December, 2011

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

When the Economy Gets Tough---The IRS Gets Tougher

A suffering economy makes things hard for everyone— including the government. Finding itself with less money to operate, Congress has given the IRS the nod to step up collection efforts to help close the budget gap.

What does this mean for taxpayers? Faster, more accurate and aggressive tax collection.

The IRS has already sent more letters and notices this year than ever before, and it’s only going to get worse. Two things have made it possible:

1. The IRS has entered the modern age of technology. In just minutes or seconds, computers now do what used to take days, weeks, or even years for IRS agents to process. Most notices don’t even see human eyes until they are read by the taxpayer, leaving IRS employees with more time to do actual collection.

2. The computer system has been upgraded and tweaked so it can find the smallest mistakes and slightest inconsistencies, leaving the margin of error razor–thin. The system rates a tax return, and if it finds contradictions or something outside normal parameters, it decides to send the taxpayer a notice or send the return straight to an IRS examiner for further investigation.

The end result: The best thing a taxpayer can do is be as accurate as possible. Take your time and be as thorough as possible when gathering your tax information. Remember: That employer, broker, or bank didn’t just send you that W2 or 1099— they sent a copy to the IRS, too.

David S. Nelson, CPA, CTRS
Certified Public Accountants

IRS Times & Inquirer

Inside This Issue...

Rapper Owes IRS Nearly $100,000 in Back Taxes
Diamond Merchant Hid $7.1m Offshore
Former Inmate Gets 92 Months for IRS Scam
Former NY Resident Guilty of Filing More than $1 Million in False Refund Claims
IRS Question Corner

Rapper Owes IRS Nearly $100,000 in Back Taxes

Bow Wow, a 24-year-old rapper whose real name is Shad Gregory Moss, owes the Internal Revenue Service nearly $100,000.

According to TMZ, the federal government filed a tax lien against Bow Wow in Florida for $91,105.61 in unpaid taxes from the year 2006.

Formerly known by the stage name “Lil’ Bow Wow”, the rapper released his first album, Beware of Dog, at age 13. He has also appeared in a number of movies and television shows, including All About the Benjamins, Johnson Family Vacation and the HBO series Entourage.

Diamon Merchant Hid $7.1m Offshore

Richard Werdiger, a former client of Swiss bank UBS, was sentenced to one year and one day in prison for conspiring to defraud the Internal Revenue Service. He hid more than $7.1 million at UBS in an effort to evaded nearly $400,000 in taxes.

Werdiger pleaded guilty in March 2011 and agreed to pay a civil penalty of more than $3.8 million for his failure to report his overseas accounts to the IRS.

From 1986 to 1988, Werdiger opened multiple accounts at UBS under the name of sham foundations. To further conceal his ownership of these accounts, Werdiger communicated with UBS using the code name “Trygon.” In late 2000, Werdiger opened up yet another account at UBS that allowed him to continue to invest in U.S. securities without having UBS notify the IRS of his identity or withhold taxes on income arising out of his holding U.S. securities.

During the conspiracy, Werdiger used the funds hidden offshore to satisfy various business obligations, such as paying off business debts incurred by his companies, Michael Werdiger Inc. and Eloquence Corporation, which sell diamonds and other jewelry.

“As his case shows, along with the many others we are prosecuting against those who use offshore accounts to hide their income and assets, we will find tax cheats of all stripes and they will be punished,” Manhattan U.S. Attorney Preet Bharara said in a statement.

Former Inmates Gets 92 Months for IRS Scam

Walter Allen Johnson, a former Tennessee Department of Correction inmate, was sentenced to 92 months in prison for his role in a conspiracy to submit false tax returns on behalf of prison inmates. Johnson admitted that, while incarcerated from 2006 to 2007, he conspired with others to submit false tax returns that claimed refunds on behalf of other inmates. Johnson and his co-conspirators collected 87 checks totaling approximately $57,800.

Former NY Resident Guilty of Filing More than $1 Million in False Refund Claims

Following a three-day trial, Douglas Cavanaugh, Jr., 45, formerly of Binghamton, N.Y., was convicted of six counts of filing false claims for tax refunds from the IRS.

Cavanaugh was arrested at Los Angeles International Airport shortly after he arrived on a flight from Australia, where he resided. Evidence presented during the trial showed that Cavanaugh knowingly made and presented to the IRS six claims for payments of refunds of taxes totaling $1,045,587.31 which he knew to be false, fictitious and fraudulent. 

Cavanaugh filed these false claims in the form of Form 1040 tax returns for himself and a number of family members. Each return contained false and fraudulent information as to interest and dividend income taxes paid on that income.

The case was investigated by Internal Revenue Service’s Criminal Investigation Division. Cavanaugh faces up to five years in prison for each count, and a fine of up to $250,000.


--Our Policies--

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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