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March, 2011

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

Extensions DO NOT Trigger Audits - Mistakes do!

Study after study has shown that filing for extensions do not trigger audits. DIFF Scores (created by the program the IRS uses to determine who should be audited) have no numeric factors that include extensions.

Urban myths have created the folklore that insinuates you are more likely to be audited if you file for an extension. Of course, the IRS has done nothing to dispel this myth. The reason is quite simple: It is a proven fact that taxpayers who rush to get their taxes done by the April 15th due date consistently miss deductions, resulting in overpayment of taxes. It is estimated that these tax bills are overstated by as much as 15 to 17%.

Fact: Almost 99.9% of the major corporations in the United States listed on exchanges such as NASDAQ and NYSE file for extensions for at least 6 months - and often longer.

Remember: There is no "extra credit" for filing early. Allow time for your return to be filed properly so you do not pay Uncle Sam more than he is due. Extensions do not cause audits - what is on your return can.

Certified Public Accountants

IRS Times & Inquirer

Inside This Issue...

IRS Agent Nailed on Tax Charges
AZ Treatment Center Owners Get Prison Term
Racecar Specialist Gets Prison Time for Evasion

IRS Agent Nailed on Tax Charges

An IRS revenue agent pleaded guilty to charges of filing false tax returns for himself and innocent relatives that claimed, among other things, bogus deductions for alimony and mortgage payments.

Albert Bront, 51, a former Santa Clarita, CA, resident, pleaded guilty to one count of subscribing to a false return and two counts of assisting others in subscribing to false tax returns.

Bront specifically pleaded guilty to a count involving his own fraudulent 2005 tax return, but also admitted filing fraudulent tax returns for the tax years 2003 to 2007 that claimed excessive deductions and failed to report certain income. Bront also pleaded guilty to two counts involving fraudulent tax returns he filed without his relatives' knowledge, admitting that he stole large tax refunds that were the result of the fraudulent tax returns filed on behalf of the unknowing relatives.

In relation to his 2005 tax return, Bront falsely claimed approximately $16,819 in mortgage interest. Bront also falsely claimed an approximately $12,000 deduction for "alimony paid" and failed to report as income more than $10,000 he received from the fraudulent activity.

Bront faces up to nine years in prison and has agreed to pay approximately $127,116 in restitution.

AZ Treatment Center Owners Get Prison Term

The owners of a Sedona, AZ, drug and alcohol rehabilitation center have been sentenced to prison following a trial in which they were convicted on one count of conspiracy to impede the IRS and four counts of tax evasion.

Dr. William Howard Steiniger, 65, received 42 months in prison. His wife Diana, 52, received eight months behind bars.

Together, the Steinigers operated Desert Canyon Treatment Center from 1998 to 2008. During a four-day trial, testimony showed that the Steinigers concealed income from the IRS by funneling money into sham entities they created. One of those sham entities was set up in the Central American nation of Belize.

Racecar Specialist Gets Prison Time for Evasion

Ian Prout, 38, of Essex, CT, was sentenced to three months in prison, to be followed by one year of supervised release, for failing to report more than $250,000 in income on his federal tax returns between 2005 and 2007.

According to court records, Prout was a self-employed racecar specialist. Typically, Prout rented the facilities for the weekend and was paid to teach high-performance car owners how to drive and race their vehicles. Prout also derived income by providing consulting services to car dealerships and marketing firms.

Prout deposited most of the income from his racetrack instruction events into his business banking account, but deposited the income from his consulting work into his personal bank account.

When preparing his tax returns, Prout supplied information to his accountant about his business bank account but failed to supply information about his personal bank account. That ensured his tax returns failed to report the total amount of income he received in each year.

For the tax years 2005 to 2007, Prout failed to report $251,136 in income, resulting in his underpayment of $74,481 in taxes for those years.

Prout was ordered to pay to the IRS approximately $150,000.


--Our Policies--

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

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.