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 0705-1
E-MAIL TAX BULLETIN
July, 2005
Message From Nelson & Company, P.S., CPAs
Q & A ---IRAs and Taxes
  Q:  I had to cash in my IRA to pay off some credit cards. A lot of tax was taken out. Now the tax return shows I owe more. Why?
  A: 
Withholding is often at ten percent for the early withdrawal penalty and may not cover regular income tax. If you are in the 25 percent tax bracket and take money out of your IRA, you need to have at least 35 percent withheld to cover the regular tax and the ten percent early withdrawal penalty. The ten percent penalty is in addition to the regular tax. The most expensive place to borrow money is from your IRA; any other source is cheaper.

NELSON & COMPANY, P.S.
Certified Public Accountants

JULY, 2005

Inside This Issue....
"Yes, I'm sure obituaries are very important to your business, but you can't deduct them as business publications."

MA GAS STATION OWNER INDICTED ON TAX EVASION CHARGES

A Dennis, MA owner of a West Harwich Sunoco station was charged with multiple counts of tax evasion.

From 1991 to 2002, Edward Varjabedian skimmed income from his business, West Harwich Sunoco. Varjabedian's sister, Diana Varjabedian, allegedly opened bank accounts and safe deposit boxes into which they deposited cash. Additionally, Varjabedian also ran an off-the-books cigarette sales operation.

The indictment also alleged that Varjabedian significantly underreported proceeds from his auto repair business. In all, he allegedly evaded more than $400,000 in taxes.

If convicted, Varjabedian faces up to five years in prison and a $250,000 fine.

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

MBTA Supervisor Charged with Evasion

The former Superintendent of revenue collection for the Massachusetts Bay Transportation Authority (MBTA) was indicted on tax evasion charges.

According to the indictment, Mary Lempitski, 46, of Jamaica Plain, Mass., spent at least $87,984 at Nieman Marcus alone from 2000 to 2002. Her declared sources of income did not account for her spending ability.

At the time, Lempitski oversaw the operations of an MBTA facility known as the MBTA "Money Room," which is the central cash repository for revenues collected by the MBTA daily. The indictment alleges that, during the years 2000 through 2002, the MBTA Money Room routinely contained hundreds of thousands of dollars in uncounted and unregistered cash. The indictment alleges that Lempitski's taxable income and federal income taxes substantially exceeded the amounts she actually declared on her income tax filings for tax years 2000 to 2002.

If convicted, Lempitski faces up to 5 years in prison, to be followed by three years of supervised release, and a $100,000 fine on each count.


Trust Operator Gets 41 Months for Tax Scam

The operator of a trust used to hide income from the Internal Revenue Service was sentenced to 41 months in prison and ordered to pay a total of $897,773.45 in restitution.

Star L. Mathias, 52, of Phoenix, had been charged with conspiracy to defraud the United States. From January 1995 to December 1997, Mathias and others joined together in an organization known as PROTEC to promote and market a system of trusts in which individual taxpayers would illegally reduce the income on which they would pay federal taxes.

Mathias admitted that in one instance she advised a client to purchase a package of offshore trusts to pass through the client's business income. The income was to be transferred to an international corporation, which had no filing requirement and, therefore, no federal tax liability. Mathias advised the client that with the purchase of the offshore trust package, the client could eliminate taxes for the entire year. Mathias also advised the client to have her spouse place his income from wages into a business trust containing their personal residence and to take deductions against the income based upon expenses of running the residence.

IRS QUESTION CORNER...

Question:     A colleague of mine mentioned that he has some sort of an agreement with the IRS in which he makes a monthly payment. He says that it will eventually satisfy his tax debt. I have tax debt as well, but I don't think the government has ever offered me such a payment plan. Is this for real?

Answer:     Yes, it is. While IRS agents don't go around advertising it, the government does offer what's known as an Install Agreement. It's really pretty simple - and can be great for taxpayers who are in a position to use it.

Here's the breakdown: After decades of chasing taxpayers to collect unpaid debts, the government realized that it can more effectively deal with taxpayers gently rather than with a strong arm. If you qualify, it could be the perfect solution for you to get rid of IRS debt.

First of all, you'll want to consult a qualified tax professional. He or she will analyze your previous returns with a fine-toothed comb to make sure that you are not going to pay the IRS a penny more than you owe. Once you and your tax professional have the exact amount you owe, you'll meet with an IRS Collections Agent. After showing the agent your tax debt and current finances, your tax professional will work out a monthly Installment Agreement with the IRS. Now don't get scared. No matter how much you owe, you can likely find a way to make it work as a small monthly payment. Over time that payment will satisfy your IRS debt.

This monthly payment will be similar to a mortgage or car payment - something substantial but also something you can learn to live with. Consider the alternative: A tax bill looming over your head, stressing you out and making you lose sleep. Or worse! If you are not financially able to pay your debt, another option you can consider is an Offer in Compromise. You should discuss this with a qualified tax professional.

I handle problems like yours every day. It'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 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