May, 2006

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

Q & A ---Does my LLC have to pay tax?

  Q: I just formed an LLC. Does it have to pay tax?
Yes, No, and Maybe. It all depends on what type of business your LLC is doing. LLCs can be taxed as Regular C-Corporation, a Subchapter S-Corporation, a Partnership, and as part of your individual tax return on either Schedule C or E, Sole Proprietorship, or rental properties. C-Corporations pay taxes. Net income from S-Corporations and Partnerships are reported on individual returns. You must use Form 8832 to elect what type of tax return to file. A single member LLC electing to report as a sole proprietor on an individual tax return need not file Form 8832, unless there are employees and an EIN is not needed.

Certified Public Accountants

May, 2006

Inside This Issue....

Telemarketing Sales Director Evaded Taxes
Exec: I Evaded $119,579 in Income Taxes
Tax Charges Handed Down in Kansas
IRS Question Corner
"Of course the government
denies our existence
...until tax time."


Three people from Wichita were indicted in unrelated cases this week on charges of filing false federal income tax returns.

Travis Franklin, 25, is charged with making a false claim. According to the indictment, he falsely indicated on a Form W-2 that he was employed with Stingray Inc. in 2003, which resulted in a claimed refund of $6,500 to which he was not entitled. He signed a Form 8879 IRS e-File Signature authority along with a detailed claim for the refund. If convicted, he faces up to five years in prison and a fine up to $250,000.

Seth Bryant, 20, is charged with making a false. According to the indictment, he falsely indicated on a Form W-2 that he had been employed with Koch-Glitsch in 2003, resulting in a false refund of $5,160. He signed a Form 8453 Individual Income Tax Declaration for an IRS E-file Return. If convicted, he faces up to five years in federal prison and a fine up to $250,000.

Tiffany Cubit, 29, is charged with making a false claim upon. According to the indictment, she falsely indicated on a Form W-2 that she had been employed with Sonic Drive-In in 2003, resulting in a false refund of $3,951. If convicted, she faces up to five years in federal prison and a fine up to $250,000.

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IRS Times & Inquirer
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Telemarketing Sales Director Evaded Taxes

The sales director for a now-defunct San Diego telemarketing business will spend time behind bars for attempting to evade income taxes for the year 2000.

Michael Kayser has been sentenced to serve six months in custody, six months in home confinement, and three years of supervised release. Kayser was also ordered to pay $13,408 to the IRS, a fine of $2,000 and a $100 special assessment.

Kayser was convicted by a federal jury in December 2005 of evading taxes by understating the income he declared on his 2000 individual tax return.

According to the evidence presented at trial, Kayser failed to declare about $46,481 he received as commissions from the telemarketing company. He declared other income he earned during that year, but he concealed the income earned from his telemarketing employment, evading $13,408 in additional income tax.

Exec: I Evaded $119,579 in Income Taxes

A corporate executive from Salem, OR, and formerly of San Ramon, CA, pleaded guilty to three counts of tax evasion, admitting that he evaded $119,579 in income taxes.

Robert G. Gardner, 65, was the general manager of Pacific Coast Metals, a metal fabricating corporation owned by his wife. Although he and his wife divorced, he remained at PCM as general manager of the corporation.

According to the plea agreement, beginning in 1998, Gardner started to receive a smaller salary and began having his ex-wife's company pay his personal expenses. Gardner admitted that during 1998, 1999, and 2000, he took money from PCM in the form of fictitious loans, checks paid to cash, and diverted PCM funds to himself through third parties. Gardner then failed to report the income to the IRS.

He faces up to five years in prison and a $250,000 fine for each count.


Question:     I owe close to $100,000 in back taxes. Yes, I know - that's a lot! But I just don't see how I can pay it. My business has gone under, I'm making one-fourth of what I used to, and I feel like I just barely get by. Do I have any options?

Answer:   Yes, you do have options. While $100,000 in back taxes is a lot, you should feel better knowing that there are thousands of taxpayers out there with as much tax debt - or even more. They, like you, have options and ways to get out of debt. In your case, since you are making substantially less money than you used to, it sounds like the Offer in Compromise program will be a suitable option.

Here's how it works:

The first thing you need to do is find a qualified tax professional who will analyze your previous returns. He or she will be able to determine exactly how much money you owe to the IRS (after all, why pay even a penny more than you owe? Once that figure is determined, you and your qualified tax professional will meet with an IRS agent to discuss the Offer in Compromise program.

This program was created after the government became sick and tired of chasing down deadbeat taxpayers with no success. The Offer in Compromise program allows taxpayers to make a compromise offer that will settle the tax debt once and for all. Oftentimes, this settlement offer amounts to pennies on the dollar.

If your financial situation has drastically changed and you have little possibility of paying down the debt, the IRS likely will agree to participate in the Offer in Compromise program. They will determine how much you can realistically afford and come up with a new settlement figure that often amounts to, as I said, pennies on the dollar!

I handle cases like yours every day. That's what I do - I'm an IRS Problem Solver.

For a free, no-risk consultation, call my office at 253-752-9522 or send me an E-mail at Do it today!

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