Sorry, people. It doesn't matter that other people used tax software and ended up filing incorrect returns, even if one of them is the Secretary of the United States Treasury. It's still your, other taxpayers' and Treasury Secretary Timothy Geithner's ultimate responsibility to properly calculate and file your taxes. When you don't, regardless of who you are and which tax filing method you used, the IRS is well within its rights to demand that you pay your accurate tax bill and any associated penalties that errors might have caused. The TurboTax excuse: You remember the Geithner case. During his Senate confirmation…

Attention online shoppers. States are moving forward in their efforts to collect sales taxes on items purchased from remote retailers.   This week, the Virginia Senate approved a measure that would require Internet retailers to collect the Old Dominion's 5 percent sales tax.  Virginia lawmakers say they are justified in demanding their version of the so-called Amazon tax, named after the popular online retailer, because the Seattle, Wash.-based company has two facilities in Northern Virginia. The bill goes further, however, by also citing presumed nexus, or physical presence, in the state based on a company's agreements with affiliates.  In this…

The highest court in the Lone Star State has agreed to consider whether the state's $5 charge on strip club patrons violates the First Amendment right of free expression. How nice. The decision to take the case came just in time for Valentine's Day. At issue is whether the so-called "pole tax" unfairly singles out for regulation nude dancing in clubs that serve alcohol. Last summer, the 3rd Court of Appeals in Austin agreed, by a 2-to-1 vote, with a state district judge's decision to strike down the law. "While nude dancing 'falls only within the outer ambit of the…

Joe Francis, founder of the soft-porn Girls Gone Wild video empire, has lost a round in his effort to regain control of $22 million the IRS seized. Last month, Francis filed suit in federal court in Los Angeles against the federal tax collector contending that the agency improperly issued a jeopardy assessment against him. The action effectively freezes Francis out of access to the millions held in two brokerage accounts linked to the video entrepreneur. Jeopardy assessments, which essentially amount to immediate seizures, are typically used when the IRS believes such action is the only way to preserve assets to…

The credit card bills with Christmas charges are starting to show up and, like millions of other shoppers, the hubby and I spent much of our holiday budget at virtual storefronts. Such dot-com spending habits are of great interest to state tax departments. I've blogged before about cities and states going after online operations, as in Chicago's tax lusting after eBay and StubHub transactions. But the favorite tax target of most state revenue offices is Amazon. The Seattle-based seller collects sales tax in just a few states. Last year, however, the quest for more money prompted several revenue-hungry state legislatures…

Not only does the hubby read the ol' blog, he acts on its suggestions! Sometimes. One of my Christmas gifts yesterday was Tax Stories, the book edited by TaxProf Paul Caron. I had mentioned it in my Holiday gifts for tax geeks post earlier this month with a parenthetical note to my sweet spouse. Thanks, dear! In addition to editing the publication, Caron wrote the introduction, Tax Archaeology, in which he concludes that the problematic results in the book's 10 Supreme Court federal income tax cases underscore that "perhaps the fault lies…in our income tax itself." "Instead of chastising the…

The year is winding down. You're trying to gather of all your receipts. (Yeah, I know, next year you'll institute that record-keeping system). But some paperwork is missing. What can you do? You might want to check out a 79-year-old rule regarding the estimation of tax deductions. In 1930, a federal court ruled that a famous actor, playwright and producer could deduct entertainment expenses based on estimated expenses, rather than having to produce detailed records of each expenditure. The holding in this case became known as the Cohan Rule. Yep, Cohan as in George M. As in the man most…

Don't you just love tax coincidences?In my post Don't hate me because I'm rich that went up earlier today, I mention state taxes targeting millionaires as part of the current anti-wealth trend.Now I discover (thanks to TaxProf Blog) that rich Californians are going to have to live with their state's 1 percent tax on annual incomes in excess of $1 million. The extra collections are designated to fund state mental health services.The tax, known as Proposition 63, was approved by voters in 2004. Craig and Sally Jensen challenged the tax, notes Courthouse News Service, suing to recover a portion of their…

The first Monday in October kicked off a new U.S. Supreme Court term. While everyone is anxiously awaiting the first bench pronouncements from new Justice Sonia Sotomayor, one thing about this Court is already abundantly clear. These justices aren't very interested in hearing tax matters.The publication Tax Analysts (subscription required) reports that on its opening day, the Court denied certiorari in a number of federal and state tax-related cases. "Certiorari Denied" basically means that the Court has declined to hear the case and will let the prior ruling stand. Amid the tax cases refused by the Supreme Court, several with…

Finally! The end to our tackiest national tax nightmare is near."Girls Gone Wild" founder Joe Francis apparently has reached a plea agreement with federal prosecutors so we should be hearing much less about his tax troubles.According to published reports, Francis will plead guilty this afternoon in a California court to filing false tax returns (and one count of bribing Nevada jailers for food; really), receive credit for time (301 days) already served in connection with the tax charges and pay $250,000 in restitution.Any outstanding tax liabilities allegedly owed by Francis or his companies from 2002 to 2008 will be handled…

What happens when you run out of other people's money? If you're facing federal fraud charges, you have to resort to a public defender. That's the case for Texas financier R. Allen Stanford, who's charged with bilking investors out of $7 billion. In addition, the IRS says Standford owes $226 million in taxes. Unfortunately for Stanford's former clients and Uncle Sam, Stanford apparently doesn't even have enough money to pay his defense attorney. So that lawyer, Dick DeGuerin, has told the court he wants to withdraw. Stanford's second choice for legal representation, Robert Luskin, a Washington lawyer and former counsel to White House…

A prostitute by any other name is a "performing artist." Or so says a now-fired ACORN worker.An independent, conservative filmmaker and a colleague, posing as a Congressional-wannabe friend to a prostitute (this scenario alone creates a whole other set of questions…), visited the Baltimore office of Association of Community Organizations for Reform Now (ACORN), which was created to help inner city communities and their residents.But I suspect  that such creative renaming of the world's oldest profession, along with some suspect tax advice, is not exactly how most community groups try to help their clientele. Bad, by all definitions, tax advice:…

I admit it. I'm a sucker for lists. And easy news hooks. So the first thing that came to my mind on 09-09-09 was the nine states that don't tax wage income.Everyone probably already knows that my native state, Texas, along with Alaska, Florida, Nevada, South Dakota, Washington and Wyoming don't have any income tax at all. But two others also don't tax wage income. They are New Hampshire and Tennessee.However, the Granite and Volunteer States do collect taxes on the dividends and interest their residents earn.State tax luck runs out: Folks who live in a state with some type…

As despicable as Joe Francis' business is, you've got to give him credit for chutzpah. Outlandish efforts also seem to be what the Girls Gone Wild (GGW) founder looks for in his tax attorneys.Francis is awaiting trial on federal tax-evasion charges that he hid business income in offshore companies and deducted millions in phony business expenses. When Francis' trial starts this fall, his attorneys will try to convince jurors that all those write-offs were OK because Joe is the business. And since Joe is GGW, everything he does is business related and therefore legally deductible. Or, as Joe Kristan of…

Delaware officials hoping to make easy money off sports bettors will have to revise their gaming plan.A Third Circuit Court of Appeals panel says Delaware's proposal to offer single-game bets on all major league and college games violates a 1992 federal ban on sports gambling. Because of that, the court issued an emergency injunction against the practice.Delaware officials had hoped to have the single-game system operating by Sept. 1. Now, however, they'll have to rely on parlay betting on professional sports. As I understand it, with this system you pick, for example, the Cowboys and Redskins and they both have…

Crime reportedly doesn't pay, but Uncle Sam recently handed out $250 checks to almost 4,000 jailed felons.The payments were mistakenly issued as part of the American Recovery and Reinvestment Act, popularly known as the February 2009 stimulus law. Under the Making Work Pay credit portion of the new law, workers have seen a smaller amount of payroll taxes withheld from their paychecks. But folks who don't have jobs also got a stimulus benefit. Separate $250 checks were sent to 54.4 million beneficiaries of Social Security, veterans and federal railroad payments. And some of those check recipients are behind bars. Excuse…

Massachusetts' use tax is in the news again, as that state's highest court ruled today that the state can't collect taxes from a New Hampshire retail chain that sells tires to Massachusetts residents."The Legislature may, of course, enact such a presumption, but in the absence of any such statutory authorization, it is error to rely on a presumption that tires sold to a Massachusetts resident outside the Commonwealth were actually used in the Commonwealth,'' according to the court's decision.The case arose when, in 2003, a Massachusetts auditor found 313 invoices in a sample of sales records at three Town Fair…

If school hasn’t started in your neck of the woods and you’re looking to squeeze in a last-minute vacation, Uncle Sam might be able to help.Specifically, the tax code could be a good travel companion. Robert D Flach, better known on the Internet as The Wandering Tax Pro, chose his nom de blog because between his regular tax work, he likes to hit the road. And, being a tax pro, he likes to let the feds help him pay for his journeys.Now such tax help in covering travel costs is not without its rules. To be able to write off…

Discussion of drug taxes provokes a variety of reactions. "Crazy" is the usual comment about state efforts to wring some tax dollars out of drug dealers. "Useless" is another frequently uttered word in connection with controlled substances and taxes.But in Tennessee, the state's highest court has pronounced the final word: "Unconstitutional." In late July, the Tennessee Supreme Court deemed the state's so-called "crack tax" invalid because it exceeds the state's constitutionally defined taxing authority.The Unauthorized Substances Tax was enacted by Volunteer State lawmakers five years ago. It required individuals holding marijuana, cocaine and other illegal drugs to buy tax stamps…

So now, Sonia Sotomayor waits to see if she'll be taking a seat on the country's highest court.Her U.S. Supreme Court confirmation hearings are over, but the verdict from the Senate Judiciary Committee has been put on hold by the panel's leading Republican until July 28.Don't ask me to explain the arcane rules that allow such procedural delays. It's the Senate and I'm just finishing up my first cup of coffee. Suffice it say that the judge who hopes to become the first Latina on the Supreme Court has to wait a bit longer for that to become official.And despite…

While I've been concentrating on ways to improve the IRS at my Taxpayer Advocacy Panel meetings this week, the real world has been continuing on its merry way outside our conference room. One event of note is the Senate questioning of Supreme Court nominee Sonia Sotomayor. I haven't been able to watch any of the hearing, but The Caucus has been live blogging the proceedings.In connection with her nomination to the country's highest court, I also wanted to remind you of my June 29 post on the judge's dearth of tax rulings, Supreme Court reverses Sotomayor case.Yeah, I know, writing…

Bernard Madoff is heading to jail for the rest of his life. And the victims of the largest-ever Ponzi scheme got some measure of vengeance from the 150-year prison sentence handed down for the faux financier yesterday.But what about their money?There's all sorts of wrangling going on over who owes whom what and how to get it. Before all's said and done, this process likely will join the ranks of the longest legal battles.One of the targets is the Securities and Exchange Commission (SEC).As Joe Nocera notes in his his New York Times blog Executive Suite, some victims of Madoff’s…

The Supreme Court has ruled that white firefighters in New Haven, Conn., were unfairly denied promotions because of their race. The case has received special attention because Supreme Court nominee Sonia Sotomayor was part of an appellate panel that issued the ruling that was today overturned. Legal experts say the 5-to-4 High Court ruling could alter employment practices across the country and make it harder to prove discrimination. Sotomayor on taxes: Capitol Hill is obviously paying close attention to all of Sotomayor's prior rulings, not just the high-profile ones. Those in the tax world, however, don't have a lot to examine. "Sotomayor has…

Watch out businesses, out-of-state state tax collectors just got a boost from the country's high court.The U.S. Supreme Court today decided against hearing an appeal from out-of-state companies that Massachusetts officials say owe it taxes.As I mentioned about a month ago in Money-hungry states, cities tax trolling, Bay State tax collectors set their sites on credit-card giant Capital One Financial. Massachusetts officials said that since the Virginia-base company made beaucoups money from cardholders who live in their state, Cap One should fork over more than $2 million in taxes to the Massachusetts treasury. The Department of Revenue was emboldened by…

I bet it's not often that "no interest" is used in connection with adult entertainment. But that's a key phrase in a Texas Court of Appeals ruling last week that upheld a lower court's finding that the state's so-called "pole tax" is unconstitutional. Texas officials today said they are appealing the ruling that the $5-per-customer admission tax on certain sexually-oriented businesses violates the First Amendment. The Associated Press reports that lawyers for Texas Attorney General Greg Abbott and Comptroller Susan Combs have asked the Texas Supreme Court to overturn the ruling invalidating the tax. The appellate court ruling that struck…

The United States Tax Court is one way for taxpayers to dispute an IRS decision. In addition to ruling on amounts that the IRS says are due, the Court also has jurisdiction to, among other things, make certain types of declaratory judgments, order abatement of interest charges and award administrative and litigation costs.While the Tax Court isn't the starting point for most tax disagreements, sometimes it does become the best ultimate avenue for tax issue resolution. Unfortunately, it combines the two things that tend to give most of us our worst nightmares: taxes and the legal system. Both are complex…

Helio Castroneves, the two-time Indianapolis 500 winner and Dancing With the Stars champ, will be back on the race track this weekend. A Miami federal jury acquitted him of six tax evasion charges this afternoon. Castroneves' sister, Katiucia, was cleared of the same charges. The siblings' lawyer, Alan Miller, also left the courthouse a free man. Jurors did, however, deadlock on the conspiracy charge against the brother and sister. There's a chance that federal prosecutors could push for another trial on that charge. But don't bet on it. Helio, Katiucia and Miller had been accused of using Panamanian and Dutch…

Finally catching up this afternoon and wanted to pass along the definitive word on same-sex marriages and Iowa taxes. Joe Kristan writes the Tax Update Blog for Roth & Company, PC, based in Des Moines. Joe says that the Iowa Supreme Court ruling (blogged about here) will make little tax difference to most of the state's same-sex couples. "The Iowa tax system allows married couples to file 'separately on a combined return,' giving them each a run up the brackets," writes Joe. Get the rest of the filing details in Joe's post, Same-sex marriage in Iowa: The tax stakes.

Wow! Who would have predicted that Iowa would have a more liberal approach to same-sex couples than California? We are indeed living in interesting times. Just in case you didn't hear, the Iowa Supreme Court today issued a unanimous decision that the Iowa statute limiting civil marriage to a union between a man and a woman violates the equal protection clause of the state's constitution.The decision strikes the language from Iowa Code section 595.2 limiting civil marriage to a man and a woman. It further directs that the remaining statutory language be interpreted and applied in a manner allowing gay…

Limiting Free File participation on the basis of income is fine.So says a U.S. District Court judge, who last week dismissed a class action lawsuit that was filed in 2007 against the Free File Alliance. That's the group of tax software vendors who provide free software and electronic filing to low-income taxpayers via a special IRS Web page. Also named in the lawsuit were Intuit (TurboTax's manufacturer), H&R Block Digital Tax Solutions (maker of TaxCut) and the Internal Revenue Service. Stacie Byers and Deborah Seltzer initiated the class action suit on the grounds that Free File was artificially restricted to…

By all accounts, Ruth and Bernard Madoff were inseparable. Married nearly 50 years, they worked in the same office and ended most days dining together, just the two of them, at a favorite New York City restaurant.But in December, when Madoff admitted that his multibillion-dollar hedge fund was an elaborate Ponzi scheme, Ruth reportedly was as shocked as the rest of the world.”One day, she was married to a stock-market genius, the next she was married to one of history’s great con men,” write David Segal and Alison Leigh Cowan in today’s New York Times.Could the long-time wife of a…

Race fans know Helio Castroneves as a winning, exuberant Indy car driver. Television fans know him as the winner of the 2007 season of ABC’s Dancing with the Stars. Now the two-time Indianapolis 500 champ has a less stellar item to add to his resume: indicted tax evader. Earlier this month, a Miami federal grand jury (Castroneves lives in South Florida) found there was enough evidence to hand up an indictment against the 33-year-old driver on charges of conspiracy and six counts of tax evasion. He allegedly failed to report to the IRS about $5.5 million in income that federal…

A Massachusetts funeral director has won a round in his latest legal battle to eliminate burial fees imposed by the state’s cities and towns. What the municipalities call fees, contends Paul F. Silva, are really taxes in disguise. The Massachusetts Appeals Court agrees, ruling that the burial permit fees charged in the three towns named in Silva’s suit are "improper taxes." "A municipality should not be able to justify an otherwise invalid tax merely by providing an accounting of expenses," said the Court. Silva, a funeral director at Silva-Faria Funeral Homes in Fall River and Somerset, had already won a…

Yeah, that headline looks like it came straight out of weekly News of the Weird, but it’s true. Plus it’s much catchier than "Demutualization tax battle finally ends." Both are accurate. The decision more than two decades ago by insurance companies to demutualize and the accountant who for most of that period fought the IRS over the tax consequences to individual policy holders due to that corporate shift has been resolved in favor of taxpayers. And some folks now might finally reap the tax refund rewards of accountant Charles Ulrich’s efforts. Demutualization details: For all of us non-insurance folks, here’s…

Two attorneys have come up with what is probably the first tax comic book. Get Smart (About Special Manufacturing Deductions) is the creation of Jeffrey M. Tolin, tax principal and  senior tax advisor for the entertainment industry at Ernst & Young, and Michael H. Salama, vice president for tax administration and senior tax counsel with the Walt Disney Company. At the Web page for Loyola Law School, Los Angeles, where Tolin is an adjunct professor in the school’s Tax LLM program, the graphic novel is described as a parody of the classic television show Get Smart. It blends, say the…

Yeah, I’m tired of Wesley Snipes, too, but at least this time the news about his tax fraud conviction is good for the rest of the taxpayer public. Snipes has been ordered by a federal district judge to pay $217,363.75 to cover the government’s prosecution costs. Here’s the itemized bill: $2,456.40 for daily trial transcripts $193,716.98 for scanning, printing and numbering documents $21,052.19 for witnesses $138.18 for certification and copying of trial exhibits The court-ordered amount is $40,323.99 less than the bill Assistant U.S. Attorney M. Scotland Morris had submitted. The big difference is in connection with witness-related fees. Now…

It  sounded like a good idea. Pay $20,000 to get out of a $300,000 tax bill. Unfortunately, it wasn’t an offer in compromise arrangement from Florida construction company owner Randy Nowak. Rather, it was the amount Nowak allegedly offered a hitman to kill the IRS agent who was auditing him. However, the guy Nowak thought was a gun for hire was an undercover FBI agent. In addition to trying to avoid the $300,000 that the audit indicated he owed, Nowak allegedly was worried that the examination process would reveal the $4 million he had stashed in offshore accounts. Now Nowak…

Wesley Snipes has been granted court permission to leave the United States in order to work on a couple of films. As blogged about here, the action film star asked for the travel OK to head to London and then Bangkok in connection with movie roles. Snipes, just in case you’ve forgotten, was convicted in March of three misdemeanor counts of failing to file returns on $13.5 million in earnings. He was sentenced to three years in federal prison, but has been free on bail while appealing the conviction. Judge William Terrell Hodges signed off on the work travel request…

Earlier on this July 4th, the issue of taxation and representation was broached in connection with levies on fireworks purchases. It also came up after the change on July 1 of Washington state’s tax system from origin-based to destination-based for shipped goods. That means that taxes now will be collected based on the location of the buyer, not the location of the seller. The change was made, say Washington officials, because Evergreen State brick-and-mortar retailers that collect the state’s sales tax are losing business to out-of-state retailers that don’t charge buyers the tax. As you might suspect, many Washington residents…

Action film actor Wesley Snipes wants out of the country. Not permanently. Just for a few months to make some more movies. But since Snipes was convicted in March of three misdemeanor counts of failing to file returns on $13.5 million in earnings, he has to get permission from the court. The next month, Snipes was sentenced to three years in federal prison, but he has been free on bail while his appeal works its way through the courts. Last week Snipes’ attorneys filed a formal request with the Florida federal court that would allow the actor to travel this…

State taxes certainly are a pain for some prominent people. The latest celebrity to run afoul of state collectors is MSNBC’s Keith Olbermann. As the host of the cable TV program Countdown, he regularly cites the screw-ups of others in his "Worst Person in the World" feature. Now Olbermann is catching heat for apparently being one of the worst New York state taxpayers. OlbermannWatch.com, which proclaims that it has been "persecuting Keith since 2004," broke the story that a New York state tax warrant is still outstanding for Olbermann in connection with $2,269.50 in unpaid Empire State taxes. The money…

Aficionados of crime tales, and judging from the popularity of investigative themed shows on TV nowadays, there are a lot of us, might already know that on this day in 1934 the felonious rampage of Bonnie and Clyde came to the ultimate conclusion. The celebrated Depression-era Texas outlaws were killed in a roadside ambush, famously recreated in the Faye Dunaway-Warren Beatty film, outside of Gibsland, La. According to the Texas State Historical Association (as previously acknowledged, we Texans own up to — OK, revel in — our excesses, both bad and good), the duo’s bodies were put on public display…

The U.S. Court of Appeals for the District of Columbia Circuit, by a 2-1 margin, has ruled that the United States discriminates against the blind and visually impaired because our paper currency is all the same size regardless of a bill’s denomination. I think this — the ruling, not the discrimination! — is a good ruling for a couple of reasons. First, while I haven’t yet had any trouble distinguishing between a $20 and a $50, I do need my reading glasses for most tasks. It’s just a matter of time until I’ll need some help paying properly. Secondly, my…

States and municipal bond managers are breathing easier today. The U.S. Supreme Court just ruled that it’s OK for states to exempt the earnings from the bonds they issue, but collect taxes on bonds issued by other states. We blogged about this case back in October and November. Forty-two states offer such exemptions for their municipal bonds. An estimated $2.5 trillion is invested in the municipal bond market. And nearly 500 mutual funds invest in bonds from specific states to take advantage of the tax  breaks. The 7-2 high court decision (Justices Anthony Kennedy and Samuel Alito dissented) overturned a…

As mentioned in my post (here) on Wesley Snipes’ prison sentence for tax evasion, here’s the promised follow up on the monetary penalty portion. Reuters reported that the judge did not fine Snipes, but the IRS still could levy penalties and interest charges in addition to the taxes owed. Meanwhile, according to the Orlando Sun-Sentinel, during yesterday’s sentencing hearing, the actor’s lawyers offered prosecutors checks worth $5 million to pay part of his debt to the government. Prosecutors called the courtroom check presentation a grandstanding move, with prosecutors saying the money was just "a fraction of what he owes." The…

Wesley Snipes latest role will be as a federal prisoner. According to news reports from the Florida courtroom, the actor was sentenced to the maximum three-year prison term for his conviction earlier this year on three misdemeanor counts of tax evasion. Snipes’ attorneys had argued for no jail time and offered dozens of letters from family members, friends and even fellow actors Denzel Washington and Woody Harrelson attesting to Snipes’ good character. The judge obviously was not swayed. No word yet on any fine tagged onto the jail time. Updates will follow as that information becomes available.

Actor Wesley Snipes, convicted of three misdemeanor counts of of tax evasion back in February (blogged here), is to be sentenced today. Federal prosecutors have gone on record in seeking the maximum punishment for the actor: up to three years in prison and a fine of $5 million. Snipes attorneys, meanwhile, have submitted a 70-page sentencing memo (courtesy of TaxProf) to the court arguing for clemency, because, in part, the actor, most well-known for his "Blade" vampire films, "is contrite, promises that he will never again break the law, and respectfully asks the Court to consider not just the jury…

Tax preparers in the Des Moines, Iowa, please be on the lookout for a prospective client who needs, in addition to general filing help, some assistance in getting a replacement W-2 form. And by the way, he might pay you in stolen funds. A man who robbed a convenience store made off with about $115, according to the Des Moines Register. But he left the police a great clue. In his haste to clear the crime scene, he left behind his jacket. In a pocket, officers found  a W-2 form they are sure belongs to the man. The taxpayer named…

Not to kick a man when he’s down, although New York Gov. Elliot Spitzer sure is making it easy, but the New York Times has a good article today elaborating on the role of the IRS’ Hauppauge office in tracking the [soon to be ex?] governor’s alleged payments to the Emperor’s Club prostitution ring. According to the paper in Revelations Began in Routine Tax Inquiry, "… the criminal investigation that discovered the tryst began last year in a nondescript office building opposite a Dunkin’ Donuts on Long Island." Finally, the Howard Johnson’s Motor Lodge across the street from the Watergate…

Notch up another one to the T-men. The IRS was a key player in taking down New York Gov. Elliot Spitzer, the man who made his political name battling high-finance corruption. That’s because it was the money, not the prostitute to whom Spitzer allegedly gave it, that first caught investigators’ attention. It seems that governor’s "suspicious" money movement prompted a bank to call the IRS which then brought in the FBI’s Public Corruption Squad. According to to ABC News, federal agents initially thought Spitzer was hiding bribes. "We had no interest at all in the prostitution ring until the thing…

Wesley Snipes walked away last week relatively unscathed from his tax evasion trial (blogged here). So that naturally got legal minds across the country commenting. TaxProf has a collection of thoughts (here) from tax law professors, including an educator from my alma mater (Texas Tech), one from Houston, and another from the little school down the road in Austin. My, we Texans sure are chatty, but then I guess you already knew that!

This morning, both sides in the Wesley Snipes tax evasion trial presented their closing arguments. Now it’s up to the actor’s ostensible jury of his peers. The defense unexpectedly rested Monday without calling any witnesses. Rather than put a string of celebrities on the stand to underscore Snipes’ argument that he simply got bad tax advice, his attorneys opted to rely on the contention that the prosecutors’ case was so weak that they bore the "complete failure of their burden." Courtroom gawkers were no doubt disappointed that the trial was cut short. Among the defense’s potential witnesses were Sylvester Stallone,…

It’s finally showdown time for Wesley Snipes, star of the vampire film series "Blade," who in real life is facing off against the IRS. As blogged about previously (here, here and here), Snipes is charged with conspiracy to defraud the government, filing a false claim for a $7 million refund and failure to file tax returns for the six years starting in 1999. His trial begins today in Ocala, Fla. The actor’s attorneys are expected to argue that Snipes is not actually required to pay taxes. Oh, Wesley! If only it were that easy. Uncle Sam usually wins: Sure, some…

The new year always brings with it changes, especially in the legislative area. Stateline.org has put together a nice compendium of new state laws that take effect today. Here are some key tax-related ones: Massachusetts, which set a precedent last July with the first U.S. law requiring each of its uninsured residents who can afford health care to buy it, now goes a step further. Starting today, every able Bay State resident who hasn’t gotten health insurance will lose a state income tax exemption and get slapped with monthly fines. Texas begins levying a $5-per-customer charge at strip clubs, aka…

The IRS got a very welcome belated holiday gift Dec. 27 when the U.S. Court of Federal Claims ruled that a "Son of Boss" transaction was an effort to avoid paying taxes. It was the first such case to go to trial. The court found that the tax shelter, successor to an earlier scheme known as a bond and options sales strategy (BOSS), generated artificial losses for Jade Trading. The entity was a limited liability corporation allegedly used by Robert Ervin and two of his brothers in 1999 to offset the income taxes due on a $40 million profit from…

Talk about timing. Just as the alternative minimum tax 2007 patch was signed into law yesterday, a Tax Court ruling (129 T.C. No. 18) was issued requiring a married couple to include qualified dividends in the calculation of their AMT liability.Below are the case facts, per the opinion issued by Judge Michael B. Thornton. On their 2005 tax return, Tobias and Gertrude Weiss reported $24,376 in qualified dividends — you know, those earnings that get the preferred capital gains tax rates. But they didn’t include that amount in $265,408 that they reported as taxable income, and upon which they figured…

Ten people have been indicted on federal charges of trying to illegally obtain confidential information on more than 12,000 citizens across the country. The federal indictment, unsealed today in Seattle, Wash., alleges that the owners of the Bellair, Wash.-based BNT Investigations, the company’s office manager and seven associated private investigators across the country posed as others in order to get government agencies — including the IRS, the Social Security Administration and various state employment security offices — to provide confidential information. The year-long investigation dubbed, "Operation Dialing for Dollars," also revealed that some of the individuals posed as representatives of…

It wasn’t a particularly happy Thanksgiving this year for Austin-area resident George Green. Twelve years ago, the former Texas Department of Human Services architect raised questions about construction quality, or rather the lack of it, and claimed contractors were offering kickbacks. Green subsequently was fired, sued under the whistleblower law and won a $13.6 million judgment against the state. But his legal luck hasn’t held up against another government entity: the IRS. Just before turkey day, Green got word that a federal appellate court agreed with the IRS argument that much of his settlement was for punitive damages, which are…

I’ve been searching for responses from the tax software companies named in the class action lawsuit filed against Free File Alliance corporate partners (more on the legal action in this earlier blog post). Not surprisingly, there’s nothing official on any of the major company Web sites. It’s a cliche, but I’m sure the truth, that the companies’ lawyers are all poring over the documents and have mostly muzzled spokespeople. However, I did find a few reply reports and, in the interest of fairness, wanted to share them. Tim Hugo, executive director of the Free File Alliance (this link takes you…

A group of taxpayers who didn’t meet Free File income requirements have decided to recoup their e-filing fees by taking the software companies to court. Two Philadelphia law firms have filed a class-action suit in federal court against the companies that make up the Free File Alliance. They estimate that damages could be billions of dollars. The complaint, filed by Feldman, Shepherd, Wohlgelernter, Tanner & Weinstock and Cooley & Handy, alleges that while the agreement the IRS made with the Alliance companies was supposed to provide free e-filing for up to 70 percent of Americans, only 3.8 million taxpayers filed…

A Pennsylvania woman is suing Kmart over a 12-pack of Angel Soft toilet tissue that cost her $3.99. The shelf price isn’t the problem. Rather, says Mary Bach, the Kmart store where she purchased the TP improperly collected 7 percent sales tax on what is a non-taxable item. Her final register tally: $4.27 — or 28 cents too much. So Bach is taking her case to court. A hearing is set for Oct. 31, at which she’ll be asking for $100 in damages, plus court costs, for violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law. It’s not just…

The Supreme Court has five tax cases on its docket for the new term, which began Monday. A couple of them strike me as having the potential to affect "average" taxpayers. First, there’s Kentucky Department of Revenue v. Davis, which deals with the issue of a state providing an income tax exemption for bonds it issues, while continuing to tax interest income realized from bonds issued by other states. This is a standard practice in most of the jurisdictions that have a state income tax. State tax collectors pocket a portion of interest paid on out-of-state municipal bonds, but allow…

The last we heard from actor Wesley Snipes, he was corresponding with an Orlando reporter about tax evasion charges filed against the actor. In that e-mail exchange, Snipes, best known for his vampire hunter Blade movie series, complained that he was being "scapegoated" by the U.S. government "because there’s more public interest in ‘celebrities gone bad’ than ‘rich people being taken advantage of.’" In case you forgot, Uncle Sam alleges that Snipes owes $12 million in back taxes. That sum is due to, according to the indictment, conspiracy to defraud the government, making false refund claims and failing to file…

While much of the eastern half of the country bakes in a late-summer heat wave, many folks no doubt are dreaming of cooler places. Frigid climes also have been the subject of tax fantasies, as some taxpayers have sought to use a cold locale as the basis for a tax break. Remember the fellow who worked at McMurdo Station, Ross Island, Antarctica, and who tried to report his earnings there as foreign income (blogged here)? He was hoping to exclude that amount from his U.S. tax filing. The Tax Court said no in that instance, and has again turned a…

Ted Stevens, the longest-serving Republican in the U.S. Senate, is under investigation by the FBI, IRS and Interior Department in connection with a political corruption case. Federal lawmen on Monday raided the 83-year-old Alaskan’s personal home in the ski resort area of Girdwood. Of apparent interest to officials who served the search warrant are Steven’s ties to an Alaska energy services company, Veco. That company’s chief executive has pleaded guilty to a bribery scheme involving state lawmakers. The Washington Post has published a time line of the Steven’s investigation. Last year, Stevens gained recognition beyond Alaska’s borders when he succeeded…

If you’re an e-shopper of a certain age, you probably remember the early days of e-commerce. It was new, it was exciting, and there were lots of items that you just couldn’t find down on Main Street. Even better, in almost every instance, you didn’t have to pay sales tax on your electronic purchases. That didn’t last long. State revenue departments were soon demanding their portions of revenue from online sales. The determining factor was whether a company had an actual physical presence in the state. That means if you’re looking for a particular scented candle and your local Yankee…

A federal judge today dismissed indictments against 13 former KPMG executives in what has been called the biggest criminal tax case in U.S. history. U.S. District Judge Lewis A. Kaplan issued his ruling (full text here, courtesy of the Wall Street Journal), saying he had no alternative but to dismiss the indictment after determining last year that prosecutors violated the former accounting firm executives’ constitutional rights by putting undue pressure on KPMG not to advance them defense costs. The dismissal is not necessarily bad news for the feds. In fact, federal prosecutors had urged the judge to do just that.…

Last August, a D.C. federal appellate panel ruled that the IRS cannot collect taxes on money awarded as compensation for emotional distress and other intangible injuries.  In the original ruling, Marritta Murphy was awarded damages for emotional distress and loss of reputation after she blew the whistle in 1994 on environmental hazards at a New York Air National Guard base. The three-member D.C. appellate panel said Murphy should get a tax refund of $20,665, plus interest, on her $70,000 judgment from the Department of Labor Administrative Review Board because it was "compensation for the loss of a personal attribute," not…

I try to avoid gender stereotyping, mainly because many of the attributes traditionally assigned to women are not applicable to me. I love most sports. I hate shopping, except for groceries. I’d rather wander the aisles of a Lowe’s or Home Depot than any high-fashion mall. I long ago gave up routinely applying makeup; the choice gives me an extra half hour of sleep in the mornings. On the distaff side, I know that all men aren’t pigs. In fact, I have as many male friends as female ones. That’s why I was so distressed by the creation of the…

That’s what one Georgia lawmaker is suggesting. Glenn Richardson, Speaker of the Georgia House of Representatives, plans during next year’s legislative session to push a bill that would levy the state’s sales tax on attorneys. Actually, the measure would tax all professional-service providers, notes an article on Law.com, from barbers and landscapers to accountants and, yes, lawyers. Since it’s always more fun to consider an attorney in an uncomfortable, and in this case taxing situation, let’s look at what the measure might cost a counselor in Atlanta, where the sales tax is 8 percent. If the lawyer puts in an…

There weren’t any tax charges connected with Paris "I want my mommy" Hilton’s return to L.A. County jail last week, but we start with something that blog and tax aficionados should find pretty cool. Former Atlanta Mayor Bill Campbell was impressed by a blogger’s critique of his sentence for tax evasion. So impressed, that Campbell called the blogging law professor and asked him to argue his appeal.   Douglas A. Berman, a law professor at Ohio State University’s Moritz College of Law and author of the blog, Sentencing Law and Policy, agreed. On Friday, June 8, he argued before Atlanta’s…

For this week’s look at tax cheats, we’re going with just two cases because this weekend has turned out to be just as overloaded as Monday through Friday was. But I think you’ll find each instance ranks quite high in the "you’ve got to be kidding" category. First, we have another big accounting firm involved with bogus tax shelters, a la KPMG and Jenkens & Gilchrist. So what, you say? Here’s what: Federal prosecutors say one of the illegal shelters devised by Ernst & Young employees used the Sept. 11 terrorist attacks as the basis to cheat the government of…

What do a California businessman, a Michigan gambler and a former museum administrator in Massachusetts have in common? They make this week’s list of folks facing tax troubles. Let’s go West to East, meaning we start with Robert Gene Cable of La Crescenta, Calif. The 75-year-old former owner of Enmark Aerospace in Valencia pleaded guilty this week in federal court to conspiracy to "impede, impair, obstruct and defeat the lawful functions of the Internal Revenue Service." Moving on the Michigan, we find a gambler whose luck ran out when he, according to federal charges, filed false reports to avoid paying…

Medical marijuana is not deductible on a federal 1040. But other services provided by a San Francisco-based group that helps folks suffering fatal or debilitating illnesses can be written off. That was the split decision handed down Tuesday in a U.S. Tax Court ruling regarding expenses claimed by Californians Helping to Alleviate Medical Problems, Inc. The group, which in subsequent references we’ll refer to by the acronym CHAMP because that sounds much better than the Tax Court’s "Petitioner" (or P), was organized in December 1996 under California law as a public benefit corporation to help individuals suffering from AIDS and…

For the second week, although a day late this time (the inaugural roundup was May 4), I did a search of tax crimes. Here’s the current batch of convicted tax miscreants. We start with a former IRS director, Jesse Ayala Cota, who pleaded guilty in a Kansas City, Kan., court to promoting a tax-fraud scheme through his accounting firm. Cost to the U.S. Treasury: $1.3 million. Cota, according to court documents, pocketed $300,000. Between 1997 and 2002, he prepared bogus tax returns based on “false and misleading representations” to clients. Cota admitted to using his former position with the IRS…

The Senate’s recent look at ways offshore tax havens escape IRS enforcement got me thinking about those scofflaws who do get caught. So I did a little Googling and discovered some recent tax prosecutions. I might just make this a regular Friday afternoon effort. I suspect I’ll find at least a few reports of tax miscreants every week. The cases might not be as sexy or salacious as those reported on The Smoking Gun, but the ramifications for us law-abiding taxpayers are substantial. If you and I are shelling out our fair share, then everyone else needs to do so,…

You’ve heard that old saying, "Virtue is its own reward." Well, a more accurate proverb for some tax evaders is "Patience is the best tax reward." It seems that if you’re engaged in a financial activity that the IRS finds suspicious, like say an offshore account, you and your tax haven money have a pretty good chance of escaping any rebuke (or worse) from the tax agency. The reason is quite simple: Tax examiners just don’t have time to complete these types of investigations. As long as you can wait out Uncle Sam, you’re likely to get away without any…

A Washington state man set up a "bank" in his suburban home for folks who specifically wanted to evade taxes. That’s the charge against Robert Arant, whom IRS investigators say took in at least $28 million from people throughout the United States who wanted accounts they could conceal from the tax agency. Or, as Arant reportedly advertised, his financial services were for those "who would rather not deal directly with the banking system." According to news reports (such as this Associated Press story on the WTOP radio Web site), Arant pooled his customers’ money it in six accounts at Bank…

I hate to give this creep any attention, but at least this time it’s to report that he’s now facing federal tax evasion charges. Joe Francis, who reportedly makes an estimated $29 million a year from the exploitative videos, was indicted last week by a federal grand jury in Reno, Nev., on charges of deducting more than $20 million in false business expenses on his California and Nevada companies’ 2002 and 2003 tax returns. The improper business deductions, according to the indictment, include $3.78 million used to build a residence in Punta Mita, Mexico, $10.4 million in "false consulting services"…

Marc Anthony, singer, actor and husband of Jennifer Lopez, has agreed to pay $2.5 million in back taxes and fines owed by himself and three of his companies. The Manhattan District Attorney’s office said that between 2001 and 2004, Anthony failed  to file New York state and city corporate tax returns on $15.5 million in income. According to New York Department of Taxation officials, the deaprtment’s computer kicked out Anthony’s return because of discrepancies. Anthony was not charged with any criminal tax acts, according to prosecutors, because the salsa singer’s taxes for the years in queston were prepared by a…

At a Senate hearing this morning (previewed here), a convicted felon said that using stolen identities to apply for tax refunds was "an easy way to make money quickly." With a sport coat partially hiding his orange prison jumpsuit and flanked by federal marshals, Evangelos Soukas told the Senate Finance Committee that he was a "criminal already on the run from the FBI" in 2000 when he came across an Internet ad for quick tax refunds. He used his mother’s W-2 form to fashion a legitimate-looking tax return, applied for a refund anticipation loan through a tax preparer and got…

Everybody needs help now and then. That’s especially true at tax time, when millions of us turn to professionals we expect to guide us safely through the tax code. But once in a while, a tax pro becomes more hindrance than help. Most recent case in point: The IRS yesterday shut down 125 Jackson Hewitt branch offices in Detroit, Atlanta, Chicago and Raleigh, N.C. The tax agency alleges that preparers at these sites, cited as locations "in which fraudulent tax return preparation is encouraged and flourishes," filed fake returns to obtain inflated refunds that cheated the federal government out of…

I was chatting with the Web’s Tax Mama, Eva Rosenberg, this afternoon and one of our topics was questionable tax tactics. Then I opened up my e-mail box and there was a release from the IRS on a $76 million penalty settlement agreement the IRS has reached with a Texas-based law firm for, quoting the IRS here, its "promotion of abusive and fraudulent tax shelters and violation of the tax law concerning tax shelter registration and maintenance." As Eva had just noted not half an hour earlier, "You don’t ever want an IRS press release with your name on it."…

The IRS, which is always nagging us taxpayers to be careful in filing our returns, needs to talk to its government colleagues in the Justice Department about their paperwork protocols. Poorly written prosecutorial documents just cost Uncle Sam more than $100 million in what was supposed to have been the feds’ biggest tax prosecution ever. Telecommunications entrepreneur Walter Anderson admitted hiding hundreds of millions of dollars from the IRS and District of Columbia tax collectors. Federal prosecutors said Anderson used offshore corporations to disguise his ownership in telecommunications companies that earned more than $450 million between 1995 and 1999. He…

$49,000 in deductions for donated designer clothing is disallowed. No, that extravagant (and errant) tax claim wasn’t on Paris Hilton’s tax return. It was on the 1040, actually the Schedule A accompanying the 1040, of a New York investment banker. There wasn’t any question as to whether the haute couture was donated. The problem was with the dollar assessment of the expensive designer duds. In a written opinion, the special trial judge called the valuation "overly optimistic." True, the items did indeed cost a pretty penny when purchased. But as one consignment shop owner told the Washington Post, everything depreciates,…

Want to end up in a federal jail cell? The IRS has just issued a list of 40 tax claims that'll help you get your wish. The official Internal Revenue Service name for these tax, or rather nontax positions, is "frivolous." That's a nice euphemism. I call them, the arguments and their adherents, crazy. Crazy for thinking these wacky schemes would work. Crazy for thinking you won't get your wrist, or worse, slapped if you use them to avoid paying your tax bill. I know that tax protesters for many years pointed to the lack of prosecution of some of…

Harry Willner, an IRS agent since 1974, has been charged with tax fraud. Federal prosecutors in Manhattan allege that Willner was part of a group that evaded taxes by manufacturing false business deductions for a company Willner operated out of his home. The Fair Lawn, N.J., resident was arrested Monday and subsequently released on his own recognizance. The amount of the alleged fraud: $758,000 claimed as a "bad debt" from 1998 through 2001. The resulting tax evasion on his personal return, prosecutors say, was almost $21,000 over four years. The potential time in jail for Willner: 18 years. Details on…

We’ve all done it. Typed in the wrong URL. Or taken the lazy way and just hit enter after typing in what we thought was the site name to have our browser automatically add the extension. The only problem with that shortcut method is that the automatic extension is dot-com. And that might not be what you’re looking for. Case in point: Not so long ago, anyone wanting to see what the President of the United States was up to and who typed dot-com instead of dot-gov after White House got an entirely different, and decidedly adult, Web page. Whoa…

So maybe the criminals weren’t hardcore Capone clones, but they were breaking the tax law and they now will have to pay. The IRS announced this morning that it had executed search warrants at tax preparation businesses in five states, closing business and seizing computers and documents that federal agents believe will prove the filing of illegal inflated telephone tax refund claims. Earlier, the IRS had reported widespread problems with the new, this-year-only tax break, which is the result of the agency’s decision to stop collecting a 108-year-old long-distance excise tax. Some of the incorrect filings were simply mistakes by…

Whether you just dropped a couple of bucks into the office Super Bowl pool, are in Vegas watching the game line (and your bank account) change all day, handed money over to a bookie or are bouncing between this blog and your online gambling account, the big money you make today when Da Bears beat the odds and win is taxable. The problem for the IRS, as detailed in this story, is that many people don’t realize that Uncle Sam counts gambling winnings as taxable income. And even if they do, they tend to ignore the law. Obviously, it’s a hard…

Less than a week ago, I blogged about how to turn in a tax cheat and mentioned a new law enacted to improve the apprehension of scofflaws. What shows up today in my e-mail box? An announcement from the IRS that the agency has just appointed Stephen A. Whitlock as director of the new Whistleblower Office. Part of Whitlock's job will be administering the program that receives information to help uncover tax cheating. And, paraphrasing the Law & Order voice, the separate, yet equally important job of the office will be handing out appropriate rewards to whistleblowers. In making the…

As I’ve mentioned before, I get letters from readers. I love ’em, readers and their questions. However, as I’ve also mentioned before, I can’t answer every question that shows up in my e-mail. Some are technical beyond my knowledge (remember, I’m not an accountant). Others I know I could answer, but they would take time and unfortunately, just like y’all, I tend to run very short of that commodity, especially during tax season when I have a regular writing gig. Others queries, though, where I know the answer off the top of my head or know just where to find…

Just in case you were wondering, Antarctica is not a foreign country. At least not in the eyes of the IRS. And definitely not when it comes to Dave Arnett’s tax return. Arnett of Hayward, Wisc., a state that has its fair share of cold weather, was transferred in 2001 to McMurdo Station, Ross Island, Antarctica. No, he did not royally piss off his boss. Rather, his employer was Raytheon Support Services, which had a contract with a National Science Foundation project at the South Pole site. In filing his 2001 taxes, Arnett excluded the $48,894 he earned while at…

Back in August, a Washington, D.C., federal appeals court judge ruled in Murphy v. The United States that the federal government cannot tax money individuals receive as compensation for emotional distress and other intangible injuries. Now, however, the full federal appeals panel has overturned the ruling. Yep, Murphy’s Law does indeed apply to other, more official laws, too. I’m not a trained legal scholar, but I am glad that this issue will get another look. No, I’m not arguing that Uncle Sam get a piece of every single dollar any of us makes. But this case seemed at best problematic,…

This time he wants more than just your taxes. He wants you to help him collect them. As the year winds down, the IRS is conducting its annual search for employees to help it get through the filing season crunch. Here in Austin, the call’s gone out via ads in the local daily newspaper (shown here) as well as on television, albeit mostly during late-night programs. According to the the print appeal and the stentorian tones of the TV voice-over guy, a job as a G-man or woman is great: retirement plan, paid vacation, stability ("We’re not an up-and-coming employer.…

Twice this year, a tax court has thrown out attempts by filers to blame tax return mistakes — which, of course, produced nice tax results for the filers — on computer software. In the latest ruling, filed last week, the court made it clear that the taxpayer is the one ultimately responsible for submitting a return and making sure such filing is timely and correct. Here are the facts, per the court ruling. Henry Broderick, owner of a small business in New Jersey, filed a corporate return for his company in 2002 showing earnings of just under $3,000 and business…

Wesley Snipes, known for his role as the title character in the vampire-slayer series "Blade," is now facing off against the IRS, an agency that has itself been called bloodsucking. On Tuesday, the U.S. Department of Justice office in Tampa, Fla., unsealed an eight-count indictment that charges Snipes and two Florida men with "conspiracy to defraud the Internal Revenue Service and presenting a fraudulent claim for payment." Snipes also faces six counts of failing to file income tax returns. If convicted, the men could get maximum prison sentences of five years for each of the false claim and conspiracy charges.…

I'm far from a Biblical scholar, but a story in Tuesday's New York Times sent me scripture searching. Even the most religiously lapsed among us knows this one (recounted in the gospels of St. Luke, chapter 20, verses 21-26, and St. Mark, chapter 12, verses 13-17), about how, as the Pharisees were trying to trip up Jesus, they delved specifically into that touchy area where church and state intersect. It's one of my favorites, since the topic of taxes is specifically addressed and is the where JC issues one of his most famous pronouncements: "Render to Caesar the things that…

A Brooklyn tax preparer has been getting big federal refunds for his clients by declaring that New York State is a separate country. Under the preparer’s logic (OK, we’ll use that word, advisedly, for now), wages earned in the state are “foreign” income, qualifying NY filers for the foreign earned income tax exclusion. No surprise that federal officials respectfully disagree with the tax pro, Garry P. Webb-Bey, and have hauled him into court. According the U.S. Justice Department lawsuit, Webb-Bey has frivolously claimed $335,000 in refunds and his clients have received actual IRS checks totaling more than $97,000. You can…

Albert Einstein once said that the hardest thing in the world to understand is the income tax. Now some tax scholars say a ruling on what is — or more precisely, isn’t — taxable as income in legal awards is equally incomprehensible. On Aug. 22, a Washington, D.C., federal appeals court judge ruled that the U.S. government cannot tax money individuals receive as compensation for emotional distress and other intangible injuries. Some brief background: In 1994, Marrita Murphy filed a complaint with the Department of Labor claiming that her former employer, New York Air National Guard, had blacklisted her because…