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 0704-1
E-MAIL TAX BULLETIN
July, 2004

A Message From Nelson & Company, P.S., CPAs


 Q & A
Q: Is it my imagination or has preparing my tax return become more complicated the last few years?
A: No, you're right. Preparing a tax return has definitely become far more complicated and time consuming. The preparation time for an average tax return, as estimated by the IRS, has increased 19% to 27.5 hours from 1998 to 2003. Congress enacted 7 major tax acts in 1996, 1997, 1998, 1999, 2001, 2002 and 2003. Roughly three hundred thousand words have been added to the Internal Revenue Code, that now totals 2.8 million words. Is it any wonder why over 60% of taxpayers, a record number, sought the advice of paid preparers during the 2004 tax season?
 TAX TIP
If your child has a summer job, you can contribute an amount equal to whatever they earn to a Roth IRA up to a maximum of $3,000. That $3,000, at 7%, can grow to $115,000 by the time they reach age 70.

Also, if your child will earn less than $4,850 in wages and less than $250 in interest this year, have them claim "Exempt" on their W-4 form to avoid the witholding of taxes and the need to file a tax return.

Now is the time to start Tax Planning. Call our office for an appointment.
NELSON & COMPANY, P.S.
Certified Public Accountants
                 JULY, 2004

Inside This Issue....

COMPUTER TECH MANAGER SENTENCED FOR TAX FRAUD

An Alabama computer manager was sentenced to 37 months in prison, plus three years of supervised release, for a scam in which he bilked a healthcare company and then did not report proceeds as income.

According to U.S. Attorney Alice H. Martin, 41-year-old Timothy V. Buckner, of Springville, Alabama, managed the computer systems at Eastern Health System in Birmingham. While employed there, Buckner created a fake business, Network Services Inc., an unincorporated entity that allegedly provided computer services to Eastern Health. However, the company consisted of nothing more than letterhead, a mail drop, and a checking account set up with Buckner’s wife’s Social Security number.

Bucker then submitted bogus claims to Eastern Health System in the name of Network Services. In all, he received $273,000 in income from the scam. He then deposited the proceeds. What’s more, Buckner did not report the proceeds as income on his 1999, 2000 and 2001 federal tax returns. That ultimately led to his conviction. “All income, from whatever source, is taxable income, even income generated by fraud,” said Martin in a statement. “Convictions for healthcare fraud and tax fraud carry stiff sentences.”

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

Former Cape Cod Physician Convicted

A former Cape Cod physician has pleaded guilty to failing to file individual income tax returns for the years 1997, 1998 and 1999 despite earning nearly $1 million in gross income during those years.

Kenneth E. Smith, 59, formerly of Osterville and Centerville, MA., and currently of Hilton Head, S.C., pleaded guilty following a three-count information field by the federal government.

According to the federal prosecutor, had Smith not taken a plea, the evidence would have shown that the doctor received significant income from his medical practice, Hyannis OB-GYN Associates, from 1997 to 1999.

In fact, that income exceeded $800,000. Despite the six-figure income, Smith did not file tax returns reporting his income and did not pay the taxes that were due on the income.

He faces up to one year in prison for each of the three counts.


Illinois Man Gets 24 Months for Fraudulent Refunds

Milo M. Sullo, a 40-year-old resident of St. Clair County, IL, was sentenced to 24 months in prison, followed by three years of supervised release, after being convicted of three tax charges and then making false statements to IRS investigators.

According to trial evidence, Sullo prepared false W-2 forms for his electronic tax filings for the years 1999, 2000, and 2001, causing the government to issue tax refund checks for which Sullo was not eligible.

“The filing of false returns are serious criminal tax offenses,” said IRS Special Agent James Martin in a statement. “To ensure confidence in our tax system, the IRS has a responsibility to aggressively investigate and pursue individuals who violate the nation’s tax laws.”

IRS QUESTION CORNER...

Question:     I’ve been seeing some signs on the side of the road lately that advertise: SETTLE YOUR TAX DEBT FOR PENNIES ON THE DOLLAR. I’m pretty wary of any business advertising with picket signs in the median, but I had heard that it was indeed possible to settle your tax debt for a substantial amount lower than you owe. I’m particularly interested because I currently owe $94,000 in back taxes. Is this program true, and would it be available to me?

Answer:     You’re probably wise to be wary of businesses advertising with roadside picket signs. Although they may be legitimate, there are a lot of scammers out there — and some of them do claim to work in the tax field.

But, yes, it’s true that you can settle your tax debt for pennies on the dollar! But make sure you hire a qualified tax professional to guide you through the process. It requires a delicate, graceful dance with IRS agents.

Here’s how it works: Realizing that the agents most likely will be unable to collect anything if they hound taxpayers for debts they simply cannot pay, the IRS instituted the Offer in Compromise program as a way to get something while, at the same time, allowing taxpayers to settle up. If you can prove that you do not have the economic means (or will not have the economic means in the near future), you may be eligible for the program.

The first step will be for a qualified tax professional to analyze your previous returns, making sure that you are not overestimating your tax debt. Once the true figure is established, your tax professional will negotiate with an IRS agent the amount of money you can pay in order to satisfy your debt. Oftentimes, this really is pennies on the dollar! Obviously, if you’re driving around in a new BMW, the IRS might not welcome you into the Offer in Compromise program. But if you can prove you do not have the financial means to pay off your debt, this program could be exactly what you need.

Why don’t you give me a call? I’m an IRS Problem Solver. My number is 253-752-9522 or send me an E-mail at Firm@DNelsonCPAs.com for a free, no-risk consultation. Call us 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