January, 2007

Message from Nelson & Company, P.S., CPAs

Q & A ---What is Tax Planning?

  Q:  Folks keep telling me I need to do tax planning; what steps do I have to take?
  A:  Tax planning is done before a transaction is begun or at year end to minimize a year's tax. The first step is to project what tax would be due if no changes are made. Then any changes can be added to see if any savings result. The key issue is: real tax planning occurs during the year, before the deal is signed and well before year end in December.

Certified Public Accountants


Inside This Issue....

Mobster: I'm Guilty
CEO indicted on
Tax Evasion Charges
CA Man Sentenced for Tax
Evasion, Use of Illegal Trust
IRS Question Corner

"So, when would be the
best time to break up with the
guy I'm living with...taxwise?"


Charles Sigerseth, 66, of Sacramento, CA, was sentenced to 63 months in federal prison on charges of conspiracy to defraud the United States in the assessment and collection of taxes and two counts of tax evasion related to his 1995 and 1996 federal income tax returns.

According to trial evidence, Sigerseth attended a seminar put on by a company called "National Trust Services" (NTS), which told Sigerseth that by putting his business into a "business trust" and directing all business profits to a "family trust," he could write off all personal expenses as business deductions on the family trust returns.

Further, he was told, any remaining taxable income could be "set-aside" into a "family foundation" that would purportedly later be donated to charity and that, as a result, the "set-aside" amount constituted a charitable deduction. Sigerseth implemented this scheme and used it for his 1993 to 1997 tax returns, usually paying just 10 percent of what he actually owed in federal taxes.

At sentencing, United States District Judge William B. Shubb told Sigerseth: "When you don't pay your taxes you cheat all of us. We all end up paying for your taxes. We need to send out the message that it can't go unpunished."

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IRS Times & Inquirer
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Mobster: I'm Guilty!

Genovese wise-guy Matthew Ianniello, 86, has pleaded guilty to racketeering and tax charges in Connecticut.

On June 8, 2006, a federal grand jury in New Haven indicted Ianniello and several others on various charges stemming from an investigation of the waste-hauling industry in Connecticut and New York.

Since the 1960s, the Mafia in the New York area has represented garbage haulers who claim "property rights" to every stop they collect - no matter what contracts are in effect. The Mafia protects this right and the haulers, in turn, make "tribute" payments to the organized crime outfit, the indictment alleged. Ianniello admitted that, for several years, he collected "tribute" payments from a member of Connecticut's carting industry in exchange for his backing and that he failed to declare these payments as income on his tax returns and failed to file tax returns in 2003 and 2004.

As part of his plea agreement, Ianniello has agreed to pay more than $400,000 to the government.

CEO Indicted on Tax Evasion Charges

A federal grand jury indicted John Frances Griffin, of Orinda, CA, with mail fraud and tax evasion, in a scheme in which he lied to investors and employees about making significant loans to the company he was running.

According to the indictment, Griffin, 43, was the CEO of VaporTech, Inc., a startup company in Livermore, CA, involved in the research and development of technology which converts fuel to hot water, high-quality steam or superheated water vapor. From February 2004 to May 2006, Griffin allegedly told investors he had loaned $275,000 to VaporTech to entice them to invest in the company. The indictment also alleges that Griffin falsely told VaporTech employees he had loaned VaporTech $1 million to conceal the fact that he had taken money from the company bank account without authorization.

The indictment further charges that during the calendar years 2004 and 2005, Griffin evaded the assessment and payment of his income taxes by failing to provide his Social Security number to the VaporTech CFO, cashing his salary checks instead of depositing them, and by extensively using cash and cashier's checks to avoid detection of his income.

If convicted, he faces up to 20 years in prison and a fine of up to $250,000.


Question:     Since the New Year has rolled around, I've made myself a promise: I want to get rid of my tax debt. I owe about $140,000 in back taxes and now earn about $65,000 per year (with no savings). I don't know where to begin. Can you help?

Answer:    You've made the first step. The hardest part in overcoming tax debt is coming to the realization that you want to finally eradicate that debt. Considering the amount you owe and your annual income, I realize that this tax problem can seem insurmountable.

But trust me: It isn't.

What you need to do is find a qualified tax professional. He or she will analyze your previous tax return with a fine-tooth comb to get to the exact amount you owe. Why do this? Because there is no reason you should volunteer to pay the IRS even a penny more than you owe.

Once you and your qualified tax professional have determined the exact amount of your debt, you will meet with the IRS. While you will have many options available, the two most popular options for taxpayers in your situation are the Offer in Compromise program and the Installment Agreement.

The Offer in Compromise program is for taxpayers who no longer have the financial wherewithal to satisfy their debt, no matter how many expenses they cut or assets they sell. If you qualify for this program, your tax professional will negotiate a settlement that often can amount to pennies on the dollar!

The other option is the Installment Agreement. Together with your tax professional and the IRS, you will negotiate a payment schedule that will allow you to satisfy your debt without significantly crimping your quality of life.

I solve IRS problems like yours every day. I'm an IRS Problem Solver. For a free, no-risk consultation, please call my office at 253-752-9522 or send me an E-mail at Firm@DNelsonCPAs.com. Do it today!


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