NELSON & COMPANY, P.S.
Certified Public Accountants
Tacoma Mall Office Building
4301 South Pine Street, Suite #241
Tacoma, Washington 98409-7205
David S. Nelson, CPA
E-MAIL: Firm@DNelsonCPAs.com
ON THE WEB: NEVERPAYTAX.com
PHONE: 253-752-9522
FAX: 253-276-0144
1-800-669-0137
Edition 0305-1
E-MAIL TAX BULLETIN
March, 2005
Messages From Nelson & Company, P.S., CPAs
Q & A ---Self-employment and Taxes
  Q:  We just had our taxes done and we owe over $5,000. We have never owed taxes before. Our accountant says it's because of my husband's new job and receiving a 1099. We don't understand.
  A:  Welcome to the wonderful world of self-employment. Your husband's new job is not a job. He is now self-employed and in business for himself. He has to pay both income and self-employment tax. Self-employment tax is Social Security and Medicare. We see this all the time with employers outsourcing jobs that were once paid via a W-2. We have 25 million businesses in the U.S. vs. 10 million in 1995. This is the primary reason why millions of Americans owe the IRS over $300 billion dollars. Our May column will follow-up with some ideas on how to deal with being self-employed.
  NELSON & COMPANY, P.S.
Certified Public Accountants
       MARCH, 2005

Inside This Issue....

"That program supplies you with all kinds of ways to cheat on your taxes and it calculates how much time you'll do in prison if you get caught."

EXECUTIVE RECRUITER
SENTENCED FOR FILING
FALSE TAX RETURN

An executive recruiter in Wilton, Connecticut, has been sentenced to four years of probation for filing a false 1999 tax return for his corporation.

Brian M. O’Connell, 50, is the operator of the O’Connell Group Inc. In 1999, after reading the book The Offshore Advantage by Terry Neal, O’Connell contacted Offshore Corporate Services and Neal for advice regarding protection of personal assets. With the assistance of Neal — and through the Nevis American Trust Company in Nevis, West Indies — O’Connell set up an illegal offshore trust. O’Connell avoided paying $143,718 in taxes.

Due to his cooperation with the government, the judge departed downward from the sentencing guideline range of 15 to 21 months in prison.

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IRS Times & Inquirer
NELSON & COMPANY, P.S.
CERTIFIED PUBLIC ACCOUNTANTS
253-752-9522 | 1-800-669-0137

‘Survivor’ Winner Charged with Tax Evasion

Richard Hatch had the physical ability and psychological cunning to win $1 million on the first season of CBS’s hit reality show Survivor. Now, he’s facing a much greater opponent than a deserted island: the federal government.

Hatch, who became known to worldwide television audiences as a flamboyant and ruthless game player, has been charged with tax evasion. Federal prosecutors in Rhode Island allege that Hatch filed an income tax return omitting his more than $1 million in winnings and also failed to report $321,000 in earnings from WQSX-FM, a Boston radio show.

Hatch, a 43-year-old resident of Newport, R.I., could face up to five years in prison and a $250,000 fine. The stakes are higher than ever for Hatch. Instead of Survivor host Jeff Probst, Hatch will face a federal judge.

Woman Sentenced to 46 Months in Refund Scheme

A Terra Bella, CA., woman has been sentenced to 46 months in federal prison for orchestrating an illegal tax-refund scheme. The investigation was part of a crackdown on such illegal activity in California’s Central Valley.

Elvia Ruiz, 37, admitted that she used Post Office boxes to receive refund checks from false returns that she prepared using fictitious names.

According to Assistant U.S. Attorneys Mark Cullers, Sheila K. Oberto and E. Robert Wright, the case was part of a crackdown by the IRS on numerous tax refund schemes operating in the Central Valley. The schemes consisted of individuals who submitted false 1040 Individual Income Tax Returns to the IRS in order to receive false refund checks. To date, 16 people have entered guilty pleas in connection with the illegal tax refund scheme.

“These cases represent a significant priority for IRS,” said IRS Special Agent Victor Song in a statement. “We are committed to working with the U.S. Attorney’s Office to combat false tax return schemes such as this.”

IRS QUESTION CORNER...

Question:     I think this Offer in Compromise program is for me. I owe roughly $65,000 in back taxes. Trouble is, I’m worth about $50,000. I'm paying the price for a few bad business decisions, a divorce and some personal troubles. Can you help?

Answer:     Although it’s impossible to know for sure until I have an opportunity to analyze your specific situation, it does sound like you are a potential candidate for an Offer in Compromise. And, yes, I can certainly help!

Here’s what we’d do: You would come visit with me for a free consultation. If we’re able to conclude that an Offer in Compromise is a good option for you, the next step would be to analyze your previous returns with a microscope, making sure that you have not overestimated your tax debt to the IRS. Once that step is complete, we’d submit a settlement offer to a revenue officer.

Assuming you are a good candidate for the program — that is, you do not have a vast fortune in real estate or automobiles that you have not disclosed to the government — it’s likely that the government official will accept your offer. That means you could reduce your tax debt by pennies on the dollar!

It’s as simple as that. Over the years, the IRS has learned that settling with taxpayers — as opposed to chasing them for years over unpaid taxes — is a much more effective way of collecting revenue.

The Offer in Compromise program has striking benefits for average taxpayers as well. Ask yourself this: Do you stay up at night, worried about your tax debt? Do you sometimes wonder if that knock on the door is the taxman? Do you feel paralyzed, as if you can’t move forward because of the looming tax debt?

Then simply knock those feelings out of your life. An Offer in Compromise can do that once and for all. In fact, I work on these types of cases every day. Please give me a call to set up your initial appointment. For a free, no-risk consultation, call my office at 253-752-9522 or send me an E-mail at Firm@DNelsonCPAs.com. Do it today!

David S. Nelson, C.P.A.
NELSON & COMPANY, P.S.
Certified Public Accountants

Tacoma Mall Office Building
4301 South Pine Street, Suite #241
Tacoma, Washington 98409-7205
Phone: 253-752-9522
FAX: 253-276-0144
E-MAIL: Firm@DNelsonCPAs.com
WEB: www.NEVERPAYTAX.com