Newsroom March 13, 2009
IR-2009-20, March 6, 2009 — Taxpayers are filing earlier and receiving larger refunds so far this year, according to early filing season statistics released today by the IRS. As of Feb. 27, 2009, the IRS had received 56 million individual tax returns, a slight increase over the previous year. And, the average individual refund was $2,869, a 9 percent increase or $232 more than the same time last year. The IRS notes that possible reasons for the larger refunds may include taxpayers benefiting from the recovery rebate credit and other tax breaks such as the first-time homebuyer credit and the additional standard deduction for real estate taxes.
IRS Conducts Extensive Review, Decides Not to Renew Private Debt Collection Contracts
IR-2009-19, March 5, 2009 — After conducting an extensive review of the private debt collection program, including the cost effectiveness of the effort, the Internal Revenue Service will not renew its contracts with two private debt collection agencies. The IRS determined that the work is best done by IRS employees who have more flexibility handling cases, which is particularly important with many taxpayers currently facing economic hardship.
IRS Seeks New Issues for the Industry Issue Resolution Program
IR-2009-18, March 5, 2009 — The IRS is encouraging business taxpayers, associations and other interested parties to submit to the Industry Issue Resolution (IIR) Program tax issues for resolution involving a controversy, a dispute or an unnecessary burden on business taxpayers. Though submissions can be made at anytime for consideration in the IIR program, submitted issues received by March 31, 2009, will be considered for acceptance in April and, if accepted, included on the Treasury/IRS Priority Guidance List.
IRS Issues Winter 2009 Statistics Of Income Bulletin
IR-2009-17, March. 3, 2009 —The IRS released the winter 2009 issue of the Statistics of Income Bulletin, which features information on 138.4 million individual income tax returns filed for tax year 2006.
Don't forget to keep checking this link … the Internal Revenue Service is offering a daily series of Tax Tips for the 2009 federal tax filing season. More than 70 tips on federal taxes will be available with a new one for each business day until the April 15 tax filing deadline. Tips are available as easy-to-understand text as well as several audio files for podcast.
IRS Partner Headliner
- Volume 262: The definition of "in and doing business in" the
- Volume 263: Is it Too Good To Be True? Home-Based Business Tax Avoidance Schemes
Technical Guidance
Revenue Ruling 2009-07 provides the rates for interest on tax overpayment and underpayments for the calendar quarter beginning April 1, 2009. The interest rates will be 4 percent for overpayments (3 percent in the case of a corporation), 4 percent for underpayments, 1.5 percent for the portion of a corporation overpayment exceeding $10,000, and 6 percent for large corporation underpayments.
Revenue Ruling 2009-07 will appear in IRB 2009-13, dated March 30, 2009.
Announcement 2009-17 regarding the suspension of the federal tax exemption under section 501(p) of the Internal Revenue Code of a certain organization that has been designated as supporting or engaging in terrorist activity or supporting terrorism. Contributions made to this organization during the period that the organization's tax-exempt status is suspended are not deductible for federal tax purposes.
Announcement 2009-17 will be in IRB 2009-12, dated March 23, 2009.
Events
NATIONAL PHONE FORUMS (http://www.irs.gov/businesses/small/article/0,,id=158856,00.html)
- Cancellation of Debt – March 18, 2009
Tax Talk Today.TV (http://www.taxtalktoday.tv/ )
· Specialty Taxes: Estate and Gift and Employment Taxes - Tuesday, May 12, 2009
IRS will no longer sponsor Tax Talk Today - The May 12, 2009 program will be the last live Tax Talk Today show. Archived programs will be available online through Sept. 30, 2009.
We have two new pages that offer video and audio presentations on tax topics. Visit our pages for small businesses and practitioners.
We've partnered with this new Internet news channel for small businesses. Look to the SBTV.com daily newscast every Wednesday for IRS news, and visit the IRS Partner Page on SBTV's Web site for more IRS resources and information.
1. Tax Havens Pledge to Ease Secrecy Law * Wall Street Journal
2. Switzerland Eases Its Stance on Bank Secrecy Rules * New York Times
3. No Second Stimulus Bill Is Coming Soon, Pelosi Says *
4. Another Victim of the Ponzi Schemers: The IRS * Time
5. Tax Policy: Geithner Hints Tax Increases On Wealthy Could Be Postponed * BNA Daily Tax Report
6. Tax Forms: TIGTA Says Rarely Used Tax Payment Receipt, Form 809, Poses Security Risk * BNA Daily Tax Report
7. IRS: TIGTA Says Limitations in Initial IRS Data Impede Assessment of FSRP's Effectiveness * BNA Daily Tax Report
8. Virgin Islands Criminal Tax Case Part of Growing Trend, Practitioners Say * Tax Notes Today
9. Finance Approves Kirk as Trade Representative Despite Unpaid Taxes * Tax Notes Today
10. Talking Taxes *
11. FEDERAL DIARY: And Now for the Laggards in the OPM Survey *
Wall Street Journal March 13, 2009
Tax Havens Pledge to Ease Secrecy Law By DAVID CRAWFORD A-1
The European principalities of
The moves raise the stakes for big tax-haven centers such as
The global financial crisis has encouraged cash-strapped governments to crack down on the offshore industry, which helps wealthy clients evade billions of dollars a year in taxes. The downturn has also exposed alleged financial frauds that flourished under lightly regulated jurisdictions such as
The OECD blacklist comprises
The OECD has no regulatory or policing powers but carries political weight in Western capitals. In a recent report, the OECD listed estimates for the assets held by the offshore banking industry as high as $11.5 trillion. Together,
The developments come two days after the Obama administration endorsed legislation in the U.S. Congress to crack down on countries that refuse to cooperate in multinational tax and securities-fraud inquiries. "We fully support the legislation," Treasury Secretary Timothy Geithner told the
Rep. Lloyd Doggett of
Over the past few decades offshore havens have gradually lifted at least some of the secrecy surrounding their banking industries. For instance, most now cooperate with foreign authorities in tracking down the proceeds of illegal activity such as drug trafficking. And since the Sept. 11, 2001, terrorist attacks, they have acceded to some greater measures of counterterror surveillance. But they have been reluctant to undermine their much larger business of helping foreigners shield their income and assets from tax authorities. Because their own laws don't proscribe tax evasion, they have argued, they are under no obligation to assist foreign tax officials.
Thus, some foreign governments remained skeptical about Thursday's announcements. "We don't care what
The
Bank-secrecy laws in neighboring
On Friday, an expert commission on bank secrecy established only last week will offer recommendations to the Swiss cabinet on how best to respond to the gathering pressure. Soon thereafter, Swiss President and Finance Minister Hans-Rudolf Merz is expected to address possible changes to
"
Any action by the Swiss is likely to echo across the $7 trillion wealth-management industry, unleashing a flurry of cross-border fund transfers as the wealthy look to preserve secrecy.
John Christensen, director of the International Secretariat of the Tax Justice Network, a U.K.-based nonprofit organization, says the erosion of bank secrecy in Europe could benefit banking centers further afield, with
EU negotiators have turned up the heat on
Among Thursday's proposed changes,
Earlier this week, LGT Group,
LGT came under pressure and criticism last year after German intelligence agents acquired a list of hundreds of foreign customers of LGT who were suspected of large-scale tax evasion. They included members of
NEW YORK TIMES March 13, 2009
That followed announcements by the small tax havens of
In a statement on Friday, the Swiss government said it would agreed to exchange information with other countries on a case-by-case basis where there were "specific and justified" requests.
Accordingly, the government withdrew its reservations to a standard by the Organization of Economic Cooperation and Development on international tax norms "and to enter into negotiations on revising double taxation agreements," referring to the organization's Model Tax Convention. However, the government added that "banking secrecy is maintained."
"The Federal Council acknowledges that the wish of the people of
That message was reinforced by the Swiss Bankers' Association, which said in a statement Friday that "the privacy of foreign clients not under suspicion will continue to be protected by Swiss bank-client confidentiality."
It added, "An automatic exchange of information is excluded."
In addition, it said it expected that
The agreement marks a victory of sorts for
This week, it emerged that the O.E.C.D. had added
In
"I can say today that the Austrian bank secrecy law can stay as it is,"
The Luxembourg government agreed to "exchange information on request in specific cases and on the basis of concrete proof" for investigations by other tax authorities, Bloomberg News quoted the country's budget minister, Luc Frieden, as saying Friday, a day after meeting in Paris with the O.E.C.D. secretary general Angel Gurria.
"
The
"Today's declaration was very important in the run-up to the G-20 meeting, so that
Pressure had been building on
In January, Klaus Zumwinkel, the former Deutsche Post chief executive, received a two-year suspended sentence and a fine in a related case. On Tuesday, the
The Singapore Finance Ministry said late last week that it had endorsed O.E.C.D. tax standards. An O.E.C.D. official said that this week
No Second Stimulus Bill Is Coming Soon, Pelosi Says By Ben Pershing A02
House Speaker Nancy Pelosi said yesterday that a second economic stimulus package is not "in the cards" in the short term, disappointing those seeking another quick infusion of federal money into the struggling economy.
Pelosi's statement came less than a month after President Obama signed the $787 billion stimulus measure into law and on the same day the administration warned state officials gathered in
Pelosi (D-Calif.) helped nudge the idea of another stimulus Tuesday when she said that Congress should "keep the door open" to the possibility. And House Appropriations Chairman David Obey (D-Wis.) said this week that he will begin "preparing options" for a second stimulus package.
But Democratic aides have cautioned strongly that another such plan is not a serious possibility in the short term, and Pelosi said yesterday that she "really would like to see this stimulus package play out" before contemplating another one.
"I don't think you ever close the door to being prepared for whatever eventuality may come," she said at her weekly news conference but emphasized that a second package is "just not right now something that's in the cards."
Some prominent economists have suggested that a second stimulus measure, costing several hundred billion dollars, may well be needed. Mark Zandi, the chief economist at Moody's Economy.com who has become a key adviser to House Democrats, said this week that "policymakers need to do more. I don't think we're done. . . . I think another stimulus package is a reasonable probability, given the way things are going."
The Wall Street Journal's most recent forecasting survey, a poll of 49 economists, found that more than 40 percent of respondents thought a second large stimulus package is necessary to jump-start the economy.
But several key Democrats have said they do not like the idea of another package so soon, and congressional Republicans -- who almost unanimously opposed the first stimulus bill -- have even less appetite for a second. "I think the fact that they are already talking about stimulus two indicates they already think stimulus one has failed," suggested House Republican Conference Chairman Mike Pence (
Pelosi said that Congress has passed or would pass measures beyond the first package that would help create jobs, including the $410 billion omnibus spending bill that Obama signed Wednesday and the massive highway reauthorization bill the House will take up this year.
Pelosi said that a supplemental spending measure may be necessary to cover the costs of the wars in
She said she expects that economists and others might continue to promote the idea of another stimulus package "but not from my initiation."
The debate over a second plan comes as the money from the first is only beginning to trickle into the economy.
At the
"And so I've said before . . . if we see money being misspent, we're going to put a stop to it, and we will call it out, and we will publicize it," Obama said.
Vice President Biden delivered a similar warning to the group earlier yesterday. "A little hint: no swimming pools in this money," he said, later adding: "If we don't get this right, folks, this is the end of the opportunity to convince the Congress that anything should go to the states."
Lower-level officials drove the same point home. Thomas Barrett, the deputy transportation secretary, told attendees that "there is no room for projects that are going to look stupid or be stupid" and warned against mistakes such as "buying the spa treatments and charging it to a federal contract."
More than 100 state officials attended the conference, peppering administration aides with questions about how the stimulus money will be distributed and how it can be spent. They represented every state but
Jon Hanian, a spokesman for Idaho Gov. C.L. "Butch" Otter (R), said the governor has announced his recommendations for how the state's stimulus money should be spent. And because of the economic downturn, Hanian said,
TIME March 13, 2009
Another Victim of the Ponzi Schemers: The IRS By Robert Chew
The Internal Revenue System is bracing for a deluge of amended tax returns from tens of thousands of victims caught up in the recent wave of multi-billion dollar Ponzis and other frauds, most notably the sensational swindle perpetrated by Bernie Madoff, and R. Allen Stanford's $8 billion certificates of deposits scam.
Rough IRS numbers on Madoff's theft alone could total from $7 to $10 billion in refunds due victims, according to accountant tallies. But don't feel too bad for the IRS. Over the last 20 or more years it has been collecting taxes on income that never actually existed. Last year, the IRS sent out 106 million refund checks totaling $254 billion, so Ponzi victims will hardly empty the refund cookie jar.
The IRS is always the first "go to" place for financial fraud survivors trying to recoup lost monies. But with the April 15 tax clock ticking, figuring out what to do about recovery, both from taxes and from the Securities Investor Protection Corp., has become a mind-boggling maze for accountants and their Ponzi-victim clients. At a hearing yesterday, Madoff pleaded guilty to his decades long crime, was handcuffed and put in jail. Sentencing is scheduled for June, but he could potentially be sentenced to 150 years on 11 counts.(Read "The Madoff Hearing: A Guilty Plea, but No Catharsis.")
There's no unanimity about what to do in regard to Ponzis and other fraud recovery, when it comes taxes. Ponzi survivors are getting a litany of mixed signals from bulletins, tax advisor reports, panel discussions and on the Web. And to make matters worse, many of those trying to get their tax returns in quickly are being slow-danced by their former feeder-fund managers, who, under advisement, have been slow in sending out amended statements, or K-1's; they have until October 15, the final deadline for 2008 filings.
"I think we're going to see the IRS come out with guidelines very shortly," said Neil Tipograph, tax partner at New York-based, Imowitz Koenig & Co, LLP, an accounting firm specializing in private equity and feeder hedge funds. According to Tipograph and other tax experts, victims involved in Ponzis have four ways to reclaim taxes paid on fraudulent income, the first being a good old-fashioned "Theft Loss" deduction, which allows a person to go back three years and reclaim taxes paid. Currently, no deduction can be made on the original investment, especially if a SIPC claim has been made.
The second is a "Phantom Income Deduction," which allows you to remove the Ponzi income going back three years, but if you still have a loss you can carry it forward [i.e., apply it as a deduction against future gains] until the full loss is made up.
The third option, "Claim of Rights Credit," is most beneficial, he says. It allows victims to claim a credit for all taxes paid on Ponzi income going back to the first investment year on their 2008 tax return. The catch, according to Tipograph: "It's never been tested in regard to Ponzis." This option is typically used in insider trading cases, when tax monies need to be returned.
The last option is "Mitigation," which requires the taxpayer to go back and reopen each year's tax filing, back to the year of the first investment. There are some technical requirements related to this option.
"It's likely the IRS will just allow for the theft loss," said Tipograph. "It's not the best option for taxpayers, but is a reasonable way to handle this." But if you don't file by April 15, you can lose out on filing for 2005, Tipograph says, since there's a rolling three-year time limit. One can, however, file a "protective refund claim" form, a kind of placeholder that keeps the 2005 return open.
Of course no on knows what the IRS will do, but Bob Goldstein, a senior consultant at Marks Paneth & Shron LLP, New York, said he had been assured by the IRS "that guidance would be forthcoming," hopefully by April 15. He suggests a simple approach for both the victims and IRS.
"If the Service (IRS) were to allow the victim to deduct his or her tax basis, less the SIPC recovery and less a small reserve for other recoveries, as a theft loss on the victim's 2008 tax return, the taxpayer could quantify the loss quickly and file for the appropriate refunds," Godstein says. "The benefit for the IRS is the consistency of the claims filed, which will make the administration of this deluge of claims easier."
Goldstein says he has spoken with IRS officials and they know the complexity of the issues before them. "The people there are sensitive to the victims and to the urgency."
Even Congress is scratching its collective head.
Late last month, two senators and three congressmen sent a two-page, single-spaced letter with 10 questions to the IRS asking for direction in resolving a series of important, questions regarding Madoff and Ponzis, such as whether or not to there will be special extensions for victims. It also suggests setting up a special "Madoff Unit" to process claims.
So, far, no comment from the IRS.
Daily Tax Report The Bureau of National Affairs, Inc. Federal Tax & Accounting
March 13, 2009
Tax Policy: Geithner Hints Tax Increases On Wealthy Could Be Postponed
Treasury Secretary Timothy Geithner kept the door open March 12 to postponing a proposed 2011 tax increase on the highest earners if the economy has not rebounded as economists believe it will.
President Obama's fiscal year 2010 budget proposal included a proposal to reinstate the 36 percent and 39.6 percent rates for single taxpayers earning over $200,000 and joint filers earning over $250,000. The budget also would cap the value of tax deductions that can be claimed by the highest-income taxpayers at the level allowed for households in the 28 percent tax bracket (37 DTR GG-1, 2/27/09).
At a hearing of the Senate Budget Committee, Sen. Mike Crapo (R-Idaho) asked Geithner whether the tax increases, which are designated to help reduce the deficit and pay for health care reform, are contingent on an economic rebound.
"We need to lay out an ambitious path for bringing those deficits down, commit to achieving that, with a mix of measures on the resource side and the spending side that do the best possible job of leaving our economy stronger. And that's what the president's budget tries to do," Geithner said. "Now, of course, we're going to have to watch how the economy evolves, and I want to underscore that one of the mistakes governments may have made over time in dealing with economic crises is putting the brakes on too quickly or in ways that, you know, hurt growth just as it's starting to take hold."
Asked to clarify, Geithner said, "I'm just saying that recovery requires that we keep stimulus sustained until growth is in place, but we have to do it in a fiscally responsible way."
Charitable Deduction Proposal Criticized.
Obama's proposal to limit tax deductions for the highest-income taxpayers again faced congressional criticism as Sen. Lindsey Graham (R-S.C.) expressed opposition because of what he said was likely to be a reduction in the amount of future charitable giving.
Geithner objected to that premise, and defended the proposal, saying it would "affect a very small fraction"of filers. In previous congressional testimony he has said the change, which would not take effect until 2011, would affect only 1.2 percent of filers (40 DTR G-6, 3/4/09).
Asked if limiting deductions would have a negative impact on charities, Geithner said it would not, but then said it depends on what else is happening. Additionally, the "most important thing you can do to effect charitable giving is to get this economy back on track" and establish a stronger basis for giving, he said.
Graham disagreed, saying, "I think the most important thing you can do is to reward it when it's done."
Separately, the Center on Budget and Policy Priorities released a report March 12 calling criticisms of Obama's proposal "overblown." CBPP said that capping deductions would result in a decrease of 1.3 percent in charitable giving. According to CBPP, in 2007, the actual amount of charitable giving was $306 billion, with that figure reduced to $302 billion if the 28 percent cap had been in place.
Obama Flexible on Health Care Offsets, Boyd Says.
Rep. Allen Boyd (D-Fla.), a member of the House Budget Committee and a former co-chairman of the Blue Dog Coalition, told reporters that White House officials seem receptive to using alternative offsets for the health care reserve fund.
Boyd's statement came the day after he met at the White House with Obama, Office of Management and Budget Director Peter Orszag, White House Chief of Staff Rahm Emanuel, presidential adviser David Axelrod, and other House Budget Committee Democrats.
When asked if Obama would be receptive to a congressional proposal that might use offsets other than changes to itemized deductions to fund health care, Boyd said, "Absolutely, I think he's flexible on those things."
By Heather M. Rothman and Jonathan Nicholson
Text of Geithner's prepared statement for the hearing is available at http:// budget.senate.gov/democratic/testimony/2009/GeithnerTestimony% 20- SenateBudgetCommittee.pdf.Text of the CBPP report, Limiting Itemized Deductions for Upper-Income Taxpayers Would Have Little Effect on Small Business, Charities, Housing: Criticisms of Proposal are Overblown, is available at http://www.cbpp.org/3-12-09tax.htm.
Daily Tax Report The Bureau of National Affairs, Inc. Federal Tax & Accounting
March 13, 2009
Tax Forms: TIGTA Says Rarely Used Tax Payment Receipt, Form 809, Poses Security Risk
Revenue officers rarely use Form 809, Receipt for Payment of Taxes, and the forms present a security risk, the Treasury Inspector General for Tax Administration said in an audit report released March 12.
From fiscal year 2004 to fiscal 2007, Forms 809 were used in fewer than 2 percent of all cases closed by revenue officers, TIGTA said. During fiscal 2007, fewer than 20 percent of the officers assigned a Forms 809 book issued a receipt, and 59 percent of them had not issued a single Form 809 from their currently assigned book, it said. It is possible that, when revenue officers issued these forms, more than 90 percent either were unnecessary because the taxpayer did not pay with cash, or the receipts were issued for frivolous amounts, TIGTA said.
Forms 809 present an administrative burden despite their limited use because they are classified as security items, TIGTA said. IRS has detailed procedures and controls for requesting, issuing, reconciling, and accounting for lost or stolen Forms 809 books, it said.
Changes Recommended.
TIGTA recommended that the service research other ways for providing receipts when receiving cash payments. In the meantime, among other suggestions, TIGTA said IRS should:
. evaluate areas where the Forms 809 books assigned to the field can be reduced,
. modify procedures to eliminate the requirement to provide Forms 809 for noncash payments, and
. ensure the administrative procedures concerning the Forms 809 books align with the usage of Form 809.
IRS officials agreed with TIGTA's recommendations and said they plan to research an approved paper check electronic image conversion tool to replace the manual process of providing Forms 809. IRS also intends to revise field procedures to address proof of delivery procedures and modify Part 4 of Form 809 in the next reprint to hide the first five digits of the Taxpayer Identification Number, the report said.
Text of the report, Revenue Officers Have Minimal Need for Individual Forms 809 Books, (No. 2009-30-044), is available at http:// www.treas.gov/tigta/auditreports/2009reports/200930044fr.html.
Daily Tax Report The Bureau of National Affairs, Inc. Federal Tax & Accounting
March 13, 2009
IRS: TIGTA Says Limitations in Initial IRS Data Impede Assessment of FSRP's Effectiveness
The Treasury Inspector General for Tax Administration could not determine whether the Facilitated Self-Assistance Research Project (FSRP) provides effective customer service or a viable way to reduce taxpayer wait times because there were limitations on the data collected during the project's initial phase, it said in a March 10 audit report.
The FSRP allows taxpayers the chance to help themselves to IRS services, with help from a
IRS reported in September 2008 that a small sample size, inconsistent data collection, and low survey response rates during the FSRP placed significant limitations on the data collected, TIGTA said. However, the project was expanded to an additional 35 Taxpayer Assistance Centers for the 2009 filing season before the service ensured that it addressed all the limitations, it said.
While one of the main goals of the FSRP is to eliminate the need for contact with an IRS employee, funding does not include printers for each self-assistance computer terminal, TIGTA said, so project participants must see an employee to obtain copies of any documents they print.
IRS did not conduct any further studies to determine whether FSRP service tasks should stay the same, nor was there any support to show why the FSRP does not offer access to all of IRS.gov, TIGTA said.
Without sufficient support for the methodologies used in the FSRP, IRS cannot appropriately analyze the results and establish performance measures, it said.
Recommendations and Response.
TIGTA recommended that the commissioner of the Wage and Investment Division:
. not expand the project before all data collection issues have been addressed and adequate data collected;
. modify and/or eliminate surveys to reduce burden and promote participation;
. conduct a cost analysis of either providing a printer for each FSRP terminal or using a facilitator who can provide printed documents to taxpayers quickly;
. ensure all decisions and processes are documented and maintained;
. consider broadening the criteria for participation in the project to all activities on IRS.gov; and
. conduct testing at several Taxpayer Assistance Centers to determine the benefit of providing the terminals for taxpayers to use at all times.
IRS agreed with the second and fourth recommendations, and in part with the fifth recommendation. The service said that it had conducted a cost analysis and will use facilitators to provide printed materials, but that cost and security issues preclude placement of more printers, TIGTA said.
IRS management did not agree to delay FSRP expansion because funding for additional Taxpayer Assistance Centers had already been granted and implementation had been completed, TIGTA said. Officials also did not agree with TIGTA's recommendation to study the benefit of providing FSRP terminals for taxpayers' use at all times, it said.
Text of the report, There Were Significant Limitations in Phase 1 of the Facilitated Self-Assistance Research Project, No. 2009-40-047, is available at http://www.treas.gov/tigta/auditreports/2009reports/200940047fr.pdf.
Tax Notes Today March 13, 2009
Despite the government's vigorous prosecution, a jury last week found four businessmen not guilty on 98 charges of tax evasion and conspiracy in connection with a U.S. Virgin Islands economic development program. Taxpayers engaged in similar complex transactions can expect to find themselves criminally prosecuted as the government gears up to take more punitive action on alleged shelter activity, practitioners told Tax Analysts.
The case was brought against the four men -- Illinois car dealer James Auffenberg, Texans James W. Ferguson III and Peter G. Fagan, and J. David Jackson of the island of St. Croix -- on the grounds that they engaged in conspiracy and wire fraud, and evaded $ 74 million in taxes by funneling money through investment structures in the Virgin Islands.
The government alleged that the men formed a conduit, Kapok Management LP, to transfer funds to the
Despite the verdict, members of the criminal defense bar said they believe the IRS Criminal Investigation Division (CI) will continue to refer more tax evasion cases to the Justice Department for criminal prosecution in order to strengthen tax administration and boost revenue collection.
Josh Ungerman of Meadows, Collier, Reed, Cousins & Blau LLP, who represented
The case was groundbreaking, Ungerman said, because the government tried a criminal case on a sham argument: that the transactions lacked economic substance even though there was a congressionally enacted tax incentive program. "This shows that the government is not having a problem attempting to criminalize behavior in the past that no one thought was criminal," he said. "On a broader perspective, that seems to be the trend."
Ungerman said the Auffenberg case is likely just the first of a big wave of cases with complicated facts that the government intends to pursue.
Justin A. Thornton, a private practitioner in
The government's new assertiveness in taking on complex cases is not surprising, said
Robert Chicoine of Chicoine & Hallett PS agreed that there are more complex criminal cases than there used to be. "While there are still lots of bread and butter criminal cases out there that are developed locally, bigger and more complicated cases are being orchestrated by the national office," he said. In the past, the government was somewhat reluctant to take on complex cases because of the effect on conviction rate statistics. "In more complicated cases, it is less likely that the government will prevail in getting a conviction, and they don't like acquittals," he said.
But new public upset over perceived greed by high-income individuals, publicity over aggressive tax shelters marketed by some large accounting and law firms, and the use of offshore accounts gives impetus to the government's actions, Chicoine said. "I do think there is a trend, and there should be a reaction by the government to show the public they take tax compliance seriously," he said. Nonetheless, most criminal tax cases are targeted at "easier cases with weaker taxpayers," he said. And, he added, regardless of the size of the case, the government will invest substantial resources to eke out a win.
A prime opportunity for the government to showcase its strong commitment to criminal sanctions against wayward taxpayers is with the ongoing spotlight on offshore bank accounts.
"I think the message from [IRS] Commissioner [Douglas] Shulman is loud and clear that as to offshore accounts, the IRS is looking hard at those involved with UBS or other banks,"
Tax Notes Today March 13, 2009
FINANCE APPROVES KIRK AS TRADE REPRESENTATIVE DESPITE UNPAID TAXES
The Senate Finance Committee on March 12 approved the nomination of former Dallas Mayor Ron Kirk to be
But unpaid taxes did not prove to be an insurmountable obstacle to Kirk's nomination, as it has for some key administration nominees. Former Senate Majority Leader Tom Daschle, Obama's choice to lead the Health and Human Services Department, and Nancy Killefer, who would have become the nation's first chief performance officer, both withdrew their nominations after disclosing tax problems. Kirk is expected to be confirmed by the full Senate without controversy.
Finance Committee Chair Max Baucus, D-Mont., in remarks prepared for a March 9 panel hearing on the nomination, said Kirk was the "best man for the job." Kirk was not questioned about his taxes at that hearing. Sen. Jim Bunning, R-Ky., was the only panel member who voted to oppose Kirk's nomination March 12.
According to a Finance Committee memo, Kirk deducted a total of $ 7,500 in donated honoraria in 2005 without reporting it as income. The committee review also turned up $ 3,600 in unsubstantiated business expenses, among other unpaid tax liabilities. Kirk "agreed to promptly file amended returns reflecting the adjustments," the memo said. (For the memo, see Doc 2009-4563 or 2009 TNT 39-40. For prior coverage, see Doc 2009-4582 or 2009 TNT 39-3.)
Talking Taxes By Michelle Singletary
If you missed my Web chat yesterday, be sure to read the transcript. The chat was a day earlier than my regularly scheduled Thursday discussion, and Jim Dupree from the IRS, joined me.
There were dozens of questions we couldn't get to, so I'll post the answers to more next week, but here's one I can answer now:
Q: I purchased a new home in 2008. My closing date was Dec 30. I have already filed my taxes and received the $7,500 tax credit. I see that in the new stimulus package you get even more money back from the IRS and you don't have to pay that back. Is there any way I can qualify for the new deal?
A: Sorry, if you closed on your home in 2008, you are out of luck. The new deal or new tax credit of $8,000 is for folks who purchased their home from Jan. 2009 to Nov. 2009 (The qualifying date for this first-time homebuyer's credit is cutoff at the end of November).
And by the way I hope you realize that $7,500 isn't really a credit but a loan -- a 15-year loan to the IRS. It's interest free but I'm still not a fan of it.
Here are two columns about the difference in the two first-time home buyer credits:
* You Can Benefit, but Don't Get Caught by Details (Feb. 22)
* Before You Take That New Housing Credit . . . (Aug. 17, 2008)
The Power of Women
Business columnist Steven Pearlstein and Post Vice President Ben Bradlee recently posed this question to their online panel discussion group: Would the current financial crisis have happened, or been anywhere near as severe, if women had been in the top leadership positions on Wall Street? Read what the leaders had to say in Testosterone and the Crash (March 8).
Color of Money Question of the Week
This week's question was: How should you communicate your lack of money to your date?
Readers discussed their experiences with having no money and still dating:
Benjamin Chayes, of
"Be creative," writes Noelle Edwards of
Veld says that because she didn't have hidden motives such as "money, marriage or family potential," men with various backgrounds liked to date her. "Money and love should not be on one pillow."
Veld also said that she struggled financially as a poor artist and that "children were never an option, due to my own financial situation, since I always felt I needed to be able to support them on my own, if need be, and was never able to do so (thus far)."
Eight More
Veld's last comments lead me to another issue -- children and finances. Last month, I asked whether the "Octomom," Nadya Suleman, should have considered her finances before having eight babies with the assistance of in vitro procedures. Suleman is unemployed and now the single mother of 14 children.
Here's what you said about her decision to have more children:
Matthew Tracy of
"My husband and I were very aware of finances when we thought about having children," said Terry Dolan of
Nikhila Pai of
"I can't imagine expecting others to take care of our financial needs the way Suleman and many of these multiple babies at once families seem to expect," she said. "I'm thinking about that TLC show 'Jon and Kate Plus 8.' I just hope we find a day when we can afford children."
You are probably waiting for me to go ballistic right?
But you know, as I watch interview after interview with Suleman, it appears she's been enabled to be financially irresponsible by a lot of people surrounding her. Her mother let her live free in a house that is now in foreclosure. Her father just hands her money. And the man who allegedly donated the sperm, which helped produced the 14 children? What a louse! He doesn't care enough about his seed and justs gives it away to someone clearly in need of long-term counseling.
Suleman's story is a lesson for all those parents who coddle their adult children when they should be making them become ressponsible adults. Unfortunately the victims in this mess are those darling children. I have three kids and can't imagine how she plans on taking care of 14 when all the publicity and public displays of help go away.
Read more about Suleman and her financial decision in these stories:
* Octuplets Mom Says She's Paying for New LA House
* Octuplets Mom Readying Move, Babies' Homecoming
Color of Money Book Club
In last Sunday's column, I announced this month's Color of Money Book Club selection. It's "The Wall Street Journal Guide to the End of Wall Street as We Know It: What You Need to Know About the Greatest Financial Crisis of Our Time -- And How to Survive It"
Author Dave Kansas gives readers a survival guide to what he calls the greatest financial crisis of our time.
FEDERAL DIARY: And Now for the Laggards in the OPM Survey By
When officials at the Office of Personnel Management announced the results of their 2008 Federal Human Capital Survey in January, they only released the names of agencies that took the top 10 spots in each of four categories: leadership and knowledge management, results oriented performance culture, talent management and job satisfaction.
The complete list, however, includes 37 agencies in each category. By listing only the top 10, OPM officials avoided embarrassing bosses at agencies crawling along the bottom.
The Federal Diary, of course, suffers from no such compunction. We were able to obtain the complete lists. Below, we have printed the agencies that are at the top and bottom of each and their rankings for 2008 and 2006.
OPM surveys the federal workforce every two years. More than 210,000 participated in 2008. Here's how to interpret the findings:
-- The leadership index indicates how highly, or not, employees of an agency regard their leaders.
-- The performance index indicates how much workers in an agency believe it promotes improvements in processes, products and services.
-- The talent index indicates the degree to which staffers think an agency has the talent needed to achieve its goals.
-- The job satisfaction index is my favorite because it indicates how satisfied employees are with their jobs. That's key.
Here's a tip: Check out the progress made by the Court Services and Offender Supervision Agency. It's like a small, unknown college that comes out of nowhere to beat the big basketball powerhouses during March Madness.
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