$1.7 million Audit Reduced to $0

The IRS has been keying in on gambling income for audit purposes over the past couple of years. Since the advent of online gambling, during the Covid-19 pandemic, online gambling has become more prevalent, further increasing IRS scrutiny.  Its extremely common for a taxpayer to think that if they lost money gambling they don’t need to declare any gambling income on their tax return. That said the IRS requires a taxpayer to report the total amount of their gambling income on their tax return. If however you lose money gambling you are able to write off those losses up to the extent of gambling winnings. When a taxpayer hits a jackpot at the casino, if the winnings are in excess of $1200 the casino is required to issue an IRS form W2-G. After the tax return is submitted the IRS compares and contrasts the taxpayers return against data received by the IRS on a wage and income transcript. In the event that the tax return does not reflect the taxpayers gambling winnings the IRS will oftentimes subject them to an audit.

That is what happened in this particular instance a taxpayer had won over $3 million in gambling winnings however they had lost more than they had won. The IRS subjected the taxpayer to an audit and discerned that they owed over $1.7 million in tax penalties and interest. After hiring our firm we were able to review the taxpayers records and challenged the IRS assessment. In this instance as the taxpayer had lost more than they had won we were able to reduce the proposed tax increase from $1.3 million down to $0.00.

In the event that you receive and audit letter from the IRS regarding gambling winnings it is important 2 challenge that proposed assessment if you do not believe that you will owe.

IRS Tax Tip 2022-144: Choosing a Tax Preparer

Did you know that McCauley Law Offices can help you with tax prep? Contact us today for a FREE consultation! If your taxes are prepared right the first time, you won’t have to worry about the IRS. Come to McCauley Law Offices and let us help you.

The IRS believes that taxpayers should know what they’re getting when they choose a tax preparer, and that’s why IRS Tax Tip 2022-144 is all about what a tax payer should look for when it comes time to choose a preparer.

Unless you’ve been living under a rock, you probably know that it’s filing extension crunch time. Tax payers should be cautious when choosing a preparer, and not jump to a hasty decision just to get their taxes filed quickly. All it takes for someone to be a paid tax return preparer is a IRS PTIN, or Preparer Tax Identification Number, where a tax pro has different higher levels of education and expertise. Each tax payer should carefully determine which type of preparer would be best suited to represent them. While MOST tax preparers provide an outstanding and professional tax service, there are instances where the taxpayer is burned by unreliable, or worse, unethical preparers who take advantage of them. Unfortunately, even in instances where the preparer is unreliable the taxpayer is responsible for the information included in their return. In other words, the taxpayer is left holding the bag for the missteps of their preparer.

The IRS suggests the following steps for tax payers to take in order to ensure they choose a preparer who will meet their needs:

  • Check the IRS Directory of Federal Tax Return Preparers. This searchable and sortable public directory helps taxpayers find a tax return preparer with specific qualifications.
  • Check the preparer’s history with the Better Business Bureau. Taxpayers should check for any disciplinary actions for credentialed tax return preparers. For CPAs, taxpayers should check with the State Board of Accountancy. For attorneys, they should check with the State Bar Association. For enrolled agents, they can verify the agent’s status on IRS.gov.
  • Ask about fees. Taxpayers should avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of the refund into their own financial accounts. They should be wary of tax return preparers who claim they can get larger refunds than their competitors.
  • Ask if the preparer plans to use IRS Free File. Taxpayers should make sure their preparer offers to electronically file their tax return using IRS Free File.
  • Make sure the preparer is available. Some tax preparers only work on a seasonal basis. Taxpayers should consider whether the tax return preparer will be around after the filing deadline has passed. Taxpayers should do this because they might need the preparer to answer questions about the preparation of the tax return.
  • Ensure the preparer signs and includes their preparer tax identification number. Paid tax return preparers must have a PTIN to prepare tax returns. Preparers must also sign returns and include their PTIN.
  • Understand the preparer’s credentials. Enrolled agents, CPAs, and attorneys have unlimited practice rights and can represent taxpayers on any tax matter before the IRS. However, tax return preparers who participate in the IRS Annual Filing Season Program have limited practice rights.  They must have prepared and signed the tax return and can only represent the taxpayer for Taxpayer Advocate Service and customer service activities, only before any examination of the tax return.

Bookkeeper Uses Gas Money And Fuels Her Demise

Sandra Roberto was living the American Dream, until she committed tax fraud that is.

Sandra started her career at Mesilla Valley Transportation as a fuel clerk and worked her up to the accounting department. She was sentenced for four years and three months for wire fraud and filing false tax returns. Roberto had access to third party payment processors her employer used from 2011 to 2018, and was responsible for loading cash advances onto debit cards given to drivers for gas purchases. Roberto regularly added more cash than was required, and would then call the payment processing company and ask for codes to remove extra funds from the cards. Once the extra funds were back in the company’s bank account, Roberto wrote checks to herself for the newly deposited amounts.

Roberto wrote 1,735 checks to herself for a total of $1,130,215 over a period of eight years . She reported partial amounts of the embezzled funds on her tax returns, for example in 2017 when she embezzled $260,705 and reported just $31,932. She used the funds to pay her mortgage, purchase expensive cars, and for lavish vacations.

In addition to restitution to her employer, and her prison sentence, she was ordered to pay the IRS $250,473.

Contact McCauley Law today for a FREE consultation. We can work with you and the IRS to ensure you get the best possible deal and that you are out of your Tax Jam. We know we can help you. When the IRS comes knocking, let us answer!

IRS Celebrity Terror Tale: Wesley Snipes

The actor behind vampire-hunting Marvel superhero Blade, Wesley Snipes was making headlines a few years back due to his ongoing tax battle with the IRS. Let’s take a look as his case.

Snipes’ tax woes first hit the limelight back in October 2006, after he was charged with felony tax fraud and conspiracy. While acquitted of the felony charges, Snipes was ultimately convicted of three misdemeanor counts of failing to file tax returns between 1999 and 2004 and was sentenced to a stint in jail. Though Snipes and his team argued his conviction and insisted that the actor was not granted a fair trial, the U.S. Supreme Court upheld the ruling the ordered Snipes to serve out his 3 years from 2010-2013.  Upon his release in 2013, the actor still owed a whopping $23.5 million in back taxes from 2001 through 2006. Snipes made an offer in compromise (OIC) of $850,000 — equating to barley 4 percent of his total debt. An officer from the IRS was sent to determine Snipes’ assets and financial condition and Snipes refused to cooperate with the investigation. The officer denied his OIC, which then prompted Snipes to accused the IRS of abusing its discretion and took them to court. Not surprisingly, the tax court sided with the IRS.

The IRS went on to reduce their settlement offer to $9.5 million, while Snipes refused to increase his original offer citing the “economic hardship” that paying the bill would cause. Snipes was denied on the grounds that he did not meet the criteria for economic hardship which usually applies in cases of long-term illness, medical condition, disability, or monthly income being exhausted from caring for dependents.

The IRS’ decision to deny Snipes’ low OIC was upheld again by U.S. Tax Court Judge Kathleen Kerrigan in November of 2018 with the judge stating that accepting Snipes’ OIC would not be in the best interests of the United States.

McCauley Law Offices has the experience needed to work with the IRS and ensure you settle your Tax Jam for the best possible price. Contact us today for a free consultation, and we will walk you through your options and develop a course of action with your best interests at heart. When the IRS knocks, let us answer!

Freeman No Longer a Free Man, Attorney Gets Locked Up

Deron Freeman’s first run in with the IRS occurred when he fell behind on his federal tax payments from 2006 to 2010. In 2011 he entered into a payment agreement with the IRS which could have been the end of this story. But then, why would we tell it?

Once this deal with the IRS was started, Freeman begin using a bank account in the name of a third party to hide hundreds of thousands of dollars. After he had made enough payments to the IRS that a lien was removed against him, Freeman transferred $248,000 from the third party account to his personal money market account. He subsequently filed false tax returns for 2011, 2012 and 2013, failing to pay taxes on approximately $950,000 in income. He also significantly underpaid his taxes from 2012 to 2015. Freeman spent lavishly on cars, boats. and 1.5 million dollars building a new home.

He was sentenced to two years in prison, fined $15,000, and ordered to pay $357,062 to the IRS.

McCauley Law can help you out of your Tax Jam, just give us a call today for a free consultation. Our experienced team can work with the IRS for you and help you get the best deal possible.

Your IRS Questions Answered Here…

Question: I haven’t filed my tax returns for 2018, 2019 or 2020 and the IRS keeps sending me notices that I owe them 38,273. How can that be? I never even filed. What should I do?

Answer:  When a legally required income tax return isn’t filed on time, the IRS can file an income tax return on your behalf.  It’s called a “substitute for return” or “SFR”.  Most of the time the ensuing tax liability is much greater than if you filed your own return. This is because the IRS doesn’t give you credit for proper exemptions, credits nor (business) deductions. In addition, it’s a misdemeanor, punishable by up to one year in prison and a $10,000 fine, for each year not filed.

The good news: McCauley Law Offices can prevent this from happening, but you must act fast. Once retained we can replace all “SFRs” with originally filed returns, reducing in most cases, what you owe.  Once these returns have been filed, the next step is to negotiate a resolution with the IRS on the remaining amount owed.  You will most likely be looking at one of two options – the Offer in Compromise or a properly structured payment plan.

The Offer in Compromise (OIC) was created for people who owe the IRS but who, for whatever reason, are unable to pay their tax debt off, even over time. The Offer in Compromise allows taxpayers to negotiate a settlement amount that will take care of the entire tax debt once and for all. This settlement agreement can lower the tax debt by a significant amount, however there are strict eligibility requirements.

If you do not qualify for the OIC then you may consider a payment plan, which if properly structured, allows you to pay off your debt over time by making manageable monthly payments, much like a commercial installment loan.

Used Car Salesman Used Friends to Cheat IRS

It’s nice to have friends! Especially when they agree to commit tax fraud with you.

Donald Benck of St. Louis pleaded guilty to hiding upwards of $300,000 in income from the IRS. The used car salesman arranged for his employer to pay his commission with checks made out to several acquaintances. In exchange for a small fee, the acquaintances deposited the checks into their personal bank accounts and gave Benck the cash.

In 2014 Benck underreported his income by $31,300, in 2015 by $131,400, and in 2016 by $93,035, causing the IRS a loss of $84,092.

Benck faces restitution and up to 15 years in prison.

At McCauley Law Offices, we can help you get out of your Tax Jam and get you in a better situation with the IRS. Contact us for a FREE consultation! When the IRS comes knocking, let us answer.

IRS Celebrity Terror Tale: Blac Chyna

Blac Chyna, born Angela Renée White, is in big trouble with the IRS – and it is going to take far more than her famous resume to get her out of it.

A former exotic dancer, Blac Chyna’s resume also boasts her appearance in a Nicki Minaj music video as a stunt double. Chyna is perhaps most well known today for her rocky relationship with Rob Kardashian, reality TV stint, and her various lawsuits against the Kardashian family that have taken center stage since their split. This spring, Blac hoped to receive some financial compensation for the cancellation of her and Rob Kardashian’s since cancelled reality TV series “Rob & Chyna.” She claimed defamation and contract interference in her suit against a number of members of the Kardashian family, including “momager” Kris Jenner, and asked the courts to award her $100 million in return.

The Kardashian family’s lawyer, in turn, trapped her into airing her own IRS dirty laundry on the witness stand.  According to a report on TMZ, Chyna admitted during testimony that she hasn’t paid her taxes in years and doesn’t even have a bank account. Chyna also admitted under oath that she has not filed personal taxes since 2015, or filed for her businesses – which include Lashed LLC, 88 Fin, and Blac Chyna Inc. –  since either 2018 or 2019. Chyna reported, however, earning to the tune of $2 million between 2018 and 2020 through celebrity appearances and OnlyFans.

Chyna was not victorious in her suit against the Kardashians, and she may have landed herself in hot water with the IRS in the process. The IRS will surely be attempting to take this “Reality Start” back to reality. Blac, if you need representation, McCauley Law Offices is here for you!

Contact us today for a FREE consultation, and let us get you out of your Tax Jam!

Two Year Prison Term for Dallas Cowboys Fan Who Owes $12.7 Million in Payroll Taxes

Thomas Valdez Rodriguez is no star when it comes to the IRS.

Thomas, the owner of Tom-E-Lee Trucking and Tom-E Lee Industries was sentenced to 24 months in prison for failing to pay employment taxes.

From 2012 to 2018 Rodriguez failed to pay the employment taxes he withheld from employees of his trucking company and did the same from 2015 to 2018 on payments withheld from employees of Lee Industries company. Rodriguez also stopped paying personal income taxes beginning in 2011. In total he owed the IRS $12,714,214.42 in unpaid payroll taxes and unpaid personal income taxes.

Rodriguez used some of the money for season tickets on the 50-yard line at Dallas Cowboys games, chartered jets to take him and his friends to the games, and he also purchased a new home worth over two million dollars.

In addition to the prison sentence, he was ordered to pay the $12,714,214.42.

Contact us at McCauley Law Offices today for a free consultation! We can help you out of your Tax Jam. When the IRS comes knocking, let us answer.