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 0904-1
E-MAIL TAX BULLETIN
September, 2004

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


TAX TIP ---Payments to the IRS
  When sending a check to the IRS, always write your Tax Identification number (i.e. Social Security or EIN), Tax Form number and the year on your check. If you are making an estimated payment, be certain to write 2004/1040 on all checks.
  NOTE: Many taxpayers received IRS notices after the E-filing of their tax returns showing that payments were still due. During the E-filing process, the IRS did not match the Social Security numbers on taxpayers' returns to the payments made. Please send us any copies of notices so we can follow-up with the IRS.
Q & A ---Taxes and Inheritance
  Q:  I just received a substantial sum of money from a relative's estate. Will I have to pay income tax on the money?
  A:  No and maybe. Money inherited from an estate is generally tax-free because the estate pays the tax on the value of the decedent's assets at death. You may owe tax on interest or dividend income earned in the estate's trust. This income would be reported to you on Form K-1 of the IRS Form 1041 Estate Tax Return. If you inherit an IRA, you will pay tax. However, you may be able to lessen the tax by electing to receive the money over time.
IRS NEWSFLASH ---President Expected to Sign the 2004 Tax Act
  Congress has passed the Working Families Tax Relief Act of 2004 and the President is expected to sign it. The Act keeps the $1,000 Child Credit through 2010, extends the 10% tax bracket through 2010 and preserves the Marriage Penalty Relief to 2010. In addition, for businesses, the Act renews Work, R&D and Energy Credits, including the $2,000 deduction for hybrid cars through 2005. Important: The 50% Bonus Depreciation for equipment was not renewed and expires December 31, 2004.
 
NELSON & COMPANY, P.S.
Certified Public Accountants
        SEPTEMBER, 2004

Inside This Issue....

MA MAN CHARGED WITH FILING FALSE TAX RETURNS

A resident of Mansfield, Ma., has been charged with filing false tax returns.

Jeffrey Margolin, 46, owned a Brighton-based J.D. Towing. The information charges that, from 1997 to 1998, Margolin fraudulently inflated operating expenses to avoid paying income taxes. Over a two-year period, according to the information, Margolin inflated expenses by $97,000.

If convicted, Margolin faces up to five years in prison on each of the two counts.


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

Denver Man Sentenced for Tax Fraud

The former owner of a Denver auto parts company has received probation for theft and tax fraud.

Gary Chris Pappas Jr., 37, of Highlands Ranch, Colorado, was sentenced this morning to serve three years of probation, including 10 months of home detention, for theft of pension funds and tax fraud. Pappas was also ordered to pay restitution of $65,778.36 to the Internal Revenue Service and $13,916.76 to the victims of the crime.

Pappas pleaded guilty to embezzlement from an employee benefit plan, failure to pay employee federal payroll taxes, and filing a false tax refund claim with the Internal Revenue Service.

According to the indictment, Pappas was the owner and operator of Pro Auto Parts Inc., a Denver auto parts supply business. From August 1999 to January 2000, Pappas embezzled funds from the company’s employee pension. The indictment also stated that Pappas failed to pay $61,402.55 in employee payroll taxes for three quarters in 1999.


CT Businessman Pleads Guilty to Tax Fraud

Albert J. Grasson II, a 49-year-old from Cheshire, Ct., has pleaded guilty to filing a false income tax return with the Internal Revenue Service.

According to court evidence, in April 2002, Grasson filed his federal income tax return for 2001 on which he showed a negative taxable income of $15,689. However, Grasson admitted that he failed to report $18,684 in earnings from his business, Surgical Instrument Services. He also omitted from that same tax return additional rental income of $30,550.

Grasson faces up to three years in prison and a fine of up to $250,000.


IRS QUESTION CORNER...

Question:     I’ve heard tax professionals mention it before: Offer in Compromise, but I really can’t believe it. Can you really reduce tax debt to the IRS through such an offer? I currently owe $100,000 in back taxes. Is this something that could work for me?

Answer:     Let me first address your question about an Offer in Compromise. Yes, believe it or not, it is possible to reduce your debt to the IRS substantially through a negotiation process. In fact, it’s possible to reduce your debt to pennies on the dollar.

After years of chasing deadbeat taxpayers, the IRS has learned that aggressive, knock-on-your-door methods aren't the most effective. In reality, offering incentives for taxpayers to fess-up and come clean have proven to be the best method of collection.

Here’s how it works: Once a qualified tax professional analyzes your previous returns, making sure that you are not claiming to owe the IRS any more than should, you and your tax professional will present an IRS agent with an offer — often merely a percentage of what you owe. Sometimes the agent will accept the offer; other times he’ll make a counter-offer. Generally, in the end, you’ll find that your IRS debt has been reduced substantially. I should emphasize the need for a qualified tax professional in this process. Negotiating with the IRS is a complicated dance, and you need to make sure you’re working with someone who knows how to deal with the government.

Now for your second question: Do you qualify? That’s difficult to answer without a full consultation. But generally speaking, if your tax debt is so large that you cannot under any circumstance pay it off with your current income potential, then, yes, most likely you would qualify. But the BMW and the waterfront mansion?...not good if you’re applying for an Offer in Compromise.

I deal with Offers in Compromise daily. That’s my job — 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