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 0505-1
E-MAIL TAX BULLETIN
May, 2005
Message From Nelson & Company, P.S., CPAs

Important Tax Updates

---W-4s
W-4s no longer need to be sent to the IRS even if the employee claims 10 or more exemptions.

---FUTA Minimum Threshold Increased
Employers are now required to make a quarterly deposit for unemployment taxes if the accumulated tax exceeds $500. The previous threshold was $100.
Q & A ---Taxes and Self-employment  (A follow-up to our March column.)
  Q:  Here are some additional ideas for success as a self-employed (independent) contractor.
  A: 
1. Being self-employed means you are responsible, i.e. you fired your last boss. You are the boss! Being the boss means you can't blame anyone but yourself if your business fails.
2. To own a successful business today takes knowledge, determination, and dedication. Obtain as much education as possible both in your chosen field and how to run a business. Determination means working hard---not just working at your job. Dedication includes setting realistic goals and being focused on achieving them.
3. Keep good records. Poor record keeping is the #1 cause of business failure.
Don't become an IRS statistic, run your business for a profit. Don't look for write-offs, look for ways to make money.

NELSON & COMPANY, P.S.
Certified Public Accountants

MAY, 2005

Inside This Issue....
"Even though your dog did 'do his business' in the basement, you still can't deduct it as office space."

PAIR ALLEGEDLY TRIED TO USE STOLEN TAX REFUND CHECKS

Michael Dale Pass, 43, of Inglewood, CA., and Shone Danielle Harris, 40, of Long Beach, Cal if., made their initial appearance in U.S. District Court in Denver on charges relating to the attempted laundering of a stolen tax refund check in California.

According to a February 17 indictment, Pass and Harris received a stolen U.S. Treasury check in the amount of $474,150.26. Pass then allegedly contacted Centennial Precious Metals in Denver concerning a possible purchase of gold.

Over the course of several weeks, Pass and Harris arranged to use the stolen Treasury check to purchase 1,408 gold coins from Centennial Precious Metals. If convicted, the defendants face up to 20 years in prison and a fine of up to $948,300.

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

Water District Manager Jailed on Tax Charge

The assistant general manager of the Northridge Water District, in Northern California, was sentenced to 21 months in prison after pleading guilty to tax evasion.

Jerry Allen Ness, 62, of Sacramento, was also ordered to pay a fine of $5,000 and to serve supervised release after his prison term. Ness admitted as part of his plea that during this tenure as the NWD assistant general manager, he issued compensation for unused sick leave and vacation pay to its employees through accounts payable rather than payroll. As a result, no federal income taxes were withheld from this compensation, and no Form 1099s or other notifications were issued to the IRS. During that same period, Ness received approximately $119,627 in vacation “buy-back” payments and bonuses from NWD.In total, during this three-year period Ness successfully evaded paying approximately $36,143 in federal income taxes.

In addition, Ness also admitted to participating in a scheme to defraud NWD by having NWD pay for personal purchases, which he charged to a water district credit card.

Mother and Sons Charged in Tax Refund Scheme

A mother and her two sons in Jacksonville, FL., have been charged with operating a tax-refund scheme from a Florida prison.

William Michael Koster, 31, Rolando Rafael Valencia, 25, and their mother, Noris Mercedes Keller, 54, have been charged with conspiracy to defraud the Internal Revenue Service and multiple counts of filing false claims for income tax refunds. They face up to 95 years in prison and a fine of up to $4.5 million.

According to the indictment, from February to September 2003, Koster, Valencia and Keller operated a scheme to obtain fraudulent income tax refunds by preparing and filing false federal income tax returns in the names of Florida inmates. The indictment alleges that Koster, who was then an inmate at Okeechobee Correctional Institution, obtained the names and social security numbers of other inmates. Valencia then filed false tax returns with the IRS using the information Koster provided.

In all, the indictment alleges, the defendants sought nearly $100,000 in fraudulent tax refunds.

IRS QUESTION CORNER...

Question:     C’mon, the Offer in Compromise program sounds too good to be true. You could owe thousands of dollars to the IRS, and the government will simply reduce the debt substantially? Is it even available to average taxpayers?

Answer:     First, no, an Offer in Compromise is not too good to be true. In fact, every year taxpayers who aren’t able to pay their debt negotiate Offers in Compromise that amount to mere pennies on the dollar. Secondly, there’s no such thing as an “average taxpayers,” as everyone’s financial and tax situation differs. The better question is: Is the Offer in Compromise available to me and my neighborhood? The answer: Yes!

To understand why the Offer in Compromise isn’t too good to be true, you must first understand the IRS’s position: Imagine having to chase down taxpayer after taxpayer to pay back taxes, using valuable man hours and resources for pursuits that often have zero results. Enter the Offer in Compromise. Using this, taxpayers can settle debts for pennies on the dollar — and the government won’t have to chase down that taxpayer any longer.

But there are a few other issues you should understand about an Offer in Compromise. For one, the government is going to make darn sure that you are qualified — that is, that you cannot pay the debt you owe. The IRS will review your finances carefully, and although an agent won’t have any problem with your sending a child to college, he might raise an eyebrow at your driving a $100,000 car.

In a nutshell, here’s what would happen: After a qualified tax professional reviews your returns and finances, he will submit an Offer in Compromise to an IRS agent. That likely will either be accepted or negotiated, and — bingo! — you’ve settled your tax debt for an amount you can afford.

It’s that easy. It’s time to get rid of those IRS nightmares. 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