Archive | Tax Evasion

The real IRS tax-exempt scandal is who they DIDN’T go after

By on May 18, 2013 in Democracy in Action, Elections, Internal Revenue Service, Politics, Tax Evasion

The rolling sideshow of hearings and revelations about the IRS department responsible for reviewing organizations applying for 501(c)(4) tax-exempt status might not ever get around to dealing with a larger question: Why were some little organizations steamrolled with questions and scrutiny, while major national operations apparently got a pass?

As ProPublica pointed out in a long piece examining what it characterized as dysfunction at the IRS, a review by the Inspector General said that there was insufficient oversight of 200 lower-level employees responsible for examining more than 60,000 nonprofit applications annually.

“The main question raised…is how the Cincinnati office and superiors in Washington could have gotten it so wrong,” the story notes. “The audit shows no evidence that these workers even looked at records from the Federal Election Commission to vet much larger groups that spent hundreds of thousands and even millions in anonymous money to run election ads.”

The tax-exempts that didn’t come under scrutiny, as The New York Times points out, included mega-fundraisers from both sides of the political spectrum, such as Crossroads Grassroots Policy Strategy, Karl Rove’s organization, and the Democratic-oriented Priorities USA.

Organizations are supposed to operate “exclusively” for the promotion of social welfare in order to qualify as a 501(c)(4) tax-exempt group. At least, that’s what the tax code says. But the IRS has given a pass to groups that can show they are not “primarily engaged” in election-related activities.

Admit it: Regardless of where you stand politically, isn’t this one area where you’d like to see the IRS enforce the very letter of the tax code?

Oscars tax hangover: No free swag bags for celebrities

By on March 8, 2013 in Internal Revenue Service, Tax Advice, Tax Evasion

You probably heard that performers, nominees and others attending the Oscars got “Swag Bags” containing goodies worth $47,802, as Today.com and others reported. A lovely consolation prize for any nominees who didn’t get the statue, fer sure.

But did you hear that people getting the bags have to pay taxes on them?

Really! The IRS has said–you can see it for yourself right here–
that the value of the goodies are income and not gifts.

Says the Service, “…the organizations and merchants who participate in giving the gift bags do not do so solely out of affection respect or similar impulses for the recipients of the gift bags.”

The IRS says that businesses showering goodies on celebrities don’t do it out of affection!Those corporations don’t really, really love them!!

And people, don’t think the celebrities won’t notice that these gift bags are not about love. The IRS also has a bunch of rules about how businesses have to report the value of the gifts on Form 1099-MISC, which is sent to the goodie-bag recipients…and to the IRS.

A sledgehammer for foreign bank accounts

By on January 12, 2012 in Tax Advice, Tax Evasion, Tax Planning Strategies

A new law requiring financial institutions to register with and provide data to the Internal Revenue Service is getting a lot of attention in the business community because of the additional burden it is going to put on foreign corporations. But it’s also going to complicate income tax filings for lots of Americans who have accounts outside the U.S.

The Foreign Account Tax Compliance Act (FATCA) has on its surface a laudable goal—preventing people from using foreign trusts and other accounts to evade income taxes. The Act not only imposes new reporting requirements on taxpayers, but also requires foreign institutions to provide information that could help the IRS in tracking down tax cheats.

“Congress came in with a sledgehammer,” H. David Rosenbloom, a lawyer at Caplin and Drysdale in Washington and a former international tax policy adviser for the Treasury Department, told The New York Times. “The Fatca story is really kind of insane.”

You could have to file the new Form 8938 (here’s a link to the 10 pages of instructions for the form , which the IRS says can be completed in one hour & five minutes) if you have as little as $50,000 in total in the right—or wrong—types of foreign accounts and assets.

While, as Robert W. Wood explains in Forbes, the limit can be as high as $600,000 for married couples living abroad, just figuring out whether or not you’re subject to this new law is bound to be time-consuming. And failing to file the form can cost you $10,000 or more in penalties.

Taxpayers who have foreign accounts—by the way, that includes accounts in Canada or Mexico—already know they have to send something called Form TDF 90-22.1 to a Detroit office of the Treasury Department if they have as little as $10,001 aggregate in those accounts at any time during the year. The new additional reporting doesn’t get people out of having to continue filing this form. Talk about piling on.

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Lying lawyer’s tax lament: “The Internet made me do it!”

By on March 9, 2011 in Fraud, Internal Revenue Service, Tax Evasion

Attorney Micaela Dutson and her husband hid more than $1 million of income. They didn’t file tax returns. They helped clients avoid paying almost $7 million in taxes. They told others that as “sovereign citizens” they didn’t have to pay income taxes.

And this week — you knew this was coming — the Oregon-based Dutsons were sentenced to 10 years in prison for their highly unlawyerly activities.

In a last-ditch bid for leniency at sentencing, Micaela Dutson tried to blame…the Internet! Yes!! In her own words, as reported by Helen Jung of The Oregonian:

“I have learned one thing for sure,” she said. “No matter what kind of information I hear or see on the Internet, I’m not going to act on it. That’s for sure, because I don’t ever want to be here again because this is the worst thing ever.”

Maybe the Internet also inspired them to file a $1 trillion lien (that is NOT a typo) against IRS employees, as law professor Paul L. Caron noted previously at his excellent TaxProf Blog.

That’s the thing about the Internet: you start out maybe inhaling a little free-verse poetry off the laptop in your parents’ basement, and the next thing you know you’re conspiring to defraud the IRS. Well, don’t say we didn’t warn you.

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Even Hall of Famers whiff against the IRS

By on March 2, 2011 in Tax Evasion

duke snider 200x151 Even Hall of Famers whiff against the IRSBaseball Hall of Famer Duke Snider, who passed away recently, once hit 40 home runs five years in a row. Playing center field for the Brooklyn Dodgers, he was routinely compared in the 1950s with two other New York centerfielders you may have heard of: Willie Mays and Mickey Mantle. But in the 1990s, he wound up in the same category as Pete Rose, Darryl Strawberry, Willie McCovey, and several others — ballplayers who have run afoul of the IRS. He pled guilty to tax fraud for not reporting income earned at autograph and sports memorabilia shows. “We have choices to make in our lives,” Snider said. “I made the wrong choice.”

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