July-August, 2010

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

Senate Blocks Unemployment Bill -

So far Congress has not passed anything; no additional tax on S-Corps...yet.

Look for most changes to be enacted after November congressional elections, most likely reissuance of the Bush tax cuts, a new estate tax law and higher exclusions for AMT.

The economic slow-down seems to have dampened congressional desire to raise taxes

NELSON & COMPANY, P.S.
Certified Public Accountants


IRS Times & Inquirer

Inside This Issue...

Oregon Couple Convicted in Shelter Scheme
Tax Protester Pleads Guilty
Georgia Man Underreported Income by More than $1 Million
IRS Question Corner


Oregon Couple Convicted in Shelter Scheme

A married couple in Portland, OR, was convicted of nine counts of criminal tax violations spanning 10 years for their sale and promotion of abusive tax shelters.

Micaela Renee Dutson, 48, and Tony Dutson, 53, were convicted of conspiring to defraud the IRS, obstructing the IRS, causing clients to use bogus financial instruments in an attempt to pay their taxes, failing to file tax returns, and aiding and advising a client to file a false tax return. In all, according to the government, the Dutsons helped to defraud the IRS of approximately $7 million.

Micaela Dutson was a lawyer, and the couple used her law office in Tigard, OR, to promote and sell abusive tax trusts for several years before moving to Arizona in 2003. The couple made more than $1 million dollars from the scheme and paid no income tax. The Dutsons also filed approximately 30 bogus tax returns, attempting to claim fraudulent refunds from the IRS totaling more than $185 million.


Tax Protester Pleads Guilty

A Huntington Beach, CA, man who sold videotapes and books that promoted his strategy to use corporations to conceal personal income has pleaded guilty to using his corporations to hide income from federal tax authorities.

Dana Ray Reynolds pleaded guilty to two counts of subscribing to false tax returns for the years 2002 and 2003 and admitted that he failed to report more than $300,000 in income to the IRS in each of the years.

Reynolds, who promoted his tax-avoidance strategy through companies such as Repackaging America and Incorporating You used these companies to pay personal and family expenses. Reynolds also used the corporations to conceal assets, such as automobiles, recreational vehicles and at least one vacation home. Reynolds did not report the money taken from the corporations as income, causing tax losses of more than $80,000 to the IRS.

"To market his concealment and avoidance strategies, Mr. Reynolds highlighted his own elaborate lifestyle made possible by following the plans he developed. Now, Mr. Reynolds faces federal prison for having subscribed to false tax returns and his own misguided marketing,” said Leslie P. DeMarco, Special Agent in Charge of IRS Criminal Investigation’s Los Angeles Field Office, in a statement.

Reynolds faces up to six years in prison.


Georgia Man Underreported Income by More than $1 Million

Robert L. Braddy Jr., 39, of College Park, GA, was sentenced to two years and six months in prison for income tax evasion. He was also ordered to pay $306,906 in restitution.

Braddy was immediately remanded to the custody of the U.S. Marshals Service at the conclusion of the sentencing hearing. According to court records, when Braddy filed his 2003, 2004 and 2005 federal income tax returns, he willfully attempted to evade a large part of the income tax he owed the United States by filing a false and fraudulent U.S. Individual Income Tax Return (Form 1040).

For each of the returns he filed, he knew that his total income and the tax due and owing substantially exceeded the amounts he reported.

Braddy underreported his income by more than $1.1 million and underpaid his income taxes by $306,906.

“This defendant hid $1 million in income and cheated his fellow citizens who pay their fair share of taxes. Now he is going to prison,” said United States Attorney Sally Quillian Yates in a statement.

Braddy is not eligible for parole.


IRS Question Corner

Question: I’ve read some of what you’ve said about the Offer in Compromise program. To be honest, I find it hard to believe. There are so many scams out there. I owe a good deal of money in back taxes, and I don’t know how I’ll pay it off. But why would the IRS agree to accept less than I owe?

Answer:  Your skepticism is healthy. Indeed, there are a lot of scams out there today — many of them preying on people in tax trouble — and so you are wise to take a skeptical approach at first.

But I — and every other qualified tax professional out there — can assure you that the Offer in Compromise is not a scam. To understand why the IRS might be willing to accept less than you owe as part of a compromise offer, it’s important to understand the IRS’s position and mentality: Prior to use of the Offer in Compromise, the IRS often took a tough-as-nails approach with indebted taxpayers — knocking on doors, chasing taxpayers across the country, trying everything to collect what was owed.

During this period, the IRS began to realize that a gentler approach could actually be more effective. The irony is that the Offer in Compromise in many ways allows the IRS to collect more tax revenue than the more aggressive tactics netted. That’s exactly why the tax-collecting agency might be willing to accept less than you owe as part of a compromise offer.

Now, if you’re interested in filing an Offer in Compromise, the first thing you should do is consult a qualified tax professional. He or she will analyze your previous returns, establish the exact amount of your tax debt, and chart a course of action. Of course, you need to make sure you qualify for the Offer in Compromise program, and this is where you’re qualified tax professional can help. However, if you do not qualify, you may have other good options, such as the Installment Agreement.

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!


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Nelson & Company, P.S., CPAs Since 1979

====NOTICE REQUIRED BY IRS====
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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