January, 2008

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

Tax Returns---Why are they so complicated?

Congress has enacted fourteen major changes to the tax code since 2000. Many of these changes were designed to equalize the tax burden---obviously that has not happened. In a nutshell, many special interests have influenced Congress to write provisions favorable for them in the tax code.

Certified Public Accountants

IRS Times & Inquirer

Inside This Issue...

Tax-Shelter Promoters Indicted
Yankee Aide Didn't Report Players' Tips
IRS Question Corner

Tax-Shelter Promoters Indicted

A federal grand jury in Grand Rapids, MI, returned a five-count indictment charging three tax shelter promoters with conspiring to promote, market and sell fraudulent tax shelters over a 10-year period. Two of the promoters were also charged with the attempted income tax evasion of a Michigan client, who purchased the fraudulent tax shelter.

According to the indictments, beginning in 1995 Peter J. Peggs of Prides Crossing, MA., and Robert D. Larsen of Winter Park, CO, were involved in a criminal conspiracy, along with Craig M. Stone, 63, of Fort Pierce, FL., to defraud the United States by promoting, marketing and selling a fraudulent tax shelter called a loss-of-income (LOI) insurance policy.

Peggs and Larsen, both officers and directors of Security Trust, promoted and sold LOI policies to wealthy clients in order to generate illegal tax deductions. The indictment alleges that Peggs and Larson took steps to conceal from the IRS the fact that these policies were fraudulent. During the duration of the conspiracy, the defendants sold LOI policies for more than $12 million in premiums but directed the premiums, minus their fees, back to the purchasers in a manner concealed from the IRS.

Conspiracy to impede the IRS and tax evasion each carry a maximum punishment of five years imprisonment and a fine of up to $250,000.

Yankee Aide Didn't Report Players' Tips

The traveling secretary for the New York Yankees pleaded guilty in New Haven, CT, to one count of filing a false tax return.

The federal government charged David Szen, 56, of Brookfield, CT, with failing to report tips from players and coaches as income.

Those tips ranged from a few hundred dollars to $10,000. In pleading guilty, Szen admitted that he failed to report approximately $53,350 in additional income in his individual income tax returns for the tax periods 2001 through 2005.

Szen faces up to three years in prison and a fine of up to $100,000. He will also be required to pay about $10,285 in back taxes, plus penalties and interest.

IRS Question Corner

Question: I've heard a lot of inconsistent information, so give it to me straight, please: What is the Offer in Compromise program and would I qualify for it?

Answer:  To answer your question, let me first give some background: For decades agents with the Internal Revenue Service chased deadbeat taxpayers, literally banging on doors to try to collect revenue for the U.S. government. In some cases, that hard-line tactic worked, but in many cases, it did not.

Over time, the IRS discovered that a kinder, gentler collection tactic can be just as effective, if not more effective. Enter the Offer in Compromise program. Many taxpayers were running from the IRS not because they didn't want to pay but because they couldn't pay.

The Offer in Compromise program is for these taxpayers. If for whatever reason you have amassed a substantial amount of tax debt but are not in a position - and likely will not be in a position in the future - to pay that tax debt, then you may qualify for the program.

Here's how it works: The first thing you should do is consult a qualified tax professional. He or she will analyze your returns to make sure you are not obligating yourself 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 tax debt, you will meet with an IRS agent and negotiate a settlement agreement. This settlement agreement will be an amount you will pay that will eliminate your tax debt once and for all - and this agreement oftentimes amounts to pennies on the dollar.

For taxpayers who qualify for the Offer in Compromise program, it can mean the end of all of their IRS nightmares.

Closing Get help. 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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Nelson & Company, P.S., CPAs Since 1979

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