Man Indicted for Obstructing and Impeding the IRS by Filing False IRS Forms Claiming $36 Million in Refunds

Source: http://7thspace.com/headlines/429561/man_indicted_for_obstructing_and_impeding_the_irs_by_filing_false_irs_forms_claiming_36_million_in_refunds.html

Richard S Hartunian, United States Attorney, Northern District of New York, announces that a federal grand jury in Syracuse has returned a seven-count indictment charging Glenn Richard Unger (62, of Ogdensburg, New York) with obstructing and impeding the Internal Revenue Service (IRS) by filing numerous false and fraudulent IRS forms seeking refunds. Specifically, the indictment alleges that Glenn Richard Unger obstructed and impeded the IRS between 2007 and 2011 by filing numerous false and fraudulent claims with the IRS for payment of a refund of taxes totaling approximately 36 million dollars. Upon receiving the false IRS forms, the IRS realized that they were fraudulent and did not issue any refund checks to Glenn Richard Unger. The indictment also alleges that the defendant filed false claims for refunds, evaded paying income taxes, and filed a fictitious obligation.

If found guilty, the defendant faces a statutory maximum sentence of 20 years, a term of supervised release of up to three years, and a maximum fine of $250,000. The defendant was arraigned in Albany, New York, on January 2, 2013, before United States Magistrate Judge Randolph F Treece and is currently detained. The charges and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty. This prosecution resulted from an investigation conducted by the Internal Revenue Service, Criminal Investigation, New York Field Office; the Federal Bureau of Investigation, Albany Field Office; the New York State Police; and the Treasury Inspector General for Tax Administration.

The case is being prosecuted by Assistant United States Attorney Ransom P Reynolds. Further questions may be directed to Executive Assistant United States Attorney John Duncan at (315) 448-0672.

Reported by: FBI

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United States: IRS Guidance Favorably Modifies Voluntary Worker Classification Settlement Program

Source: http://www.mondaq.com/unitedstates/x/215000/tax+authorities/IRS+Guidance+Favorably+Modifies+Voluntary+Worker+Classification+Settlement+Program

One year ago the Internal Revenue Service (IRS) published Announcement 2011-64, which provided a Voluntary Classification Settlement Program (VCSP) for employers to treat their workers as common law employees rather than independent contractors only on a prospective basis.  Now the IRS has issued two new announcements that favorably modify and expand the VCSP.  Because certain favorable tax relief is available only for applications filed before June 30, 2013, employers should review quickly their worker classification issues in light of this new guidance.

On December 17, 2012, the Internal Revenue Service (IRS) issued Announcements 2012-45 and 2012-46 to revise the tax relief for employers that utilize the Voluntary Classification Settlement Program (VCSP).  Originally established in December 2011, the VCSP permits eligible taxpayers to voluntarily reclassify their workers for federal employment tax purposes and obtain limited tax relief for previous nonemployee treatment.

Background

The IRS overwhelmingly favors classification of workers as employees rather than independent contractors in part  because withholding of employment taxes is required for the former and not the latter.  Whether a worker is performing services as an employee or as an independent contractor depends upon numerous facts and circumstances, but the most important factor is whether the worker is subject to the employer's right to direct and control the worker as to what and how services are performed.  The determination of a worker as an employee is often not self-evident.  For employers under IRS examination, the Classification Settlement Program (CSP) is available to resolve federal employment tax issues related to worker misclassification if certain requirements are met.  The CSP allows the prospective reclassification of workers as employees with reduced federal employment tax liabilities for past nonemployee treatment.  The IRS determined it also would be beneficial to offer employers a program that allows voluntary reclassification of workers as employees without paying all past employment tax liabilities and without correcting past employer quarterly federal tax returns (Form 941).  Accordingly, the IRS issued Announcement 2011-64 last year.  The tax relief available under the VCSP—only 10 percent of the employment tax liability for one year—is similar to that available under the CSP, and the VCSP has become very popular.

Eligibility

Generally to participate in the VCSP, the employer must have consistently treated its workers in the past as nonemployees, must have filed all required Forms 1099 for the workers for the previous three years, must apply to participate in the program and must enter into a closing agreement with the IRS.  To use the VCSP, the employer also cannot currently be under audit by the IRS, the U.S. Department of Labor (DOL) or a state agency concerning the classification of the workers at issue.

Modifications 

The original VCSP has been modified by Announcement 2012-45 to:

• Permit a taxpayer under IRS audit, other than an employment tax audit, to be eligible to participate
• Clarify the current eligibility requirement that a taxpayer that is a member of an affiliated group within the meaning of Internal Revenue Code (Code) Section 1504(a) is not eligible to participate if any member of the affiliated group is under employment tax audit
• Clarify that a taxpayer is not eligible to participate if the taxpayer is contesting in court the classification of the class or classes of workers from a previous audit by the IRS or the DOL 
• Eliminate the requirement that a taxpayer agree to extend the period of limitations on assessment of employment taxes as part of the closing agreement with the IRS

Additionally, Announcement 2012-46 temporarily expands the VCSP to taxpayers who would otherwise be eligible, but have not filed all required Forms 1099 for the previous three years with respect to the workers to be reclassified, provided the taxpayer pays 25 percent of the employment tax liability that would have been due on the compensation being reclassified for the most recent tax year, and meets certain other requirements, including filing Forms 1099 for the past three years and paying an additional graduated penalty.  The expanded eligibility is only available for applications filed by June 30, 2013.

Summary

An employer that participates in the VCSP agrees to prospectively treat the class of workers identified in the application as employees for future tax periods.  In return, employers that properly filed Forms 1099 are only required to pay 10 percent of the employment tax liability that would have been due on compensation paid to the workers being reclassified for the most recent tax year if those workers were classified as employees for such year, as determined under the reduced rates of Code Section 3509(a).  Employers that did not properly file Forms 1099 have similar relief, but must pay 25 percent of the employment tax liability and meet other requirements.  However, this relief is only available until June 30, 2013.  In addition, under either correction program the employer is not liable for interest and penalties on the employment tax liability and will not be subject to an employment tax audit with respect to the worker classification for prior years.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Specific Questions relating to this article should be addressed directly to the author.

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CBO: Ending Corporate Tax Deferral Could Raise $100 Billion

Source:
http://blogs.wsj.com/washwire/2013/01/09/cbo-ending-corporate-tax-deferral-could-raise-100-billion/

A new Congressional Budget Office study throws some cold water on the idea of overhauling U.S. corporate tax policy to make it more like other developed countries’ tax policies.

The study suggests that the current U.S. system is bad enough, but some of the alternatives being advanced by businesses likely would be worse.

The U.S. currently is one of the few developed countries that tries to tax businesses on their worldwide profits. The majority of developed countries have moved to taxing firms only on the money they earn domestically–a so-called territorial approach. As a compromise, the government allows U.S. businesses to defer tax on overseas earnings as long as the money stays offshore–a policy that many critics regard as harmful to the economy.

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Post-Fiscal Cliff Changes in Federal Tax Law to Affect Small Business Owners

Source: http://www.newsobserver.com/2013/01/07/2586891/beyond-the-cliff-a-tricky-path.html

By Virginia Bridges - vbridges@newsobserver.com

 

Frustration, relief and confusion.
Those are the emotions of small business owners in the wake of the “fiscal cliff” deal that defined some key tax provisions for businesses and individuals, but left a lingering cloud of uncertainty.

A week ago, Congress prevented the nation from falling off the so-called fiscal cliff with a bittersweet compromise. Triangle business owners said they were relieved that the provision included a permanent fix for the estate tax, but they complained about the immediate sting from the decision to not extend the 2 percentage point reduction in the Social Security payroll tax.

“ ‘What do we do? What is really there?’ ” are questions that small business owners are asking, said J.A. Lesemann Jr., managing member of the Huntersville firm Lesemann & Associates and chair of the N.C. Association of Certified Public Accountants.

Lesemann suggests that business owners advise their employees that the payroll tax holiday is over. In 2011 and 2012, workers’ Social Security payroll taxes were reduced to 4.2 percent, down from 6.2 percent. Meanwhile, employers continued to pay 6.2 percent of the now total 12.4 percent of an individual’s total wages.

Business owners and their advocates expressed concern about tax increases on higher income earners and the delay on deciding on spending cuts to address the debt ceiling.

“As long as the federal government does not have a plan to reduce spending and address the deficit, small business owners are very concerned in very close future months that the plan that Congress proceeds with will include tax increases,” said Gregg Thompson, the state director for the National Federation of Independent Businesses.

Mary Brogan, spokesperson for the National Small Business Association, said the lingering national debt could have a chilling effect on growth as businesses hesitate to take on additional employees or debt.
“Consumers, business-to-business transactions, I think everybody is going to tighten things up,” Brogan said.
Accountants for small businesses, however, touted components of the deal that will allow some owners to make retroactive expense deductions, encourage the purchase of new equipment and extend some small business tax credits.

Payroll tax worries
Many small business owners expressed concern about the immediate impact of the payroll tax increase, but they said it would take a while to understand how other aspects of the legislation would impact their bottom line.

“(The payroll tax) is going to hurt my employees. It is going to hurt me. It is going to hurt everyone,” said Brian OliverSmith, CEO of Urban Planet Mobile, a Durham company that provides mobile digital education products.

OliverSmith is also worried about the impact of increasing taxes on individuals and families earning more than $400,000 and $450,000, respectively.

Businesses such as Urban Planet Mobile expand with the assistance from other business owners, Oliver Smith said, “So if you tax them too aggressively, that goes away.”

Brogan said the lowered tax threshold impacts a limited but important group of business owners – those who are more likely to expand and hire new employees. The limit creates a fairness issue for businesses that pass through income to owners.

Certain shareholders will face a maximum 39.6 percent tax rate, whereas a Wal-Mart or an AT&T is going to be close to a 35 percent tax rate, Brogan said.

S corporations, businesses in which shareholders report profits and losses on individual income tax returns, might want to think about a change in structure, but will face other tax challenges as different entities, accountants said.

“It is kind of that conundrum that they are in,” said Tim Robinson, an accountant with Raleigh firm Hughes Pittman & Gupton. “Which is better?”

On the plus side
Despite the concerns, business owners, their advocates and accountants applauded some aspects of the changes.

The legislative compromise includes a fix for the estate tax exemption, which was scheduled to drop to $1 million, but will remain at $5.12 million. The maximum tax rate will rise 5 percentage points to 40 percent after reaching that $5.12 million threshold.

The fix is key for Mike Strowd, co-owner of Maple View Farm in Hillsborough. If something happened to Strowd, and his two daughters inherited half the farm, they would probably have to sell some of the land to pay the tax.

“Then you wouldn’t have enough property for Maple View to exist,” Strowd said.
Increased allowable expensing under Section 179 of the tax code and the extension of the bonus depreciation could be a huge benefit for small businesses, Robinson said.

Limits for Section 179, which allows small businesses to deduct qualified equipment purchases, dipped from $500,000 in 2011 to $125,000 in 2012. The threshold was scheduled to drop to $25,000 in 2013. The fiscal cliff package bumped allowable expenses back to $500,000 in 2013 and 2012, retroactively.
The bonus depreciation, which allows businesses to recover up to 50 percent of the cost of qualified purchases, was also extended through 2014.

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Read more here: http://www.newsobserver.com/2013/01/07/2586891/beyond-the-cliff-a-tricky-path.html#storylink=cpy

Morning Bell: 13 Tax Increases in 2013

Source:http://blog.heritage.org/2013/01/08/tax-changes-2013/

The cliff is steep,
and the deal is even more so!

New Year’s Day was tough for taxpayers. Thirteen tax increases kicked in.

The deal that Congress and President Obama struck that finally—but only partially—avoided the fiscal cliff resulted in seven tax increases.

Those hikes combined with six tax increases from Obamacare that also began on New Year’s Day.

13 Tax Increases That Started January 1, 2013 Tax increases the fiscal cliff deal allowed:

1. Payroll tax: increase in the Social Security portion of the payroll tax from 4.2 percent to 6.2 percent for workers. This hits all Americans earning a paycheck—not just the “wealthy.” For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” will lose “an annual income boost of $1,000.”

2. Top marginal tax rate: increase from 35 percent to 39.6 percent for taxable incomes over $450,000 ($400,000 for single filers).

3. Phase out of personal exemptions for adjusted gross income (AGI) over $300,000 ($250,000 for single filers).

4. Phase down of itemized deductions for AGI over $300,000 ($250,000 for single filers).

5. Tax rates on investment: increase in the rate on dividends and capital gains from 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).

6. Death tax: increase in the rate (on estates larger than $5 million) from 35 percent to 40 percent.

7. Taxes on business investment: expiration of full expensing—the immediate deduction of capital purchases by businesses.

Obamacare tax increases that took effect:

8. Another investment tax increase: 3.8 percent surtax on investment income for taxpayers with taxable income exceeding $250,000 ($200,000 for singles).

9. Another payroll tax hike: 0.9 percent increase in the Hospital Insurance portion of the payroll tax for incomes over $250,000 ($200,000 for single filers).

10. Medical device tax: 2.3 percent excise tax paid by medical device manufacturers and importers on all their sales.

11. Reducing the income tax deduction for individuals’ medical expenses.

12. Elimination of the corporate income tax deduction for expenses related to the Medicare Part D subsidy.

13. Limitation of the corporate income tax deduction for compensation that health insurance companies pay to their executives.

Each of these 13 tax increases will slow the economy, meaning that businesses will create fewer jobs. Fewer jobs will make it even more difficult to land a job than it already is for the more than 12 million Americans looking for work.

President Obama demanded these higher taxes. Obama’s tax increases, in Obamacare and through the fiscal cliff deal, will not curb deficits and debt, because growing spending is driving America’s budget crisis. Congress needs to immediately turn its attention to the actual cause of our deficit and debt problem: too much spending. The proper way to address this problem is through reforms to entitlement programs.

President Obama promised the American people a “balanced approach” of tax increases and spending cuts to reduce deficits and debt. He has achieved the tax increase portion of that approach. Now Congress needs to force him to follow through on the spending cuts portion.

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Better Business Bureau's Top Ten Scams of 2012

Source: http://abclocal.go.com/wls/story?section=resources&id=8945041

January 8, 2013 -- Ariane Daguin, owner of organic meat purveyor D'Artagnan will be in town on Thursday, January 10 to host an event with Chef David Burke of David Burke's Primehouse.

(RELEASE)

Topping the list of scam activity for 2012 is work-at-home schemes that account for over 33-percent of scam inquiries to the Better Business Bureau serving Chicago and Northern Illinois. This scam is especially tempting for those out of work or needing additional income. Coming in a close second, with 30-percent of scam inquires, is advance fee brokers. This scam attracts vulnerable consumers that need cash urgently.

The BBB's Top Ten Scams are ranked based on number of specific inquiries made by consumers to provide insight on the deceptive and sometimes illegal business practices in 2012.

"In 2012, many consumers were still working on improving their financial situations in these challenging economic times," said Steve J. Bernas, president & CEO of the Better Business Bureau serving Chicago and Northern Illinois. "Scammers were ready to capitalize on this vulnerability and take advantage of consumers.
Bernas explained, "Being aware that these scams exist is extremely important so that people can avoid becoming a victim and losing money or personal financial information."

The complete list of Top Ten Scams in 2012 from the BBB includes:
1. Work-At-Home Schemes. There are certainly legitimate telecommuting jobs, but many work-from-home opportunities are scams. Promising convenient work always attracts attention; however, when the requirement is to send money for materials first, consumers should always be on guard. Do not purchase services or products from a firm that's reluctant to answer your questions and be cautious of any company that offers an exceptionally high salary requiring few skills and little work. Check offers out thoroughly for free with the BBB at www.bbb.org.

2. Advance Fee Brokers. Often these appear to be very professional operations with attractive websites and advertisements. However, it is illegal for a business to charge a fee prior to providing a loan. Typically, after wiring money to the scammer, the victim never receives the loan. These "lenders" will use fake physical addresses or the addresses of real companies that are victims of identity theft.

3. Credit Repair Services with Advance Fees. Consumers with bad credit ratings are particularly vulnerable to this scam. Everything a credit-repair operation offers an individual can do personally at little or no cost. Credit repair operations cannot ask for money in advance and they cannot automatically remove legitimate negative reports from your credit history.

4. Foreign Lotteries. Any lottery from a foreign country is illegal in the United States. Stating a person can win, or is a winner already provides a strong incentive; however, people should never send money to obtain lottery money. Scammers using fictitious addresses will request you send "fees and taxes" to them through a wire service, they take the cash and never provide any winnings because there are no winners.

5. Prize Promotions. There are several variations of this scam, but most include some aspect that requires people who are identified as "winners" to provide money or some type of personal information, such as a credit card or social security number, to verify being a winner. In the end, no prize is awarded and the personal information is then used to withdraw a victim's money from accounts or for identity theft.

6. Office Supplies - Sale by Deceptive Telemarketing. This scam features fake invoices for office supplies being sent to a business, often for only a couple of hundred dollars. This relatively low amount makes it easier for company personnel to quickly sign off and feel it is not worth their time to check the invoice's validity, which would be done if it was for a larger amount.

7. Pyramid Companies. Pyramid schemes within companies are fraudulent because returns to investors are paid from personal money or the money paid by the newest investors, rather than from any actual profit earned by an individual or organization running the operation. These scams collapse because payouts exceed investments, or because the legal authorities prosecute the organizers for sale of unregistered securities. Often the organizers simply disappear with funds sent to them.

8. Debt Relief Services (Non-Compliant with FTC rule). The Federal Trade Commission has established rules for debt relief services (for profit businesses that represent that they renegotiate, settle or alter the terms of payment for an unsecured debt). The FTC rule governs disclosures and representations that debt relief services can make and does not allow advance fees. There are legitimate debt relief companies that comply with the FTC rule and the Better Business Bureau is identifying only the non-compliant companies as scams.

9. Paving, Painting, Home Improvement by "Traveling" Workers. Never pay upfront to a "traveling" contractor who just happens to be in the neighborhood, is doing work nearby, or has extra materials. The technique to get your money often requires you to pay for added materials. Once you pay the contractor, he disappears with the money and no work is ever done. Having access to your property also provide an opportunity for these people to check what valuables you may have for a future burglary or ID theft.

10. Sweepstakes. If you don't remember entering a sweepstakes, be very suspicious about being declared a winner. If the prize provider wants you to send money or give your social security number to receive your prize, take no action. If you send money you will likely never receive a prize, or you will get a prize of lesser value than the money you've sent.

"Remember, before giving any company credit or debit card information, the BBB recommends reviewing the business fully to avoid potential billing nightmares," said Bernas. "As always, if an offer seems too good to be true, it probably is."

For more information on these top 10 scams, visit www.bbb.org

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Income Tax Return Safety Tips

Article Source: http://www2.wkrg.com/news/2013/jan/07/income-tax-return-safety-tips-ar-5315280/

MOBILE, Ala. -- The Mobile Police Department would like to provide tips and warnings of potential crimes and scams commonly reported which involve income tax returns.

• Only use licensed businesses to prepare taxes.
• Use resources such as the Better Business Bureau to research tax preparation businesses and individuals before soliciting their services.
• Protect private information such as Social Security numbers, dates of birth and account numbers. These may be used to gain access to personal information or to create fraudulent accounts.
• Make sure all transactions are documented and copies are kept for personal records.
• After filing tax records, do not disclose to others the amount of a refund received or expected.
• Report all fraud to the Mobile Police Department and allow our detectives to investigate and prevent future criminal activity.
• Only use recognized and secure tax websites when providing personal information online. 

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