“Give us a tax code that is simple enough for taxpayers to comply with and simple enough for the IRS to administer, and you’ll dramatically reduce fraud.”

Posted on March 12, 2015 by Russ

It’s not brain surgery. Tom Giovanetti hits the nail squarely on the head in his op-ed in The Hill.

Mr. Giovanetti notes that keeping the voters happy is why fraud prevention hasn’t been a big issue. But it is now, when identity theft (which voters really dislike) is mixed into the fraud. Add in the IRS’s lackidaisical attitude in the past and you have a recipe for massive fraud.

It’s not as if the IRS didn’t know about the fraud.

A July 2012 TIGTA report noted that problems “had been brought to [IRS] management’s attention long ago” via a September 2002 report, but “management has failed to take sufficient action to address those deficiencies.”

For the IRS, it might be nice to shift priorities toward this and away from your Quixotic battle for regulating tax professionals (this year, the Annual Filing Season Program). Meanwhile, I’ve tried for three days to call the IRS Practitioner Priority Service only to hear, “We’re sorry, but due to extremely high call volumes on that particular subject you’re call cannot be answered at this time.”

Posted in IRS, Tax Fraud | Tagged | Comments Off on “Give us a tax code that is simple enough for taxpayers to comply with and simple enough for the IRS to administer, and you’ll dramatically reduce fraud.”

You Have to Have an Unreimbursed Loss to Claim a Casualty Loss

Posted on March 8, 2015 by Russ

On Monday, February 23rd it was raining as I left for the gym. As I got to the gym, the road felt funny–slicker than in a normal rain. I realized that it was snowing. Now, our “blizzard” wasn’t crippling or anything like what people back east have gone through this winter, but it did inspire one of the best pictures I’ve seen this year:

vegas blizzard 2015

This came up because of a question I received from a reader on casualty losses:

Our business had a fire in 2014. We recently received a settlement from our insurance company for $225,000. We had estimated the amount of damages as $175,000, but the insurance company also paid us for relocation costs, and some other things, too. Can we claim a casualty loss on our tax return?

To claim a casualty loss, you need a casualty–an unexpected event that caused damage. You had that. You also must have suffered a financial loss. A fundamental rule of US taxation is you can only deduct things you pay for; a corollary is you can only take a loss on losses you incur. Here, you didn’t suffer a loss. You had excellent insurance coverage and there was no doubt you and your insurance agent did an excellent job. You did not suffer a financial loss as your losses were reimbursed. Thus, there’s no deductible casualty loss.

My reader has rebuilt. I’m happy to say Las Vegas has fully recovered from our blizzard, too.

Posted in IRS | Tagged | 1 Comment

Upon Further Review…

Posted on March 8, 2015 by Russ

Remember Rashia Wilson? How could anyone forget someone who brilliantly wrote on her Facebook page:

“I’m Rashia, the queen of IRS tax fraud,” Wilson said May 22 on her Facebook page, according to investigators. “I’m a millionaire for the record. So if you think that indicting me will be easy, it won’t. I promise you. I won’t do no time, dumb b——.”

She also posted this wonderful picture:

Rashia Wilson (Image Credit: Tampa Police Department)

She was sentenced to 21 years back in 2013, but appealed. The Court of Appeals ruled that there were procedural errors in her sentencing.

Robert Wood has the story of how Ms. Wilson got sentenced to 21 years at ClubFed again.

Posted in Uncategorized | 1 Comment

I’m Sure This Will Endear Him To The Judge

Posted on March 8, 2015 by Russ

You’re about to be sentenced on 20 felony convictions. You wouldn’t just flee the country, would you? Well Alan Rodrigues tried to do just that.

Mr. Rodrigues was convicted last May on charges that he led a national scheme to defraud the IRS.

Oryan Management has developed a simple, “Turn-Key” method for you, the ordinary taxpayer to receive these Tax Credits and Deductions while keeping your costs low. Depending on how you pay your taxes, you could reduce your next quarterly payment by more than your out-of-pocket expenses for the year.

In addition to offering positive cash flow and business stability, Oryan assures your peace of mind by providing Pre-Paid Audit Protection on your tax return.

That was from their marketing materials. The IRS investigated, and things went downhill from there. Mr. Rodrigues was found guilty of 20 felonies.

On February 25th, Mr. Rodrigues boarded a bus to San Ysidro, California–just across the border from Tijuana, Mexico. He ended up in a jail cell here in Las Vegas after the FBI discovered his trip. That he was carrying $63,000 on him at the time may have cemented law enforcement making a quick but likely accurate judgment that Mr. Rodrigues longed to leave the US rather than face sentencing. No such luck; he’ll be sentenced on Monday.

Posted in Tax Fraud | Comments Off on I’m Sure This Will Endear Him To The Judge

Online Gambling Addresses Updated for 2015

Posted on March 5, 2015 by Russ

NOTE: This list has been superseded by the 2016 list.

With the United States v. Hom decision, we must again file an FBAR for foreign online gambling sites. An FBAR (Form 114) is required if your aggregate balance exceeds $10,000 at any time during the year.

There’s a problem, though. Most of these entities don’t broadcast their addresses. Some individuals sent email inquiries to one of these gambling sites and received politely worded responses (or not so politely worded) that said that it’s none of your business.

Well, not fully completing the Form 114 can subject you to a substantial penalty. I’ve been compiling a list of the addresses of the online gambling sites. It’s presented below.

There is one major change for 2015. FINCEN does not want dba’s; however, they’re required for Form 8938. One would think that two different agencies of the Department of the Treasury would speak the same language…but one would be wrong.

You will see the entries do include the dba’s. Let’s say you’re reporting an account on PokerStars. On the FBAR, you would enter the address as follows:

Rational Entertainment Enterprises Limited
Douglas Bay Complex, King Edward Rd
Onchan, IM31DZ Isle of Man

Here’s how you would enter it for Form 8938:

Rational Entertainment Enterprises Limited dba PokerStars
Douglas Bay Complex, King Edward Rd
Onchan, IM3 1DZ Isle of Man

You will also see that on the FBAR spaces in a postal code are removed; they’re entered on Form 8938. You can’t make this stuff up….

Finally, I no longer have addresses for Bodog, Bovada, or Bookmaker.eu. If anyone has a current mailing address, please leave it in the comments or email me with it. [I have found an address for Bookmaker.eu which appears to be current.]

Note: This list is presented for informational purposes only. It is believed accurate as of March 5, 2015. However, I do not take responsibility for your use of this list or for the accuracy of any of the addresses presented on the list.

The list is in the cut text below.

If anyone has additions or corrections to the list feel free to email them to me.

Posted in Gambling | 3 Comments

IRS Proposes Session Method for Slot Machine Play and a Revision to the Regulations on Gambling Information Returns

Posted on March 3, 2015 by Russ

This morning the IRS proposed a new Revenue Procedure for individual taxpayers to determine wagering (gambling) gains and losses from slot machine play. Additionally, the IRS proposed an update to the regulations on information returns for gambling from slot machines.

There’s a lot to like in IRS Notice 2015-21, the IRS’s proposal for a “Safe Harbor Method for Determining a Wagering Gain or Loss from Slot Machine Play.” The proposal is for a daily session for slot machine play where there are electronic records. Let’s say an individual plays slot machines at Bellagio from 10:00am – 12:00pm and from 3:300pm – 5:00pm. That can all be combined into one session per this revenue procedure (if it is finalized).

Some things are not allowed. The day ends at midnight, so if a player is playing slot machines from 11:00pm to 1:00am, that would be two sessions (11:00pm – 11:59pm and 12:00am – 1:00am). Additionally, play at different casinos cannot be combined. Finally, each session stands on its own; a gambling loss from a session cannot be netted with a gambling win from another session.

The IRS doesn’t really have a choice in allowing session reporting of gambling; court decisions and an opinion from the IRS General Counsel have endorsed this. The proposed Safe Harbor procedure appears, at first glance, to strike a reasonable balance of session reporting with IRS verification. The only issue I see is that daily reporting is not normally provided to patrons by casinos.

Coincidentally, the IRS released a proposed regulation on reporting gambling winnings from slot machines (and bingo and keno). The IRS will be holding a public hearing on June 17th in Washington on the proposal.

The proposed regulation does not change the reporting threshold for when a W-2G is issued for slot play:

Under the proposed regulations, the reporting thresholds for winnings from bingo, keno and slot machine play (other than electronically tracked slot machine play) remain the same as under the existing regulations. These thresholds are intended to reach a balance between reporting burden and compliance risk. Based on over 35 years of experience with the current thresholds, the IRS thinks they are sufficient at this time to verify correct reporting of wagering income. Accordingly, §1.6041-10(b) of the proposed regulations provides that reportable gambling winnings means (i) $1,200 or more in the case of one bingo game or slot machine play, and (ii) $1,500 or more in the case of one keno game. However, advances in technology in the nearly four decades since the existing rules were adopted may overcome the compliance concerns that prompted the higher reporting thresholds and may warrant reducing the thresholds for bingo, keno, and slots to $600, consistent with other information reporting thresholds under §6041(a). Accordingly, the IRS and Treasury will continue to monitor the effectiveness of the existing (and proposed) reporting thresholds, and may propose to reduce those thresholds at a future time. Comments are specifically requested regarding the proposed reporting thresholds, including the feasibility of reducing those thresholds to $600 at a future time, whether electronically tracked slot machine play should have a separate reporting threshold, and whether the amounts should be uniform for bingo, keno, and slot machine play.

If anything, the threshold should be raised, not lowered. The value of a 1977 dollar today is a bit over $4. Thus, an equivalent threshold today is $4,800. I doubt the IRS will like my opinion on this. I am certain that casinos will not want the threshold lowered.

There’s more in this (this notice runs 30 pages), but it is Tax Season and I have a lot of work. I will report on this again after April 15th.

Posted in Gambling | 1 Comment

Don’t Call Us

Posted on March 2, 2015 by Russ

Today I attempted to call the IRS Practitioner Priority Service (PPS). I had an outstanding issue I needed to resolve. I didn’t get through.

I’m used to being on hold for two hours when calling the IRS. Unfortunately, the IRS has cut staff in customer service. When I called today I reached the normal recording, but every time I attempted to obtain help for an individual not in collections (that’s one of the options when calling the PPS) all I got was, “Due to extremely high call volumes that option is not available now. Please try your call again later.” Sigh.

I imagine the regular phone numbers are just as bad. The IRS estimates that only 53% of phone calls will be answered this tax season. (Of course, given that the IRS’s accuracy in answering tax help questions isn’t particularly good, some of the missed calls may be to a taxpayer’s benefit.)

Still, I have to wonder about the IRS’s priorities. First, the IRS eliminated the ability for tax professionals to use e-services to enter Power of Attorney forms; that increased call volume. The IRS has apparently cut staff at the CAF Unit–the unit that processes the POAs that we now must fax in. It’s taking over a week for those POAs to be processed (the IRS “promised” four business days). That’s increased call volume. Adding the complexity of the new property regulations and the Affordable Care Act is making things worse for everyone.

There’s no moral here–this is more of a rant. But it’s a rant with a consequence: If tax professionals can’t get through on the phone to resolve issues, we’re forced to write letters. This causes delays in resolving matters, leading to more phone calls, more letters, and more cost to the IRS. Unless I’m missing something this is the path we’re heading down.

Posted in IRS | Tagged | 3 Comments

It Was the Sisterly Thing To Do

Posted on March 1, 2015 by Russ

Three Wisconsin sisters allegedly decided that tax fraud and identity theft should stay in the family. They’ve been accused of filing 2,000 phony returns by the Wisconsin Department of Revenue.

The Staten sisters (Sharon, Tawanda, and Angela) face 22, 28, and 40 felony charges respectively. It appears the investigation began when Angela and an alleged accomplice, Anthony Coleman, were arrested at a traffic stop in East Troy, Wisconsin. The police found a fake income tax return along with other related evidence and forwarded that information to the Department of Revenue.

As to the scheme itself, it appears to be identity theft on a fairly large scale. With the help of accomplices, the sisters used the names of prison inmates to allegedly file the phony returns. While the DOR did stop many of the returns from being processed, the sisters allegedly took the department for $234,390. It’s a certainty that if the Wisconsin allegations are true that they took the IRS for more than that. The returns appeared to have been filed mainly with TurboTax.

At least one of the sisters is in prison with bail being set at $10,000. It’s quite probable that if that traffic stop hadn’t happened the sisters (if the allegations are true) would still be trying to fleece Wisconsin and the IRS.

Posted in Tax Fraud | Tagged | 1 Comment

Correctly Dealing with Tip Income

Posted on March 1, 2015 by Russ

Las Vegas is full of service workers, of course. With many of the world’s largest hotels and casinos in Sin City, there’s an army of workers to man the facilities. Last week, the Tax Court looked at a bartender that the IRS thought had unreported tip income. The bartender contended the IRS was drinking something. Who was right?

The petitioner did a lot of things right. He reported his tips to his employer, and they were included on his W-2. (The petitioner opted out of an automatic tip compliance program.) He kept meticulous records.

Petitioner testified about how his bar was set up and what a shift was like during the years at issue. He stated that his bar had only six stools and that customers would often sit at the stools playing poker for several hours and receive several comped drinks as a result. He testified that the only time his bar would be busy was when there was a big convention and then most of the drink sales tips would be on company credit cards rather than cash. He described the difficult economic times that Las Vegas faced during the years at issue and how his business had decreased as a result.

Petitioner also testified about the typical tipping behavior of his patrons. Most of his drinks served were comps, and he testified that customers rarely tipped on comp drinks and that if they did they might “throw [him] a buck or two” after several hours of sitting at his bar receiving the comped drinks. Petitioner additionally testified that college kids and foreigners rarely tipped.

As I tell my clients, document, document, and document some more and you usually will do well if you’re audited. The bartender wasn’t drinking but the IRS was.

Joe Kristan has more.

Case: Sabolic v. Commissioner, T.C. Memo 2015-32

Posted in Uncategorized | Comments Off on Correctly Dealing with Tip Income

10 = 2500 ?

Posted on February 25, 2015 by Russ

Of course ten doesn’t equal 2,500. However, in the brave new world of the United States Postal Service it does. On Monday, I mailed a Tax Organizer to a client here in Las Vegas; she’s about ten miles from where I am. I also mailed a completed tax return to a client in South Carolina. Both will be received today.

About one year ago the Postal Service noted their plans of slowing down first class mail delivery as a tool to save money. These have apparently now gone into full effect. Anything that isn’t a parcel (or Priority Mail) is being slowed down by one day. Mail that in the past would take one day to go from Summerlin to Henderson (two areas of Las Vegas) now takes two days. My Priority Mail package to Columbia, South Carolina takes the same two days.

This is just something to realize when you mail a letter (to your tax professional or anyone else); it may take a bit longer to get where it’s going. However, when you mail something to the IRS or a state tax agency, it’s the date of postmark that counts so while the slowdown will impact when your payment posts it does not impact the timeliness of the payment.

Posted in Taxable Talk | Tagged | 1 Comment