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April, 2012

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

Tax Planning -

As most of our business clients are aware, year-end tax planning is done between November 1st and December 31st. Once the year ends, very little can be done to change an individual or business tax bill. Any bonuses or payouts via payroll must be paid by December 31st for officers/owners. Pension contributions, although they may be paid after year end, should be determined by the year's end. Any other year-end transactions such as reimbursing owners for auto expenses, make-up rents, and other bills must be paid by year end in most cases to qualify for the year as a deduction.

We generally require at least a current P&L through the first ten or eleven months of the year to begin the planning process. The sooner we receive the data, the better.

IRAs - How many different kinds are there?

Well, just a basic look at the IRS website would say there are regular IRAs, non-deductible regular IRAs, ROTH IRAs, SEP IRAs and SIMPLE IRAs.

Now, which is the best for your particular situation? Almost every client should have a conference with us to decide which type of IRA (or IRAs) is best, given their situation. For example: Assume you are employed and participate in the company's 401K plan. Additionally, you do consulting work for other business and earn $12,000 extra as an independent contractor. You can generally use a SIMPLE IRA and most, if not all, of your S.E. earnings up to $12,500 can be put into an IRA. This means you do not have to pay any income tax on these extra earnings. This is just one of many facets of using IRAs not only to save for retirement, but to also save on current taxes.

As we have told a number of clients, one of our favorite new items is that if you do not qualify for a regular IRA because your income is too high, or you're covered by a company plan, you can still make a non-deductible IRA contribution and then, with the help of your broker, roll that contribution into a ROTH IRA. If you're interested in such a maneuver, please call our office and we will send a news article to use when you discuss such conversions with your financial planner and/or stockbroker.

David S. Nelson, CPA, CTRS
Certified Public Accountants

IRS Times & Inquirer

Inside This Issue...

Robin Thicke, Paula Patton Owe IRS Six Figures
Horse Farm Owner had Tax Liabilities Exceeding $1 Million
Pizza Shop Owner Gets Six Months in Prison for Underreporting

Robin Thicke, Paula Patton Owe IRS Six Figures

R&B singer Robin Thicke and his wife, actress Paula Patton, owe the Internal Revenue Service $492,583.49 for failing to pay income taxes two years in a row.

In addition to his own music, Thicke has written songs for Jennifer Hudson, Usher and Mary J. Blige. Patton has starred in a number of movies, including Idlewild, Swing Vote, Precious and Mission: Impossible — Ghost Protocol.

A representative for Thicke and Patton said the couple is working to take care of their tax debt. The representative told the celebrity news outlet TMZ: “They’ve already paid more than half of this and they’re working with the IRS to pay the rest.”

Horse Farm Owner had Tax Liabilities Exceeding $1 Million

A Connecticut horse farm owner was sentenced to four months in prison and ordered to pay a $5,000 fine after pleading guilty to one count of tax evasion and one count of failure to collect and pay tax.

According to court records, Juliana Cole Weber, 64, of Ridgefield, Conn., owned and operated Stepping Stone Farm Inc., a horse farm offering a range of services. During the tax years 2001 through 2006, Weber filed personal income tax returns with the IRS that underreported her taxable federal income by more than $1.1 million, resulting in a failure to pay more than $389,000 in personal income taxes due on that unreported income. In addition, during the 2005 and 2006 tax years, Weber failed to collect and pay tax withholding and FICA taxes that were owed on Stepping Stone Farm’s employee payroll, for a total additional tax underpayment of $190,308.24.

With interest and penalties, Weber’s total tax liability exceeded $1 million.

In addition to her criminal prosecution, Weber has entered into a stipulated civil forfeiture agreement in which she has forfeited to the federal government $1.37 million that was seized from a safe deposit box and from the horse farm during the course of the investigation.

Pizza Shop Owner Gets Six Months in Prison for Underreporting

Adam Lucas, a North Huntingdon, Penn., restaurateur, has been sentenced to six months in prison following his conviction of tax evasion and filing a false return.

Lucas owned the Pizza and Gyro Express restaurant and failed to report approximately 50 percent of the gross receipts from his business, as well as underreported payroll and employment taxes. Lucas’ underreporting resulted in a $321,376.77 tax loss.


--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.