On September, 30, 2010 in Fairview Heights, Ill., Orvil Hassebrock was sentenced to 36 months in prison followed by three years of supervised release and ordered to pay restitution and fines of more than $1.71 million for failing to file tax returns. According to court documents, Hassebrock was convicted on April 29, 2010, for willfully attempting to evade and defeat the assessment and payment of income tax for 2004 and willful failure to file an income tax return resulting in a tax loss to the IRS of nearly $594,000. Hassebrock’s restitution includes back taxes, interest, fines and a special assessment.
Archive for the ‘Newsworthy’ Category
Illinois Man Sentenced for Income Tax Evasion
Monday, July 25th, 2011Florida Prisoners Lead the Nation in IRS Payment Scam
Monday, July 4th, 2011Inmates Received $39.1 Million by Filing Fraudulent Tax Returns…
Recently, Hillsborough County jails have been coming down hard on inmates that have been attempting to claim tax refunds for themselves by way of stolen identity. Several pages of employee tax information, which contained annual earnings information, SSAN (Social Security Account Number), and stacks of IRS Form 1040 EZs were found in their facilities.
Officials have said this has been an ongoing problem for years in state prisons , and now it’s trickling down into the county jails. A prisoner by the name of Brian Singletery was recently transferred to a Hillsborough County for an appeal, where he taught his new fellow inmates how they could easily mislead the IRS into believing they were different individuals.
Singletery had an entire instruction manual, which included detailed calculations, tax identification numbers, and instructions on how to steal the information.
Officials from various jails in Hillsborough County have caught 12 inmates thus far, but it is hard to find the alleged unless they are caught in the act.
It’s tough to gather evidence until long after the damage has already been done.
So officials presented the information to the IRS, who, in turn, seemed to show little interest. Amounts are not huge, but dollars add up over time, and funds are then deposited into fake accounts. Inmates will also pad their personal canteen money in jail (money typically used for personal items that are typically capped out at specified amounts). That’s your hard-earned tax dollars at work.
Today it’s getting tough for anyone to get a job, and we are all out busting our backs while these guys are using another scam to skim more off Uncle Sam.
They have been convicted of crimes already, now they are taking up already valuable tax payer space in state prisons, and then they arrive at county jails to continue suckling off the government and getting refunds as if they were rewards for doing time.
Former Detroit Police Officer Sentenced on Tax Evasion
Monday, June 27th, 2011On August 5, 2009, in Detroit, Mich., Vincent Crockett, a former Detroit Police Officer, was sentenced to 16 months imprisonment, followed by two years supervised release. Crockett was ordered to pay $14,547 in restitution to the Internal Revenue Service (IRS) and cooperate in filing accurate 2007 tax returns. According to court records, in 2007, Crockett received over $72,000 in income from criminal activities. He later made cash deposits with some of the proceeds into different bank accounts in amounts less than $10,000, in order to avoid the filing of currency transaction reports. Crockett knew that this income was taxable and he failed to report it to the IRS on his 2007 federal income tax return.
Felons Scam IRS for Millions in 2009
Wednesday, May 4th, 2011A federal audit revealed that in 2009 inmates received nearly forty million dollars in tax refunds by filing fraudulent tax returns with the IRS. Florida, California, and Georgia account for roughly half of the total amount refunded. This is due in part to their large prison populations.
Though the audit revealed the fraud, it can take years for the IRS to recover the funds. A 2008 law was passed to make it easier to track this type of fraud, but legal questions and challenges have slowed its implementation.
Most prisoners do not earn enough to have to file tax returns, while others earn income on outside investments that do allow them to qualify for legitimate refunds. This can make it difficult to sort the fraudulent refunds from the legitimate ones.
Tax fraud by prisoners is on the rise up from $13.1 million in 2004. Though this type of fraud is nothing new, the tools prisoners are using have become more sophisticated.
The fraudulent returns are filed either using the information of other prisoners, or outside victims of identity theft. They then file false returns that can result in thousands of dollars per refund.
Newer technology has made this easier. Felons can gather information on bankrupt businesses online and list them as employers. It is difficult for the IRS to verify reported earnings once a business has gone under.
Most of the scams are run by small groups of prisoners and often result in tens of thousands of dollars. In an effort to cut down on these types of scams a 2008 law allowed the IRS to share information with state and federal prison officials.
The law has not gone into effect due to questions surrounding whether the prisons could disclose the tax information to prisoners and their lawyers.
IRS and Prison officials continue to try to better coordinate their efforts to catch the false returns. One of the challenges for the IRS is maintaining an accurate record of current prisoners, though plans for increased data sharing are on the drawing board.
Tax Credits For Qualifying Small Businesses
Wednesday, February 2nd, 2011As the end of the fiscal year has now passed, small business owners need to be aware of the tax credits that are available for them to claim.
Among those credits is the Health Insurance Credit of up to 35%. This credit is for small businesses that provide all or part of health care coverage insurance for their workers.
The Affordable Care Act sets forth who can qualify for this credit. Claiming the credit entails the filing of Form 8941. The IRS has issued literature pertaining to how to claim the credit and its surrounding guidelines.
Qualifying small businesses have less than 25 workers, a yearly payroll under $50,000, and pay for most of the workers’ health care coverage. The available credit can net up to 35% off of the overall costs of providing health care coverage in the fiscal year 2010.
This tax credit will be extended for 3 additional years as well. By fiscal year 2014, the credit is expected to rise to up to 50%. Four million small businesses are projected to qualify for the credit. This was determined by the Council of Economic Advisers.
The IRS guidelines state that many small businesses meet the pre-requisites for the credit. Among those businesses are denominational organizations that cover workers. The companies that provide coverage using multi- employer health and welfare programs, as well as companies that utilize contribution strategies to provide health coverage, also qualify.
The Congressional Budget Office has projected that small business savings from this credit will approach approximately 40 billion dollars. The credit also applies to non-profit companies. Any business that meets the guidelines can apply for the credit, profit or non profit. A six year cap will be applied to small businesses for claiming the credit.
The White House has commenced a postcard campaign in order to notify small businesses that may qualify for the credit. They have also made all of the mandates and guidelines available to those businesses and tax professionals.
Repeal of 1099 Reporting Provision Likely
Thursday, January 6th, 2011With the elections over, a main issue for the lame-duck Congress is a requirement within the health care bill which many believe should be rewritten – the Form 1099 tax reporting.
This requirement – referred to as the 1099 rule - was introduced within the healthcare legislation Congress pushed and passed in early 2010. It mandates that a company must file a 1099 form with the IRS for each time it accumulates $600 or more in expenses with another business or contractor, for merchandise acquired, and certain services.
The bill included this provision as an attempt to prevent fraud against the IRS by alleviating the $350 billion gap between the taxes that companies pay, and the taxes that some companies owe. The theory is, if collected, this money could be used to pay for the healthcare of many Americans.
One may argue, why punish millions of honest small businesses by creating an extraordinary amount of work for bookkeepers, because of the dishonesty of others? Especially since, in the end, the federal government may not even get the results it is hoping to achieve.
Many democrats, such as Joe Manchin and Lois Capps, are against this requirement because they believe it puts more strain on small businesses already hard-pressed to keep their heads above water in this recovering economy. President Obama himself is also against the 1099 rule, stating it may prove to be counterproductive.
A prominent Democratic Senator from Montana who contended the healthcare reform last year, Max Baucus, says he will introduce legislation to repeal the 1099 rule requisite in response to the valid concerns of small businesses. He believes common ground must be met between both the Republican Party and the Democratic Party in order to give the American people what they voted for. Furthermore, he suggests brainstorming together to find a better alternative to improve tax compliance and mitigate the deficit the nation is facing.
Only time will tell as the lame-duck sessions continue and decisions are made.
IRS Begins Cleaning Up Congress’ New Tax Reporting Mess
Monday, October 11th, 2010Again, in an effort to close the tax gap, the IRS is currently drafting new tax filing policies that will take effect at the beginning of 2012.
Among the new regulations is the filing of 1099 forms for vendors with any transaction over $600.
Although this may be easy for large companies currently employing computerized tracking systems, this may prove to be detrimental to small businesses in more ways than one.
One major disadvantage is that individuals and other businesses may opt to do business with large companies that can simply send them monthly reports that are 1099-compliant.
Also, businesses may try to reduce the number of companies they transact with overall, with small businesses most likely being removed from the list.
Another regulation being drafted, according to IRS Commissioner Douglas Shulman, is that credit and debit card transactions are not included in the filing of a 1099, and instead using a different form of reporting.
Major card companies can then use this advantage to encourage more businesses to switch to card transactions to limit the paperwork.
Small businesses would then be caught in the middle as credit/debit card transaction fees normally cost 2% to 3% or higher.
National Taxpayer Advocate Nina Olson admitted that the IRS will face challenges upon the implementation of the new tax filing rules.
And it may not even be effective in the long run. Olson went on to say “The new reporting burden, particularly as it falls on small businesses, may turn out to be disproportionate as compared with any resulting improvement in tax compliance.”
IRS Going After Independent Contractors
Friday, June 18th, 2010As part of the ongoing hunt for more tax revenue, the IRS and state agencies have redoubled efforts to track companies misclassifying permanent workers as freelancers.
Over the past decade, the size of the average small business has fallen, indicating the use of more freelancers.
In February, the IRS launched a 3-year program to look into the hiring practices of 6000 companies to find misclassified workers violating the tax code.
President Obama’s proposed 2011 budget includes a budget to add 100 new federal employees to pursue such cases. Plus, it would repeal a 32-year old rule allowing companies such as healthcare and construction industries to legally classify long-term workers as freelancers.
This move comes as the IRS has picked up overall scrutiny of small and medium-sized businesses, increasing by 30% the hours spent auditing companies with less than $10 million in assets.
Although the IRS denies an official focus on small business, some tax experts believe such a move makes sense. Dean A. Zerbe, a managing director of alliantgroup, a Houston tax consultancy says “The IRS believes smaller businesses are more likely to evade taxes, it’s also easier and quicker to audit smaller businesses”.
So what is an Independent Contractor? The IRS says “People such as lawyers, contractors, subcontractors, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case. The general rule is that an individual is an independent contractor if you, the person for whom Statutory Employees the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.”
I guess we shouldn’t be surprised that nobody seems to know the difference…