July, 2012

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

We recently received the following from our friends at ADP:

Good afternoon again! I wanted to pass on an important piece of information for you to share with your business clients. These are excerpts from an article recently posted in the Wall Street Journal titled:

Employee Fraud Costs Small Businesses BIG BUCKS!

There is a tremendous amount of focus on small businesses right now and compliance issues surrounding wage and hour enforcement. Share these statistics with your business clients and let them know I will contact them for a free consultation and evaluation to uncover areas of risk that they may not be aware of!

Aaron Ness
District Manager
20700 44th Ave W., Ste. 600
Lynnwood, WA 98036
Phone (425) 908-3859
Fax (425) 908-3918
Cell (253) 318-4917

If you are interested in a free consultation and evaluation, contact Aaron Ness at ADP: Aaron.Ness@adp.com and tell him I sent you.


Rules, Regulations, and More

We’ve heard from many clients and colleagues about our newsletter last month that talked about the complexity of the new W-2 rules. It’s not only going to be more complex sets of rules for the future - we see mounting regulations coming our way for just about every aspect of accounting, tax, finance for operating just about any business. It’s my opinion that we’ve come to the point of regulation overload.

Questions we’re getting from our clients regarding just about any subject relating to running their business are getting more and more difficult to answer - not only for us, but for attorneys who specialize in particular areas as well.

A good example is the International Accounting Standards that are scheduled to take effect in 2014. The SEC recently ruled that American companies won’t have to follow them. The American Institute of CPAs is generating a whole new set of rules for small businesses; however, the IRS has yet to issue any such rules and is just beginning to study what rules it plans to follow. This is just one example of the multiple layers of regulations and rules facing just about any business today.

On July 26th, I took a one hour webinar on capitalization vs. repair under the newly issued IRS rules. The regulations issued in November (effective January 1st, 2012), are 250 pages. They cover just about any type of transaction a business can enter into when purchasing equipment or real property. The complexity is absolutely astonishing. The rules are now in affective. For real property, it gets down to whether you’re going to extend or better the asset in question. For personal property such as machinery and equipment, it depends on your business’s policy.

In our next newsletter, we’ll publish an example of a policy for equipment and personal equipment that all businesses should adopt. The rules for just about anything you deal with in a business are going to get more complicated. As we said in our last newsletter, the devil is in the detail, so you have to take the time to read through any new rules specifically for your business.

David S. Nelson, CPA, CTRS
Certified Public Accountants

IRS Times & Inquirer

Inside This Issue...

Singer R. Kelly Owes $4.8 Million in Back Taxes
Oregon Tax Protestor Found Guilty After Trial
Former Accountant Pleads - Faces Five Years in Prison

Singer R. Kelly Owes $4.8 Million in Back Taxes

Singer R. Kelly owes the Internal Revenue Service a whopping $4.8 million in back taxes for income from the years 2005 to 2010.

“R. Kelly is in the process of working everything out with the government and is confident that all his obligations will be satisfied,” a representative for Kelly told the celebrity news website TMZ.

Referred to as the “King of R&B,” Kelly is among the world’s best-known rhythm and blues artists. His major hits include “Bump n’ Grind,” “Your Body’s Callin’,” and “I Believe I Can Fly.”

In addition to his music, Kelly has been a writer or producer for a number of best-selling artists, including Janet Jackson, Whitney Houston, Lathur Vandross and Michael Jackson.

Oregon Tax Protestor Found Guilty After Trial

Following a four day trial, an Oregon tax protestor was found guilty of three counts of income tax evasion, three counts of willful failure to file tax returns and one count of witness tampering.

According to court records, Randall Blair Johnson, 53, of Sisters, Ore., was a real estate agent and half-owner of TR Hunter Real Estate, a company in Florence, Ore. Johnson’s primary sources of income were from real estate sales, commissions and the sale of TR Hunter Real Estate. Johnson did not file tax returns for the years 2002 to 2005.

In 2002, after he stopped filing returns, Johnson started sending frivolous tax protestor materials to the IRS and Oregon Department of Revenue.

Johnson’s income more than quadrupled from 2002 to 2005 but he paid no income tax, claiming to revenue officials that the tax laws did not apply to him. An IRS revenue agent testified that Johnson owes more than $238,000 in taxes. Despite not filing his own income tax returns, Johnson paid property taxes, filed corporate tax returns for TR Hunter Real Estate, and had delinquent income tax returns prepared for his wife.

Johnson faces up to five years in prison and a $250,000 fine for each of the three tax evasion counts and up to one year in prison.

Former Accountant Pleads Guilty to Evading Nearly $300,000 - Faces Five Years in Prison

James C. Howell Jr., 54, of Germantown, Tenn., a suburb of Memphis, pleaded guilty to one count of income tax evasion, admitting that he attempted to evade payment of nearly $300,000 in taxes.

According to court records, Howell, a former certified public accountant, filed a 2004 federal income tax return with the Internal Revenue Service that falsely claimed he had no taxable income for that year.

Howell admitted that he understated gross receipts from his business, overstated business expenses, misidentified early withdrawals from his Individual Retirement Account as long-term capital gains, understated the sales price of two mutual funds, and omitted charitable contributions and mortgage interest payments that would have exceeded the total amount of income reported.

During the hearing, Howell also admitted that he failed to file tax returns for the years 2005 to 2008.

Howell’s plea agreement states that the tax loss to the United States for tax years 2004 through 2008 is $286,301.

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


--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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