A Tax Poem

Indoors or out, no one relaxes

In March, that month of wind and taxes,

The wind will presently disappear,

The taxes last us all the year.

-Ogden Nash

Your IRS Questions Answered Here…

Question: I’m currently separated from my spouse, who owns his own business, and we are in the process of getting a divorce.  I have always filed jointly with my spouse and now the IRS is sending me notices stating I owe $35,000.  I have no idea how they are coming up with this amount as my spouse said he was paying the IRS.

Answer:  You may be able to avoid this liability entirely under the IRS’s Innocent Spouse Relief rules.  Under federal law if an income tax return is signed by both husband and wife, both spouses are 100% responsible for the taxes owed.  However, the law permits special consideration where a spouse cannot be held responsible for mistakes that are attributable to the other spouse.

If you meet the following criteria you may be able to apply for innocent spouse relief:  Your spouse didn’t report all their income; and you were not aware of it and no reason to know about it when you signed the tax return; and it would be unfair to hold you liable for the taxes owed due to your spouse’s error. If you feel you were deceived by your spouse or tricked into signing a return you thought was correct this will help your case too.  There are many other ways you may be eligible for relief under the IRS’s innocent spouse rules and we can help sort this out and determine the proper path for resolution. Don’t pay more than you are legally obligated to.

Fasteners, Inc. Executive Tries to Screw the IRS and Gets Nailed

William Keith Jones, of Washington State, pled guilty to four counts of tax evasion as part of a plea agreement.

Jones, a former chief executive officer, and general manager of Fasteners, Inc. admitted in court to filing fraudulent tax returns from 2012 to 2015; failing to pay nearly $74,000 of taxes owed on unreported income.  Although Jones filed returns which included his salary from Fasteners, Inc., they did not include company funds that Jones used for personal expenses, including his children’s tuition at two universities, credit card bills and landscaping expenses at his personal residence. Jones admitted to taking the funds which at first he used as a “tax dodge”, and “it kind of snowballed.”

As part of the plea agreement, the federal government dismissed the case against Jones for wire fraud.  He did agree to pay restitution up to the amount of $310,450.  The final amount will be determined by the court at sentencing, which could also include up to five years in prison for each count of tax evasion, three years supervised release, and additional monetary fines.

Take the Tax Trivia Challenge!

1. Which ancient civilization revered the tax professional as the most noble man in society?

2. How much do you think the tax on a gold watch was during the Civil War?

3. What was the top income tax rate during World War 1?

4.  Which issue had the most lobbyists working on it in 1999?

5.  What was the average annual income in 1913?

6.  In all, about how many people do you think reported 078-05-1120 as their Social Security number?

7.  The error rate for a paper return is 21 percent; what do you think the error rate is for an e-file return?

8.  What is a duck stamp, and how much is it worth?

9.  What items were first taxed as a luxury in 1898, at the start of the Spanish-American War, and continue to be taxed today?

 

 

The Tax Trivia Challenge Answers!

1.  Greece.  Although for the most part, taxes and taxation are often received with mixed emotions.  Historically, taxes have been met with rebellion and unrest.  French tax collectors were sent to the guillotine in 1789.

2.  $1.50 – During the Civil War, the government placed taxes on all sorts of goods in order to generate revenue.  Carriages, gold watches, musical instruments and pool tables are  among some of the items taxed.

3.  77 percent – In 1913, Congress levied a 1% tax on net personal incomes above $3,000, with a 6% surtax on incomes above $500,000.  As the nation sought greater revenue to finance the World War effort, the top rate of the income tax rose considerably.

4.  Taxation – Lobbyists who work with the federal government are required to fill out forms identifying the issues that they support.  In 1999, taxation and the IRS Code had almost 3,000 lobbyists working on it, serving 1,411 interest groups.

5.  $800 annually – Back in 1913 tax rates ranged from 1%-7%.

6.  40,000 – In 1938, as part of a promotion to sell wallets through Woolworth and other stores, wallet manufacturer E.H. Ferree Co. wanted to demonstrate how a Social Security card would fit into its wallets and placed them inside.  Many people confused the sample card with their own.

7. Half a percent (.5%)

8.  Over $5,000 – The duck stamp is an actual stamp that was issued in 1934 to people over the age of 16 who wanted to hunt waterfowl and had to pay a tax of $1.

9. The telephone – Prior to the income tax, many taxes were placed on items that were considered a luxury.

Las Vegas Man Gambles with the IRS and Loses

William Waller Jr., a real estate broker from Las Vegas, NV was convicted in a jury trial of one count of attempting to evade the payment of federal income taxes of more than $500,000 and two counts of failing to file income tax returns.

After filing his 1998 tax return showing zero income, Waller did not file any tax returns for the next 20 years, despite earning $400,000 in 2011 alone. Using a bank account under a fictitious business name, Waller had all commissions earned deposited into that account, which he used to pay personal expenses as well as taking large cash withdrawals.  In addition, Waller took out loans on real estate that he owned to eliminate any equity he had.

Sentencing is scheduled for June 21st, where he could face five years in prison for the count of tax evasion and one year in prison for each count of failure to file a tax return.  Waller also could be sentenced to a period of supervised release, restitution and monetary penalties.

Just a Single Count of Tax Evasion Could Land You in Prison

Kenneth Wenberg, a medical doctor from Heppner, OR, pled guilty to one count of tax evasion as part of a plea agreement with the court.

According to court documents, Dr. Wenberg created nominee entities to hide assets and income earned as a physician with two separate health care facilities.  Dr. Wenberg opened numerous bank accounts in the names of the nominees and instructed his employers to deposit his salaries directly to the sham accounts to avoid income tax liabilities.  He also purchased real property in the false entities name and paid personal expenses from their bank accounts.

Wenberg faces a maximum of five years in prison, a fine of $250,000 and three years of supervised release.  He has also agreed to pay full restitution to the IRS of approximately $187,000.

Art Dealer Tries to Paint a Different Picture of Her Income

Mary Boone, a prominent art gallery owner in NYC, who was once called “Queen of the Art Scene” by New York magazine, was sentenced to two and a half years in prison on charges of filing false tax returns.

Boone pled guilty to the charges for filing both personal and business false returns. Prosecutors said that Boone had reported false business losses and used  over $1.6 million of business funds to pay personal expenses, including $793,003 to remodel her Manhattan apartment, beauty salon purchases of $24,380, $14,00 on Hermés products and $5,000 on items from Louis Vuitton, which she wrote off as business deductions.  She also falsely inflated the gallery expenses, and in 2011, transferred $9.5 million from one business bank account to another and reported the account transfers as tax-deductible business expenses by providing falsified check registers to her accountant.

Boone opened her first gallery in 1977, showcasing young and upcoming artists, and as her business and name grew, moved the gallery to Midtown and opened another space in Chelsea.

In 2016, Boone was sued by actor Alec Baldwin, who alleged that Boone knowingly sold him a fake Ross Bleckner painting. That case was settled out of court, with Boone paying Baldwin “a seven-figure sum.”

Your IRS Questions Answered Here…

Question:  I received a notice from the IRS because I did not have the funds to pay the taxes I owed on my 2017 income tax return.  I also was late in filing my tax return. Not only is the IRS demanding the tax I owe, but they have slapped on these huge amounts for penalties and interest.  I had extenuating circumstances that caused all of this. This isn’t fair…what can I do?

 

Answer:  Your Tax Resolution Specialist can request a removal (abatement) of penalties 2 ways:  1) “First Time” Penalty Abatement and 2) a Reasonable Cause Argument. The IRS writes off billions of dollars in penalties each and every year, but you must know how to do it correctly.

A First Time Penalty Abatement  (FTPA) can be requested if you have a “clean” compliance record, meaning you have not incurred a Failure to File or Failure to Pay penalty for the 3 years preceding the year you are requesting the first time penalty abatement on.  FTBA is generally granted in most cases, regardless of what the underlying reason is, if you are eligible.

There are 9 main “Reasonable Cause” arguments to get your penalties removed.  They are: 1) Death, Serious Illness or Unavoidable Absence 2) Fire, Casualty or Natural Disaster  3) Unable to Obtain Records (common issue with couples going through a divorce)  4)  Mistake was made by the taxpayer or tax preparer  5)  Erroneous Advice or Reliance on a tax preparer  6)  Written/Oral Advice from the IRS  7)  Ignorance of Tax Laws  8)  Reasonable Cause/Ordinary Business Care and Prudence  9)  Undue Economic Hardship.

When using a “Reasonable Cause” argument, the event that caused you to file late or prevented you from paying the tax when due must correlate to the tax years involved and supporting documentation is essential.  Your Tax Resolution Specialist will guide through which documents are needed and submit a formal request in writing.  For instance, let’s say you were going through a divorce and you ex-spouse withheld records from you needed to file a complete and accurate income tax return and you filed your return last because of this.  You could request abatement of these penalties using one of the above reasonable cause arguments, specifically #3 above.

Fun IRS Statistic

In 2017, 88% of taxpayers view cheating on their taxes as not at all acceptable. 9% said “a little here and there”, and 3% responded with “as much as possible”

 

Source: 2017 IRS Data Book

Landscaper Hedges His Bet and Loses with the IRS

Joseph Ferry III, from Port Saint Lucie, FL was indicted after his arrest on five counts each of filing false corporate and individual tax returns.

Ferry was the owner of Ferry Enterprises, Inc., which provided residential and commercial landscaping services. The indictment alleges that Ferry understated his personal income on his individual returns and the business revenue for Ferry Enterprises for the tax years 2012-2016. According to the indictment, Ferry deposited business income into his corporate bank account, but Ferry used the money to pay personal expenses, including payments on his personal mortgage and loans, purchased firearms, home renovations and jewelry.  It’s also alleged that he withdrew more than $2.9 million in cash from the corporation’s account.

If convicted, Ferry could face a maximum of three years in prison for each of the 10 counts of filing a false tax return with the IRS, as well as monetary penalties and restitution.