June, 2010

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

Senate Blocks Unemployment Bill -

The Senate, by blocking the unemployment bill, leaves S-Corps safe for now. Had the bill passed with $16 to $30 billion in changes to the Tax Code, all S-Corp income would have been subject to Social Security taxes. This only applied to professionals, i.e. doctors, attorneys, artists, accountants, etc.

We may see another try by the House before the fall election. Any changes would be effective in 2011.

Certified Public Accountants

IRS Times & Inquirer

Inside This Issue...

Ambassador Was Tax Cheat, Judge Says
NJ Politician gets Probation in Tax Case
Clergy Members Guilty of Evasion
IRS Question Corner

Ambassador Was Tax Cheat, Judge Says

In a decision handed down in May, U.S. District Judge F. Dennis Saylor ruled that the late Richard J. Egan, the founder of EMC, the world’s largest data-storage company, was a tax cheat while he served as President George W. Bush’s ambassador to Ireland.

According to the judge’s ruling, in May 2000, Egan and his family hired tax shelter promoters that helped the Egans use the "Son of Boss" scheme to avoid tax liabilities. Two of the complicated tax shelter transactions were developed by Fidelity International Currency Advisor and Fidelity High Tech Advisor.

“None of the participants in these complex transactions believed that they were real business transactions, with any purpose other than tax avoidance,” Judge Saylor wrote.

Egan, who suffered from lung cancer, was 73 when he committed suicide on Aug. 28, 2009.

NJ Politician gets Probation in Tax Case

Leonard Kaiser — formerly mayor of North Arlington, NJ., executive director of the Bergen County Utilities Authority, and a commissioner of the NJ. Meadowlands Commission — was sentenced along with his wife for attempted tax evasion.

Leonard and Barbara Kaiser each received a year of probation.

Leonard Kaiser, 61, and Barbara Kaiser, 60, both pleaded guilty to an information charging them with attempting to evade income tax due on more than $28,000 in unreported income that they took from the campaign account of Leonard Kaiser.

At their plea hearing, the Kaisers admitted that while they knew that New Jersey election laws prohibited the personal use of campaign funds, they nevertheless caused a number of checks to be issued from the election fund to Barbara Kaiser personally after Leonard Kaiser lost the 2002 election. Though many of the checks indicated on their face that they were for “salary,” the payments were not disclosed on campaign finance forms filed.

The Kaisers admitted that from 2002 to about 2004, they received just under $30,000 in income from the election fund that they deliberately did not report as income on their federal tax returns in order to avoid paying taxes.

Clergy Members Guilty of Evasion

The husband-wife/bishop-pastor team at Greater Salem Church in Charlotte, NC, is guilty of tax evasion.

A federal jury in Charlotte convicted Anthony L. Jinwright, 53, and his wife, Harriett P. Jinwright, 50, following a four-week trial. The guilty verdict concluded an investigation of evasion of federal tax obligations by the couple for their failure to report more than $2.3 million in taxable income from 2002 to 2007.

The 19-count federal indictment charged conspiracy to defraud the government, six separate counts of tax evasion, six counts of filing a false tax return and five separate counts of mail fraud.

“Notwithstanding any claims to the contrary, this case was not investigated or prosecuted because of the Jinwrights’ positions as members of the clergy,” said U.S. Attorney Anne M. Tompkins in a statement. “Bishop and Pastor Jinwright chose to use their positions within their church to collect enormous amounts of compensation, but ignore the tax responsibilities that all U.S. citizens must bear.”

According to evidence presented at trial, Bishop and Pastor Jinwright collected $6 million in income, but failed to report $2.3 million that constituted income for federal tax purposes, and failed to pay nearly $700,000 in income taxes owed.

IRS Question Corner

Question: I owe a significant amount in back taxes and interest. What’s the best option for me — an Offer in Compromise or an Installment Agreement?

Answer:  I wish it were as simple as saying one option is better than the other. But that’s impossible to say. The truth is, the Offer in Compromise and Installment Agreement are both excellent programs suited for specific and different circumstances.

The first thing you should do is determine your current circumstances. The best way to do this is by consulting with a qualified tax professional who will analyze your previous returns and your current financial situation. From this information, you and your tax professional can begin to assess whether the Offer in Compromise or the Installment Agreement would be your better option.

Let me briefly explain the differences between the two programs.

The Offer in Compromise is geared to taxpayers who owe a significant amount of money to the IRS but who, for whatever reason, are unable to pay this debt, even over time. This may be due to a failed business, medical expenses, legal judgments, personal misfortune, etc. The point is, for taxpayers who cannot pay their debt, the IRS allows the taxpayer to make an offer that would settle that debt once and for all. Oftentimes, this offer amounts to a substantial discount. You and your qualified tax professional meet with the IRS and then present your offer. It’s that simple.

By contrast, the Installment Agreement is intended for taxpayers with debt who are unable to pay the debt off in one lump sum but who have the resources to pay the debt down over time. Under the program, the taxpayer makes monthly payments that will over time eliminate the tax debt. Think of this like a car payment — paying a small amount regularly to pay off a large amount in time.

If you're looking for solutions to IRS problems, come see me. I solve tax problems every day. That’s because I’m an IRS Problem Solver. For a free, no-risk consultation, please call my office at 253-752-9522 or send me an E-mail at Firm@DNelsonCPAs.com. Do it today!

--Our Policies-- www.DNelsonCPAs.com

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.


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