IRS Details Car Wash Owner’s Taxes

A couple from Missoula, MT pled not guilty to 13 counts of conspiring to defraud the federal government.  Joseph Baumgardner and his wife, Traci Baumgardner, along with their accountant, Daniel Burke of Florence, MT were accused by the federal government of skimming money from two businesses and failing to report that income on their tax returns.

The Baumgardner’s owned the Splash Car Wash and Pro Sweep Plus, an industrial maintenance company and Burke, a CPA prepared their tax returns.  The indictment alleges that the Baumgardner’s skimmed cash from the car wash and with their CPA’s assistance, did not report the cash on their corporate or individual returns.

Although earning over $5 million for the years 2011 through 2013, the total income tax paid for the same time period was $10,066. They also incorrectly identified personal expenses, such as a 2004 Freightliner motor home (calling it a trailer), a Nordic Heat ski boat (calling it a sweeper) and family trips as businesses expenses.

If convicted, the defendants face a maximum of five years in prison, a $250,000 fine and three years of supervised release.

Utah Man Thinks the Laws Don’t Apply to Him

For two decades Judge Paul Parker tried working with Dennis Kay Iverson, a man from Utah who owed back taxes, when the Judge finally had enough and issued a bench warrant for Iverson’s arrest.  Ten days later Iverson was taken into custody.

Iverson owes the state of Utah $25,062 in back taxes, interest and penalties. He represented himself in court and argued that the tax laws were not applicable to him. Judge Parker sentenced Iverson to seven 1-15 years, and six 0-5 years, in prison on 13 felony tax evasion convictions.  The terms will run concurrently, which means he will serve all of the sentences at the same time.  At his sentencing, Iverson told Judge Parker, “This is an emergency war powers court and I order you to release me.  I will accept no form of punishment.”

Software Company Owner will be Doing Hard Time in Prison

The owner of a software firm in Carnegie, PA, Amarender Tiparthy, was sentenced in U.S. District Court to two years in prison for payroll tax evasion.

Tiparthy pled guilty to collecting payroll taxes, including Medicare, Medicaid and Social Security from his employees from 2010 to 2013 totaling over $2.2 million but didn’t turn any of the money over to the IRS.

While Tiparthy’s attorney argued that he paid some of the money back, U.S. Attorney Mary Houghton disputed that, saying that Tiparthy had been the subject of IRS collection efforts for 15 years, and during that time built a $500,000 house which is considered lavish in Western Pennsylvania. Tiparthy’s attorney also requested that he be given home detention, which was rejected by the judge, as attorney Houghton stated, “The $2.2 million dollar back taxes case makes this the largest payroll taxes case in the district and that by giving Tiparthy probation would send a horrible message to other tax cheats.”

In addition to prison time, the judge ordered Tiparthy to pay the full amount owed to the IRS.

R&B Diva Can’t “Un-Break” the Bank

For most people, starting the year off with a highly publicized breakup would be the worst of your troubles. Unfortunately for rhythm and blues singer Toni Braxton, the celebrated artist is as famous for her astounding money troubles as she is for her beautiful voice.

In January of 2019, just days after calling off her engagement to hip hop singer Birdman, court records came out revealing the IRS had filed a lien against Braxton for over $340,200 in back taxes for 2017. At the same time, the California Franchise Tax Board also filed a tax lien against her for over $116,100, leaving the singer with nearly half a million dollars in debt. Both the IRS and the state of California warned Braxton that if she failed to pay her dues, they would start the process of seizing her property.

This isn’t the first time the Grammy winner has found herself with money troubles. Last year, Braxton was hit with four tax liens-two from the state of California and two from the federal government. At the time, the singer owed $780,808.29 in back taxes from 2015 and 2016.

Braxton has also filed for Bankruptcy twice in the past. She first filed for bankruptcy in 1998, later blaming a bad record deal as the reason for her money troubles. Additionally, Braxton has claimed she spent most of her money on “girly things” like dishes, houseware, and Faberge eggs. Later, when Braxton filed for bankruptcy again in 2010, she cited health problems that forced her to cancel a number of shows. Braxton reportedly had $10 million in debt erased after her second bankruptcy.

Braxton has been very open about her financial struggles, saying she hopes to be a cautionary tale for aspiring young artists about keeping a tighter grip on those Gucci purse strings. Ideally, they won’t hold so tight that they try to cut the IRS out of their share. Hopefully Braxton and the IRS will be able to work out a deal and she won’t be saying, “The third time’s the charm!’ next year.

Your IRS Questions Answered Here

Question: I have a substantial tax amount owing, the IRS is harassing me and I need help.  I got a quote from another firm at a much lower price.  Why should I hire you?

Answer:  This is your financial life and the stakes are very high. If you needed heart surgery, would you shop around for the least expensive surgeon or would you get the very best you can find. The same holds true for dealing with the Internal Revenue Service. Having IRS problems can ruin all aspects of your life, your marriage, relationships with your children and family members, your employment, ability to buy a house, a car, money for retirement or even have a bank account.  You want the best person for the job, not the cheapest.

Your IRS debt doubles every 8 years due to the daily compounding of interest and penalties so to ignore this problem is probably not a wise decision.  Generally, you’ll never have to speak or meet with the IRS once we’re retained on your case; you’ll be able to sleep better at night knowing that we’re working hard to get you the lowest settlement allowed by law in the most expeditious fashion possible!

Office Manager Helps Herself to Employer’s Money

Terra Dawn Ferguson, of New London, NC, pled guilty in Federal Court on one charge of employment tax fraud.

Ferguson was employed as the office manager for a pediatric office for approximately 24 years.  It was Ferguson’s responsibility to collect, account for and pay to the IRS the business’ employment taxes. From 2011 to 2016, Ferguson withheld $78,937 from the employees’ paychecks but failed to turn those funds over to the IRS.  The employer’s share of employment taxes in the amount of $35,472 was also not paid to the IRS.  Instead, Ferguson used the money to pay her personal credit card bills, funded personal business ventures including a mountain cabin rental and a bar, paid for personal vacations and issued herself checks totaling $1.4 million from the business’ bank account.

In addition, Ferguson tried to hide her crime by preparing false income tax returns on behalf of her employer that underreported gross receipts and inflate mortgage interest deductions. The result is a loss to the IRS of $374,101.

Ferguson faces up to five years in prison, restitution and monetary penalties.

Any Way You Slice It, Deli Owner is in Trouble with the IRS

The owner of a deli in Hamden, CT, Raymond George, waived his right to be indicted and pleaded guilty in federal court to one count of tax evasion.

George, who owned Ray & Mike’s deli, tried to evade taxes in numerous ways between 2012-2013.

According to court documents, George failed to deposit all of the cash receipts he collected from his business into his business bank account.  He used a portion of the cash to fill an in-store ATM and didn’t report the cash as income.

George deposited three large checks totaling $300,000 from Ray & Mike’s business account to his personal investment account without reporting the funds as income, and then withdrew the funds to buy personal investment property. He was also accused of depositing a check for $25,800 from Ray & Mike’s lottery account into his personal investment account without reporting the income.

The IRS states that George’s underreported income for those two years totaled $638,173, resulting in a loss to the IRS of approximately $220,000 in taxes.

George faces up to five years in prison and a fine of up to $440,000.  He has agreed to pay back taxes of $220,663 plus penalties and interest.

The IRS and Computerization

At the end of the Second World War, the IRS was handling sixty million tax returns each year, using a combination of mechanical desk calculators, accounting machines and pencil and paper forms. In 1948 punch card equipment was used. The first trial of a computer system for income tax processing was in 1955, when an IBM 650 was installed in a Kansas City office that processed 1.1 million returns. The IRS was authorized to proceed with computerization in 1959, and purchased IBM 1401 and IBM 7070 systems for local and regional data processing centers. The Social Security Number was used for taxpayer identification starting in 1965. By 1967, all returns were processed by computer and punched card data entry was phased out.

Former Police Chief Learns Orange is the New Blue

Former police chief, Anthony Marraccini, of Harrison, NY, was sentenced to 18 months in prison for tax evasion.

Marraccini pleaded guilty to charges against him this past January.  According to federal prosecutors, Marraccini earned more than $2.5 million from his home improvement business and rental income from investment property owned, causing a loss to the IRS in excess of $782,000 and nearly $200,000 in state income taxes.

Marraccini retired in 2016 from the Harrison Police Department after serving nearly 30 years due to being placed on paid leave for allegedly falsifying his timesheets.

In addition to prison time, the court sentenced him to one year supervised release, a fine of $25,000 and pay $126,347 in restitution.

Marraccini must report to prison on July 31st.

Tax Identity Theft and the Dark Web

In the World Wide Web, there is a part of it that is only accessible by means of special software, which allows users and website operators to remain anonymous or untraceable. That place is known as the dark web.

A cybersecurity firm called Carbon Black, released a report in April about the growing threat of obtaining inexpensive tax identity information through the dark web.  Here’s what they found:

·         W-2’s and 1040’s are available at a relatively low cost, ranging from $1.04 to $52.  Names, social security numbers and birthdates can be obtained for a range of $.019 to $62.

·         For $1,000, a relatively inexperienced hacker can purchase authenticated access to a U.S.-based bank account, file a false tax return, claim the IRS refund and cash out via a cryptocurrency exchange for a 100+% return on investment.

·         How-to guides for cashing out other people’s tax returns are available for around $5 but one offer, claiming to be the most comprehensive guide for tax refund cash out was listed for $70.

·         A hacker can now provide stolen/purchased identity information (Name, DOB, SSN, etc.) and receive an original image of some person holding a forged passport with matching picture/information and scans of the forged identity documents.

In an article from Bleeping Computer, a summary of the report said:

“Financial and social security identity theft services are becoming more and more affordable every year on the dark web, leading to a drop in the skill level required for tax fraud schemes.  This means that even the most inexperienced cybercriminals can now quickly whip up a whole new identity with just a couple of mouse clicks.  It is just as easy for a crook to get his hands on the documents and credential needed for running a successful tax identity theft campaign these days as is for someone to order a pizza using a food delivery service.”

Although the IRS is taking steps to identify and stop tax fraud, there are ways that the taxpayer can take to minimize the chances of identity theft:

·         Protect your data by limiting the places your information is stored;

·         Only use secure, encrypted transfer methods when possible;

·         Never click on a link sent to you in an email, always go to the actual website;

·         If you see a small charge on your credit card that you did not make, contact your credit card issuer immediately;

·         Review your credit report annually.