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Wesley Snipes’ Lawyers Argue Appeal of Tax Conviction

The Associated Press reports that oral argument on Wesley Snipes’ appeal of his conviction on three misdemeanor charges of failure to file tax returns was heard by the United States Court of Appeals for the Eleventh Circuit, in Atlanta today. See Wesley Snipes Appeals 3 Tax Convictions in Georgia. (http://sn.im/tc2fn)

Posted in Tax Crimes, Tax Penalties. Tagged with .

By Allan Pearlman
November 20, 2009

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IRS Extends Voluntary Disclosure Deadline for Secret Offshore Accounts

With 48 hours left before the final deadline to participate in a voluntary disclosure program designed get taxpayers with unreported foreign bank accounts to come back into the system and report their foreign income, the IRS has announced that it is extending the deadline from Wednesday September 23, 2009 until October 15, 2009.

The IRS reports that this extension was made in response to repeated requests from attorneys and other tax practitioners from all over the country.

In addition, an IRS agent working on a team evaluating the disclosures being submitted by taxpayers trying to participate in this program told me that there was a huge volume of submissions.

Within the guidelines of this program, taxpayers are given an opportunity to avoid criminal prosecution for tax crimes such as tax evasion and tax fraud.

Also, as part of this program, a taxpayer is subject to paying penalties on previously unreported income in foreign bank accounts under guidelines defined earlier this year, in March 2009. These guidelines are tough and expensive, but not nearly as tough or expensive as the sort of penalties a taxpayer would be facing if not working within this program.

Posted in IRS Collection, IRS Enforcement, IRS News, IRS Power, Tax Crimes, Uncategorized. Tagged with , , .

By Allan Pearlman
September 22, 2009

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New Scam Email Claiming to be From IRS is Fake

The Internal Revenue Service flatly states about its own practices: “The IRS does not send taxpayers e-mails about their tax accounts.”

So, if your email in-box has a message saying that its from “Internal Revenue Service [no-reply@irs.gov]” with a subject line of “Notice of Underreported Income” you  can know, from the start, that this message is a fake.

This message is apparently being sent to gazillions of email addresses.

The text of one I received today reads as follows:

Taxpayer ID: arp-0000174073547US

Tax Type: INCOME TAX

Issue: Unreported/Underreported Income (Fraud Application)

Please review your tax statement on Internal Revenue Service (IRS) website (click on link below):

review tax statement for taxpayer id: arp-0000174073547US

Internal Revenue Service

This is plainly a fake, and a scam, probably designed to steal the recipient’s identity, or install malicious software on the recipient’s computer.

Steve Ragan of The Tech Herald (thetechherald.com) reports that this bogus message is being sent out at a rate approaching 90,000 an hour, and that the goal of it is, in fact, to trick computer users to install malicious software onto their computers.

So the quick thought here: don’t fall for it, don’t click on the link in this bogus email which is designed to do harm.

Posted in Identity Theft. Tagged with , , .

By Allan Pearlman
September 9, 2009

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Taxman’s Facebook Miranda Warning? Anything You Put on Your Wall Will Be Used Against You

By now, as taxpayers, if we’ve ever had a scrape with the IRS or a state’s taxing agency, especially if we happen to be owing some, we are accustomed to getting letters, maybe getting phone calls, maybe even having some live person from the IRS show up at our door.

And we are familiar with the forms, and the questions: things like:

  • Where do you work?
  • Where do you bank?
  • Do you rent or own your house or apartment?
  • What is the rent?
  • What is the mortgage?
  • What is the maintenance or common charges?
  • Do you own stocks or bonds?
  • What are they worth?

All these questions, and more.

And, if you happen to get audited, the Revenue Agent (the IRS’s name for the person who does the audit) might send you a few pages of forms which ask you to provide specific information and documents to help answer these sorts of questions. The IRS calls them IDRs, which stands for “Information Document Request.”

If you don’t respond, and things get ugly, the IRS can drag you into court and have you explain to a judge why didn’t provide the information the IRS requested. You might have a good reason; you might not.

It’s all pretty low tech: letters, paper, phone calls, knocking on doors.

But according to an article in the Wall Street Journal, the Taxman is leaping quickly into the 21st Century and gathering information about taxpayers from Facebook walls, MySpace posts, chat rooms, and Google.

In “Is ‘Friending’ in Your Future? Better Pay Your Taxes First,” The Wall Street Journal’s Laura Saunders reports that state taxing authorities in Minnesota, Nebraska, and California have been catching long-time tax debtors and tax evaders who announce their professional and travel plans on social media sites. Other states are doing so as well, or at least thinking about it.

For example, one tenacious and inquiring tax collector found a delinquent taxpayer who was a “rigger of sails” by searching for his name and the phrase (”rigger…”). This search led him to a discussion board of local riggers, and in it, a discussion thread telling where this rigger went after his store closed.

With this morsel of information, the taxman located the missing “rigger of sails” and collected the unpaid tax debt.

While states are jumping into mine social media sites and more generally the internet, the IRS is playing its hand very close to the vest. It refused to comment on whether or how it might be using social networking sites.

Posted in Audits, IRS Collection, IRS Enforcement. Tagged with , .

By Allan Pearlman
September 1, 2009

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American Express Cardholders’ Personal Information Stolen by Insider

One former employee of American Express has taken its slogan, “Don’t Leave Home Without It,” to a new extreme.

Not only did he or she feel (presumably) obligated to carry his (or her) own card (assuming he or she was a cardholder), but also this ex-employee stole account information of other cardholders, so that the don’t-leave-home-without-it security blanket of one’s own card might be multiplied by that of all the other people’s cards whose information this ex-employee stole.

Unfortunately, for the ex-employee and fortunately for all the other cardholders, this scheme was uncovered and the ex-employee caught. (Question: was the ex-employee still actively employed by American Express at the time he or she was caught?)

Today, some American Express cardholders received a letter with the not-very-encouraging opening sentence:

“I am writing to inform you of an unfortunate issue concerning your American Express Card.”

American Express then explained what it meant by an “unfortunate issue”:

“We recently learned that certain account data was acquired without authorization by an employee who is no longer with the company”

Translation to plain English: when the former employee “acquired” “account data” “without authorization” he or she stole personal information of American Express customers which might be used to fraudulently charge their cards.

According to American Express, the rogue ex-employee stole data stored on the magnetic stripe on the back of the customers’ American Express card:

  • the card holder’s name,
  • account number,
  • card’s expiration date,
  • PIN number
  • card holder’s state of residence, and/or
  • card holder’s residence zip code.

American Express’s bad-news letter, apparently searching for a silver lining, stressed that the card holder’s social security number was not among the stolen information.

In a telephone call with American Express today, a representative named Patty,  gave more information:

  • The alleged perpetrator was arrested in Phoenix, Arizona on June 24th, 2009.
  • The stolen information was downloaded to a laptop computer.
  • The case is being prosecuted in federal court, not state court.
  • Identifying information about the perpetrator (i.e., name, gender, position at Amex when in its employ, job position, title and his or her responsibilities) was not available to the American Express representative with whom I spoke.
  • Amex has hired an outside security firm to assist it in dealing with this case (it is not clear who that outside firm is or what it is doing for American Express, but, but Amex has definitely hired somebody to do something).

American Express’s representative stated today that the number of accounts which were affected by this security breach and theft was unavailable.

Later in the same conversation she said that “very few” accounts were affected. But still, the American Express representative did not have any more detailed information to describe how many affected accounts qualified as “very few.”

Internet searches for additional information about this security breach have yielded nothing, so far. Searching the website of the United States Department of Justice for the US Attorney’s Office in Phoenix also showed nothing. No press releases regarding arrests, arraignments, indictments or anything else.

Posted in Data Security, Identity Theft. Tagged with , , , .

By Allan Pearlman
August 12, 2009

1 comment

IRS Staff Are Human, Too Human

Not scorpions, not reptiles, not hairy poisonous spiders, not jackals, not piranhas, not hyenas.

And while some taxpayers may swear that the IRS agent they talked to was worse than the mythical Leroy Brown (that is, “meaner than a junkyard dog” and who was “bad, Bad!”

fourteen years before Michael Jackson was “Bad”), experience suggests (and were a study conducted, empirical evidence, I believe, would support) that the people who work for the IRS are human, all too human.

The significance of this to a taxpayer in a jam is that if some IRS (or corresponding state taxing authority) staffer has been trying for months or years to collect a back tax debt, or just get the taxpayer to file one or more missing returns*, that salaried government employee just might develop an all-too-human negative impression of the taxpayer.

(*If you find a tax advisor who says you don’t have to file a return, hang on to your wallet, and run, don’t walk, to someone else!)

The Taxman’s Human? What’s the Downside?

Even if the taxpayer has one or one-hundred-and-one unassailable reasons to explain how it is that he or she wound up in this situation with IRS agents giving chase, and it all makes sense, the all-too-human IRS employee might form a decidedly negative impression which can affect how that employee might treat the taxpayer.

Continued…

Posted in Audits, IRS Enforcement, IRS News, Tax Professionals.

By Allan Pearlman
July 30, 2009

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IRS Insider Information: More Multi-Year Audits Coming

Recently, in an attempt to resolve a dispute with the IRS before taking it to Tax Court, I met with an IRS auditor who had already slammed my new client with an additional $36,000 in tax interest and penalty by disallowing $90,000 of business deductions he claimed for his little company. My mission: persuade the auditor that many, most, or all of the deductions she had disallowed were legitimate, and that she should which should be recognized as legitimate.

Policy Changes Which Affect Everyone Revealed in Conversation About One Taxpayer

In the course of talking about my taxpayer’s business and deductions, we discussed more generally tax rules and policy. And in that part of the conversation, this auditor told me that starting now, more and more audits will involve multi-year examinations (what many of us call a “tax audit,” the IRS calls an “examination” — audit, examination, both words refer to the same thing).

So, for example, three years ago, a taxpayer might have been audited (or “examined”) for tax year 2005, now, it is much more likely that if the IRS initiates an audit, the audit will involve not just 2005, but also ‘06, and ’07.

IRS Uses Old TV Commercial Logic: “How Do We Do it? Volume!”

Why? Simple: it’s cheaper by the dozen! Three years in one audit costs the IRS less than doing only one year.

In fact, this auditor explained, doing multi-year audits has always been the official policy, but often it was not carefully supervised by the layers of internal management at the IRS. But now that the federal government needs money severely, the IRS is looking to get as much of a bang for its audit buck as it can.

Happy(er) Ending for Client

Meanwhile, over the course of 6 hours or so, I persuaded the this auditor to recognize more than half of the disallowed expenses as being legitimate, resulting in reducing the additional tax, interest and penalty from more than $36,000 down to about $6,000. The taxpayer considered that a very good result.

And, a Word to the Wise Taxpayer

And, so, a “take-away” for everyone else, be aware: multi-year audits are on the rise. One way to start being ready if you become a target of audit is to keep and have good records. It may be a great time to review your record-keeping system, or to develop one if you don’t have one!

Posted in Audits, Record Keeping, Tax Policy.

By Allan Pearlman
July 20, 2009

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Lies and the Lying Liars in the Tax Business (with apologies to Al Franken)

I have the good fortune of having professional friends and colleagues around the country who have law practices or accounting practices which specialize in defending taxpayers whom the IRS claims owe back taxes.

And so, when some thorny issue comes up I might talk to a brother or sister tax pro in Florida or Texas or New Hampshire or Washington State or a smattering of other places around the country, in both red and blue states.

Recently, I was working on a tricky issue relating the Trust Fund Recovery Penalty (to the uninitiated, this weird string of four words refers to one aspect of tax law that properly strikes fear into the hearts of business owners with employees everywhere or, if it doesn’t, either it should or the business owner has already dealt with the issue and taken steps to avoid or solve this problem; see, for example, http://lifelawandtaxes.com/not-just-for-bernie-madoff-or-king-tut-business-owners-build-devastating-pyramids-of-withholding-tax-debt-deducted-from-paychecks-but-not-sent-to-irs/).

After brainstorming a bit on strategy for my Trust Fund Issue, my colleague and I started talking about life, the world, and business, generally.

She complained bitterly (and hilariously) about our still-new president Obama (I couldn’t disagree with her more on this, yet we still are able to find common ground elsewhere and get along just fine – like the Jets and the Sharks go bowling together).

Then, to my surprise, she told me that she is doing less and less tax work.

Honest Analysis Loses Out to Empty Promises

Her explanation: We can’t compete with these tax resolution companies who promise the sun, moon and stars in their advertising and then have telephone sales people who don’t know anything about the tax rules and say whatever the taxpayers want to hear.

Continued…

Posted in 100% Penalty, Lien, Offer in Compromise, Tax Professionals, Trust Fund Recovery Penalty. Tagged with , , .

By Allan Pearlman
May 30, 2009

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Jobs Agency Owner Gets Temp Assignment (Some Call it a ‘Sentence’) to Federal Prison for Unpaid Employment Tax

A San Antonio, Texas, woman was sentenced to 41 months in federal prison and ordered to pay $1.5 million in restitution to the IRS for her role in a fraudulent tax scheme.

In addition to the prison term, United States District Judge Fred Biery ordered that Terrell Diamond be placed under supervised release for a period of three years after completing her prison term.

According to court records, Diamond, along with her now-ex-husband and co-defendant, William Diamond, conspired to defraud the IRS in the assessment and collection of more than $1.5 million in employment taxes due and owing from November 1996 to June 2003.

The employment taxes owed pertained to temporary employment agencies owned and operated by the Diamonds, including Ameriforce and Primo Labor.

Both Diamonds pleaded guilty to the same charge: one count of conspiracy to defraud the IRS.

Posted in 100% Penalty, Employment Tax, IRS Collection, IRS Enforcement, IRS News, Payroll Tax, Pierce the Corporate Veil, Tax Crimes, Trust Fund Recovery Penalty, Withholding Tax. Tagged with , , , , , , .

By Allan Pearlman
May 27, 2009

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copyright (c) 2009 Allan R. Pearlman