November, 2007

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

Q & A ---Are payments made to my health insurance company taxable on my W-2?

  Q:  My employer pays my health insurance directly to an insurance company. They include the amount paid in premiums as income and report it as part of my W-2 wages. Is this correct?
  A:  No! Contributions by an employer to provide accident and health benefits for employees are not taxable to the employee under Code Section 103. It makes no difference whether you're the only one covered by the employer or they cover all the employees. There is no specific rule as to who can or cannot be covered by a health insurance plan. Clearly, under the code, the insurance premiums paid on your behalf are not taxable.

Certified Public Accountants


Inside This Issue....

Excell Personnel owner Guilty of Tax Evasion
Some People Just Never Learn; Inmate Files $1 Million In Fraudulent Income Tax Returns
Cheating Couple Caught
IRS Question Corner


Andrew J. Olmer, 44, and Susan E. Olmer, 43, a married couple in Leigh, NB., were sentenced on federal tax charges. Andrew Olmer was sentenced for tax evasion for the years the 1999 to 2002. Susan Olmer was sentenced for failure to file federal tax returns for the same tax years.

Andrew Olmer received 10 months in prison and a fine of $3,000. After his release from prison, he will serve three years of supervised release. He was also ordered to pay $38,197 in restitution.

Susan Olmer received five years of probation. She will serve six months under home confinement and pay a $2,000 fine. She was ordered to pay $25,870 in restitution.

The Olmers failed to file a tax return since 1998. Each held jobs as wage earners. From 1999 and 2000, Andrew Olmer accumulated income taxes totaling $38,197, and Susan Olmer accumulated $25,870 in income taxes. Each of them filed false W-4s with their employers claiming exemption from federal and state taxes.

The government's "efforts are directed at taxpayers who willfully and intentionally violate their known legal duty of voluntarily filing income tax returns and paying the correct amount of income tax," said IRS Special Agent in Charge, James D. Vickery.

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Excell Personnel Owner Guilty of Tax Evasion

Bruce Alexander Brown, the former owner of an employee-leasing business, Excell Personnel, Inc., pleaded guilty to one count of willful failure to account for and pay more than $300,000 in payroll taxes owed.

Brown, of Dallas, TX was charged with various tax offenses in an 11-count indictment, acknowledged in his plea that he has outstanding obligations to the IRS for taxes owed by Excell Personnel as well as for his personal income taxes.

According to court records, from 1996 to 2003, Brown's company "leased" employees to companies that did not want to directly hire their own workers. The customers did not pay the employees that Excell provided, but rather paid a fee to Excell that included the gross wages that would be owed to the employees for their labor, plus an administrative fee. Excell, in turn, paid the employees their wages, making deductions for the required withholding of income taxes.

Brown admitted he deliberately chose not to pay the IRS the required withholding taxes, Social Security taxes and Medicare taxes. During the fourth quarter of 2002, Brown failed to pay $297,384 in federal income taxes.

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

Some People Just Never Learn; Inmate Files $1 Million In Fraudulent Income Tax Returns

Kevin William Small, 44, was sentenced to 150 months in prison for filing false returns. While an inmate in Pennsylvania, Small filed tax returns for years 2003, 2004 and 2005. He claimed tax refunds due to him of $5,027 for 2002, $603,107 for 2003, and $415,769 for 2004. The total loss to the United States would have been more than $1 million had he received the fraudulent refunds.


Question:   For various reasons, I owe a substantial amount in back taxes. I've heard you talk about the Offer in Compromise program. How does it work, and how do I know if I am eligible to use it?

Answer:   The Offer in Compromise program has a specific purpose for a specific taxpayer. To understand how it works and why it's used, it can be helpful to understand the history.

For years, IRS agents spent countless man hours trying to track down deadbeat taxpayers and force them to cough up what they owe. Some taxpayers avoided the IRS because they didn't want to pay. Others avoided the tax-collecting agency because they couldn't pay.

That second group is important. The IRS discovered that being more flexible can be a more effective strategy in some cases, particularly with taxpayers who want to settle their tax debt but lack the financial wherewithal to do so.

Enter the Offer in Compromise program. With this program, taxpayers who amassed substantial tax debt but do not, and will not, have the financial resources to settle can make a compromise offer that will settle their debt once and for all.

If you're among these taxpayers, the first thing you should do is consult a qualified tax professional. He or she will go over your previous returns with a magnifying glass to ensure that you do not pay the IRS even a penny more than you owe.

Once your tax figure has been established, you and your tax professional will make an offer to the IRS to settle your debt. Oftentimes, this amounts to significantly less than the amount owed! Truly, it is that simple.

I deal with problems like yours every day. For a free, no-risk consultation, please call my office at 253-752-9522 or send me an E-mail at Do it today!



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