Malibu man to plead guilty to using Swiss bank to avoid U.S. taxes
John McCarthy is the first Californian to be prosecuted after Swiss bank UBS agreed to reveal identities of its customers. The IRS is seeking more names from the bank.
By Nathan Olivarez-Giles, LATimes.com
A nationwide crackdown on federal income tax evasion using secret Swiss bank accounts yielded an agreement from a Malibu businessman to plead guilty to hiding at least $1 million abroad.
John McCarthy is the first tax dodger in California — and the fourth nationwide — to be prosecuted after Switzerland’s largest bank, UBS, agreed to reveal the identities of U.S. customers.
The Internal Revenue Service is seeking the names of more than 52,000 U.S. residents who deposited money into secret accounts through agreements with both UBS and the Swiss government. The charge against McCarthy was based on information provided by UBS in February, officials said.
McCarthy funneled the money to a UBS account with the help of a Swiss lawyer and bank officials between 2003 and 2008, court documents said.
Click link above for complete article.
How Lehman Sold Plan To Sidestep Tax Man
“Wall Street firms have long sought to use financial alchemy to save clients a bundle on their tax bills. Now, one of the Street’s cleverest strategies is coming under scrutiny.
The strategy arose a few years ago, a time when lots of U.S. companies were paying fat dividends. Wall Street sensed a golden business opportunity: sell their hedge-fund clients on ways to make those dividends even fatter by avoiding taxes on them.
Bankers at Lehman Brothers Holdings Inc. pitched an enticing product. By using a complex financial tool called derivatives, hedge funds with offshore operations could reap the benefits of owning big-dividend U.S. stocks without actually owning them. The result: no dividend-tax bite. Different versions of the strategy cropped up all over Wall Street.
Hedge funds were thrilled. The Internal Revenue Service apparently wasn’t. Federal tax authorities are seeking information about the trades from Lehman and Citigroup Inc., The Wall Street Journal reported in July, and other firms are btracing for similar inquiries.”
Complete article can be found here:
http://online.wsj.com/article/SB118998876153829237.html
Taxpayers showing losses on Schedule C are in the spotlight
The Treasury Inspector General for Tax Administration (TIGTA) has issued a report presenting the results of a review to determine what actions the Internal Revenue Service is taking to address noncompliant, high-income Small Business/Self-Employed (SB/SE) Division taxpayers who claim business losses using a U.S. Individual Income Tax Return (Form 1040) Profit or Loss From Business (Schedule C) for activities considered to be not-for-profit. This audit was part of the Treasury Inspector General for Tax Administration’s Fiscal Year 2007 audit plan.
Complete article can be hound here:
http://www.accountingweb.com/cgi-bin/item.cgi?id=104021
IRS Resources: Business Entertainment Expenses
The IRS is pretty clear in explaining rules to avoid a tax audit when dealing with entertainment expenses. See complete article for list of IRS publications.
Complete article can be found here:
http://activerain.com/blogsview/199592/IRS-Resources-Business-Entertainment
Look out for tax hit after home loss
“In a package of proposals aimed at easing foreclosure worries for homeowners having trouble making their mortgage payments, President Bush called last week on Congress to temporarily make some borrowers exempt from a little-known tax that kicks debtors when they’re down.
The provision, which assesses income tax on canceled or “forgiven” debts, can be triggered when a lender forecloses on a home or agrees to accept the proceeds of a property sale for less than the balance on the loan.”
Complete article can be found here:
http://www.latimes.com/business/investing/la-fi-perfin2sep02,1,1737597.column?coll=la-utilities-business-money
Closing the Gap: Why the IRS Wants to Practice Random Acts of Audit
“Bottom Line:
• According to IRS estimates, there is a $345 billion gross “tax gap” for 2001. The tax gap is the difference between taxes the IRS thinks should have been paid and taxes that actually were paid.
• To better understand the tax gap and non-compliance with tax codes, the IRS is resurrecting random audits of tax returns.
• Some 13,000 taxpayers will be chosen for random audits of 2006 returns.
• The IRS will continue random audits for tax years 2007 and 2008.”
Complete Article can be found here:
http://knowledge.asu.edu/blog/index.php/2007/08/24/closing_the_gap_why_the_irs_wants_to_pra
IRS to institute random audit program
“The IRS is paying particular attention to reporting of income, to wealthy people and especially to flow-through entities such as partnerships, S corporations (a domestic corporation of 100 or fewer shareholders) and trusts”
“An April 16 article in the New York Times said the IRS is auditing the middle class more often, It cited IRS data showing the audits for taxpayers earning between $25,000 and $100,000 nearly tripled to 436,000 taxpayers between 2000 and 2006. That is 1 in 140 taxpayers. One in 59 taxpayers with income over $100,00 are likely to be audited, as are 1 in 16 taxpayers with income above $1 million, the article said.”
Complete article can be found here:
http://www.insidebayarea.com/business/ci_6590831
IRS drops carrot for the stick to improve effectiveness
“In 2001, the IRS reported a $345 billion tax gap…To close the tax gap, the IRS spent 13 percent more on enforcement in 2006 than in 2004″
“To further minimize the tax gap, the proposed 2008 IRS operating budget of 11.6 billion earmarks 63 percent of the overall budget for collection enforcement.”
“Increased IRS enforcement also translates to more civil and criminal actions against taxpayers trying to cheat the sytem. In 2006, the IRS reports that it initiated 3,907 investigations resulting in 2,319 criminal complaints and indictments and 2,019 convictions. That’s a conversion rate of 82 percent. The average prison time per conviction and sentencing was just over two years”
Complete article can be found here:
http://www.sun-sentinel.com/news/opinion/sfl-irscol07forumnbaug07,0,953556.story
Prison sentences for financial guru Wade Cook, wife
“U.S. District Judge Thomas Zilly also ordered Cook, 57, to pay $3.75 million in back taxes on roughly $9.5 million of underreported income generated by sales of Cook’s books, tapes and seminars.
Zilly sentenced Cook’s wife, Laura, 54, to 1-½ years in prison. She is jointly responsible for paying the back taxes.”
Complete article can be found here:
http://seattletimes.nwsource.com/html/localnews/2003819531_wadecook03m.html
Father-and-son owners of Cipriani restaurants plead guilty to tax fraud
Complete article can be found here: http://www.courttv.com/news/2007/0731/cipriani_ctv.html?link=eaf
“A Manhattan district attorney said he would not recommend jail time for the famed father-and-son owners of the Rainbow Room and Cipriani restaurants, who pleaded guilty Tuesday to swindling the city and state out of nearly $10 million in taxes.”
“Arrigo Cipriani, the patriarch of the Cipriani family restaurants, and his son, Giuseppe Cipriani, the CEO of Cipriani USA, acknowledged in state Supreme Court that they deducted sham royalties from their taxes and knowingly falsified their tax returns. Arrigo Cipriani pleaded guilty to felony tax charges, while his son pleaded guilty to misdemeanor tax charges.”
“Under the plea agreement, they will be required to pay $10 million in back taxes. The felony charge of filing false returns carries a maximum sentence of 21 months, and the misdemeanor charge carries a maximum sentence of one year. They are expected to receive probation when they are sentenced Oct. 10.”
