Certified Public Accountants
Tacoma Mall Office Building
4301 South Pine Street, Suite #241
Tacoma, Washington 98409-7205
David S. Nelson, CPA
PHONE: 253-752-9522
FAX: 253-276-0144
Edition 01205-1
December, 2005
Message From Nelson & Company, P.S., CPAs
NEWS FLASH:   Two Items Under the New Bankruptcy Act Benefit Creditors
    New Rules of Reclamation

According to Section 546(c)(1) of the Bankruptcy Act, the period during which a creditor company may make a reclamation demand (recovering goods sold by a company) will expand from 20 to 45 days. In other words, if you send goods to a debtor company that subsequently files bankruptcy, you now have 25 more days to send the debtor a letter essentially saying, "We sent you 100,000 widgets and you failed to pay for them. Send them back."

Tighter Commercial Lease Laws

Section 364(d)(4) tightens the reins on debtors in favor of the lessors of nonresidential properties. It states that the debtor must immediately surrender the property to the lessor if an un-expired lease is not assumed or rejected by the earlier of (1) 120 days of the bankruptcy filing or, (2) when the reorganization plan is confirmed. The old law required the debtor to take action, but the guidelines weren't as strict. So, if you own commercial property that you lease to tenants, the changes in the law give you, the creditor, sharper "teeth".
Q & A ---New Auto Mileage Rate for 2006.
  Q:  What is the new auto mileage rate going to be for 2006?
The IRS has announced the standard auto mileage rate will be 44.5¢ a mile for 2006. For 2005 tax returns, the rates are 40.5¢ a mile through 8-31-2005 and 48.5¢ thereafter. Effective October 1, 2005, for overnight business travel, the daily per diem rate for food is $45 for any location, and lodging is $96 a day. The 2006 social security wage base goes to $94,200. Medicare Plan B will be $88.50 a month. You can earn $12,480 if you are under 65 and drawing social security without incurring a penalty. Additionally, the 401K contribution limit goes to $15,000, and $20,000 if over 50. IRA deductions for 2005 and 2006 are $4,000 and the +50 catch-up is $4,500.

Certified Public Accountants


Inside This Issue....

"Honey, look! This tax attorney followed me home.
... Can we keep him?"


A man who serviced slot machines in casinos in the Reno, Nevada, area has been sentenced to 11 months in federal prison for evading more than $40,000 in federal income taxes over a three-year period.

Paul James Arny was also ordered to pay $42,144 in restitution to the IRS and perform 100 hours of community work service. He pleaded guilty in April to one count of evasion for the year 2000; however, the plea covers evasion of income taxes from 1999 to 2001.

According to the plea, Arny admitted that during calendar years 1999 to 2001, he worked as a slot route mechanic for United Coin Machine Company and was responsible for maintaining, repairing and filling their slot machines at various sites throughout the Reno area.

During that same period, Arny earned additional income that he failed to report on his federal individual income tax return. That income was derived from money he earned working part-time as a slot route mechanic for another company; money he earned from remodeling homes; and money he embezzled from United Coin Machine Company through various methods.

In all, Arny failed to report $159,218 for all three years. The total tax loss to the government is $42,144.

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IRS Times & Inquirer
253-752-9522 | 1-800-669-0137

Isley Brother Convicted on Tax Charges

Singer-songwriter Ronald Isley has been convicted on five counts of tax evasion and one count of willful failure to file a tax return for concealing millions of dollars of income from the IRS.

During a three-week trial that included nearly 20 witnesses, federal prosecutors showed that Isley, 64, received millions of dollars in cash and spent his money on a lavish lifestyle. From 1997 to 2002, evidence showed, Isley evaded more than $3 million in income taxes.

Isley evaded taxes in a variety of ways, including using for his own benefit royalty checks that were issued to other Isley Brothers-related entities and persons, including Okelly Isley, Isley's deceased brother. Prosecutors argued to the jury that Isley created a vast web of bank accounts and shell companies that he used to conceal his income.

He faces up to 26 years in federal prison.

Taco Bell Baron Pleads Guilty to Tax Charges

The owner of 52 Taco Bell franchises in Southern California and Arizona has pleaded guilty to fraud and tax charges.

Karl James pleaded guilty to two-counts charging him with bankruptcy fraud and tax evasion as part of a scheme to fraudulently divert millions of dollars of business assets for his personal use.

According to the plea agreement, from 1998 to 2001, James fraudulently diverted for his own personal use more than $3 million of his companies' income and assets, including beverage and food supplier rebate checks, and expensive residences that were purchased with company funds. James concealed the scheme by opening approximately 19 bank accounts, including "off book" company accounts and nominee accounts in the names of his father and a California limited liability company that his father controlled. In all, James evaded over $1.1 million in income taxes from 1998 to 2001.

James then hid the money and assets when he filed for corporate and personal bankruptcy, concealing roughly $2 million of corporate income and assets from the United States Bankruptcy Court and creditors.


Question:     I've heard about a program that the IRS offers in which taxpayers can break up their tax debt into smaller payments. I find this absolutely hard to believe. Is it true?

Answer:     As hard as it may be to believe, it's actually true. The program is known as an Installment Agreement.

Here's how it works: For those qualified, the IRS allows taxpayers with large debts to pay off their outstanding balance in installments. This allows someone to take care of their tax debt without, say, having to pull their son or daughter out of college. And that's the point.

Despite the horror stories about how taxmen are out to get you, IRS agents can actually be very accommodating in some ways. The Installment Agreement is one of those ways. By agreeing to pay the government a set amount every month, you can eliminate your tax debt over time. You can think of this payment as a mortgage or car payment - something substantial but not so insurmountable every month that you have to change your lifestyle drastically.

If you need a program like this, the first thing you should do is consult a qualified tax professional. He or she will first analyze your previous filings to ensure that you are not paying the government even a penny more than you owe. Once he or she has reviewed your filings, you can get a better idea of what program is best for you. It's possible that the Installment Agreement might be your best bet.

But remember, it's not your only option. If you have tax debt that you absolutely cannot pay off, you might qualify for the Offer in Compromise program. This allows taxpayers to settle their tax debt for pennies on the dollar. Realizing that chasing deadbeat taxpayers is ineffective, the IRS now offers a number of programs to encourage tax compliance.

If you or a friend needs help, give me a call. I handle cases like this every day. That'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 Do it today!

David S. Nelson, C.P.A.
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