Allan, Author at Pearlman Law

1 09, 2009

Taxman’s Facebook Miranda Warning? Anything You Put on Your Wall Will Be Used Against You

By Allan|2020-02-12T14:20:19-05:00September 1st, 2009|Audits, IRS Collection, IRS Enforcement|0 Comments

By now, as taxpayers, if we’ve ever had a scrape with the IRS or a state’s taxing agency, especially if we happen to be owing some, we are accustomed to getting letters, maybe getting phone calls, maybe even having some live person from the IRS show up at our door.

And we are familiar with the forms, and the questions: things like:

Where do you work?
Where do you bank?
Do you rent or own your house or apartment?
What is the rent?
What is the mortgage?
What is the maintenance or common charges?
Do you own stocks or bonds?
What are they worth?

All these questions, and more.

And, if you happen to get audited, the Revenue Agent (the IRS’s name for the person who does the audit) might send you a few pages of forms which ask you to provide specific information and documents to help answer these sorts of questions. The IRS calls them IDRs, which stands for “Information Document Request.”

If you don’t respond, and things get ugly, the IRS can drag you into court and have you explain to a judge why didn’t provide the information the IRS requested. You might have a good reason; you might not.

It’s all pretty low tech: letters, paper, phone calls, knocking on doors.

But according to an article in the Wall Street Journal, the Taxman is leaping quickly into the 21st Century and gathering information about taxpayers from Facebook walls, MySpace posts, chat rooms, and Google.

In “Is ‘Friending’ in Your Future? Better Pay Your Taxes First,” The Wall Street Journal’s Laura Saunders reports that state taxing authorities in Minnesota, Nebraska, and California have been catching long-time tax debtors and tax evaders who announce their professional and travel plans on social media sites. Other states are doing so as well, or at least thinking about it.

For example, one tenacious and inquiring tax collector found a delinquent taxpayer who was a “rigger of sails” by searching for his name and the phrase (“rigger…”). This search led him to a discussion board of local riggers, and in it, a discussion thread telling where this rigger went after his store closed.

With this morsel of information, the taxman located the missing “rigger of sails” and collected the unpaid tax debt.

While states are jumping into mine social media sites and more generally the internet, the IRS is playing its hand very close to the vest. It refused to comment on whether or how it might be using social networking sites.

12 08, 2009

American Express Cardholders’ Personal Information Stolen by Insider

By Allan|2020-02-12T14:20:19-05:00August 12th, 2009|Data Security, Identity Theft|2 Comments

One former employee of American Express has taken its slogan, “Don’t Leave Home Without It,” to a new extreme.

Not only did he or she feel (presumably) obligated to carry his (or her) own card (assuming he or she was a cardholder), but also this ex-employee stole account information of other cardholders, so that the don’t-leave-home-without-it security blanket of one’s own card might be multiplied by that of all the other people’s cards whose information this ex-employee stole.

Unfortunately, for the ex-employee and fortunately for all the other cardholders, this scheme was uncovered and the ex-employee caught. (Question: was the ex-employee still actively employed by American Express at the time he or she was caught?)

Today, some American Express cardholders received a letter with the not-very-encouraging opening sentence:

“I am writing to inform you of an unfortunate issue concerning your American Express Card.”

American Express then explained what it meant by an “unfortunate issue”:

“We recently learned that certain account data was acquired without authorization by an employee who is no longer with the company”

Translation to plain English: when the former employee “acquired” “account data” “without authorization” he or she stole personal information of American Express customers which might be used to fraudulently charge their cards.

According to American Express, the rogue ex-employee stole data stored on the magnetic stripe on the back of the customers’ American Express card:

the card holder’s name,
account number,
card’s expiration date,
PIN number
card holder’s state of residence, and/or
card holder’s residence zip code.

American Express’s bad-news letter, apparently searching for a silver lining, stressed that the card holder’s social security number was not among the stolen information.

In a telephone call with American Express today, a representative named Patty, gave more information:

The alleged perpetrator was arrested in Phoenix, Arizona on June 24^th, 2009.
The stolen information was downloaded to a laptop computer.
The case is being prosecuted in federal court, not state court.
Identifying information about the perpetrator (i.e., name, gender, position at Amex when in its employ, job position, title and his or her responsibilities) was not available to the American Express representative with whom I spoke.
Amex has hired an outside security firm to assist it in dealing with this case (it is not clear who that outside firm is or what it is doing for American Express, but, but Amex has definitely hired somebody to do something).

American Express’s representative stated today that the number of accounts which were affected by this security breach and theft was unavailable.

Later in the same conversation she said that “very few” accounts were affected. But still, the American Express representative did not have any more detailed information to describe how many affected accounts qualified as “very few.”

Internet searches for additional information about this security breach have yielded nothing, so far. Searching the website of the United States Department of Justice for the US Attorney’s Office in Phoenix also showed nothing. No press releases regarding arrests, arraignments, indictments or anything else.

30 07, 2009

IRS Staff Are Human, Too Human

By Allan|2020-02-12T14:20:19-05:00July 30th, 2009|Audits, IRS Enforcement, IRS News, Tax Professionals|0 Comments

Not scorpions, not reptiles, not hairy poisonous spiders, not jackals, not piranhas, not hyenas.

And while some taxpayers may swear that the IRS agent they talked to was worse than the mythical Leroy Brown (that is, “meaner than a junkyard dog” and who was “bad, Bad!”

fourteen years before Michael Jackson was “Bad”), experience suggests (and were a study conducted, empirical evidence, I believe, would support) that the people who work for the IRS are human, all too human.

The significance of this to a taxpayer in a jam is that if some IRS (or corresponding state taxing authority) staffer has been trying for months or years to collect a back tax debt, or just get the taxpayer to file one or more missing returns*, that salaried government employee just might develop an all-too-human negative impression of the taxpayer.

(*If you find a tax advisor who says you don’t have to file a return, hang on to your wallet, and run, don’t walk, to someone else!)

The Taxman’s Human? What’s the Downside?

Even if the taxpayer has one or one-hundred-and-one unassailable reasons to explain how it is that he or she wound up in this situation with IRS agents giving chase, and it all makes sense, the all-too-human IRS employee might form a decidedly negative impression which can affect how that employee might treat the taxpayer.

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20 07, 2009

IRS Insider Information: More Multi-Year Audits Coming

By Allan|2020-02-12T14:20:19-05:00July 20th, 2009|Audits, Record Keeping, Tax Policy|0 Comments

Recently, in an attempt to resolve a dispute with the IRS before taking it to Tax Court, I met with an IRS auditor who had already slammed my new client with an additional $36,000 in tax interest and penalty by disallowing $90,000 of business deductions he claimed for his little company. My mission: persuade the auditor that many, most, or all of the deductions she had disallowed were legitimate, and that she should which should be recognized as legitimate.

Policy Changes Which Affect Everyone Revealed in Conversation About One Taxpayer

In the course of talking about my taxpayer’s business and deductions, we discussed more generally tax rules and policy. And in that part of the conversation, this auditor told me that starting now, more and more audits will involve multi-year examinations (what many of us call a “tax audit,” the IRS calls an “examination” — audit, examination, both words refer to the same thing).

So, for example, three years ago, a taxpayer might have been audited (or “examined”) for tax year 2005, now, it is much more likely that if the IRS initiates an audit, the audit will involve not just 2005, but also ‘06, and ’07.

IRS Uses Old TV Commercial Logic: “How Do We Do it? Volume!”

Why? Simple: it’s cheaper by the dozen! Three years in one audit costs the IRS less than doing only one year.

In fact, this auditor explained, doing multi-year audits has always been the official policy, but often it was not carefully supervised by the layers of internal management at the IRS. But now that the federal government needs money severely, the IRS is looking to get as much of a bang for its audit buck as it can.

Happy(er) Ending for Client

Meanwhile, over the course of 6 hours or so, I persuaded the this auditor to recognize more than half of the disallowed expenses as being legitimate, resulting in reducing the additional tax, interest and penalty from more than $36,000 down to about $6,000. The taxpayer considered that a very good result.

And, a Word to the Wise Taxpayer

And, so, a “take-away” for everyone else, be aware: multi-year audits are on the rise. One way to start being ready if you become a target of audit is to keep and have good records. It may be a great time to review your record-keeping system, or to develop one if you don’t have one!

30 05, 2009

Lies and the Lying Liars in the Tax Business (with apologies to Al Franken)

By Allan|2020-02-12T14:20:19-05:00May 30th, 2009|100% Penalty, Lien, Offer in Compromise, Tax Professionals, Trust Fund Recovery Penalty|0 Comments

I have the good fortune of having professional friends and colleagues around the country who have law practices or accounting practices which specialize in defending taxpayers whom the IRS claims owe back taxes.

And so, when some thorny issue comes up I might talk to a brother or sister tax pro in Florida or Texas or New Hampshire or Washington State or a smattering of other places around the country, in both red and blue states.

Recently, I was working on a tricky issue relating the Trust Fund Recovery Penalty (to the uninitiated, this weird string of four words refers to one aspect of tax law that properly strikes fear into the hearts of business owners with employees everywhere or, if it doesn’t, either it should or the business owner has already dealt with the issue and taken steps to avoid or solve this problem; see, for example, https://pearlmanlaw.wpengine.com/not-just-for-bernie-madoff-or-king-tut-business-owners-build-devastating-pyramids-of-withholding-tax-debt-deducted-from-paychecks-but-not-sent-to-irs/).

After brainstorming a bit on strategy for my Trust Fund Issue, my colleague and I started talking about life, the world, and business, generally.

She complained bitterly (and hilariously) about our still-new president Obama (I couldn’t disagree with her more on this, yet we still are able to find common ground elsewhere and get along just fine – like the Jets and the Sharks go bowling together).

Then, to my surprise, she told me that she is doing less and less tax work.

Honest Analysis Loses Out to Empty Promises

Her explanation: We can’t compete with these tax resolution companies who promise the sun, moon and stars in their advertising and then have telephone sales people who don’t know anything about the tax rules and say whatever the taxpayers want to hear.

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27 05, 2009

Jobs Agency Owner Gets Temp Assignment (Some Call it a ‘Sentence’) to Federal Prison for Unpaid Employment Tax

By Allan|2020-02-12T14:20:20-05:00May 27th, 2009|100% Penalty, Employment Tax, IRS Collection, IRS Enforcement, IRS News, Payroll Tax, Pierce the Corporate Veil, Tax Crimes, Trust Fund Recovery Penalty, Withholding Tax|0 Comments

A San Antonio, Texas, woman was sentenced to 41 months in federal prison and ordered to pay $1.5 million in restitution to the IRS for her role in a fraudulent tax scheme.

In addition to the prison term, United States District Judge Fred Biery ordered that Terrell Diamond be placed under supervised release for a period of three years after completing her prison term.

According to court records, Diamond, along with her now-ex-husband and co-defendant, William Diamond, conspired to defraud the IRS in the assessment and collection of more than $1.5 million in employment taxes due and owing from November 1996 to June 2003.

The employment taxes owed pertained to temporary employment agencies owned and operated by the Diamonds, including Ameriforce and Primo Labor.

Both Diamonds pleaded guilty to the same charge: one count of conspiracy to defraud the IRS.

23 05, 2009

IRS Auditor Caught Faking Own Tax Return

By Allan|2020-02-12T14:20:20-05:00May 23rd, 2009|IRS Enforcement, IRS News, IRS Power, Tax Crimes|0 Comments

A revenue agent with the Internal Revenue Service has agreed to plead guilty to a federal tax fraud charge for filing a personal income tax return that claimed he suffered a loss in a real estate transaction when in fact he realized a substantial profit. (“Revenue agent” is the official title for the people at the IRS who audit tax returns.)

In a plea agreement, Jim H. Liu, 43, of Diamond Bar, Calif., agreed to plead guilty to subscribing to a false tax return — a charge that carries a penalty of up to three years in federal prison.

‘My Gain is Your Loss’ Shenanigan Uncovered and Confessed

Liu admitted he filed a false tax return for the 2002 tax year that improperly claimed a loss on his sale of a property in Pomona. Liu sold the property for a profit of more than $48,000, but he instead claimed a loss of more than $4,200.

The tax loss to the government, as a result of Liu’s filing, was approximately $14,642.88.

19 05, 2009

One reason to want to be paying taxes

By Allan|2020-02-12T14:20:20-05:00May 19th, 2009|Income, Making Money, Profit, Tax, Tax Policy, Tax Problem Solving|0 Comments

This is obvious but, with all the dread, resentment, and busywork that frequently comes along with the chore and expense of preparing tax returns and paying taxes, it is all too often overlooked:

if you’re paying taxes it means you made money.

Not owing (and so, paying) taxes generally means you aren’t making money. And that’s worse. (Let’s leave aside, for the moment, the issues surrounding “tax haven” countries like Leichtenstein, the Caymen Islands, Andorra, Monaco, etc., where we’ve been reading in the news recently that profitable companies avoid taxes through foreign subsidiaries incorporated in one of these offshore places).

It is a where-there’s-smoke-there’s-fire causal connection (or putting it into achievement test comparison: Income taxes are to making money as smoke is to fire (and again, following the metaphor, we leave aside the smokeless fires of off-shore tax havens for the moment).

The basic reality is, again, if your paying taxes, you’re making money, and that’s a good thing. (Thank you, Martha Stewart.)

~~~~~

Post Script: At risk of blowing a punch line (not that this is funny), this paying-taxes-because-you’re-making-money-and-that’s-a-good-thing message makes me think to mention that I recently started a second blog, on a completely different topic, which is relevant here: the other blog is called “Marketing and PR Lab” and, instead of discussing law or the government or taxes, it instead focuses on ways of improving one’s business and so, income, by improving your marketing methods and getting known.

So as you think of ways to have the “smoke and fire” problem described above, that is: “I have to pay taxes, Dang! But that means I made money — Great!” you might want to go to http://marketingandprlab.com to see if there are things there that can push your business and income-earning forward, or leave a comment to share your experiences, or both.

15 05, 2009

Prosecutor: Marion Barry Owes $277,000 in Back Taxes

By Allan|2020-02-12T14:20:20-05:00May 15th, 2009|IRS Enforcement, IRS News, Tax Crimes|0 Comments

Can this guy keep try to keep out of trouble for even a minute or two?

Prosecutors allege Washington, D.C., Council member and former Mayor Marion Barry has failed to pay more $277,000 in back taxes.

In a recent court filing, prosecutors told the court the politician had not made a tax payment during a period in which he took a Jamaican vacation and ran for re-election to the Ward 8 council seat.

“There is no excuse for the defendant’s failure to make payments to the District of Columbia because, during this six-month period, the defendant nevertheless had enough time and money, for instance, to take a six-day vacation in Jamaica in Sept. 2008 as well as to run for re-election as a council member,” prosecutors told the court.

In 2006, Barry received three years of probation for not filing tax returns from 1999 to 2004.

11 05, 2009

Something to think about when you’re not thinking about taxes – Miles Davis

By Allan|2020-02-12T14:20:20-05:00May 11th, 2009|100% Penalty, Tax, Trust Fund Recovery Penalty, Withholding Tax|0 Comments

We can’t be fretting over Internal Revenue Code 6662 (the accuracy-related penalties, 20%, 40% depending on how inaccurate your tax return might be found to be) all the time.

There are alternatives. To be especially self-punishing, one look at § 6672 (the “Trust Fund Recovery Penalty,” formerly known as the “100% penalty” and think “oh how lucky I am to be only exposed to liability under § 6662 and not § 6672).

Better yet, and less punishing, just think about something else entirely.

For example, one timeless, but all to often overlooked alternative, there’s Miles Davis.

Below is video of a part of a concert at Montreaux, in 1973.

In this clip, Miles is in his late 60’s/early 70’s period which critics and some fans seemed to love (or loved) to hate. One theory: they are (or were) apparently stuck in the 50’s when he did those great recordings with the quintet, Kind of Blue and Round About Midnight, etc. (not a bad place to get stuck, but now 40 years later some might argue that the late 60’s/early 70’s electric Miles is still ahead of his time).

So, below is the clip….

About Allan

The Taxman’s Human? What’s the Downside?

Policy Changes Which Affect Everyone Revealed in Conversation About One Taxpayer

IRS Uses Old TV Commercial Logic: “How Do We Do it? Volume!”

Happy(er) Ending for Client

And, a Word to the Wise Taxpayer

Honest Analysis Loses Out to Empty Promises

‘My Gain is Your Loss’ Shenanigan Uncovered and Confessed