Original Story: thestateofthegulf.com
The Special Master tasked with investigating the Deepwater Horizon settlement process filed a motion this week urging the District Court to order the return of fraudulent payments made to Gill Johnson, Sr., who received over $440,000 from the Deepwater Horizon Economic Claims Center (“DHECC”). The motion alleges that Johnson’s claims were based on falsified tax returns that were never even filed with the IRS.
In his motion, the Special Master informed the Court that in January 2013, Johnson filed claims seeking compensation for losses associated with his commercial fishing business based on his 2008 and 2009 tax records. The rub? Johnson didn’t file or pay taxes with the IRS in either of those years.
The 2008 tax return Johnson provided to the claims facility was undated and unsigned – and false, according to the Special Master’s motion. The claims facility accepted his return despite the fact that the Settlement Agreement specifically requires claimants to file signed tax returns with their claims. And the motion also stated that the 2009 tax record he provided to support his claims was prepared in July of 2010 for the sole purpose of allowing Johnson to file his Deepwater Horizon claim. Johnson, the motion explains, allegedly based his 2009 return not on any source documents, but rather on a verbal summary given by Johnson’s girlfriend to the tax preparer Johnson had hired.
The claims facility accepted Johnson’s misrepresentations and his falsified forms, and awarded him over $440,000. For their efforts in helping Johnson prepare his claim, his attorneys received over $109,000 – fees that the law firm returned the very same day that the Special Master filed his motion.
This motion, like others filed by the Special Master, underscores a simple fact: settlement funds paid for improper claims should be repaid. Restitution is important in cases like this, not only so that fraudsters don’t benefit from their fraudulent acts, but also “to safeguard the integrity of an important public institution administering a fund for the benefit of an injured segment of society.” In addition, the Special Master also urges the Court to enforce a one strike, you’re out policy with regards to Johnson, arguing that allowing claimants who have filed fraudulent claims the opportunity to resubmit their claims using different documentation would only encourage them to take a chance on fraud – knowing that they could submit different data if they got caught.
Of course, this is exactly what the PSC's lead lawyer appears to want: in a recent letter to Judge Freeh and the Court, Steve Herman argues that when fraud is alleged or suspected, the claimant should be notified that the "claim might be fraudulent" and given a chance to withdraw the Claim or otherwise attempt to explain it. Unfortunately, this process would have the effect of giving unscrupulous claimants a risk-free chance to get their fraudulent claims paid. In the world he appears to be urging, there's no apparent downside to taking your best shot at free money. Such attempts at fraud would not be treated so leniently anywhere else in the world - not by employers, not by merchants, and definitely not by the IRS. The policy at a court-supervised claims facility should reflect that attempts to commit fraud will not be tolerated.
Fraudsters should take note: BP certainly did not agree to pay for claims tainted by fraud or corruption. The Special Master’s latest motion sends a clear message that attempts to take advantage of the settlement process are being investigated, and that those caught red-handed should expect to answer for their fraud.
Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts
Wednesday, December 3, 2014
Friday, February 8, 2013
109 Arrests - IRS Cracking Down on Identity Theft
Story first appeared on USA Today -
The IRS says a coast-to-coast campaign against tax-related identity theft led to more than 700 enforcement actions last month, including arrests and indictments.
Federal authorities took action against 389 people suspected of involvement in identity theft to commit tax fraud, the IRS said Thursday.
Announced as the annual federal tax-filing season begins, the nationwide actions include 109 arrests and 189 indictments, plus court complaints and information, said acting IRS Commissioner Steven Miller.
The bulk of the enforcement actions took place on the East Coast and in the Midwest, a map released Thursday by the IRS shows.
Additionally, IRS auditors and criminal investigators in late January started visiting 197 money service businesses, including check-cashing stores, to ensure the locations don't aid identity theft or refund fraud. The visits focus on 17 high-risk areas identified by the IRS in or near New York; Philadelphia; Atlanta; Tampa; Miami; Chicago; Houston; Phoenix; Los Angeles; San Diego; El Paso; Tucson; Birmingham; Detroit; San Francisco; Oakland and San Jose.
Part of a year-long IRS crackdown, the effort targets thieves who gain access to other people's Social Security numbers and other identifying information, and then use that information to concoct and file fraudulent federal tax returns — and collect unwarranted refunds.
"As tax season begins this year, we want to be clear that there is a heavy price to pay for perpetrators of refund fraud and identity theft," said Miller. "We have aggressively stepped up our efforts to pursue and prevent refund fraud and identity theft, and we will continue to intensely focus on this area.
The tax agency has added additional computer screening filters in an effort to stop the crime, said Miller. Although he acknowledged the filters could slow IRS processing of some legitimate tax returns and refunds, Miller said the tax agency would work to keep any delays to a minimum.
Additionally, the IRS as of late 2012 had assigned more than 3,000 employees to work on identity theft-related work, said Miller. That's more than double the number devoted to the area in 2011, he said.
In all, the IRS says its efforts in 2012 "protected" against $20 billion in fraudulent refunds, most of which are directly related to identity theft. That compares with $14 billion in 2011.
Miller said the IRS is making progress in fighting identity theft refund fraud, but still has room to improve. The agency is working to speed the time it takes to get refunds to honest taxpayers victimized by the crimes, he said.
The IRS says a coast-to-coast campaign against tax-related identity theft led to more than 700 enforcement actions last month, including arrests and indictments.
Federal authorities took action against 389 people suspected of involvement in identity theft to commit tax fraud, the IRS said Thursday.
Announced as the annual federal tax-filing season begins, the nationwide actions include 109 arrests and 189 indictments, plus court complaints and information, said acting IRS Commissioner Steven Miller.
The bulk of the enforcement actions took place on the East Coast and in the Midwest, a map released Thursday by the IRS shows.
Additionally, IRS auditors and criminal investigators in late January started visiting 197 money service businesses, including check-cashing stores, to ensure the locations don't aid identity theft or refund fraud. The visits focus on 17 high-risk areas identified by the IRS in or near New York; Philadelphia; Atlanta; Tampa; Miami; Chicago; Houston; Phoenix; Los Angeles; San Diego; El Paso; Tucson; Birmingham; Detroit; San Francisco; Oakland and San Jose.
Part of a year-long IRS crackdown, the effort targets thieves who gain access to other people's Social Security numbers and other identifying information, and then use that information to concoct and file fraudulent federal tax returns — and collect unwarranted refunds.
"As tax season begins this year, we want to be clear that there is a heavy price to pay for perpetrators of refund fraud and identity theft," said Miller. "We have aggressively stepped up our efforts to pursue and prevent refund fraud and identity theft, and we will continue to intensely focus on this area.
The tax agency has added additional computer screening filters in an effort to stop the crime, said Miller. Although he acknowledged the filters could slow IRS processing of some legitimate tax returns and refunds, Miller said the tax agency would work to keep any delays to a minimum.
Additionally, the IRS as of late 2012 had assigned more than 3,000 employees to work on identity theft-related work, said Miller. That's more than double the number devoted to the area in 2011, he said.
In all, the IRS says its efforts in 2012 "protected" against $20 billion in fraudulent refunds, most of which are directly related to identity theft. That compares with $14 billion in 2011.
Miller said the IRS is making progress in fighting identity theft refund fraud, but still has room to improve. The agency is working to speed the time it takes to get refunds to honest taxpayers victimized by the crimes, he said.
Friday, January 11, 2013
US tax code longer than Bible and without good news
originally appeared in The Associated Press:
Too intimidated to fill out your tax return without help? Join the club.
At nearly 4 million words, the U.S. tax law is so thick and complicated that businesses and individuals spend more than 6 billion hours a year complying with filing requirements, according to a report Wednesday by an independent government watchdog.
That's the equivalent of 3 million people working full-time, year-round.
If tax compliance were an industry, it would be one of the largest in the United States, according to a report by the National Taxpayer Advocate.
The days of most taxpayers sitting down with a pencil and a calculator to figure out their taxes are long gone, she said. Since 2001, Congress has made almost 5,000 changes to U.S. tax law. That's an average of more than one a day.
As a result, almost 60 percent of filers will pay someone to prepare their tax returns this spring. An additional 30 percent will use commercial software. Without the help, she says, most taxpayers would be lost.
On the one hand, taxpayers who honestly seek to comply with the law often make inadvertent errors, causing them to either overpay their tax or become subject to IRS enforcement action for mistaken underpayments, she said. On the other hand, sophisticated taxpayers often find loopholes that enable them to reduce or eliminate their tax liabilities.
The tax advocate ranks complexity as the most serious tax problem facing taxpayers and the Internal Revenue Service in her annual report to Congress. She urges lawmakers to overhaul the nation's tax laws, making them simpler, clearer and easier to comply with.
Momentum is building in Congress to overhaul the tax code for the first time since 1986. But Washington's divided government has yet to show it can successfully tackle such a task.
President Barack Obama and Republican leaders in Congress say they are onboard, though they have rarely seen eye to eye on tax policy. They struggled mightily just to avoid the year-end fiscal cliff, passing a bill that makes relatively small changes in the nation's tax laws.
Undaunted, the top tax writer in the House says he is determined to pass reform legislation this year.
This report confirms that the code is 10 times the size of the Bible with none of the good news, according to Rep. Dave Camp, chairman of the House and Ways and Means Committee. Our broken tax code has become a nightmare of loopholes and special interest provisions that create added complexities and costs for hardworking taxpayers and small businesses.
Comprehensive tax reform will make sure everyone is playing by the same rules and help businesses create more jobs and invest in their workers, Camp said.
The general formula for tax reform is widely embraced on Capitol Hill: Eliminate or reduce some tax credits, exemptions and deductions and use the additional revenue to pay for lower income tax rates for everyone. There is, however, no consensus on which tax breaks to scale back.
That's because Americans like their credits, deductions and exemptions - the provisions that make the tax law so complicated in the first place. Would workers want to pay taxes on employer-provided health benefits or on contributions to their retirement plans? How would homeowners feel about losing the mortgage interest deduction?
Those are the three biggest tax breaks in the tax code, according to congressional estimates. Together, they are projected to save taxpayers nearly $450 billion this year.
In all, taxpayers will save about $1.1 trillion this year by taking advantage of tax breaks, according to the Joint Committee on Taxation, the official scorekeeper for Congress. That's almost as much as individuals will pay in income taxes.
To avoid angering millions of constituents who rely on popular tax breaks, politicians prefer to endorse tax reform without getting into specifics. Instead, they say they want to reform the tax code by eliminating special interest "loopholes" that help only small but well-connected groups of taxpayers.
Obama has repeatedly said he wants to eliminate tax breaks for hedge fund managers and companies that buy corporate jets. Throughout the recent fiscal cliff debate, House Speaker John Boehner said he favored raising additional tax revenue by reducing unspecified tax loopholes rather than raising income tax rates.
The tax advocate defines "loopholes" as tax breaks that benefit someone else. She warns that targeting only narrow provisions won't raise enough revenue to significantly lower rates or make the law much simpler.
That's what we've been trying to say to taxpayers, that the special interests are us. It's not just oil and gas or whatever you want to point your finger at, she said. That's not where the money is.
Too intimidated to fill out your tax return without help? Join the club.
At nearly 4 million words, the U.S. tax law is so thick and complicated that businesses and individuals spend more than 6 billion hours a year complying with filing requirements, according to a report Wednesday by an independent government watchdog.
That's the equivalent of 3 million people working full-time, year-round.
If tax compliance were an industry, it would be one of the largest in the United States, according to a report by the National Taxpayer Advocate.
The days of most taxpayers sitting down with a pencil and a calculator to figure out their taxes are long gone, she said. Since 2001, Congress has made almost 5,000 changes to U.S. tax law. That's an average of more than one a day.
As a result, almost 60 percent of filers will pay someone to prepare their tax returns this spring. An additional 30 percent will use commercial software. Without the help, she says, most taxpayers would be lost.
On the one hand, taxpayers who honestly seek to comply with the law often make inadvertent errors, causing them to either overpay their tax or become subject to IRS enforcement action for mistaken underpayments, she said. On the other hand, sophisticated taxpayers often find loopholes that enable them to reduce or eliminate their tax liabilities.
The tax advocate ranks complexity as the most serious tax problem facing taxpayers and the Internal Revenue Service in her annual report to Congress. She urges lawmakers to overhaul the nation's tax laws, making them simpler, clearer and easier to comply with.
Momentum is building in Congress to overhaul the tax code for the first time since 1986. But Washington's divided government has yet to show it can successfully tackle such a task.
President Barack Obama and Republican leaders in Congress say they are onboard, though they have rarely seen eye to eye on tax policy. They struggled mightily just to avoid the year-end fiscal cliff, passing a bill that makes relatively small changes in the nation's tax laws.
Undaunted, the top tax writer in the House says he is determined to pass reform legislation this year.
This report confirms that the code is 10 times the size of the Bible with none of the good news, according to Rep. Dave Camp, chairman of the House and Ways and Means Committee. Our broken tax code has become a nightmare of loopholes and special interest provisions that create added complexities and costs for hardworking taxpayers and small businesses.
Comprehensive tax reform will make sure everyone is playing by the same rules and help businesses create more jobs and invest in their workers, Camp said.
The general formula for tax reform is widely embraced on Capitol Hill: Eliminate or reduce some tax credits, exemptions and deductions and use the additional revenue to pay for lower income tax rates for everyone. There is, however, no consensus on which tax breaks to scale back.
That's because Americans like their credits, deductions and exemptions - the provisions that make the tax law so complicated in the first place. Would workers want to pay taxes on employer-provided health benefits or on contributions to their retirement plans? How would homeowners feel about losing the mortgage interest deduction?
Those are the three biggest tax breaks in the tax code, according to congressional estimates. Together, they are projected to save taxpayers nearly $450 billion this year.
In all, taxpayers will save about $1.1 trillion this year by taking advantage of tax breaks, according to the Joint Committee on Taxation, the official scorekeeper for Congress. That's almost as much as individuals will pay in income taxes.
To avoid angering millions of constituents who rely on popular tax breaks, politicians prefer to endorse tax reform without getting into specifics. Instead, they say they want to reform the tax code by eliminating special interest "loopholes" that help only small but well-connected groups of taxpayers.
Obama has repeatedly said he wants to eliminate tax breaks for hedge fund managers and companies that buy corporate jets. Throughout the recent fiscal cliff debate, House Speaker John Boehner said he favored raising additional tax revenue by reducing unspecified tax loopholes rather than raising income tax rates.
The tax advocate defines "loopholes" as tax breaks that benefit someone else. She warns that targeting only narrow provisions won't raise enough revenue to significantly lower rates or make the law much simpler.
That's what we've been trying to say to taxpayers, that the special interests are us. It's not just oil and gas or whatever you want to point your finger at, she said. That's not where the money is.
Thursday, April 12, 2012
Unpaid Taxes Eating Into Your Tax Refund
Story first appeared in the Detroit Free Press.
The joy of going out and spending a tax refund on that new living room furniture set you've had your eye on, could be short-lived if you owe past taxes.
The Internal Revenue Service is warning taxpayers that the U.S. Department of Treasury's Financial Management Service, which issues federal tax refunds, can use part or all of your federal tax refund to cover specific unpaid debts.
So before you dream about spending that refund, consider:
• Do you owe state or federal income taxes from the past? Your federal refund will be offset to pay those taxes.
• Do you have debt outstanding for child support or student loans? Again, the Treasury can use your refund to offset those debts.
The IRS notes that taxpayers would receive a notice if some debt is automatically paid off with refund money.
The notice would include the original refund amount, your offset amount, the agency receiving the payment and its contact information.
The publisher of Fastweb.com and FinAid.org, said what's known as a "Treasury Offset" occurs after someone defaults on a federal student loan -- both the federally guaranteed student loans and the direct loan programs. The offset typically happens about a year after the borrower defaults. And both federal and state income tax refunds can be intercepted.
In some cases, a spouse could mount an innocent spouse defense to protect his or her share of the refund from being offset.
There are options if you dispute the actual debt or the amount taken from the refund. But you'd need to contact the agency shown on the notice -- not the IRS.
Of course, sometimes there's the case where only one spouse is responsible for that debt. So, maybe the spouse can get that new dining room table they've been looking at.
If you filed a joint return and you're not responsible for the debt, but you're entitled to a portion of the refund, you can file IRS Form 8379, or Injured Spouse Allocation.
A certified public accountant and director of the tax-assistance program of the Accounting Aid Society of Detroit, said some taxpayers might be tempted to not file jointly, as one spouse owes debts that are subject to the tax refund offset.
However, he warned that if they file separately, certain credits and deductions are not available.
So in general, it is often best to file jointly to get the largest refund and file the Form 8379 to protect the part of the refund owed to the injured spouse. The Form 8379 can be filed with the tax return if a refund offset is anticipated.
The IRS notes that you'd want to follow instructions for Form 8379 carefully to avoid delays. If you don't receive a notice that spousal relief was granted or you don't receive a refund, it's possible to contact the Treasury's Offset Call Center at 800-304-3107 weekdays.
The Michigan Department of Treasury also offsets refunds for certain debts and then the state mails taxpayers a Form 743, Income Allocation for Non-obligated Spouse. That form must be completed and returned within 30 days. Only the Form 743 received from Michigan Treasury can be submitted. The Form 743 is not otherwise available and is only issued after processing of the return.
It's important that taxpayers anticipating a Michigan state tax refund offset on a joint Michigan return watch for this Form 743 in the mail and submit it in a timely fashion.
For more national and worldwide business related news, visit the Peak News Room blog.
The joy of going out and spending a tax refund on that new living room furniture set you've had your eye on, could be short-lived if you owe past taxes.
The Internal Revenue Service is warning taxpayers that the U.S. Department of Treasury's Financial Management Service, which issues federal tax refunds, can use part or all of your federal tax refund to cover specific unpaid debts.
So before you dream about spending that refund, consider:
• Do you owe state or federal income taxes from the past? Your federal refund will be offset to pay those taxes.
• Do you have debt outstanding for child support or student loans? Again, the Treasury can use your refund to offset those debts.
The IRS notes that taxpayers would receive a notice if some debt is automatically paid off with refund money.
The notice would include the original refund amount, your offset amount, the agency receiving the payment and its contact information.
The publisher of Fastweb.com and FinAid.org, said what's known as a "Treasury Offset" occurs after someone defaults on a federal student loan -- both the federally guaranteed student loans and the direct loan programs. The offset typically happens about a year after the borrower defaults. And both federal and state income tax refunds can be intercepted.
In some cases, a spouse could mount an innocent spouse defense to protect his or her share of the refund from being offset.
There are options if you dispute the actual debt or the amount taken from the refund. But you'd need to contact the agency shown on the notice -- not the IRS.
Of course, sometimes there's the case where only one spouse is responsible for that debt. So, maybe the spouse can get that new dining room table they've been looking at.
If you filed a joint return and you're not responsible for the debt, but you're entitled to a portion of the refund, you can file IRS Form 8379, or Injured Spouse Allocation.
A certified public accountant and director of the tax-assistance program of the Accounting Aid Society of Detroit, said some taxpayers might be tempted to not file jointly, as one spouse owes debts that are subject to the tax refund offset.
However, he warned that if they file separately, certain credits and deductions are not available.
So in general, it is often best to file jointly to get the largest refund and file the Form 8379 to protect the part of the refund owed to the injured spouse. The Form 8379 can be filed with the tax return if a refund offset is anticipated.
The IRS notes that you'd want to follow instructions for Form 8379 carefully to avoid delays. If you don't receive a notice that spousal relief was granted or you don't receive a refund, it's possible to contact the Treasury's Offset Call Center at 800-304-3107 weekdays.
The Michigan Department of Treasury also offsets refunds for certain debts and then the state mails taxpayers a Form 743, Income Allocation for Non-obligated Spouse. That form must be completed and returned within 30 days. Only the Form 743 received from Michigan Treasury can be submitted. The Form 743 is not otherwise available and is only issued after processing of the return.
It's important that taxpayers anticipating a Michigan state tax refund offset on a joint Michigan return watch for this Form 743 in the mail and submit it in a timely fashion.
For more national and worldwide business related news, visit the Peak News Room blog.
Wednesday, March 10, 2010
IRS to go Easier on Tax Settlements
USA Today
WASHINGTON — IRS agents will be more flexible with taxpayers who have seen their incomes drop during the recession.
IRS Commissioner Doug Shulman announced Tuesday that the agency is loosening its rules for negotiating tax settlements for less than the amount owed.
The agency also plans to open about 1,000 offices on various Saturdays, beginning March 27, to give taxpayers more opportunities to work with IRS employees to resolve their tax debts.
The IRS expects to process 138 million individual tax returns this year.
Most will qualify for refunds, but with the economy shedding more than 8 million jobs since the start of the recession, many taxpayers will be unable to make timely payments.
Under an IRS initiative started a year ago, agents can negotiate new payment plans and postpone asset seizures for delinquent taxpayers who are financially strapped but make a good-faith effort to settle their tax debts.
Shulman cautioned that those seeking help will have to demonstrate their inability to pay.
Those who fail to file tax returns, or who simply ignore collection notices, will not be eligible for help. Individual tax returns are due April 15.
To qualify for a tax settlement, taxpayers must file detailed financial statements, listing all their assets, liabilities and income, said Jackie Perlman, an analyst at the Tax Institute at H&R Block.
Taxpayers could be required to sell assets to help settle tax debts.
"You can't just call up the IRS and say, 'Hey, I lost my job. I can't pay the bills. Can you cut my taxes in half?' " Perlman said.
"Nice try," Perlman said, "but it doesn't work that way."
Shulman said new rules for negotiating tax settlements, known as offers in compromise, better reflect the economic problems many taxpayers face.
IRS agents can accept settlements only for less than the full amount owed if they determine there is little chance the taxpayer will be able to pay.
IRS Commissioner Doug Shulman announced Tuesday that the agency is loosening its rules for negotiating tax settlements for less than the amount owed.
The agency also plans to open about 1,000 offices on various Saturdays, beginning March 27, to give taxpayers more opportunities to work with IRS employees to resolve their tax debts.
The IRS expects to process 138 million individual tax returns this year.
Most will qualify for refunds, but with the economy shedding more than 8 million jobs since the start of the recession, many taxpayers will be unable to make timely payments.
Under an IRS initiative started a year ago, agents can negotiate new payment plans and postpone asset seizures for delinquent taxpayers who are financially strapped but make a good-faith effort to settle their tax debts.
Shulman cautioned that those seeking help will have to demonstrate their inability to pay.
Those who fail to file tax returns, or who simply ignore collection notices, will not be eligible for help. Individual tax returns are due April 15.
To qualify for a tax settlement, taxpayers must file detailed financial statements, listing all their assets, liabilities and income, said Jackie Perlman, an analyst at the Tax Institute at H&R Block.
Taxpayers could be required to sell assets to help settle tax debts.
"You can't just call up the IRS and say, 'Hey, I lost my job. I can't pay the bills. Can you cut my taxes in half?' " Perlman said.
"Nice try," Perlman said, "but it doesn't work that way."
Shulman said new rules for negotiating tax settlements, known as offers in compromise, better reflect the economic problems many taxpayers face.
IRS agents can accept settlements only for less than the full amount owed if they determine there is little chance the taxpayer will be able to pay.
Friday, February 19, 2010
Nurse Challenges IRS and Wins
The Washington Post
It is hardly unusual for Americans to disagree with the Internal Revenue Service. What sets Lori Singleton-Clarke apart is that she challenged the formidable agency in court and won.
Singleton-Clarke, a registered nurse from Bryantown, represented herself in U.S. Tax Court during her December 2008 trial. A year later, the judge issued an opinion affirming her right to deduct almost $15,000 in educational expenses related to a master of business administration degree she received from the University of Phoenix, an online college.
Her dispute with the government began with an IRS audit of her 2005 tax return. She conceded most of the challenges to the deduction but held firm on her MBA deduction because it conformed to her understanding of the law, according to the opinion issued in December 2009.
At issue were Singleton-Clarke's intentions in pursuing the graduate degree. According to a provision of the labyrinthine U.S. Tax Code, educational expenses are deductible only if the degree does not let the recipient pursue a new career.
Singleton-Clarke insisted the degree would help her in the type of management positions she already held in the health-care industry. The IRS, she said, did not believe her.
IRS spokesman Jim Dupree said that privacy laws preclude the agency from commenting on individual cases.
At St. Mary's Hospital in Leonardtown, Singleton-Clarke was the performance improvement coordinator, making it her job, at times, to tell doctors what they were doing wrong. But she found doctors did not always feel they had to obey a nurse, so she sought to better speak their language: money.
"As a PI coordinator you have to be able to convey regulatory information to physicians in a quick manner. For physicians, particularly surgeons, their time is money," Singleton-Clarke said. "Sometimes they're biased of, 'You're just a nurse.' They don't value, sometimes, the advice a nurse can give because they view us as someone that works underneath them. I wanted the degree in business administration so I could talk the talk with the physicians because physicians listen to financial stuff."
The outcome, issued in a five-page summary opinion by Judge Stanley Goldberg, attracted a great deal of attention, including an article in The Wall Street Journal. But at the time, Singleton-Clarke had no idea what she was getting into, she said.
She did not realize that going to trial was unusual until she showed up and found herself the only case on the docket. As it began, she found a small army managing and observing on the IRS' side, "and on my side it was me," she said. She was alone because she did not have the money to hire a lawyer.
"I couldn't afford it; that was the bottom line. Never did I imagine that my experience was -- I don't want to say a big deal -- would get so much attention," she said. "It was personal. I just kept saying to myself, 'When will this end?' I'm not trying to cheat the government. I just felt this was something I was entitled to."
When the opinion emerged more than a year after the trial, she struggled to understand what it meant.
"On the last page, that is when I realized he had ruled in my favor. I was just so excited. Did I think it was me against big government? Not at the time, necessarily. I thought it was something the IRS didn't understand and it's upon me to convince them why I felt I was entitled to claim the education deduction," she said.
Singleton-Clarke also held management-level positions at Children's National Medical Center in Washington, D.C., and Civista Medical Center in La Plata between 2004 and 2008. She now works part time for the Charles County Department of Health administering swine flu vaccine because, she said, she needed "a break" and wanted to spend more time with her teenage children.
Bob W. Askey, managing partner at the Leonardtown-based accounting firm, Askey, Askey & Associates, said he was very impressed with Singleton-Clarke but advised others not to go toe-to-toe with the IRS alone.
"This is an exceptional individual who did something very exceptional in representing herself," Askey said. "It's not something that I would suggest to most people to ever consider. I wouldn't want to do it for myself even though I've been doing this for 30 years. It's a dollars and cents thing -- she made the decision on her own and it saved her. She definitely deserves the kudos she's getting from it."
Singleton-Clarke, a registered nurse from Bryantown, represented herself in U.S. Tax Court during her December 2008 trial. A year later, the judge issued an opinion affirming her right to deduct almost $15,000 in educational expenses related to a master of business administration degree she received from the University of Phoenix, an online college.
Her dispute with the government began with an IRS audit of her 2005 tax return. She conceded most of the challenges to the deduction but held firm on her MBA deduction because it conformed to her understanding of the law, according to the opinion issued in December 2009.
At issue were Singleton-Clarke's intentions in pursuing the graduate degree. According to a provision of the labyrinthine U.S. Tax Code, educational expenses are deductible only if the degree does not let the recipient pursue a new career.
Singleton-Clarke insisted the degree would help her in the type of management positions she already held in the health-care industry. The IRS, she said, did not believe her.
IRS spokesman Jim Dupree said that privacy laws preclude the agency from commenting on individual cases.
At St. Mary's Hospital in Leonardtown, Singleton-Clarke was the performance improvement coordinator, making it her job, at times, to tell doctors what they were doing wrong. But she found doctors did not always feel they had to obey a nurse, so she sought to better speak their language: money.
"As a PI coordinator you have to be able to convey regulatory information to physicians in a quick manner. For physicians, particularly surgeons, their time is money," Singleton-Clarke said. "Sometimes they're biased of, 'You're just a nurse.' They don't value, sometimes, the advice a nurse can give because they view us as someone that works underneath them. I wanted the degree in business administration so I could talk the talk with the physicians because physicians listen to financial stuff."
The outcome, issued in a five-page summary opinion by Judge Stanley Goldberg, attracted a great deal of attention, including an article in The Wall Street Journal. But at the time, Singleton-Clarke had no idea what she was getting into, she said.
She did not realize that going to trial was unusual until she showed up and found herself the only case on the docket. As it began, she found a small army managing and observing on the IRS' side, "and on my side it was me," she said. She was alone because she did not have the money to hire a lawyer.
"I couldn't afford it; that was the bottom line. Never did I imagine that my experience was -- I don't want to say a big deal -- would get so much attention," she said. "It was personal. I just kept saying to myself, 'When will this end?' I'm not trying to cheat the government. I just felt this was something I was entitled to."
When the opinion emerged more than a year after the trial, she struggled to understand what it meant.
"On the last page, that is when I realized he had ruled in my favor. I was just so excited. Did I think it was me against big government? Not at the time, necessarily. I thought it was something the IRS didn't understand and it's upon me to convince them why I felt I was entitled to claim the education deduction," she said.
Singleton-Clarke also held management-level positions at Children's National Medical Center in Washington, D.C., and Civista Medical Center in La Plata between 2004 and 2008. She now works part time for the Charles County Department of Health administering swine flu vaccine because, she said, she needed "a break" and wanted to spend more time with her teenage children.
Bob W. Askey, managing partner at the Leonardtown-based accounting firm, Askey, Askey & Associates, said he was very impressed with Singleton-Clarke but advised others not to go toe-to-toe with the IRS alone.
"This is an exceptional individual who did something very exceptional in representing herself," Askey said. "It's not something that I would suggest to most people to ever consider. I wouldn't want to do it for myself even though I've been doing this for 30 years. It's a dollars and cents thing -- she made the decision on her own and it saved her. She definitely deserves the kudos she's getting from it."
Friday, August 1, 2008
Scam Highlights Abuses In Charitable Write-Offs
A recent criminal case involving wealthy donors, religious groups and secret kickbacks of donations provides an object lesson in how not to give to charity.
The government contends that two men solicited millions of dollars in contributions to charitable organizations by promising to secretly refund large portions of those gifts -- typically 80% to 95% -- to donors, who would then deduct the full amount of their original gifts on their tax returns. One of those men and another individual recently pleaded guilty to participating, and others accused of wrongdoing are scheduled to face trial later this year. The government is targeting more than 100 donors as part of its continuing investigation, says Daniel O'Brien, an assistant U.S. attorney in Los Angeles.
While most contributors play by the rules, law-enforcement officials say some don't -- and are robbing the U.S. Treasury Department of large amounts of revenue. Sometimes the abuse appears to be intentional, resulting in criminal charges. In other cases, donors may be led astray by professional tax preparers, or they may inadvertently run afoul of complex tax-law provisions.
Whatever the case, the Internal Revenue Service has been turning up the heat in recent years on what officials consider to be abuses ranging from fabricating deductions to making improper noncash gift valuations.
According to the latest IRS data, more than 41.4 million individual income-tax returns claimed charitable donations for 2006. Their donations totaled a record $173.02 billion, up 0.6% from the prior year.
Here are a few areas IRS and Justice Department officials have been focusing on and advice from lawyers and accountants on how to avoid trouble:
• Kickbacks. Consider the case of the two men who pleaded guilty recently to criminal misconduct involving donations to a variety of charitable groups operating under the umbrella of Spinka, a religious group within orthodox Judaism. One was Joseph Roth, a Tel Aviv-based banker, according to the U.S. Attorney's office for the central district of California. The other was Rabbi Moshe E. Zigelman of Brooklyn, N.Y., who "pled guilty because he accepts full responsibility for his actions and seeks to atone for any harm he caused," says Michael J. Proctor, a lawyer at Caldwell Leslie & Proctor in Los Angeles.
They were among eight individuals and five charitable entities indicted in the Spinka case late last year. The government accused Rabbi Naftali Tzi Weisz and Rabbi Zigelman, formerly an assistant to Rabbi Weisz, of soliciting donations to Spinka-related groups by promising to secretly refund up to 95% of the "contributions." Rabbi Weisz pleaded not guilty, says Brian Hennigan, a lawyer with Irell & Manella in Los Angeles.
In some cases, contributors got cash payments through an "underground money transfer network" involving various parties, some of whom operated businesses in and around the Los Angeles jewelry district, the U.S. Attorney's office said. Among other things, Mr. Roth admitted to facilitating tax evasion by setting up secret bank accounts in Israel involving the use of bogus trusts, according to a U.S. Attorney's office statement.
• Professional preparers. Government officials have been cracking down on professional preparers who manufacture phony charitable deductions. Earlier this year, for example, a Washington, D.C., preparer pleaded guilty to conspiring to prepare false returns that included overstated charitable gifts and other items, according to the Justice Department. The man faces up to five years' incarceration and a $250,000 fine.
The department also is seeking court injunctions to put some preparers out of business. Recently, a federal court permanently barred a Texas woman from preparing federal income-tax returns for others. The government said the woman had prepared returns that included false deductions for charitable gifts, among other things.
How can you avoid picking a crooked preparer? There's no bulletproof method, but here are a few tips: Beware of anyone who bases his or her fee on the size of your refund, or who promises a bigger refund than anyone else, or who prepares your return but refuses to sign it. Also, never, ever, sign a blank return.
• Disguised payments and overvaluations. The IRS says it's concerned by an upturn in the number of cases in which taxpayers have tried to disguise tuition payments as tax-deductible contributions to charitable or religious organizations. Asked for more detail, an IRS spokesman said Tuesday the agency is "aware that some taxpayers improperly claim charitable contribution deductions for payments that are earmarked for the benefit of individuals." The IRS "continues to examine whether payments to tax-exempt schools benefit individuals." In addition, the IRS "has noticed that some taxpayers are trying to claim deductions for payments to other types of tax-exempt or government-sponsored organizations but earmarked for the benefit of individuals." The IRS "reminds taxpayers that payments to charitable organizations but earmarked for the benefit of individuals are not deductible."
IRS officials say valuation problems typically are greatest with noncash charitable gifts, such as a stake in a closely held family business, for which there isn't any easily accessible public market. Officials have said overvaluations may arise from errors by taxpayers or even appraisers, deliberate abuse or overly aggressive positions.
• Valuing noncash donations. Valuing used clothing or household items can be tricky. If you make such gifts, consider buying tax software-preparation software, such as Intuit Inc.'s TurboTax, which includes a feature with estimates of thousands of commonly donated items. Keep a list of what you donate, take photos of especially valuable items, and be sure to get a professional appraisal when required. You can't deduct clothing or most household items unless they're in "good used condition or better," the IRS says. What does that mean? The government hasn't yet defined it.
Donating stocks and other investments that have risen in value over the years can be a great idea since you generally get a deduction for the current market value and don't owe tax on the gain, says John M. Olivieri, a tax partner at White & Case LLP in New York. But don't make the mistake of donating investments that have declined in value, he says. Instead, consider selling losers and using those losses to reduce your taxes. Then give the proceeds to your favorite charity.
An IRS ruling could spark creation of more private trust companies.
A small number of very wealthy people have created private trust companies in recent years, in part to give them greater control over how family trust assets are managed. A proposed IRS revenue ruling, issued late last week, "provides a roadmap" for creating a private trust company "without falling into various tax traps," says Mr. Olivieri of White & Case. "Once the ruling is issued in final form, it will not be necessary for each individual family to apply for its own private letter ruling" from the IRS "in order to be sure of the tax consequences of having their family trusts managed by a company controlled by the family," Mr. Olivieri says.
The ruling, if finally adopted, "eliminates virtually every uncertainty now existing" as to whether a private trust company "has any per se negative implications for the exposure of family members to tax risk," says John P.C. Duncan, a lawyer at Duncan Associates in Chicago.
Fred Nathan, a lawyer at Kelley Drye & Warren in New York, says that once the ruling has been finalized, "it will undoubtedly increase the use of private trust companies by very wealthy families."
By: Tom Herman
Wall Street Journal; July 16, 2008
The government contends that two men solicited millions of dollars in contributions to charitable organizations by promising to secretly refund large portions of those gifts -- typically 80% to 95% -- to donors, who would then deduct the full amount of their original gifts on their tax returns. One of those men and another individual recently pleaded guilty to participating, and others accused of wrongdoing are scheduled to face trial later this year. The government is targeting more than 100 donors as part of its continuing investigation, says Daniel O'Brien, an assistant U.S. attorney in Los Angeles.
While most contributors play by the rules, law-enforcement officials say some don't -- and are robbing the U.S. Treasury Department of large amounts of revenue. Sometimes the abuse appears to be intentional, resulting in criminal charges. In other cases, donors may be led astray by professional tax preparers, or they may inadvertently run afoul of complex tax-law provisions.
Whatever the case, the Internal Revenue Service has been turning up the heat in recent years on what officials consider to be abuses ranging from fabricating deductions to making improper noncash gift valuations.
According to the latest IRS data, more than 41.4 million individual income-tax returns claimed charitable donations for 2006. Their donations totaled a record $173.02 billion, up 0.6% from the prior year.
Here are a few areas IRS and Justice Department officials have been focusing on and advice from lawyers and accountants on how to avoid trouble:
• Kickbacks. Consider the case of the two men who pleaded guilty recently to criminal misconduct involving donations to a variety of charitable groups operating under the umbrella of Spinka, a religious group within orthodox Judaism. One was Joseph Roth, a Tel Aviv-based banker, according to the U.S. Attorney's office for the central district of California. The other was Rabbi Moshe E. Zigelman of Brooklyn, N.Y., who "pled guilty because he accepts full responsibility for his actions and seeks to atone for any harm he caused," says Michael J. Proctor, a lawyer at Caldwell Leslie & Proctor in Los Angeles.
They were among eight individuals and five charitable entities indicted in the Spinka case late last year. The government accused Rabbi Naftali Tzi Weisz and Rabbi Zigelman, formerly an assistant to Rabbi Weisz, of soliciting donations to Spinka-related groups by promising to secretly refund up to 95% of the "contributions." Rabbi Weisz pleaded not guilty, says Brian Hennigan, a lawyer with Irell & Manella in Los Angeles.
In some cases, contributors got cash payments through an "underground money transfer network" involving various parties, some of whom operated businesses in and around the Los Angeles jewelry district, the U.S. Attorney's office said. Among other things, Mr. Roth admitted to facilitating tax evasion by setting up secret bank accounts in Israel involving the use of bogus trusts, according to a U.S. Attorney's office statement.
• Professional preparers. Government officials have been cracking down on professional preparers who manufacture phony charitable deductions. Earlier this year, for example, a Washington, D.C., preparer pleaded guilty to conspiring to prepare false returns that included overstated charitable gifts and other items, according to the Justice Department. The man faces up to five years' incarceration and a $250,000 fine.
The department also is seeking court injunctions to put some preparers out of business. Recently, a federal court permanently barred a Texas woman from preparing federal income-tax returns for others. The government said the woman had prepared returns that included false deductions for charitable gifts, among other things.
How can you avoid picking a crooked preparer? There's no bulletproof method, but here are a few tips: Beware of anyone who bases his or her fee on the size of your refund, or who promises a bigger refund than anyone else, or who prepares your return but refuses to sign it. Also, never, ever, sign a blank return.
• Disguised payments and overvaluations. The IRS says it's concerned by an upturn in the number of cases in which taxpayers have tried to disguise tuition payments as tax-deductible contributions to charitable or religious organizations. Asked for more detail, an IRS spokesman said Tuesday the agency is "aware that some taxpayers improperly claim charitable contribution deductions for payments that are earmarked for the benefit of individuals." The IRS "continues to examine whether payments to tax-exempt schools benefit individuals." In addition, the IRS "has noticed that some taxpayers are trying to claim deductions for payments to other types of tax-exempt or government-sponsored organizations but earmarked for the benefit of individuals." The IRS "reminds taxpayers that payments to charitable organizations but earmarked for the benefit of individuals are not deductible."
IRS officials say valuation problems typically are greatest with noncash charitable gifts, such as a stake in a closely held family business, for which there isn't any easily accessible public market. Officials have said overvaluations may arise from errors by taxpayers or even appraisers, deliberate abuse or overly aggressive positions.
• Valuing noncash donations. Valuing used clothing or household items can be tricky. If you make such gifts, consider buying tax software-preparation software, such as Intuit Inc.'s TurboTax, which includes a feature with estimates of thousands of commonly donated items. Keep a list of what you donate, take photos of especially valuable items, and be sure to get a professional appraisal when required. You can't deduct clothing or most household items unless they're in "good used condition or better," the IRS says. What does that mean? The government hasn't yet defined it.
Donating stocks and other investments that have risen in value over the years can be a great idea since you generally get a deduction for the current market value and don't owe tax on the gain, says John M. Olivieri, a tax partner at White & Case LLP in New York. But don't make the mistake of donating investments that have declined in value, he says. Instead, consider selling losers and using those losses to reduce your taxes. Then give the proceeds to your favorite charity.
An IRS ruling could spark creation of more private trust companies.
A small number of very wealthy people have created private trust companies in recent years, in part to give them greater control over how family trust assets are managed. A proposed IRS revenue ruling, issued late last week, "provides a roadmap" for creating a private trust company "without falling into various tax traps," says Mr. Olivieri of White & Case. "Once the ruling is issued in final form, it will not be necessary for each individual family to apply for its own private letter ruling" from the IRS "in order to be sure of the tax consequences of having their family trusts managed by a company controlled by the family," Mr. Olivieri says.
The ruling, if finally adopted, "eliminates virtually every uncertainty now existing" as to whether a private trust company "has any per se negative implications for the exposure of family members to tax risk," says John P.C. Duncan, a lawyer at Duncan Associates in Chicago.
Fred Nathan, a lawyer at Kelley Drye & Warren in New York, says that once the ruling has been finalized, "it will undoubtedly increase the use of private trust companies by very wealthy families."
By: Tom Herman
Wall Street Journal; July 16, 2008
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