I need a clever tax pro

I need a clever tax pro
One with a nimble mind
Someone who thinks like I do
Who'll cover my behind

My pro must understand me
And never cause a fuss
My details may be fuzzy
But she'll curb the urge to cuss

We won't count Mom's deposit
Coming from the SSA
For five years I've enjoyed it
Ever since she passed away

It turns up just like clockwork
I just can't make it stop
A plea to call it off
Would cause a needless income drop

My home's a custom call site
For an extra little gig
My nifty IRS badge
Helps legitimize the jig

My pug is my true business
I therefore write him off
He's lavished with deductibles
At which most pros would scoff

My tax pro won't be bothered
To check out what I say
She'll get me every credit
And make my tax go ‘way

She'll prove she's indispensable
And worth her weight in salt
But when we go to Tax Court
I'll say it's all her fault

When you lie about your assets to the IRS, you make an ass out of ... well, just yourself

Melville D. Hayes, an orthodontist from Ohio, was slapped with a 15-month jail sentence for lying about his assets on IRS Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals.1

Hayes underpaid his tax for 2005–2007 by $125,753.62, and when the IRS came to collect in 2009, they asked him to complete Form 433-A so they could determine his ability to pay. One of the questions on that form asks if the taxpayer had transferred assets for less than their full value in the last 10 years, to which Hayes answered "no." Except that in 2007 and 2008, he had given his mother $56,445 in jewelry and antiques. But other than that, he hadn't transferred assets for less than their full value in the last 10 years.

Because he didn't claim those assets, the IRS concluded that Hayes was not able to repay the amount and closed the collection case. In 2011, Hayes declared bankruptcy, claiming $651,874 in assets and more than $1.4 million in liabilities. On his personal property schedule, the only items listed were old dental X-ray machines, a 1963 Cadillac Fleetwood that didn't run, and a 10-year-old computer.2

In 2013, Hayes' mother died, and the assets he had given her all came back to him, and somehow the IRS caught word and brought criminal charges against Hayes for lying on Form 433-A.

At sentencing, the district court and the parties went back and forth about whether the tax loss was created when he underpaid the tax or when he lied to the IRS on Form 433-A. The court agreed that the recommended sentence was zero to six months. But because Hayes had caused harm to the U.S. government by causing the tax he owed to not be collected when he definitely had the means to pay, the court opted for a harsher 15-month sentence and $223,783 in restitution.

Hayes appealed, claiming that the court used his socioeconomic status against him. But the appellate court said no, the district court had given harsher sentences to people who had stolen less. Plus, the court didn't want the public to "lose faith in the law's evenhandedness." Faith restored.

1 U.S. v. Hayes (January 4, 2017) U.S. Court of Appeals, Sixth Circuit, Case No. 16-3292
2 http://blogs.wsj.com/bankruptcy/2015/08/19/stories-of-weird-bankruptcy-the-trial-of-the-alabaster-medallion/

Strip club owners reveal scam to undercover IRS agent

An Oregon jury was making it rain ... rain prison sentences, that is.

A father and his two sons are headed to prison for skimming around $1.5 million in cash from their two Portland-area strip clubs and filing false tax returns. The trio charged cash cover charges for customers to get in the door (according to reviews on Yelp, cover was around $3). They also took a cut from the dancers' cash earnings as "stage fees," which included fees for use of the club's facilities plus fines for showing up late or breaking other etiquette rules.

The family maintained books that recorded income from liquor sales, lottery, and ATM fees, and provided these books to their tax preparers. But one of the sons maintained a second set of books at home that tracked all of the income coming into the club, including the door charges and stage fees.

The IRS had its eye on the business from the beginning, and when the family listed the clubs for sale, an undercover IRS agent swooped in to pose as a potential buyer. To back up their high sales price, the family brought out the second set of books and proceeded to explain their double-book system to the IRS agent, who knew how much the clubs had reported the previous year and astutely noticed that the numbers he was being shown didn't match.

At trial, the brothers argued that their filing of false tax returns wasn't due to willfulness, just negligence borne of being unsophisticated businessmen.

1 www.forbes.com/sites/robertwood/2016/10/26/strip-club-owners-get-prison-terms-based-on-irs-undercover-operation/#2f9b12f179c3

A few fun facts about this week's writers:

Diane FullerDiane Fuller is a woman of many talents which include writing children’s poetry, taking unwitting challengers to town in poker, and whipping up Michelin-worthy dishes from scratch. Find her laughing with her two grandkids.
Hometown: Los Altos, CA

Kathryn Zdan, EAKathryn Zdan, EA, is not only director of the editorial department, she also "rocks the house" as a regular in curling bonspiels around the country. She also enjoys foreign and avant-garde film, baking, and the Investigation Discovery channel.
Hometown: Plymouth, MI

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