Tuesday, February 21, 2017

Survey Says . . . !

The people who work at the IRS can be proud to do an important job. They're the "accounts receivable" department for the federal government, and whether you think we need more government or less, we should collect the revenue to finance it as effectively as possible. Treasury Secretary Mnuchin has already stated that the incoming administration's ban on new government hiring shouldn't apply to the IRS — perhaps because he's seen the research showing every dollar invested in tax enforcement yields seven dollars in tax. (If you could spend one dollar to make seven, you might do it all day long!)

At the same time, IRS staffers understand the work they do isn't especially popular. As Louis XIV's Finance Minister Jean-Baptiste Colbert once said, "the art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing." So you could say the IRS is similarly looking out for ways to boost the plucking while minimizing the hissing.

Towards that end, the IRS collections division has engaged the Pacific Consulting Group to send a "Customer Satisfaction Survey" (Form 13257-A, revised April, 2016) to a random group of taxpayers who have gone through the collections process. It included the usual collection of questions you would expect from a government survey, like rating how much you agree with statements like, "I received an adequate description of the collection process," and "I was treated with respect during the collection process." But we thought there were a few more questions that might have made sense — like these:

    "Did you feel violated when agents picked you up by the feet to shake the change out of your pockets?"

"Did the Revenue Officer put the cushions back on the couch after searching for spare quarters that might have fallen between them?"

"What would you have done with that money if you didn't have to pay your taxes?"
"If you could tell the government exactly how to spend your tax dollars, what would you tell them?"
"Does the tax code make any more sense to you than it does to us?"
"Be honest . . . you'd rather give the money to us than to the sales tax goons, amirite?"
"When the robots finally take over, how do you think we should tax them?"
"Pinch yourself. Does it hurt? If so, consult IRS Publication 502, Medical and Dental Expenses."
"You seem nice . . . what are you doing next Thursday?"
"What's your favorite BBQ joint? (Asking for a friend.)

Here's another question they should ask, but probably never will. "Do you have a plan in place to pay less tax so you don't get caught up in collections in the first place?" If not, call us, and see if we can silence some of the hissing!

Tuesday, February 14, 2017

Better Call Saul!

On January 20, 2008, AMC debuted a promising new drama called Breaking Bad. The series chronicled the highs and lows of high-school chemistry teacher Walter White, who was diagnosed with terminal lung cancer and put his knowledge to work opening a meth lab to secure his family's financial future. Millions of viewers became addicted to White's exploits as he plunged deeper and deeper into a life of crime, breathlessly watching him juggle relationships with his DEA-agent brother-in-law, arms dealers, cartel soldiers, and crooked strip-mall lawyer Saul Goodman. All fun to watch, sure . . . but there's a reason the announcer always says, "Kids . . . don't try this at home."

Jack Vitayanon is a 41-year-old, Ivy League-educated attorney in the IRS Office of Professional Responsibility, where he investigates crooked accountants, attorneys, and IRS agents. He even taught a class called "Tax Lawyering and Professional Responsibility in Tax Practice" at Georgetown Law School. But apparently he needed to crank out some adventure in his life. And while we may never know if he drew his ambition from AMC's antihero, it's crystal clear that he decided to join the methamphetamine trade.

Agents from the Department of Homeland Security say that back in December, they intercepted a FedEx package containing 460 grams of meth at the end of its journey from Arizona to Long Island. (Everyone knows you ship your drugs FedEx instead of regular mail — who needs U.S. Postal Inspectors all up in your grill?) The unlucky recipient did what everyone does when they get busted with a pound of meth — he flipped and agreed to rat out someone further up the supply chain. Unfortunately, that chain included Vitayanon, who had been dealing with the Arizona sender since 2014.

Two weeks later, our new confidential source recorded a video chat with Vitayanon, "who was observed in his Washington DC apartment smoking what appeared to be methamphetamine from a glass pipe." (C'mon, Jack, you never get high on your own supply!) Vitayanon promised to send a "zip" (one ounce of meth) to the source. A day later, he texted to confirm he was packaging the shipment and helpfully provided a FedEx tracking number for the delivery. (You'd expect that sort of attention to detail from an IRS attorney, wouldn't you?)

Last month, agents tailed Vitayanon as he shipped two more zips to the same source on Long Island. At that point, he was pretty much cooked, and on February 1 he was arrested. Naturally, the Justice Department dropped a Breaking Bad reference in the press release announcing the bust.

Now the disgraced attorney is looking at spending several years surrounded by fellow Walter White wannabes. Adding insult to injury, he might face another smack for failing to pay tax on his side gig. Remember, the IRS doesn't care how you make your money. They even tweaked the tax code with a special provision, Section 280E, that prevents drug dealers from writing off their legal business expenses. No deductions for delivery and shipping, business use of the home, or even "cost of goods sold"!

Jack Vitayanon won't be making much money over the next few years, so taxes will be the least of his worries. Unfortunately, you don't have that luxury. So count on us to help you pay less — legally, morally, and ethically!

Tuesday, January 24, 2017

Tax Apprentice

Back in 2004, Donald Trump was just another overextended real-estate developer with two divorces and four bankruptcies under his belt. That all changed with the debut of The Apprentice, the show that made "you're fired!" a national catchphrase. It's safe to say that without the popularity of The Apprentice, Trump wouldn't have just taken the oath of office to become the country's 45th President.

Apprentice candidates completed all sorts of business-oriented tasks, like opening a lemonade stand, designing an ad campaign for a private-jet service, and managing a restaurant on New York's bustling Times Square. So we got to thinking . . . what would happen if NBC rolled out a season of Tax Apprentice? Who would host it? Who would compete? And what sort of challenges would they embrace to entertain the breathless millions who would anxiously wait for each "very special episode"?

We're going to need a colorful celebrity host, one who knows their way through the jungle of the 70,000-page tax code. We considered baseball hit king and convicted tax felon Pete Rose. We considered Venice Film Festival winner and convicted tax felon Wesley Snipes. And we considered legendary country crooner and tax scofflaw Willie Nelson. But we think the strongest pick is Beanie Babies creator Ty Warner, who launched a billion-dollar business and paid a $53 million civil penalty for hiding income in a Swiss bank account.

Beyond the draw of the host, the real action comes from the weekly competitions featuring a representative sampling of astonishingly good-looking CPAs, Enrolled Agents, and Registered Tax Return Preparers:

    Light Bulb Challenge: How many tax professionals does it take to screw in a lightbulb? Let's find out! The challenge starts with a bare bulb screwed into a 20-foot ceiling and a file cabinet full of back tax returns, brokerage statements, and miscellaneous travel receipts. The winning team will be the first one to stack the files high enough to climb up and change the lightbulb without incurring a deductible medical expense.

Deduction Scavenger Hunt: Teams sit down with a moderately-complicated and totally clueless business owner's annual returns: three 1065s, an 1120S, an 1120, and a 1040. Their goal is to comb through the returns to find the mistakes and missed opportunities that cost the owners thousands in tax, then prescribe solutions to rescue those wasted dollars.

Audit Lottery: Everyone knows that switching a business owner from a sole proprietorship to an S corporation can slash their risk of audit by over 50%. Teams will scrub a business owner's return, identify opportunities to "fly under the radar," and make sure all the paperwork is in order. Then a panel of guest judges made up of experienced auditors will put on their green eyeshades and examine the returns to see who's the cleanest.

(Hey, wait a minute, a couple of those are completely legitimate!) Here's today's bottom line. Paying less tax isn't a game, and you can't afford to treat it like a reality show. Tax planning is serious business and you deserve serious expertise on your side. So call us to pay less, and tell unnecessary taxes, "You're fired!"

Monday, January 16, 2017

Politicians Behaving Badly

(Hard to believe, right?)

Last week, we presented three stories from the IRS Criminal Investigation unit's most recent annual report outlining their work to protect the Treasury's revenue from grifters, cheats, and cons. It's a "true crime" fan's favorite IRS report that puts TV cop dramas to shame.

Most public servants are as honest and dedicated as we could want them to be. But some find ways to use their positions for more "entrepreneurial" pursuits. That's why the CI unit pursues public officials for offenses like bribery, extortion, embezzlement, and money laundering, too, not just tax fraud. Here are three stories of politicians who really should have known better:

    George Gallo earned $150,000 per year as chief of staff to the Connecticut House of Representatives' minority leader, where he helped his party's members spot opportunities to advance their interests through the legislature. Along the way, he spotted a way to steer campaign funds to a friendly Florida direct-mail consultant in exchange for $117,226 in kickbacks. Hey, he even paid his tax on the money! Unfortunately, while that may have helped avoid tax-fraud charges, it couldn't save him from a year and a day in federal prison for mail fraud.

Barry Robinson ran the Baltimore Department of Transportation's Division of Transit and Marine Services, where he found nontraditional opportunities to supplement his city pension. First he found a vendor who placed advertising on the city's free "Charm City Circulator" bus, and made him an offer he could hardly refuse: pay the city the $60,000 he owed, or pay him just $20,000 in cash. That worked well enough that he took a $70,000 bribe from a Canadian company for the right to buy 13 city-owned bus shelters. Like his colleague Gallo in Connecticut, Robinson's efforts ultimately landed him a year and a day in jail.

Louis "Lolo" Willis was Executive Director of the U.S. Virgin Islands legislature, where he oversaw renovating the legislature's historic building overlooking the harbor in Charlotte Amalie, St. Thomas. You might think that serving the citizens of a paradise like the Virgin Islands would be its own reward. But of course you would be wrong — Willis used his position to squeeze $13,000 in bribes out of the contractors working on the building. Now Willis gets to spend five years in a very different sort of government building, one with no historic interest or harbor views at all.

If there's any silver lining to these stories, it may be this. We live in an era of unprecedented partisanship, with Democrats and Republicans lobbing "fake news" across the aisle and ducking compromise like a zombie ducks sunlight. It's good to know that even in today's toxic environment, our officials can find at least one thing to agree on. It's just too bad that one thing is graft!

We know you don't like paying taxes. But you don't have to break the rules to get ahead like these guys tried. Just call us, and we'll help you investigate opportunities that don't risk time in a small gray room. And remember, we're here for your bagmen and accomplices family, friends, and colleagues, too!

Tuesday, January 10, 2017

Happy

The IRS publishes hundreds of reports every year, covering all sorts of topics. You'll find routine statistical summaries, like the always-popular "Number of Individual Income Tax Returns, Income, Exemptions and Deductions, Tax, and Average Tax." You'll find page-turners worthy of a Tom Clancy thriller, like last summer's "Actions Can Be Taken to Better Address Potential Noncompliance for Roth Individual Retirement Arrangement Conversions." But the most entertaining report of all is the Criminal Investigations unit's annual business report summarizing their work for the previous year.
On November 29, CI released their annual report for FY 2015. As is typical in government, budget cuts colored the story — the unit hired just 45 investigators over the last three years, and attrition has reduced staffing to its lowest levels since the 1970s. And, as usual, you've got to be a really bad guy to find yourself in CI's crosshairs. For 2015, the unit initiated just 3,835 investigations, down from 4,297 in 2014. But if CI does take you on, they've usually got you dead to rights: the unit won 93.2% of the cases they prosecuted.
Dig behind the dry statistics, though, to read about the actual offenders that CI targets, and you'll find one sorry smorgasbord of human greed, frailty, arrogance, and downright stupidity. Here are three of the more entertaining stories:
    Happy Asker grew his company, Happy's Pizza, from a single Detroit-area location in 1994 to a 95-store chain. But paying taxes didn't make him happy. (Sorry, couldn't resist.) So he conspired with four of his franchisees and employees to skim $6.1 million in cash from the books and divvy it up in weekly "profit splits." The group also underreported wages to evade $2.39 million in payroll taxes, because why not? Now Happy will spend the next fifty months eating bland microwaved pizza at the Morgantown Federal Correctional Institution.
Xavier Franklin Lewis was pastor of the Holy Ghost Praise and Deliverance Ministries outside Savannah, Georgia. But he behaved more like a mobster than a minister. He submitted false tax returns to the IRS, stole refunds out of the mail, and used bank accounts he set up in the church's name to cash 92 IRS checks totaling more than $250,000. As investigators closed in, Lewis visited at least one potential witness and told her she needed to change her story, "or else." Now he's looking at 119 long months in purgatory to read his bible and repent for his sins.
Michael Spitzauer launched a company called Green Power, Inc., and told investors he had found a way to convert municipal waste into biofuel. But what he'd really found was a way to convert demand for cutting-edge green energy into a classic Ponzi scheme. Spitzauer used his investors' money on a million-dollar mansion, private schools for his children, Seattle Seahawks tickets, and paying back previous victims. Oh, and somehow he "forgot" to pay taxes on the $10 million he stole. Now he gets to spend four years in a northern California prison and pay the IRS $2,585,177 in restitution.
Crime really doesn't pay — especially when it comes to taxes! Fortunately, there's no reason to learn that lesson the hard way! We can help you help manage your taxes the right way, with a comprehensive menu of court-tested, IRS-approved strategies and tactics. We're committed to helping you pay less, no matter what the New Year brings!

Monday, January 2, 2017

Tax Thoughts for the New Year

2017 is likely to be a big year for taxes. House Speaker Paul Ryan and President-elect Donald Trump haven't been shy about their New Year's resolutions to rewrite the tax code, and we could be in for quite a ride. So here are some thoughts to start exercising your 2017 tax-planning muscles:

    "If you get up early, work late, and pay your taxes, you will get ahead — if you strike oil."
    J. Paul Getty

"If you are truly serious about preparing your child for the future, don't teach him to subtract — teach him to deduct."
Fran Lebowitz

"The question is: What can we, as citizens, do to reform our tax system? As you know, under our three-branch system of government, the tax laws are created by: Satan. But he works through the Congress, so that's where we must focus our efforts."
Dave Barry

"The avoidance of taxes is the only intellectual pursuit that carries any reward."
John Maynard Keynes
"The taxpayer — that's someone who works for the federal government but doesn't have to take the civil service examination."
Ronald Reagan
"Income tax returns are the most imaginative fiction being written today."
Herman Wouk
"Dear Tax Commissioner: Three years ago I cheated on my taxes. Since then I have been unable to sleep at night. Enclosed is $5,000. If I still can’t sleep, I'll send you the rest."
Anonymous
"Just because you have a briefcase full of cash doesn't mean you're out to cheat the government."
Pete Rose
"The difference between death and taxes is death doesn't get worse every time Congress meets."
Will Rogers
"Worried about an IRS audit? Avoid what's called a red flag. That's something the IRS always looks for. For example, let's say you have some money left in your bank account after paying taxes. That's a red flag."
Jay Leno

We wish we could tell you exactly what's going to happen with taxes, in 2017 and beyond. But whatever the future holds, we can promise we'll be here to help you make the best of it, in 2017 and beyond. And remember, we're here for your family, friends, and colleagues too!

Tuesday, December 27, 2016

Creepy Little Elf Has Nothing on the IRS

If you have kids and you celebrate Christmas, you're probably familiar with the Elf on the Shelf — a storybook and accompanying doll that help encourage your little darlings to behave themselves before the holidays. The book tells wide-eyed children how Santa marshals an army of scout elves to sneak into their houses before Christmas, then fly back to the North Pole every night to rat out the stinkers. Every day the elves return find a new place to hide, which turns this whole monstrous Fourth Amendment violation into an adorable ongoing game of hide and seek.

Parents love how the elf enforces good behavior. (Mommy says it's that or an extra glass of wine!) But not everyone is a fan. The Atlantic magazine mocks it as a "marketing juggernaut dressed up as a tradition" that bullies kids into thinking good behavior equals presents. The Washington Post condemns it as "just another nannycam in a nanny state obsessed with penal codes." And a Canadian professor argues that the elf brainwashes kids into accepting the surveillance state: "if you grow up thinking it's cool for the elves to watch me and report back to Santa, well, then it's cool for the NSA to watch me and report back to the government."

Our friends at the IRS have their own version of the Elf on the Shelf. In fact, they have several — and they're all more effective than the pointy-hatted little informant spying on your kids. Here's how the IRS knows if you've been naughty when it comes to reporting your presents throughout the year:

    The first "elf" is the IRS's computerized income matching program. For example, employers report wages on Form W2, mutual funds report investment income on Form 1099-DIV, and partnerships report partners' income and expenses on Schedule K1. IRS computers cross-check these figures to your return to make sure you've reported those amount. If you haven't, you'll get a lump of coal notice calculating how much more you owe and a deadline for paying up.

If computerized matching fails, the IRS can squeeze more information out of third parties. If the IRS elves suspect mischief, they can subpoena your bank records then add up your deposits to make sure you've reported the income. If those deposits add up to more than you've reported, the IRS will assume the difference is taxable. Good luck convincing a Tax Court judge that Santa left that extra cash in your stocking!

Finally, the IRS dangles cash bounties to catch tax cheats. The IRS Whistleblower Office pays rewards of up to 30% of amounts it collects in disputes topping $2 million. Bradley Birkenfeld, who helped the IRS score an $852 million settlement with Swiss bank UBS, spent two years in jail for his part in the scheme, but walked away with a $104 million reward for his effort. We can think of an elf or two who would be happy to make that trade!

The IRS systems may not be quite as effective as what the CIA or Department of Homeland Security can put to work. But they put that stool pigeon Elf to shame, at least until they can force Santa into filing a 1099-GIFT for every present he leaves.

Here's the bottom line, for the elf and for you. Planning is the key to paying less tax, and you can do it without worrying about who's watching. So call us to pay less in 2017, and have a happy New Year!