Can’t Pay Your Taxes? How To Set up an Installment Agreement

May 5, 2011 by

By Bonnie Lee
Published February 17, 2011, FOXBusiness.com

If you owe current year taxes or liabilities from prior years, you may want to consider setting up an installment agreement with the IRS.

But know this: It’s a revolving payment arrangement and the interest and penalties that accompany the unpaid balance can be killers. Not only that, but there is a one-time user fee (currently $52 for direct debit agreements and $105 for non-direct debit agreements).

If you qualify as a low-income individual, the fee is $43, and if you default on the agreement, the IRS will charge you a $45 fee to reinstate the agreement and they may consider seizing your bank account or garnishing your wages.

Even if you set up an installment agreement, The IRS may still file a Notice of Federal Tax Lien to secure the government’s interest until you make your final payment. This could play havoc with your credit rating.

So if mom, dad, your BFF, the local loan shark, or your banker, is willing to cut you a deal to front the balance owing, take it. You will be better off.

If you owe for the current year only and need less than 120 days to come up with the money, don’t bother applying for an installment agreement. Simply pay what you can with the tax return.Then over the course of the next several months, continue paying off the balance. During the first six months of delinquency, your account is handled by Simon, a giant IRS computer, which generates letters requesting then demanding payment. Simon is nothing to fear.

A real person at the IRS will not be assigned to your account until you have fallen very far behind. It varies of how long the IRS waits until they send someone a callin;’ I’ve seen the IRS loom like predators over some taxpayers and ignore others for years and years.

All that said, if you are still interested in setting up an installment agreement, the process can be fairly easy. If you owe less than $25,000, go to www.irs.gov and complete Form 9465. If you propose a monthly payment amount that will satisfy the debt within a three-year period, your request will likely be accepted automatically.

If the debt is your current year liability, attach the Form 9465 to the front of your tax return. To limit interest and penalties, send as much money as possible with the tax return. Make sure you indicate the tax year and your Social Security number on the memo line of the check.

There are other ways to request an installment agreement. To set up a plan online go to www.irs.gov and from the pull down menu, select “I need to set up a payment plan.” Or call the phone number on the most recent collection letter and set up one over the phone.

I normally recommend you low ball the proposed monthly payment. This will give you some leeway if you experience a lean month and you can always pay extra each month. Just don’t try paying any less than what you propose or you will hear from them.

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7 Tips for Negotiating With The IRS

May 5, 2011 by

By Bonnie Lee
Published January 27, 201, FOXBusiness.com

From time to time every taxpayer will have to go head to toe with the IRS. Whether you are setting up an installment agreement, facing the auditor from hell, resolving a misunderstanding, or dealing with collectors on the phone or worse yet, on your doorstep, you would be well advised to heed the following suggestions.

1. You get more flies with honey. Dealing with bureaucracy can be very frustrating, but park your bad attitude and anger at the door. Take a deep breath, demonstrate a cooperative attitude, and proceed in an orderly fashion to resolving your issue. In my 28 years of dealing with the IRS, I have found that most IRS personnel are compassionate humans that bend over backward to find ways to resolve issues and help taxpayers. Of course you are going to run into that power-hungry, condescending, surly agent from time to time, but if you do, you can always trade up to a more understanding and respectful model by asking for the manager.

2.Use IRS lingo. When you use IRS lingo the agent you are speaking with will find you knowledgeable and may treat you with a little more respect. Here is some verbiage you may find useful:

Ask for penalties to be “abated” rather than removed. Tell them, if it’s the case, that your failure to (pay or file or comply with a document request) was due to “reasonable cause.” Use this term if you didn’t just flake and have a good reason, which could include such things as unemployment, losing your records, losing your home, health problems, etc.

If you can’t pay a tax bill because you are suffering financial reversals, you can ask to be deemed “currently not collectible.” If you are granted this status, they will leave you alone for an entire year while you get it together.

If you feel a spouse or former spouse should be responsible for a tax matter, ask to be treated as an “innocent spouse.” There are certain criteria to this status; do some research or discuss the issues with your tax pro.

If defending business deductions during an audit, the term “ordinary and necessary” business expense will help–but only if that’s really the case.

3. Don’t talk too much. IRS agents are trained to draw as much information from you as possible. Answer questions truthfully, but keep your answers short, succinct and to the point. There is no need to elaborate or discuss your personal life or disclose too much. This will only lead to misunderstandings and maybe even investigations.

4. Always tell the truth. Lies have a way of uncovering themselves. Once you are caught in a lie, you will always be suspect. And when you are suspect, you lose the cooperation you would normally receive. Don’t hide assets, don’t run for cover. There are many ways to resolve tax problems using a straightforward and honest approach. Lies may lead to jail time.

5. Only make promises you can keep. This is especially true when it comes to paying your liability. If an IRS agent asks you if you can pay $200 per month on a tax balance and you know you can only afford $100, tell him so. Indicate that you will try to pay extra when you can, but you are not going to set yourself up for failure by promising more than you are able. Throw that in with the fact, (if it’s the case), that you have always timely filed and paid liabilities in the past and now you need a break. Note that this will not work if their analysis of your financial situation indicates you can pay more.

6. Go to them before they come at you. If you are unable to keep a promise you make, tell the IRS immediately. The agency is usually so happy with the cooperation it will likely grant you the extensions you need. The collections department notes your file whenever you or your representative calls.

7. Stop the Interview. If at any time during an audit or a phone conversation you feel intimidated, disrespected, or out of your depth, simply say so and end the interview. Tell the IRS that you will be seeking representation and will get back with them soon. This will give you a chance to take a deep breath and discuss the matter with your tax pro. If you felt disrespected, you can always request a different auditor. Or if it was a matter of a surly customer service rep you were speaking with on the phone, you can hang up and call again in hopes of getting someone kinder or a little more understanding.

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IRS Tax Levies: What You Need To Know

April 29, 2011 by

William Freudenthal owed the IRS some money. Quite a bit of money, actually – just over $16,000. And Freudenthal hadn’t been exactly timely about paying his tax obligation. He’d ignored notice after notice from the IRS. Finally, the IRS took action. They were going to seize some of Freudenthal’s assets – namely his classic 1965 Chevy Chevelle – to settle the debt.

This was not news that Freudenthal took well. His wife wasn’t exactly thrilled, either, and as you can imagine, the couple had an argument. Events escalated tragically, and Freudenthal struck his wife. The blow killed her.

Now, William Freudenthal is in prison. His wife is dead and his life is wrecked – and the real tragedy here is that the situation was completely avoidable. It didn’t have to end that way. Freudenthal, like every other American taxpayer, was entitled to the protections and procedures that are built into the tax code.

What is a Tax Levy?

A tax levy is the procedure the IRS uses to get money from taxpayers after they’ve exhausted every other avenue available to them. If you won’t voluntarily turn over the money to pay your tax obligation, the IRS will come and get it.

Let’s say you have some outstanding tax debt on the books – taxes that you were supposed to pay, but just didn’t, for whatever reason. The IRS will send you several notices, reminding you that you need to pay your taxes. If it remains unpaid, the IRS will eventually send you a Final Notice of Intent To Levy. This is your final warning to pay your taxes. If you don’t, the IRS is going to seize some of your assets to settle the debt.

What Type of Assets Can The IRS Seize?

The IRS has been given a great deal of latitude in their mission to collect revenue for the government. They can seize many different types of assets, including money from your bank account, real estate, vehicles, or personal property. The IRS can also garnish your paycheck, taking their share of your earnings before you even see it! This is known as a wage levy.

What Should You Do If You Receive A Final Notice of Intent To Levy From The IRS?

If you have received a Final Notice of Intent to Levy from the IRS, you have 30 days to respond. During those thirty days, the best thing you can do is find an expert tax problem solver. You are entitled to file a Collection Due Process Appeal in response to the Final Notice of Intent to Levy. However, it must be filed within 30 days of the date of the Final Notice. This appeal stops the IRS collections process and sends your case to the IRS Appeals Office. At that point, your tax accountant will work with the IRS to find a reasonable solution to your tax problems.

What If More Than 30 Days Have Gone By?

If it’s been more than 30 days since you received the Final Notice of Intent to Levy from the IRS, don’t despair! You still have options. With the assistance of your tax accountant, you can still file a Collection Due Process Appeal. At this point, the IRS collection efforts don’t stop automatically. However, your tax accountant will be working with the IRS to prevent the seizure of your assets.

If a levy has already happened, you still have options. A Collection Appeal, also known as a CAP, can be filed. In order to release the levy, you will have to meet certain conditions. Your tax accountant will let you know what these are, but they generally include filing any outstanding or unfiled tax returns, and submitting a Collection Information Statement along with a proposal of how you plan to resolve your outstanding tax debts. This could include an Installment Agreement, being placed as Currently Uncollectable Status, settling through an Offer In Compromise, or additional time to raise the funds to full pay the outstanding tax liabilities.

What Type of Resolution Can There Be For My Tax Problems?

The IRS has a single goal. They are mandated to collect as much tax revenue as possible, and they are becoming more diligent about this mission with every passing day. However, an experienced tax professional can often work with the IRS to find a resolution you can live with – and that stops the IRS from seizing your bank accounts, property, or classic cars!
Installment Agreements are a common resolution, as are Offers In Compromise to settle the tax debt for a fraction of the original amount owed. If you have to full pay your outstanding tax liabilities, a great tax problem solver will work to see if there is reasonable cause to abate any interest and penalties, which can save you thousands of dollars.

Solving Your Tax Problems

William Freudenthal learned the hard way that the one thing you don’t want to do in this situation is ignore the IRS. The IRS moves slowly, but it doesn’t stop – once they have you in their sights, they’re going to pursue you until the tax debt is settled. Having an expert tax problem solver on your side can help you get the debt resolved and the threats of levies and seizures behind you. Don’t lose everything. Get help for your tax problems!

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American Tax Relief Shut Down by Federal Trade Commision

April 26, 2011 by

American Tax Relief Shut Down by Federal Trade Commision

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Sharon & Ozzy Osbourne Owe Back Taxes

April 18, 2011 by

By Josh Board • Mon, Apr 11th, 2011
Sandiego.com

With tax day around the corner, no better time then now to have a story about the latest singer to run into tax problems. Ozzy and Sharon Osbourne could lose their US home if they don’t pay the $2 million tax debt on it.

They’re one of the wealthiest couples in the UK, and aside from Ozzy’s music career, Sharon has had success with the Osbourne’s reality show, being a judge on the X Factor and America’s Got Talent, and now a panelist on The Talk. Sharon was also the first of the Osbourne clan to run into tax problems, when in 2009 she was slapped with a $23,000 tax bill to the State of California for payments going back to 2007.

TMZ has reported that daughter Kelly was hit with a tax lien of $34,000 last month.

Over the last few years, Ozzy and Sharon have accumulated a bit of debt. Documents filed by tax authorities state that “John” and Sharon Osbourne, ‘self-employed’, owe $718,948 in tax from 2008, and $1,024,175 from 2009.

Sharon did what most celebrities would do in this situation. She fired off a message on Twitter last Saturday. It said: You can’t rely on anyone but yourself. You have to be on top of your own business affairs. My fault. Lesson learned.

The most famous tax problem celebrity is Willie Nelson, who was hit with a $16.7 million tax bill in 1990. That stemmed from him not paying taxes between ’78 and ’82, and owing $6.5 mil. An additional $10.2 million was tacked on in penalties and interest. The IRS froze his accounts and auctioned off items in his personal position. Many of his fans bought those items, only to return them back to Nelson. Eventually, the IRS claimed Nelson owed $30 million, but that they’d settle for $17 million. This got Nelson poking fun of that in various commercials, and even releasing the album IRS Tapes: Who’ll Buy My Memories?

Releasing a record like that was nothing new. Marvin Gaye released an album called Here, My Dear, when he owed money on alimony payments.

When John Cleese played Spreckels Theatre here in 2009, he was calling it The Alimony Tour. His third wife got a $13 million divorce settlement, and he had to pay her a million a year in alimony. Perhaps he should’ve known better before marrying wife #3, but the comedic actor and Monty Python member does have a law degree – and is smart enough never to have run afoul of the IRS.

The Isley Brothers lead singer Ronald declared bankruptcy in 1997 after the IRS seized his property, including a yacht. He’s currently serving a 37-month sentence for tax evasion and failing to file a tax return.

Mr. Vegas, Wayne Newton, filed for bankruptcy in the early ‘90s with $20 million of debt. He got back into financial trouble in 2005, when the IRS claimed he owed them almost $2 million in back taxes.

Another singer that had a big Vegas show – Toni Braxton – filed for Chapter 7 a second time, late last year. She had well over $10 million in unpaid debts to numerous creditors, one of which was the IRS.

Wesley Snipes was recently given a sentence for years of failure to pay taxes. What a lot of people don’t realize is, the IRS is really good about working on payment plans with people, and the interest isn’t outrageous. Snipes was given jail time for continuing to run afoul of the tax laws. He made $40 million since 1999 (thanks mostly to the Blade films) and between 1999 and 2004, he never filed taxes. In 2006, he even tried to get a $7 million refund.

What a lot of people don’t realize is, if you don’t file, the IRS does a Substitute ForReturn for you. This doesn’t work so well for the rich and famous, as the IRS isn’t writing off all the things those folks probably would for deductions.

These days the IRS has more sophisticated resources and incentives (hundreds of billions owed to the federal government) for tracking down non-filers.

I’m guessing the Osbourne’s are in no real danger of losing anything they own. The IRS would have no problem believing they could pay back anything they owe from future earnings, and wouldn’t make them sell houses or personal items, the way David Crosby had to sell a yacht for a million bucks when he ran into financial problems.

Ozzy’s son Jack Osbourne has a production company (Jacko Productions) that has a documentary on Ozzy that is supposed to hit the theatres later this year. One of the things covered is all the craziness his dad was involved in over the years. We assume Jack has learned from the things that almost killed his father, and made him the punchline to many jokes.

Let’s hope Jack doesn’t also follow in the family footsteps and run into problems with the IRS in the future. Let’s also hope Ozzy doesn’t bite the head off an IRS agent.

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Webster, Mass., man charged with killing wife shortly after IRS agents seized car for taxes

April 8, 2011 by

THE ASSOCIATED PRESS
March 23, 2011

DUDLEY, Mass. — A Webster man charged with killing his wife about an hour after two IRS agents seized their car for nonpayment of taxes has been ordered held without bail.

William Freudenthal (FROY’-den-thal) pleaded not guilty to second-degree murder Wednesday in Dudley District Court.

Worcester District Attorney Joseph Early Jr. says police responded to the 50-year-old Freudenthal’s home Tuesday when he became angry at the IRS agents.

Police returned less than an hour later after getting two 911 hang-up calls from the home. Officers found Jennifer Freudenthal on the bathroom floor with head and neck injuries. She was pronounced dead at a hospital.

William Freudenthal’s lawyer called the death an accident.

Police say they have gone to the home several times for alleged domestic violence incidents.

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Lots of Big Stars Are in Big Trouble With the Tax Man

March 21, 2011 by

By Lindsay Carlton
Published March 21, 2011|FoxNews.com

March 26, 2010: Al Pacino poses for a portrait in Beverly Hills, Calif.
Despite their high-priced tax attorneys and mega-millions, big stars can find themselves in big trouble come tax time.

Take Hollywood director Martin Scorsese. He was recently nailed with a $2.85 million bill for unpaid taxes. Scorsese was charged for past-due tax and related interest penalties. Although Scorsese’s spokeswoman Leslee Dart says the entire amount is now paid in full and that he has no current IRS debts, sources say the Oscar-winning director’s tax woes are due to his dealings with celebrity accountant Kenneth Starr. Starr was jailed for seven and a half years for a $33 million ponzi scheme, and has duped other superstars in his corrupt plots. He scammed Hollywood heavyweights such as Uma Thurman, Lauren Bacall and Al Pacino, to name a few.

Pacino allegedly failed to pay taxes for two years, a bill for $169,143 in 2008 and $19,140 in 2009, totaling $188,283. Anyone who would stiff this “Godfather” star out of $200,000 might be sleeping with the fishes too, but luckily for Al Pacino, the IRS doesn’t handle their business the same way the mob does. Pacino poured the blame on Starr, his business manager and close friend for years. The money hungry financier apparently used a lot of his fraudulent earnings to play sugar-daddy to his younger wife, ex-pole dancer Diane Passage, who enjoyed a lavish lifestyle. “Managers can be very helpful, but many are not skilled in the area of tax planning and some are outright greedy when given control of celebrities finance,” said Ray Lucia, a certified financial planner.

A spokesperson for Pacino said the “Scarface” actor is working to resolve the situation as soon as possible with a new financial manager.

Another Hollywood cash cow who skipped his IRS bill is Jennifer Lopez’s husband, Marc Anthony. The Latin crooner owes $3.4 million for unpaid taxes on his Long Island mansion. Anthony has a history of running from the tax man. In 2007 he failed to pay taxes on his $15 million income over a five-year-period and ended up paying $2.5 million in back taxes. One might assume that such a power couple would have a better handle on their finances, but some tax attorneys aren’t surprised. “They live in a world where everyone gives them more and more leeway and slack — and they slowly develop an attitude of being above it all,” said Doug Burns, a federal prosecutor who has prosecuted dozens of tax fraud cases.

One pop star even sang a song about paying bills, the aptly titled “Bills Bills Bills,” but then forgot to fork up the cash herself. Former Destiny’s Child singer Kelly Rowland owes $98,634 in back taxes. The government filed a lien against her on Nov. 8, according to the Detroit News. The songstress hasn’t had much success since splitting from the Beyonce Knowles-led girl group. She also recently parted ways with her long-time manager and Beyonce’s father, Matthew Knowles. “Celebs who are attending to other details in their lives may brush taxes aside for later, but by then it’s too late,” said CelebTV.com host Kelli Zink.

“Survivor” winner Richard Hatch has had his fair share of tax trouble. The reality star spent three years in jail for failing to pay taxes on the $1 million prize money he won on the hit show. Hatch is heading back to the slammer for not settling a tax bill that is now reportedly up to $2 million. Hatch is currently starring in Donald Trump’s “Celebrity Apprentice” show. Although the episodes of the series have already been filmed, he will miss the live finale in May while he finishes his sentence behind bars. Along with his prison term, Hatch will remain under supervision for 26 months, and 25 percent of his wages will be garnished to pay back the IRS.

Joe Francis, founder of “Girls Gone Wild,” also spent some time behind bars for his tax tribulations and says the IRS targets celebrities every year around tax day. To avoid glitches in your taxes, Francis recommends Hollywood newcomers hire reputable business managers and get references from their other clients. “Good financial managers are helpful, ones like Bernie Madoff are awful. I was young, I was making a lot of money,” Francis said. “You trust people like lawyers and accountants. I didn’t even sign my own tax return. I didn’t even question it.”

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IRS Has Problems Identifying Prisoner Tax Fraud

January 3, 2011 by

Washington, D.C. (January 3, 2011)

By Michael Cohn from accountingtoday.com

Significant problems remain with efforts by the Internal Revenue Service to identify and prevent tax refund fraud by prisoners after the passage of a 2008 law aimed at curbing such issues, according to a new government report.
The report, by the Treasury Inspector General for Tax Administration, found that despite the passage of the Inmate Tax Fraud Prevention Act of 2008, refund fraud committed by prisoners is increasing at a significant rate. The number of fraudulent prisoner tax returns identified by the IRS has more than doubled from 18,103 tax returns in calendar year 2004 to 44,944 tax returns in calendar year 2009. Fraudulent refunds claimed rose from $68.1 million to $295.1 million during the same period.

“More than two years ago, Congress gave the IRS the authority to share tax information with the Federal Bureau of Prisons,” said Senate Finance Committee ranking member Chuck Grassley, R-Iowa, in a statement. “The IRS and the Federal Bureau of Prisons still don’t have an agreement in place to share information. Meanwhile, the number of inmates’ false returns and refunds continues to rise. This signals that prisoner tax fraud is a low priority for the federal government. The agencies need to take action and correct that impression. While they wait, taxpayers are picking up a growing tab for prisoner tax fraud.”

TIGTA found that, as of October 2010, the IRS had not completed the required agreements to allow the IRS to disclose prisoner tax return information to prison officials. As a result, no information has been disclosed to either the Federal Bureau of Prisons or State Departments of Corrections.

In addition, the Calendar Year 2009 Report to Congress on prisoner fraud is incomplete. The report stated the IRS identified 44,944 false or fraudulent prisoner tax returns during calendar year 2009. However, the processes the IRS uses to identify prisoner tax returns may result in the IRS understating the amount of prisoner fraud. Finally, TIGTA’s review of the process used by the IRS’s Criminal Investigation Division to compile the 2009 prisoner data file identified a lack of managerial oversight to ensure the accuracy and reliability of this file.

TIGTA recommended that the IRS work with the Treasury Department to seek legislation to extend the period of time the IRS has to disclose prisoner tax return data to the Federal Bureau of Prisons and state prison officials. TIGTA also recommended that the commissioner of the IRS’s Wage and Investment Division revise the annual report to provide Congress with a complete assessment of potential prisoner fraud. TIGTA said the IRS should ensure that all tax returns filed by prisoners are processed through the Electronic Fraud Detection System and receive a prisoner indicator. The report also recommended that the IRS revise prisoner filters to validate the wages and withholding associated with prisoners incarcerated for a year who filed tax returns claiming a refund. The IRS should also develop a process to assess the reliability (accuracy and completeness) of data received from federal and state prisons, TIGTA suggested.

The IRS agreed with two of TIGTA’s five recommendations and partially agreed with two recommendations. The IRS did not indicate its agreement or disagreement with one of the recommendations, on providing Congress with a complete assessment of potential prisoner fraud by revising the annual report to include the total number of tax returns filed by prisoners, number selected for fraud screening, and the number verified as false or fraudulent.

However, the IRS noted hat it would continue to report to Congress all of the prisoner information that is required to be reported by the Inmate Tax Fraud Prevention Act of 2008, such as the number of false and fraudulent returns associated with prisoner filings. In addition, the IRS said it would respond to future Congressional requests pertaining to prisoner- related fraud.

The new report is available here.

TIGTA issued a report last September saying the IRS needs to subject tax returns filed by prisoners to greater scrutiny for fraud. The report was largely about how expanded access to wage and withholding information could improve the identification of fraudulent tax returns, but it noted that the majority of tax returns the IRS identifies as being filed by prisoners are not being sent to screening to assess fraud potential.

TIGTA’s review identified 253,929 (88 percent) of the 287,918 tax returns filed by a prisoner as of March 24, 2010, were not selected for screening. Of those tax returns not screened, 48,887 individuals had no wage information reported to the IRS by employers.

These 48,887 prisoners claimed refunds totaling more than $130 million including Earned Income
Tax Credit claims of $78.5 million. Some of these refunds may have been stopped by other compliance activities. For example, TIGTA determined that the IRS prevented the issuance of nearly $18.1 million in EITC claims for 4,532 of the 48,887 prisoner tax returns.

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Actor Wesley Snipes reports to prison to begin sentence

December 30, 2010 by
From Michael Martinez, CNN
December 9, 2010 1:28 p.m. EST
(CNN) — Actor Wesley Snipes reported to a medium-security Pennsylvania prison Thursday to begin a three-year sentence for failing to file tax returns.

The 48-year-old actor is now incarcerated in McKean Federal Correctional Institution in Lewis Run, officials said.

Snipes’ attorney said he is appealing his client’s misdemeanor convictions for not filing tax returns in 1999, 2000 and 2001.

Snipes was acquitted of felony charges.

Snipes is nervous, he said, but hopeful that his prayers will be answered.

“We still have prayers out there. We still believe in miracles. So don’t send me up the river yet,” Snipes said in an interview on CNN’s “Larry King Live” Tuesday night.

The actor conceded he was uneasy about losing his freedom if his appeal to the U.S. Supreme Court fails.

“I think any man would be nervous if his liberty is at stake,” Snipes said. “I’m disappointed that the system seems not to be working for me in this situation.”

Prosecutors said Snipes earned $40 million since 1999 but had filed no returns and had been involved in a tax resisters group.

Snipes disputed such involvement and said that the failure to file was his advisers’ fault.

“This is another thing that has been misreported: It has been framed that I was a conspirator and that I was an architect in a scheme by an organization that has been characterized as tax protesters,” Snipes said. “The press hasn’t reported that I was a client of people who I trusted (who) had knowledge and expertise in the areas of tax law that would protect my interests.”

Snipes is best known for his roles in the “Blade” action films, the comedy film “White Men Can’t Jump” and the drama “Jungle Fever.”

In February, a jury convicted Snipes on the misdemeanor charges, but he was acquitted of more serious felony charges of tax fraud and conspiracy. Jurors accepted his argument that he was innocently duped by errant tax advisers.

Defense attorneys in court documents suggested that to sentence Snipes harshly would be to disregard the jury’s verdict.

But prosecutors, in their sentencing recommendation, said the jurors’ decision “has been portrayed in the mainstream media as a ‘victory’ for Snipes. The troubling implication of such coverage for the millions of average citizens who are aware of this case is that the rich and famous Wesley Snipes has ‘gotten away with it.’ In the end the criminal conduct of Snipes must not be seen in such a light.”

Snipes suggested he was unfairly singled out by prosecutors.

“It does seem to be rather unusual and rather bizarre when you had a prosecutor come into the sentencing and say that this is the biggest tax trial in the history of the IRS,” Snipes said. “I think there is a certain amount of selectivity going on here.”

Snipes indicated he was disturbed by some public comments that he was receiving “just punishment.”

“It’s been presented as though I’m worthy of this punishment,” Snipes said. “I’ve been a law-abiding citizen ever since I grew up in the Bronx, New York.”

One juror, Frank Tuttle, gave Larry King Live a written statement that three other jurors had made up their mind that Snipes was guilty before the trial began.

The jury’s verdict was a compromise between those jurors who thought Snipes was guilty and those who didn’t, Tuttle said in the statement.

“That’s when a deal was made to find him guilty on the failure to file taxes and not guilty on the federal tax evasion charges,” Tuttle said in the statement. “We did not think he would go to jail.”

Snipes’ attorney, Daniel R. Meachum, said neither he nor Snipes had any involvement in preparing that juror’s statement to Larry King Live, saying the show’s producers obtained it on their own.

“We on the defense team never suggested that the media reach out to any of the jurors,” Meachum said.

Snipes contended that some media accounts of his trial have distorted public perceptions.

“There have been some egregious and very malicious efforts to report the facts of this case,” Snipes said. “I was never charged with tax evasion. I’ve never been a tax protester.”

Snipes said he has paid his taxes.

“They claimed that there was a certain number that was owed and that number has been all over that place. The press has escalated it and changed it a number of times. But we think we are fully compliant with what was owed,” Snipes said.

CNN’s Jessica Thill contributed to this story.

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IRS Pressed to Fight Tax Evasion by Business Networks

December 30, 2010 by

Washington, D.C. (October 26, 2010)
By WebCPA Staff from AccountingToday.com

Businesses that have developed complex networks of related trusts and partnerships to evade taxes are making it difficult for the Internal Revenue Service’s efforts to close the tax gap, according to a new government report.

The IRS views network-based tax evasion as a problem but does not have estimates of the associated revenue loss, in part because data does not exist on the full population of the networks, according to a report by the Government Accountability Office. A taxpayer can control a group of related entities — such as trusts, corporations, or partnerships — in a network. These networks can serve a variety of legitimate business purposes, but they also can be used in complex tax evasion schemes that are difficult for the IRS to identify.

The IRS does know that at least 1 million networks existed involving partnerships and similar entities in tax year 2008. The IRS also knows that many questionable tax shelters and abusive transactions rely on the links among commonly owned entities in a network, said the report.

The IRS generally addresses network-related tax evasion through its examination programs. These programs traditionally involve identifying a single return from a single tax year and routing the return to the IRS division that specializes in auditing that type of return. From a single return, examiners may branch out to review other entities if information on the original return appears suspicious.

However, this traditional approach does not align well with how network tax evasion schemes work, the report noted. Such schemes can cross multiple IRS divisions or require time and expertise that IRS may not have allocated at the start of an examination. A case of network tax evasion also may not be evident without looking at multiple tax years.

In reaction to the report, Senate Finance Committee Chairman Max Baucus, D-Mont., called for new tools to help the IRS fight complex tax evasion schemes. Baucus had requested the report from the GAO as part of his ongoing efforts to reduce the estimated $345 billion tax gap.

“When people skirt their tax obligations, it places an undue burden on the hardworking Americans who do pay their taxes,” said Baucus in a statement. “This report makes clear the IRS needs to develop a comprehensive strategy to fight complex tax evasion schemes and that more work is needed to close the tax gap. I intend to closely monitor the IRS’s progress to make sure they have an effective strategy to root out this tax evasion and close the tax gap once and for all.”

The IRS is developing programs and tools that more directly address network tax evasion. One, called Global High Wealth Industry, selects certain high-income individuals and examines their network of entities as a whole to look for tax evasion. Another, yK-1, is a computerized visualization tool that shows the links between entities in a network. These efforts show promise when compared to the GAO’s criteria for assessing network analyses. They represent new analytical approaches, have upper-management support, and cut across divisions and database boundaries. However, there are opportunities for more progress.

For example, the IRS has no agency-wide strategy or goals for coordinating its network efforts. It has not conducted assessments of its network tools, nor has it determined the value of incorporating more data into its network programs and tools or scheduled such additions. Without a strategy and assessments, the IRS risks duplicating efforts and managers will not have information about the effectiveness of the new programs and tools that could inform resource allocation decisions, said the report.

Among other items, the GAO recommends that the IRS establish an IRS-wide strategy that coordinates its network tax evasion efforts. Also, the IRS should assess its network programs and tools and should evaluate adding more data to its current tools. The IRS generally agreed with these recommendations and noted additional organizational changes the agency is making that will address networks.

“In the end, the IRS will always be challenged to find technological, administrative, or auditing approaches to address the tax problems associated with the ever-increasing complexity and variability of both legitimate and abusive entity structures that use tiered flow-through tax reporting,” wrote IRS Deputy Commissioner Steven T. Miller. “We are in the process of studying potential legislative and guidance changes to reduce the tax risks inherent in network structures.”

 

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