all relevant information requested by Appeals, including financial statements, for its consideration of the facts and issues involved in the hearing.”). Therefore, we hold that the SO’s determination to sustain the filing of the NFTLs and proceed with the proposed levy was not an abuse of discretion. [citations omitted]

While I expect the Miccouskee Tribe to file an appeal, and this will delay any IRS action for the time while an appeal is pending, it’s clear that time is running out for the Miccosukee Tribe on this matter. They may not want to provide their financial information to the IRS, but they have to. They also need to start complying with the law in regards to reporting and withholding casino income payments. Years ago, the US government ended up owning part of the Bicycle Casino. It wouldn’t surprise me that at some date in the near future that the Miccosukee’s casino is under new management.

Posted in Gambling, IRS, Tax Court | Tagged | 1 Comment

Where I Agree (In Part) With IRS Commissioner John Koskinen

Posted on November 3, 2015 by Russ

It’s rare for me to agree with IRS Commissioner John Koskinen. However, he spoke to some tax practitioners today and I do agree with some of what he said. From Accounting Today:

Once again, Congress has been working on legislation to extend a group of expired tax provisions, but it has not completed action yet. The uncertainty we face over the extenders legislation raises operational and compliance risks for the IRS in its administration of the tax law and delivery of the filing season. This uncertainty imposes stress, not only on the IRS, but also on the entire tax community, including everyone in this room.

If this uncertainty persists into December, we could be forced to postpone the opening of the 2016 filing season…This would delay the start of processing of tax refunds for millions of taxpayers. It’s also important for lawmakers to understand what the effect would be if they made any substantive changes to tax provisions that are extended, or decided to approve any new tax provisions. We would need to reprogram our systems and make processing changes that would result in delays. So I will continue to urge members of Congress not to let this uncertainty drag on. We believe it is critical for Congress to make a decision one way or another on the extenders legislation no later than the end of November in order to ensure there are no disruptions to the upcoming filing season.

Commissioner Koskinen is correct. Congress should get off its duff and pass the extender legislation. That said, the calendar hasn’t hit December so I don’t expect anything to happen for four weeks.

Meanwhile, Commissioner Koskinen complained about the funding cuts to the IRS. Yes, they’ve hurt service (on that, he’s correct). However, the biggest villain isn’t Congress; it’s the IRS. The 501(c)(4) scandal and the wishy-washy testimony from almost everyone at the IRS (including Commissioner Koskinen) has led directly to the cuts in funding. Republicans aren’t going to fully fund an agency being used against them. Until this is resolved, Commissioner Koskinen can complain all he wants but the funding levels aren’t going to increase.

Interestingly, IRS Taxpayer Advocate Nina Olson also appeared and spoke at the same meeting. She noted that the funding issues are hurting morale (I’m sure they are) and that there is resistance to the Taxpayer Advocate from the IRS.

We are finding instances where the IRS is refusing to let me or my staff have access to the administrative files of the taxpayers unless I sign a document agreeing in writing not to share any information that I find or see in that file with the taxpayer him or herself. I find that deeply offensive. I am subject to the same laws as any other IRS employee about disclosure of tax information. I am also by law entitled to any tax return or any tax return information that I need to conduct my tax administration duties. My tax administration duties are in the code and number one is help taxpayers resolve their problems with the IRS, and I need to be able to see the administrative files in order to determine how they go about doing that. My position is that the IRS in those instances has violated the law by not providing me access to those files, and I do not say that lightly.

Well, if the IRS will violate the law in regards to 501(c)(4) organizations, they can violate the law with regards to the Taxpayer Advocate Service. Until Congress or the courts stop it, that’s the environment that we work in.

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I’m Sure Their Vacation in Arizona Will Impress the Sentencing Judge

Posted on November 1, 2015 by Russ

Back in October 2014, Ronald and Dorothea Joling were convicted of tax evasion. As the US Department of Justice noted in the press release,

Evidence at trial detailed the Jolings’ illegal efforts over close to twenty years to keep the IRS and the Oregon Department of Revenue from collecting almost $2 million they owed in back taxes, penalties and interest. The Jolings’ efforts to thwart the IRS included their use of sham trusts, a corporation, sole bank accounts in the names of nominees, a warehouse bank, bogus money orders, bills of exchange, bonds, and filing false tax returns with the IRS. When those efforts failed, the Jolings resorted to intimidation tactics and threats. Witnesses testified that in response to attempts to collect taxes owed, the Jolings threatened them with arrest, criminal prosecution and lawsuits. In one instance, the Jolings took out a newspaper advertisement in the Coquille Valley Sentinel accusing a local government employee of malfeasance just for performing her job. The Jolings also filed retaliatory bogus liens against federal judges, the federal court clerk’s office, and federal prosecutors who were involved in the criminal case.

That’s bad enough, and US Attorney for the District of Oregon is absolutely right in stating, “When people like the Jolings refuse to pay their fair share, and then threaten, harass, and file liens against people who are just trying to do their jobs, my office will aggressively prosecute them and work with the IRS to hold them accountable.” But that’s just the first part of the story.

They were due to be sentenced this past April. However, they decided that retiring to Clarkdale, Arizona was a better choice than being sentenced for their crimes in Eugene, Oregon. The US Marshals Service caught them in Clarkdale.

Not only are the Jolings likely to face lengthy terms at ClubFed for their convictions on tax crimes (prosecutors were going to recommend ten years for Mr. Joling and five years for Mrs. Joling), they still face charges related to allegedly filing retaliatory liens.

The Jolings apparently believe they are sovereign citizens immune to federal taxation. Mr. Joling wanted to be on “biblical safe ground” (he was a pastor) so he didn’t pay taxes.

I’m sure the sentencing judge (Judge Ann Aiken who also presided over their first trial) will be impressed by their six month vacation and being subject to one of the alleged retaliatory liens. A helpful hint to anyone thinking of repeating the Jolings’ strategy: Just pay your taxes, and if you ever have a court date show up.

Posted in Tax Evasion | 2 Comments