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21 09, 2020

When a Biscuit is a Puck, Cheating the Team Can Put One Out of Luck

By |2020-09-21T17:42:20-04:00September 21st, 2020|Embezzle, tax evasion, Tax problem|0 Comments

Hockey players call the puck a “biscuit.” Borrowing more of hockey’s specialized language, one might describe Jennifer Durham, office manager of Rapid City Rush, a professional hockey team in South Dakota, as “a dirty deke who dangled” her way to $700,000 of ill-gotten team money. She pleaded guilty, in plain English rather than Hockey-ese, to wire fraud and tax evasion for embezzling $700,000 from the organization. Not only do her crimes expose her to the prospect of prison, but they also create a tax problem, an unpaid tax debt which will exist during, and perhaps after her incarceration.

While employed as the team’s office manager between 2010 and 2019, Durham falsified entries into accounting records to make it appear that the money she was stealing was spent on legitimate business expenses.

Hockey player image represents subject of post, a hockey team.

hockey player, black and white drawing

Durham paid herself $87,000 in mileage reimbursement and sales commissions, transferred nearly $285,000 from the team’s bank account to pay her American Express bill and transferred another $181,000 to her personal bank account. Durham also admitted to taking $214,971 in cash receipts to use for personal expenses and made payments totaling $7,712 to cover her family’s cell phone bill. She did not report the additional income to the IRS, causing a tax loss of $186,277 to the federal government.

The investigation began when new team owners discovered, “Inconsistencies and irregularities with regard to some bookkeeping handled by a single former employee.”

As part of the plea agreement, Durham must pay restitution to the team totaling $700,000 and the IRS $186,277. She faces up to 45 years in prison.


14 04, 2020

Three certainties in life

By |2020-04-14T14:35:48-04:00April 14th, 2020|Uncategorized|0 Comments

Ben Franklin (and perhaps others) noted that two things are certain in life. The number of certainties has grown: Three things are certain in life. Death and taxes are two of them. The third is tax fraud.

— Matt Pearce, LA Times 4-19-16 and thanks to Bob McKenzie.

6 04, 2020

Still here, still working, during the days of COVID-19 and novel coronavirus

By |2020-04-06T20:09:04-04:00April 6th, 2020|Uncategorized|0 Comments

In these strange and scary days, now into the fourth week of go-home-and-stay-home, we’re still here. I and the little team that helps me are still working, working from home.

I am reachable by phone, by email, by video conference, mostly zoom.  Suddenly it seems we live by zoom, skype, duo, facetime, facebook live, and other apps).

While the IRS has suspended many of its functions due to the coronavirus/covid-19 emergency, it has not stopped. What’s suspended will be the subject of a separate post.

After the suspension ends, the IRS will be ready to resume. At some point “New York on Pause” — and other states “on pause” — will unpause, and business will resume.

Also, New York’s “IRS” — the DTF, Department of Taxation and Finance has also not fully stopped.

We’re still here, and working to make a positive difference in taxpayers’ lives.

9 03, 2020

Coronavirus and COVID-19 v. Tax Controversies, Keeping Perspective

By |2020-03-09T20:08:08-04:00March 9th, 2020|Not About Taxes|1 Comment

Usually the topics taken on in this blog relate to taxes, e.g., comparing IRS tax penalties, the so-called “voluntariness” of the tax system and how taking the meaning of “voluntary” when it comes to income tax can get a person into trouble.

Sometimes, though, the world outside the universe of taxation grabs everyone’s attention, and the outbreak and threat of a world-wide pandemic in the form of the new coronavirus which causes the illness named COVID-19 requires that the serious business of tax issue, tax problems, tax controversies must take a back seat to matters more pressing.

For example, how does one protect one’s self from an incurable, sometimes fatal, contagious disease with no vaccine, and no possibility of one for more than a year?

The World Health Organization (WHO) and the Centers for Disease Control and Prevention (CDC) agree: washing your hands a lot and well is one thing to do. But this is not just any hand washing; it is a thorough, whole hand, front and back and between-the-fingers kind of hand washing.

The World Health Organization has posted instructions, with words and diagrams showing on just exactly how to effectively wash your hands, and so render them “safe.” And you get to sing Happy Birthday. Twice. See below:

washing hands

15 02, 2020

Letter from the Editor: A Tale of Two Tax Penalties

By |2020-04-06T21:12:45-04:00February 15th, 2020|IRS Collection|0 Comments

While the weather is still cold much of the time these days, now in early February, the days are already a little longer than just a month ago. And though it is often cold, after a string of 18 and 19-degree days followed by eight and nine-degree days, a 30-degree day feels downright spring-like. Almost t-shirt weather.red-heart

Any moment now it will be Valentine’s Day. Then at the end of February, major league baseball’s spring training starts. Alas, not long after that comes Tax Day, April 15th, and with it the annual ritual of gathering up one’s bank statements, W-2’s and 1099’s, and sundry receipts tucked away in wallets, desk drawers, and other places you’re trying to remember right now, so that we, on our own, or with help can prepare and file our tax returns.

Because I’ve worked with many a taxpayer who somehow strayed from the righteous path, to represent them so that they did not have to take on the IRS (or New York’s DTF) alone, I’ve heard many stories about how it was that things went wrong.

Frequently, part of the story of how a taxpayer finds him or herself sitting across a conference table from a lawyer, is that in addition to all the tax on income owed for all those years, there are also the tax returns themselves, which were never filed or were filed even a day late.

The taxpayer makes plain: “I didn’t have the money to pay the tax, so I didn’t do the returns either.” And also, occasionally, “I figured that if I didn’t file, they wouldn’t come after me as quickly.”

The problem with this strategy is that, to the IRS, as important as collecting tax payments is, a taxpayer timely filing his or her return is even more important.

How do we know this? The penalties the IRS imposes for failure to file are ten times higher than for paying late.

Late Payment Penalty: where a taxpayer has not paid or paid in full the tax due by the due date, the taxpayer will likely be subject to a late payment penalty of one-half of one percent of the tax due, for every month – or fraction of a month – that the tax is not paid.

For example, if a taxpayer owes $100,000 and it is not paid on time, that taxpayer becomes subject to a late payment penalty of $500 as of the day after the due date.

By contrast, if the taxpayer fails to file a tax return by the due date, the taxpayer will become subject to a Late Filing Penalty 10 times larger than the late-payment penalty, i.e., 5 percent of the unpaid taxes for each month or part of a month at that a tax return is late. So if that taxpayer who owed a $100,000 did not file a return on time, there would be a $5,000 penalty for the first month a tax return is filed late (as compared to the $500 late payment penalty). This late filing penalty is capped at 25% of the unpaid taxes.

Why is this so? Imagine, with Valentine’s Day almost here, that a gentleman did nothing on February 14th, and sometime in March finally got around to bringing his sweetheart flowers and chocolates. “Happy Valentine’s Day, Sweetie!”

Does anyone think this would be a success with this guy’s loved one? Considering the severity of the penalty imposed on taxpayers, not only does the IRS want you to be its gift-giving valentine, but it’s unhappiness seems to go into Fatal Attraction territory, for those of you who recall Glenn Close warning Michael Douglas, “I will NOT be ignored.” As he soon discovers, her threat was not an idle one, and she would cost him dearly.

Similarly, Congress has empowered the IRS, through these penalties, to make the actual filing of tax returns more important that the mere payment of tax, and the IRS is warning you, Dear Taxpayer: “I will not be ignored.”

Happy Valentine’s Day. Don’t ignore your sweetheart.

20 02, 2017

The Anti-Loophole: The “Voluntary” Tax Which is Not So Voluntary

By |2020-04-06T21:22:51-04:00February 20th, 2017|IRS Collection, Tax, Tax Crimes, tax evasion|0 Comments

Once again, we are confronted with the truth the our “voluntary” tax system is not entirely voluntary after all. As Dan Ackroyd said on Saturday Night Live in the 90s, playing then-presidential contender, Bob Dole as he berated then-President, Bill Clinton, “You know it, I know it, and the American People know it.”

But, apparently, North Carolinian, Chet Lee West, didn’t know it. Or so he acted. He was convicted in District Court of three counts of tax evasion. West, acting as his own attorney at trial, stated in his closing arguments that the jurors should ‘see the truth and set me free.” The jurors did not agree with his statement and reached the guilty verdict in only 1 hour.

Owing more than $52,800 in back taxes, West, claimed he found a loophole in the tax code that freed him from having to pay income taxes. West attempted to read from a book containing federal tax codes but the judge had him stop, explaining that she would instruct the jurors what the law is.

During the trial, West admitted that he had not filed taxes since 2000 and had sent a letter to the IRS explaining that he elected to not be subject to income tax.  (Now that is an election almost everyone could support – at least until one considers Supreme Court Justice Oliver Wendell Holmes’s take on this issue. Holmes famously said: “I like to pay taxes. With them I buy civilization.”) The IRS responded to West’s “election not to be subject to income tax” with a letter back to West informing him that American citizens cannot opt out of paying taxes.

Donald J. Kleine, the Federal prosecutor said that West knew he had an obligation to pay his taxes but, “just didn’t want to.”

West was sentenced to Federal prison for a term of more than 4 years and ordered to pay restitution to the Internal Revenue Service in the amount of $439,515.

2 07, 2016

Bakery Owner Can’t Have His (unpaid tax obligation) Cake and Eat It Too

By |2020-02-12T14:20:16-05:00July 2nd, 2016|100% Penalty, Tax, Tax Crimes, tax evasion|0 Comments

macaron cookieOne baker seems to have gotten caught with his fingers in the cookie jar:

Owner of Kasia’s Bakery in New Britain, CT Marian Kobryn pled guilty to tax evasion by operating his business on a cash-only basis and not reporting the cash income or (of course) paying tax on it. From 2010 to 2013, sales totaling $730,860 were deposited into personal bank accounts usually under $10,000 to evade bank’s currency transaction reporting requirements (another illegal practice known as “structuring.”

Pleading guilty to one count of making a false statement of a federal tax return, Kobryn was sentenced to time served due to serious health issues, Kobryn has been ordered to pay restitution in the amount of $435,00 to cover back taxes owed, hence being compelled to restore that raided cookie jar.

21 10, 2015

Allan Pearlman Radio Interview: Tax Tricks, Trips and Traps

By |2020-02-12T14:20:16-05:00October 21st, 2015|Audits, IRS Collection, IRS Enforcement, Penalties, Tax, Tax Penalties, Tax Problem Solving|0 Comments

People and the news devote lots of attention to important dates like April 15th — tax return filing day — and October 15th — the second filing deadline for all the taxpayers who got automatic extension of the April 15th deadline. In fact for many of us, the IRS and other taxing authorities demand attention on many other occasions throughout the year.

And because there can be tax problems, tax controversies, tax disputes with the IRS that come up at any time, attorney Jack Tuckner, the host of a politics and current events oriented radio talk show, invited me in to talk about tax controversies — collection issues, audits, offshore tax issues, voluntary disclosures, offers in compromise, and similar Radio_noisyissues.

So, on Tuesday afternoon, October 20th, 2015, far, far away from April 15th, and after the October 15th deadline has passed, I met with Jack Tuckner and his partner in radio, Deborah O’Rell, to talk about the IRS and New York State’s Department of Taxation and Finance on there weekly show, Women’s Rights in the Workplace on the Progressive Radio Network, PRN.fm.

The original plan was to discuss the inner workings of the IRS, and how tax payers might best protect themselves from the eager claws of the government for a half hour. But before we knew it a whole hour went by.

The Women’s Rights in the Workplace show describes our conversation like this:

GrimDeath+IRS“Did you know that your wages can be garnished, your bank accounts and home can be seized, and even your driver’s license can be revoked due to back taxes? Join Jack & Deborah as they welcome to the show good guy tax attorney Allan R. Pearlman, who’ll provide insight, tips and “secrets” to avoid getting into boiling hot water with the taxman.”

The whole discussion, warts and all, is here:

6 03, 2015

IRS: Skimming is for Milk, Not for Tax Reporting, & Bar Owner Finds Self in Pickle

By |2020-04-06T21:09:49-04:00March 6th, 2015|Tax Crimes, tax evasion, Tax fraud, Uncategorized, understatement of income|0 Comments

This might be called the Case of the Candid Calendar. A Wisconsin bar owner was sentenced to 18 months in federal prison and ordered to pay a $100,000 fine for filing false tax returns.

Cat-laps-milk-glassAccording to court records, Jared Jerome Hart, 36, of Eau Claire, Wis., owned a tavern called The Pickle Bar. His bar accepted payments only in cash, and at the end of each day, tavern employees would place daily sales in a safe for Hart to pick up. Hart would count the cash, and then record a number for the day in his own daily calendar. Hart would then deposit only some of the cash from into the business account.

Hart gave his accountants the payroll information, bank statements, the check register and vendor invoices. From these records, which Hart knew were incomplete, the accountants created the official books of the bupicklesiness.  Hart never told his accountants about the cash he was “skimming” from the tavern, or the second set of books he was keeping at home.  Hart’s daily calendars were discovered during the execution of a search warrant at his home in June 2012.

Between 2008 and 2011, there was more than a $1 million discrepancy between the gross receipts of The Pickle Bar reflected in the books the accountants maintained and the second set of books Hart maintained at his home.

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