February, 2009

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

The Stimulus Bill---What it has for you.

As most of you know, President Obama signed the Stimulus Bill last week. In the bill are approximately 282 changes to the Tax Code. Most important is the new Making Work Pay credit. Basically, this is a reduction in tax rates. The IRS released the new wage tables that are now available at http://www.irs.gov/pub/irs-pdf/n1036.pdf. Employers should start using the new withholding tables as soon as possible. There are a number of changes in the bill, and we plan to publish a special summary that will cover tax benefits for both individuals and businesses.

Of immediate note is the $8,000 first-time home buyer refundable credit. If, as a first-time home buyer, you buy a house in 2009, you do not have to repay the $8,000. The energy credit has been increased from $500 to $1,500, and any prior credits will be counted against it. Electric plug-in cars get a special credit, along with a deduction for sales tax on a new car. This is really nothing special since we already have that credit in Washington State, except the nice part about this deduction is that it will be above the line, so folks who don't itemize can take advantage of it. The amount of qualified college tuition that can be written off has also been increased. For businesses, there is an increase in write-off for depreciation and a change in the net operating loss carry-back which can now go back five years. This can be a real boon for businesses that have been suffering.

This tax season has to be the most difficult and trying I've seen in my 30-plus years of practicing public accounting. All the other practitioners I've talked to say the same thing. Banks are extremely difficult to deal with --or they are not working with existing customers. Our priority right now must be to get work out for our business clients who need reports for financing. If these clients do not get first priority, they will be laying off employees.

We realize many of our clients are undergoing extreme hardship and, fortunately, because we've been able to invest in some new technology, we will be able to hold our fees in line with last year. If the required work is substantially less than prior years, fees should be lower.

We are working hard to help as many people as we can through this crisis. Please bear with us. We will get to everyone. Please keep in mind that the current demands placed on our profession are unprecedented in our lifetime. Although we've seen some softening in the position of the IRS, they are continuing to aggressively pursue delinquent taxes. We do have some special resources, and with the new tax bill, we have some tools to help you get through these difficult times.

Certified Public Accountants

IRS Times & Inquirer

Inside This Issue...

Tax Shelter Dealer Faces 5 Years
Four N.C. Women Sentenced in Tax Fraud Case

Tax Shelter Dealer Faces 5 Years

A financial services consultant based in Memphis pleaded guilty in New York to conspiracy to defraud the IRS in connection with tax shelters marketed by the accounting firm Ernst & Young.

According to the information filed in Manhattan federal court and statements made during the guilty plea, 46-year-old Charles Bolton, from 1998 to 2002, was involved with an E&Y group, known initially as “VIPER” for “Value Ideas Produce Extraordinary Results,” and later as “SISG” for “Strategic Individual Solutions Group,” that designed, marketed and implemented high-fee tax strategies, including tax shelters that purported to eliminate, reduce or defer taxes on significant income or gains. The shelters purported to allow wealthy individuals to pay a percentage of their income in fees to E&Y, Bolton’s companies, and other participants in the transactions, rather than paying taxes to the IRS.

The two shelters the Bolton companies implemented, known as Contingent Deferred Swap and CDS Add-On, involved financial trades that were implemented and overseen by the Bolton companies and other entities. Bolton himself made millions of dollars from his involvement in the shelter transactions and ownership of the related companies. Bolton faces up to five years in prison and will be sentenced in April.

Four N.C. Women Sentenced in Tax Fraud Case

In Wilmington, N.C., four women were sentenced for their involvement in a tax fraud scheme.

Pamela D. Evans, 33, received 15 months in prison; Bertha Battle, 28, received 15 months in prison; Tasha Battle, 28, received 180 days of home confinement with electronic monitoring; and Gwendolyn P. Evans, 49, received one month in prison and up to 150 days of home confinement with electronic monitoring.

All four pleaded guilty to conspiring to defraud the government and filing false claims. From January 2004 to April 2004, according to the indictment, the four defendants, while employees of Independent Tax Service in Rocky Mount, N.C., made claims for refunds from the IRS by filing or causing others to file false 2003 federal income tax returns.

The four women inflated wages and/or withholdings and listed false dependents and/or false dependent information to qualify clients for the earned income credit in IRS Forms 1040 and 1040A individual tax returns. They also allegedly sold fraudulent dependent information to some clients so they would qualify for a larger refund and claimed education credits for clients who were not entitled.

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Nelson & Company, P.S., CPAs Since 1979

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