February, 2010

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

New Energy-Efficiency Home and Vehicle Tax Credits

Considering a new car? Need a new furnace or air conditioner?
Visit the Alliance to Save Energy web site (http://ase.org/content/article/detail/2654) before heading out for the showroom or store. You could save a bundle.

Tax Credit vs. Tax Deduction - Both save you money, but in different ways.

What is a tax credit? You don’t receive an income tax credit when you buy the product, like an instant rebate. You claim the credit on your federal income tax form at the end of the year. This credit then increases the tax refund you receive or decreases the amount you have to pay.

What is a tax deduction? Deductions, such as those for home mortgages and charitable donations, lower your taxable income.

So what is the difference? While a tax credit reduces the tax you pay, dollar-for-dollar (100% of the amount of the credit), tax deductions lower your taxable income so if you are in the highest 35-percent tax bracket, the income tax you pay is reduced by 35 percent of the value of a tax deduction. In general, a tax credit is more valuable than a similar tax deduction.

NELSON & COMPANY, P.S.
Certified Public Accountants


IRS Times & Inquirer

Inside This Issue...

Rabbi Gets Two Years for Tax Scheme
Las Vegas Man Gets More Than 15 Years for Tax Charges
‘Intelligent Alternative’ Radio Host Charged with Failure to File Tax Returns
IRS Question Corner


Rabbi Gets Two Years for Tax Scheme

The Grand Rabbi of Spinka, a religious group within Orthodox Judaism, was sentenced to two years in federal prison for orchestrating a tax evasion scheme that prosecutors called “an astonishingly complex and sinister enterprise.”

Grand Rabbi Naftali Tzi Weisz, 61, of Brooklyn, New York, pleaded guilty last summer to a criminal conspiracy charge in which he admitted to working with others to obstruct the IRS by soliciting charitable donations to Spinka-related organizations with secret promises to refund donors the vast majority of the money they “donated.”

With Weisz’s sentencing, a total of seven individuals have been convicted and sentenced for working together to obstruct the IRS and to operate an unlicensed money-transmitting business.


Las Vegas Man Gets More Than 15 Years for Tax Charges

Robert Kahre, the owner of six construction businesses in Las Vegas who paid employees over $100 million in cash wages as part of an elaborate scheme to defraud the IRS, was sentenced to more than 15 years in prison.

“Citizens who pay their fair share of taxes can rest assured that the Department of Justice will continue to utilize all of its resources to prosecute those who choose to cheat and promote fraud,” said John A. DiCicco, Acting Assistant Attorney General of the Justice Department Tax Division, in a statement.

Following an over three-hour sentencing hearing, visiting U.S. District Judge David A. Ezra, of the District of Hawaii, sentenced Robert Kahre to serve 190 months in federal prison, followed by three years of supervised release and ordered him to pay over $16 million in restitution to the IRS. Judge Ezra also ordered that Kahre, who has been free on a personal recognizance bond since he was arrested in 2005, be immediately taken into the custody of the U.S. Marshals Service.

“This kind of conduct is simply not acceptable in the United States,” said U.S. Attorney Daniel Bogden. “Individuals who ignore the federal tax laws by engaging in schemes to defraud in order to enrich themselves at the expense of others will be prosecuted.”


‘Intelligent Alternative’ Radio Host Charged with Failure to File Tax Returns

Louis A. Wolk — a.k.a. Louie Free, a.k.a. Louie B. Free — was charged in Ohio with three counts of failure to file tax returns.

Wolk was self-employed as a radio host, doing business as The Louis Free Radio Program, a.k.a. Free Radio Ltd., a.k.a. Louie Free Radio. Wolk billed his program as “The Intelligent Alternative: Brain food from the heartland.”

Wolk allegedly failed to file tax returns despite the fact that he had gross income in the amount of $74,150 for calendar year 2004, $46,810 for calendar year 2005 and $17,945 for calendar year 2006.

If convicted, Wolk’s sentence will be determined by the court after review of factors unique to this case, including the defendant’s prior criminal record, if any; the defendant’s role in the offense; and the characteristics of the violation.


IRS Question Corner

Question: Like others who have written in questions to you, I have significant tax debt. I am interested in the Offer in Compromise option, but you have said one must qualify for this option. What if I don’t qualify?

Answer: That’s an excellent question — one to which every person who has tax debt and is considering an Offer in Compromise should understand the answer.

You’re right in saying you must qualify for the Offer in Compromise — that is to say, not everyone is eligible. For those who do not know, the Offer in Compromise program allows taxpayers with significant tax debt to negotiate settlement amounts with the IRS that often come to a small percentage of what they owe. Here’s the important part: To qualify for the program, the IRS must believe you do not have a reasonable ability to pay your debt in full, even over time.

This is the situation for many people with tax debt. Their debt may be related to a failed business, poor tax advice, or rising and unexpected costs in their lives, such as medical costs. In short, these are people whose financial situations have changed so drastically they will not be able to pay their tax debt.

But the Offer in Compromise isn’t the only option. For those with tax debt who do not qualify for the Offer in Compromise program, a good option is the Installment Agreement. Under this agreement, the taxpayer works out a payment plan with the IRS that eliminates the tax debt over time. This is similar to a monthly car payment — a large enough payment to pay off a significant debt over time but not so large that it will adversely affect your lifestyle. Whether you are interested in an Offer in Compromise or an Installment Agreement, you should first consult a qualified tax professional in your area.

I’ve seen it time and time again: Life is much easier for clients once they solve their IRS problems and no longer have to worry about the taxman.

I solve tax problems every day. That’s because 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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Nelson & Company, P.S., CPAs Since 1979

====NOTICE REQUIRED BY IRS====
Circular 230 Disclosure:
To ensure compliance with requirements imposed by the IRS, we inform you that (i) any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

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