February 2009 Archives

Marion Barry’s Tax Fraud Problems Continue

February 19, 2009,

The Internal Revenue Service (IRS) has moved to revoke Marion Barry’s probation. In late 2005, Marion Barry, former mayor of the District of Columbia, pled guilty to criminal tax charges of failing to file a tax return in violation of Internal Revenue Code Section 7203. He was sentenced to three years probation, and as a condition of said probation was ordered to file his tax returns. Nevertheless, Marion Barry failed to file his 2005 income tax return. In 2007, the IRS moved to revoke his probation, but the Court denied the government’s motion since the judge ruled that there was no proof that the failure to file was willful. According to the IRS, Barry subsequently promised to file his returns, but continued to fail to do so.

The IRS has now filed a new motion to revoke Barry’s probation since not only has he failed to file his 2005 return, he didn’t file his 2007 return either. In response to these allegations Barry has responded that he has been on dialysis, and that he has been too distracted to focus on his tax returns. According to an article on MSNBC.com Marion Barry finally filed his 2007 tax return on Feb.17, 2009. No mention of the missing 2005 return. In an interview with Bruce Johnson of WUSA9 News Barry called the federal prosecutors “vicious” and said they would “do anything to get at him.” Take a look at the video for more of what Marion Barry had to say about his tax problems.

It will be interesting to see if his tax lawyers are able to convince the judge not to revoke his probation.

If you have tax problems contact the tax lawyers at Brager Tax Law Group, A P.C.

UBS To Name U.S. Tax Fraud Clients

February 19, 2009,

UBS AG, has agreed to pay $780 million in order to avoid prosecution for conspiring to commit tax fraud in violation of 18 USC 371. UBS entered into a deferred prosecution agreement. The exhibits are here and here. As part of the deferred prosecution agreement, UBS admitted that it participated in a tax fraud scheme, and that UBS bankers facilitated U.S. taxpayers in establishing accounts at UBS in a way intended to conceal the U.S. taxpayers’ ownership in the accounts. It appears that the amount of the settlement might have been higher, but for the current financial crisis, and the input of the Federal Reserve Bank of New York.

Most importantly, for U.S. clients concerned about their own exposure for tax evasion, or tax fraud, UBS agreed to provide the identities and account information of some of its United States clients. The exact scope of the disclosure is set forth in a letter between UBS and the Department of Justice, but that letter is under court seal. Ominously, the information filed against UBS referred to some of the 20,000 U.S. account holders as “unindicted co-conspirators.”

It seems clear that not all of the names of U.S. account holders are being turned over. The agreement does not end the summons enforcement action pending against UBS requiring it to disclose offshore bank accounts of U.S. clients. Indeed, the agreement provides that UBS is not prohibited from continuing to assert its defenses in the summons enforcement proceeding. There has been some speculation that UBS is only turning over the names of about 250 clients that are known to have committed “tax fraud or the like” under Swiss law.

The deferred prosecution agreement provides for UBS’ continuing cooperation with the government in any criminal tax investigation, tax fraud or tax evasion case, or any other civil or criminal proceeding brought by government in connection with the Internal Revenue Service (IRS) investigation into offshore accounts.

The good news is that IRS Commissioner Doug Shulman has been quoted as saying that: “People who have hidden unreported income offshore need to get right with their government. They should come forward and take advantage of our voluntary disclosure process." This suggests that despite the fact that the wolf is at the door the IRS may still consider a filing at this stage to be a voluntary disclosure that could stave off criminal tax charges.

If you have an offshore bank account, you can contact the tax lawyers at Brager Tax Law Group, A P.C. to help determine if a voluntary disclosure makes sense for you.

Koko Taylor Sings the Tax Problem Blues

February 18, 2009,

The United States Tax Court has upheld a ruling by the Internal Revenue Service (IRS) turning down Koko Taylor’s offer in compromise, and allowing the IRS to proceed with a tax levy against all of her property and income. It also upheld the tax lien filed against her. Koko Taylor is a well known blues singer sometimes called the “Queen of the Blues.” The Tax Court opinion by Judge Paige Marvel details Koko’s rise from a poor orphan to a successful professional recording artist with a performing career spanning some 50 years.

Koko Taylor fell behind on her obligations to the IRS, and incurred tax debt of about $300,000 as of September 2006. To make a very long story short Koko’s tax lawyers filed for a collection due process (CDP) hearing with the IRS, and submitted three different offers in compromise including an effective tax administration offer in compromise. In the last offer in compromise, Koko’s tax attorneys proposed that she pay $125,000 and 50% of her annual net income should it exceed $125,00 per year.

The IRS rejected her offer in compromise, and the Tax Court agreed with the rejection of the offer in compromise. Let’s keep in mind that Koko Taylor was 80 years old, and her only substantial asset was her home valued at around $240,000—after taking into account its so-called “quick sale value.” She also was an insulin dependent diabetic, and had two heart attacks as well as high blood pressure. The IRS called these conditions “not uncommon for someone her age.” The IRS further determined that Taylor could pay her taxes in full without economic hardship even though that meant she would have to sell her home, continue to perform into her 80s, and live on a budget of $3,300 per month. Part of Koko’s tax problems were no doubt exacerbated by her continuing failure to stay current on her estimated tax payments which allowed the IRS and the Tax Court to rule against her on technical grounds. Nevertheless, the case represents a graphic demonstration that the so-called kinder and gentler IRS is not currently in evidence, and illustrates the difficulties of obtaining an offer in compromise. It is these difficulties which require a tax expert to navigate these treacherous waters.

If you have tax problems, and you are considering an offer in compromise or an installment payment agreement, or another alternative to your tax problems call the tax lawyers at Brager Tax Law Group, A P.C.

UBS Offshore Account Tax Problems Continue

February 18, 2009,

According to a report on CNBC.com the Senate Permanent Subcommittee on Investigations will be holding further hearings on the Internal Revenue Service (IRS) attempts to obtain the names of thousands of UBS clients who may have committed tax evasion through the use of Swiss Bank accounts. The hearing is scheduled for Feb. 24th, and the Subcommittee will announce on Feb. 20th the names of the witnesses who have been asked to testify.

As we noted in a previous post, in June of last year a judge in Miami, ordered UBS to turn over a list of its American clients who held offshore accounts at UBS. Although UBS said it would cooperate almost 8 months later the records have not been turned over. Apparently the IRS is trying to ratchet up the pressure on UBS to turn over its records.

Taxpayers who have Swiss bank accounts, whether at UBS or elsewhere are well advised to consult with a knowledgeable tax attorney to determine whether or not they should consider turning themselves in to the IRS pursuant to its voluntary disclosure program in the hope of avoiding tax fraud or tax evasion charges.

If you have an offshore bank account, and need advice contact the tax litigation attorneys at Brager Tax Law Group.

Golfer Jim Thorpe Charged with Tax Fraud

February 17, 2009,

According to Reuters News Service, criminal tax charges have been filed by the Internal Revenue Service (IRS) against Professional Golfer Jim Thorpe. The information that was filed with the District Court in Orlando, Florida alleges that Jim Thorpe failed to file or pay his taxes for 2002, 2003 and 2004. According to the IRS during those 3 years Thorpe’s taxes totaled about $1.5 million on income of over $5.2 million. Failure to pay taxes or file an income tax return is a violation of Internal Revenue Code Section 7203, punishable by 1 year in jail. In addition, the IRS alleged that for one of the years Thorpe failed to file his corporate income tax return. Thorpe could go to jail for seven years if convicted on all 7 counts.

Thorpe has pled not guilty and his attorney released a statement saying that he did not willfully violate the tax laws. It is true that mere negligence will not result in tax evasion or tax fraud charges. However, from the IRS filing it appears that the IRS has some strong evidence that Thorpe didn’t just overlook his tax problems. The IRS says that it had investigated him once before for possible criminal tax violations in the mid-90s, and he got off the hook by claiming he got confused because he had two accountants and thought they were filing the returns. Also his accountant had advised him of the need to pay estimated taxes, but he only paid in a few thousand dollars. While he wasn’t paying his taxes he was spending money like water—including the purchase of a $2 million home. Most juries don’t like to hear that, and getting him off the hook will be a tough job for his tax attorney.

It is worth noting that one of the witnesses against Thorpe will likely be his accountant, and of course there is no accountant-client privilege in criminal tax cases. One reason why those with potential tax fraud problems should not be giving sensitive information to their accountants.

If you have civil or criminal tax problems call the tax attorneys at Brager Tax Law Group, A P.C.

Payroll Tax Fraud Cases Expected To Increase

February 13, 2009,

According to a report published by Tax Analysts, Assistant Attorney General Nathan Hochman, announced at a recent American Bar Association (ABA) meeting that the Internal Revenue Service (IRS) and the Department of Justice will be aggressively pursuing businesses with payroll tax problems. Hochman, who is the head tax lawyer for the Tax Division of the Department of Justice, said in tough economic times employers try to save money by not paying their payroll tax liabilities. He also noted that while in the past payroll tax problems have been handled on a civil basis that the IRS is now bringing criminal tax evasion charges, and that judges are handing out harsh sentences. I have previously blogged about the Easterday case in which Jack Easterday was sentenced to 30 months in prison for payroll tax fraud. Apparently there are more criminal payroll tax fraud cases to come.

If your company has payroll tax problems, or you have concerns about tax fraud or tax evasion please contact the tax lawyers at Brager Tax Law Group.

California Franchise Tax Board Innocent Spouse Rules Change

February 9, 2009,

Beginning January 1, 2004 the California Franchise Tax Board (FTB) was required, with some limitations, to grant innocent spouse relief to individuals who had previously been granted innocent spouse relief by the Internal Revenue Service (IRS) pursuant to Revenue and Taxation Code Section 18533(h). The idea was that someone who had gone through all of the expense and trouble of obtaining innocent spouse relief from the IRS should not have to go through the same process with the FTB again. After all, portions of the California innocent spouse statute are identical to the federal innocent spouse statute Internal Revenue Code Section 6015. Unfortunately the Revenue and Taxation Code Section 18533(h) expired at the end of 2008.

The California Franchise Tax Board, however, announced that it would apply the same rules as existed under former Section 18533(h) in determining whether or not innocent spouse relief should be granted. However, since there is no longer a statutory basis for doing so if the FTB were to decide for any reason that the old statute didn’t apply a person could no longer appeal to the California Board of Equalization (SBE or BOE) or the courts on the basis that the FTB hadn’t followed Revenue and Taxation Code Section 18533(h) in applying the innocent spouse rules.

If you think that you are an innocent spouse, and would like to arrange a consultation with one of our tax litigation lawyers please contact Brager Tax Law Group, A P.C. Alternatively, if your spouse is requesting innocent spouse relief, and you don’t believe he or she should qualify, our tax attorneys may be able help too.

Tom Daschle Has Tax Problems

February 2, 2009,

According to CNN former Sen. Tom Daschle, President Barack Obama's nominee for secretary of Health and Human Services has some tax problems. CNN says he failed to pay taxes on a car and driver he had been loaned by a wealthy friend, and failed to disclose it on his tax return. At first it was not clear why he should have reported it on his tax return since it sounded more like a gift. However, a later report by The Wall Street Journal says that the car and driver was provided to him by InterMedia Advisors LLP, an investment firm specializing in buyouts and industry consolidation where Daschle served as chairman of the firm's executive advisory board after he left the Senate. That should have been reported, but there might be a partial offset as an employee business expense, and the firm should have included it on his W-2, or included it on his Form 1099 if he was an independent contractor.

If you have tax problems you can call our tax attorneys whether or not you are a former senator.