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December, 2009

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

What are the best odds?---Who is more likely to be audited by the IRS?

Based on new IRS data, the odds of a Sub-chapter S-Corporation being audited are .004%. Of the 4.3 million S-Corp returns filed for fiscal year ending 2009, only 17,455 were audited. This compares to over 3% of all individual tax returns (Form 1040) filed that had a Schedule-C attached. (Schedule-C is for sole proprietor business.)

There were approximately 1.4 million IRS audits of individual tax returns for the fiscal year. Of these almost half, 700,000, that included Schedule-C business were audited. Thus, it is much better to operate your business as an S-Corp. There are higher initial costs and more paper work associated with S-Corps, but you'll stand a much better chance of not being audited.

The IRS data shows collection actions continue, at a brisk pace, with the filing of levies and liens. For the FY 2009, there were 3.5 million levies filed. This is the pace maintained for 2006 and 2007. Liens were at an all-time high for the decade; almost a million liens were filed. Thus the kinder, gentler IRS that was announced in May by the Commissioner does not seem to hold up when compared to the actual collected statistics.

Certified Public Accountants

IRS Times & Inquirer

Inside This Issue...

Singer, TV Star Owes $1 Million to IRS
Nebraska Men Could Get 10 Years
CT Man Dodged Taxes for 10 Years
IRS Question Corner

Singer, TV Star Owes $1 Million to IRS

Former Backstreet Boy Aaron Carter owes the IRS more than $1 million in unpaid taxes, according to tax lien filed in Los Angeles.

The former House of Carters star and Dancing with the Stars contestant has unpaid taxes that date back to 2003. For that year alone, Carter owes the government $965,284. He also owes $45,350 from income earned in 2006.

Carter, who was eliminated from the ninth season of Dancing with the Stars, has not been charged with a crime.

Nebraska Men Could Get 10 Years

Two men from Lincoln, Neb., were indicted by a federal grand jury on tax fraud charges that could put them behind bars for 10 years.

Christian Quevedo, 27, and Carlos Carpio, 27, both of Lincoln, were indicted for conspiracy to defraud the United States by filing false claims for income tax refunds totaling $121,936.00 for the 2005 and 2006 tax years.

According to the indictment, the claims for tax refunds were based on false income tax returns filed by individuals recruited by Quevedo and Carpio. The returns misrepresented the true identity of the employers of the individuals on whose behalf the tax returns were filed and also inflated income and federal income tax withholding amounts of the individuals.

The false returns were based on false Forms W-2s created by the defendants that contained fabricated names of employers, income and federal withholding amounts. According to the indictment, Quevedo and Carpio caused the inflated income tax refunds to be paid by the IRS to them. They kept most of the money and paid a small portion to the individuals on whose behalf the fraudulent income tax returns were filed.

In addition to prison time, each man could receive fines of up to $250,000.

CT Man Dodged Taxes for 10 Years

Vincent Mavilia, 66, of Warren, CT, pleaded guilty to tax evasion. According to court records, Mavilia has owned and operated a number of bars and adult entertainment businesses.

However, from 1992 to 2003, Mavilia took steps to conceal from the IRS his ownership of the businesses, and the income he received, by placing them in the name of his adult daughter. He faces up to five years in prison and a fine of up to $718,582.

IRS Question Corner

Question: After the first of the year, I want to resolve my financial problems, including my tax debt. I've read about and seen you discuss both the Offer in Compromise and the Installment Agreement. Which one is right for me?

Answer:  First of all, I can't think of a better way to start the New Year than to find a way to resolve your financial problems and settle your tax debt.

Unfortunately, due to the limited information I have on your case, I can't tell you whether to choose the Offer in Compromise or the Installment Agreement. Each one is set up for unique situations. Instead, I'll give you some advice and tell you a little about each program.

Before you do anything, you need to consult a qualified tax professional. He or she will analyze your previous returns, determine the exact amount you owe the IRS, and chart a course that will work best for you. It's critical that you first meet with a qualified tax professional, as it's possible your situation might not be quite as dire as you think it is.

Once you and your qualified tax professional have determined what you owe, it's time to meet with the IRS.

You should first consider the Offer in Compromise. This program is designed for taxpayers who owe a substantial amount but for whatever reason cannot pay down their debt. If you qualify, you will be able to reduce your tax debt significantly by using the Offer in Compromise program. However, if you do not qualify for this program, I recommend you consider the Installment Agreement. This program allows you to pay down the tax debt over a period of time, in a manner similar to how you might pay down your car loan.

Why don't you come see me? I deal with IRS problems such as yours every day. Thatís because Iím 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 Do it today!


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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.