On Thursday, the Internal Revenue Service (IRS) issued its annual list of the “Dirty Dozen” tax scams it has seen this tax season.
“The Dirty Dozen represents the worst of the worst tax scams,” IRS Commissioner Doug Shulman said in a statement. “Don’t fall prey to these tax scams. They may look tempting, but these fraudulent deals end up hurting people who participate in them.”
The IRS works with the Justice Department to prosecute the perpetrators of illegal scams, who frequently face heavy fines and imprisonment. Taxpayers who intentionally or unintentionally get involved in such schemes must repay all taxes due plus interest and penalties.
The “Dirty Dozen” is comprised of:
Hiding income offshore
Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts or using offshore debit cards, credit cards or other options. In early February, the IRS announced a voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system.
Identity theft and phishing
Identity thieves use an unsuspecting individual’s name, Social Security number, credit card number or other personal information without permission to commit fraud or other crimes. Perpetrators often use information to run up bills on victims’ credit cards, empty their bank accounts or take out loans in their name. Some identity thieves even file fraudulent tax returns in their victims’ names and collect refunds.
Phishing is a tactic used by scam artists to trick victims into revealing personal or financial information online, often involving the use of phony e-mail, websites and social media. IRS impersonation schemes are common during tax season.
Return preparer fraud
Dishonest return preparers skim a portion of their clients’ refunds, charge inflated fees for services and attract new clients with false promises. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, while the Department of Justice has pending complaints against dozens of others.
Filing false or misleading forms
Scam artists file false or misleading returns to claim refunds to which they are not entitled. One scheme involves a taxpayer who seeks a refund by fabricating a return and falsely claiming the corresponding amount as withholding. Often, scammers use phony information returns to legitimize erroneous refund claims.
Frivolous arguments
Promoters of tax schemes encourage people to make outlandish claims to avoid paying taxes. The IRS has released a list of frivolous legal positions that taxpayers should avoid, which have been thrown out of court.
Nontaxable Social Security benefits with exaggerated withholding credit
The IRS has identified returns where Taxpayers report nontaxable Social Security benefits with excessive withholding, which results in no income reported to the agency on the return. Filings of this type of return may result in a penalty of up to $5,000.
Abuse of charitable organizations and deductions
The misuse of tax-exempt organizations includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. Another scheme involves the donation of non-cash assets where several organizations claim the full value for both the receipt and distribution of the same contribution.
Abusive retirement plans
The IRS seeks to identify abuses in retirement plan arrangements, such as transactions that taxpayers use to avoid the limits on contributions to individual retirement accounts (IRA) and transactions that are not properly reported as early distributions. Taxpayers should avoid shifting appreciated assets at less than market value into IRAs or companies owned by their IRAs to avoid annual contribution limits.
Disguised corporate ownership
Corporations and other entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity. Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering and other financial crimes.
Zero wages
The filing of a phony wage- or income-related return to replace a legitimate return is used to lower the amount of taxes owed. Often, a Form 4852 or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. Taxpayers may also submit a statement rebutting wages and taxes reported by a payer. Another version of this scheme involves including an explanation on Form 4852 that cites statutory language on the definition of wages.
Misuse of trusts
While there are many legitimate uses of trusts in tax and estate planning, some questionable transactions promise reduction of income subject to tax, deductions for personal expenses or and reduced estate or gift taxes. Such trusts are used primarily as a means to avoid income tax liability and hide assets from creditors. Recently, private annuity trusts and foreign trusts have become popular vehicles for this scheme.
Fuel tax credit scams
Some taxpayers may be eligible for the fuel tax credit, but others are claiming the credit for nontaxable uses of fuel when their occupations or income levels make the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim.
Thursday, April 7, 2011
Tuesday, March 29, 2011
Pacino, Scorsese Hit with IRS Liens
They’ve made numerous movies about characters that lived outside the law. Now actor Al Pacino and director Martin Scorsese have gotten into some hot water for real-life tax issues.
Pacino and Scorsese have separately been hit with tax liens by the Internal Revenue Service (IRS). Both liens appear to be related to their use of accountant Kenneth Starr, who was convicted of fraud and recently sentenced to 90 months in prison.
Scorsese’s $2.85 million lien isn’t the only trouble he has with Starr. The court-appointed receiver for Starr’s firm has filed suit against Sikelia, Scorsese’s production company, for nearly $600,000 in unpaid fees for accounting, bookkeeping, tax prep and personal management services.
Scorsese’s lawyers are contesting the claims and also said the director of “The Departed” and “Goodfellas” has paid off the lien, in addition to earlier liens totaling nearly $1.9 million.
The IRS filed a lien against Pacino for $188,283.50 for unpaid taxes from 2008 and 2009. A representative for Pacino said the star of “The Godfather” and “Dog Day Afternoon” has hired a new business manager to settle the debts.
Pacino and Scorsese have separately been hit with tax liens by the Internal Revenue Service (IRS). Both liens appear to be related to their use of accountant Kenneth Starr, who was convicted of fraud and recently sentenced to 90 months in prison.
Scorsese’s $2.85 million lien isn’t the only trouble he has with Starr. The court-appointed receiver for Starr’s firm has filed suit against Sikelia, Scorsese’s production company, for nearly $600,000 in unpaid fees for accounting, bookkeeping, tax prep and personal management services.
Scorsese’s lawyers are contesting the claims and also said the director of “The Departed” and “Goodfellas” has paid off the lien, in addition to earlier liens totaling nearly $1.9 million.
The IRS filed a lien against Pacino for $188,283.50 for unpaid taxes from 2008 and 2009. A representative for Pacino said the star of “The Godfather” and “Dog Day Afternoon” has hired a new business manager to settle the debts.
Friday, March 18, 2011
Report Your Bracket Winnings to the IRS
“The ball is tipped, and there you are.” March Madness is officially underway, and while many Americans are dreaming of their own “One Shining Moment” in their office bracket pool. But as tax information company CCH points out, it’s important to keep track of your bracket money and other gambling winnings.
Gambling winnings for the tax reporting year should be listed on line 21 of Internal Revenue Service (IRS) Form 1040. Taxpayers who weren’t as lucky and ended the year in the red can deduct gambling losses if they itemize their taxes using Schedule A (Form 1040), line 28. Taxpayers cannot report gambling losses that are more than their winnings.
Forms of gambling income that must be reported include, but are not limited to:
• Lottery winnings
• Horse racing wagers
• Raffle prizes
• Casino winnings
• Casual/seasonal gambling earnings (i.e. office pools)
• Fair market value for large non-cash prizes (i.e. cars or trips)
Taxpayers should provide Form W-2G for sizeable gambling winnings and all winnings subject to federal tax withholding.
“When reporting gambling wins and losses, you have to keep those numbers separate,” CCH Principal Federal Tax Analyst Mark Luscombe, CPA, said. “You can’t combine your win-loss totals and only report the difference — it really needs to be a clear record of everything you won and lost over the course of the year.”
For more information on reporting gambling wins and losses, watch a video interview with Luscombe.
Gambling winnings for the tax reporting year should be listed on line 21 of Internal Revenue Service (IRS) Form 1040. Taxpayers who weren’t as lucky and ended the year in the red can deduct gambling losses if they itemize their taxes using Schedule A (Form 1040), line 28. Taxpayers cannot report gambling losses that are more than their winnings.
Forms of gambling income that must be reported include, but are not limited to:
• Lottery winnings
• Horse racing wagers
• Raffle prizes
• Casino winnings
• Casual/seasonal gambling earnings (i.e. office pools)
• Fair market value for large non-cash prizes (i.e. cars or trips)
Taxpayers should provide Form W-2G for sizeable gambling winnings and all winnings subject to federal tax withholding.
“When reporting gambling wins and losses, you have to keep those numbers separate,” CCH Principal Federal Tax Analyst Mark Luscombe, CPA, said. “You can’t combine your win-loss totals and only report the difference — it really needs to be a clear record of everything you won and lost over the course of the year.”
For more information on reporting gambling wins and losses, watch a video interview with Luscombe.
Tuesday, March 15, 2011
Guest Blogger: Change Your Approach with Web-Generated Leads
By Brian Swanson
Flashpoint Marketing
Many CPA and accounting firms have taken the leap into the world of website marketing through search engine optimization (SEO). Though the mechanics of the optimization process have been well documented across several print and online publications, there has been little discussion about the business development process for website-generated leads, which do differ from the more standard lead.
“The biggest differences are in response time and method,” Katie Tolin, marketing director at Rea & Associates in New Philadelphia, Ohio, said. “While it is completely acceptable to return a phone call within 24 hours, that may not be soon enough for a Web inquiry. The expectation of the prospect is that you’ll respond much sooner — perhaps not immediately, but most definitely the same day.”
Sarah Johnson, a marketing and social media consultant in the Chicago area, agreed that most prospects expect that quick 24-hour (or less) response rate. She added that not only do these prospects want time to process the information because they are still in a research phase, they want to be in control of the information and communication flow with the firm.
“While contact is important, stalking them via traditional methods doesn’t always work,” Johnson said. “Giving them options will be important.”
Still, though Website leads continue to bring prospects to the firm, validating its importance still remains challenging for some. For Lori Jamail, marketing director at McConnell Jones Lanier & Murphy in Houston, the partner perception is different for an online lead than one that is more standard.
“Standard leads are ‘important,’” Jamail said. “These are real relationships in the eyes of our partners and they can usually gauge the length of the sales cycle because of the relationship they’ve built, whereas electronic leads are faceless and are perceived to want something for nothing.”
As a result, at Jamail’s firm, which she describes as “old school,” more traditional marketing methods such as direct mail, networking and phone calls are given top priority and are instantly followed up on. It’s a different story with a Website lead.
“When I provide a partner with an electronic lead, generated through an e-blast or even the online ‘contact us’ feature, I have to keep on them to follow up, to the point that I started making the first contact myself so that the partner felt the lead was more substantial,” Jamail said.
With Web leads, it’s about the prospect feeling empowered and in control. While they may be testing the firm on its response time, the person making the inquiry controls the situation, impacting the interaction with that potential client.
“The first thing you need to do is send an e-mail back,” Tolin said. “Even if you have a phone number, fight the urge to pick up the phone. Acknowledge you got the message. Maybe address something they put in the inquiry and suggest a phone call as a next step.”
Traditionally, according to Tolin, a marketing person would conduct thorough research on the prospect. With a Web-generated lead, a little cursory research is done before sending e-mail. The upfront investment is less than with a traditional call.
“This does mean that you will field some inquiries that just don’t match what you have to offer, but the ones that do pay off make the whole process worth it,” Tolin said.
Depending on the firm, the sales cycle process may differ. In Johnson’s experience, the timeline may be the same as a more traditionally generated lead — anywhere from one month to one year. Yet at Tolin’s firm, the lead times are often in the middle, in the two-week range, although she pointed out that making first contact may take longer than anticipated.
“Oftentimes, if you acknowledge and e-mail the same day, set up a call for a few days later, you can close pretty quickly,” Tolin said. “Chances are these people aren’t interviewing five different firms before making their decision, and [being] the first to respond is often an advantage.”
Ultimately, responsiveness and understanding where the prospect or lead is in the buying cycle remain two primary factors in managing Website-generated leads.
“We make an assumption that because someone requests information, they are a prospect,” Johnson said. “Unfortunately, until they are qualified, they continue to just be a lead. Understanding how to communicate with that lead is the key to moving them to a prospect. Also, understanding that not all your leads will move to a prospect is normal.”
Tolin added: “The early bird gets the worm. A first impression means a lot. The prospect went to your site and liked what they saw enough to contact you. Now you must wow them with speed and show that you understand their issues.”
Brian Swanson is a principal with Flashpoint Marketing, a marketing and lead generation company focused on serving the accounting industry. He has over 14 years' experience in traditional marketing, business development and lead generation for various CPA firms across the United States. Brian is also search engine marketing certified and focuses on providing accounting firm SEO.
Flashpoint Marketing
Many CPA and accounting firms have taken the leap into the world of website marketing through search engine optimization (SEO). Though the mechanics of the optimization process have been well documented across several print and online publications, there has been little discussion about the business development process for website-generated leads, which do differ from the more standard lead.
“The biggest differences are in response time and method,” Katie Tolin, marketing director at Rea & Associates in New Philadelphia, Ohio, said. “While it is completely acceptable to return a phone call within 24 hours, that may not be soon enough for a Web inquiry. The expectation of the prospect is that you’ll respond much sooner — perhaps not immediately, but most definitely the same day.”
Sarah Johnson, a marketing and social media consultant in the Chicago area, agreed that most prospects expect that quick 24-hour (or less) response rate. She added that not only do these prospects want time to process the information because they are still in a research phase, they want to be in control of the information and communication flow with the firm.
“While contact is important, stalking them via traditional methods doesn’t always work,” Johnson said. “Giving them options will be important.”
Still, though Website leads continue to bring prospects to the firm, validating its importance still remains challenging for some. For Lori Jamail, marketing director at McConnell Jones Lanier & Murphy in Houston, the partner perception is different for an online lead than one that is more standard.
“Standard leads are ‘important,’” Jamail said. “These are real relationships in the eyes of our partners and they can usually gauge the length of the sales cycle because of the relationship they’ve built, whereas electronic leads are faceless and are perceived to want something for nothing.”
As a result, at Jamail’s firm, which she describes as “old school,” more traditional marketing methods such as direct mail, networking and phone calls are given top priority and are instantly followed up on. It’s a different story with a Website lead.
“When I provide a partner with an electronic lead, generated through an e-blast or even the online ‘contact us’ feature, I have to keep on them to follow up, to the point that I started making the first contact myself so that the partner felt the lead was more substantial,” Jamail said.
With Web leads, it’s about the prospect feeling empowered and in control. While they may be testing the firm on its response time, the person making the inquiry controls the situation, impacting the interaction with that potential client.
“The first thing you need to do is send an e-mail back,” Tolin said. “Even if you have a phone number, fight the urge to pick up the phone. Acknowledge you got the message. Maybe address something they put in the inquiry and suggest a phone call as a next step.”
Traditionally, according to Tolin, a marketing person would conduct thorough research on the prospect. With a Web-generated lead, a little cursory research is done before sending e-mail. The upfront investment is less than with a traditional call.
“This does mean that you will field some inquiries that just don’t match what you have to offer, but the ones that do pay off make the whole process worth it,” Tolin said.
Depending on the firm, the sales cycle process may differ. In Johnson’s experience, the timeline may be the same as a more traditionally generated lead — anywhere from one month to one year. Yet at Tolin’s firm, the lead times are often in the middle, in the two-week range, although she pointed out that making first contact may take longer than anticipated.
“Oftentimes, if you acknowledge and e-mail the same day, set up a call for a few days later, you can close pretty quickly,” Tolin said. “Chances are these people aren’t interviewing five different firms before making their decision, and [being] the first to respond is often an advantage.”
Ultimately, responsiveness and understanding where the prospect or lead is in the buying cycle remain two primary factors in managing Website-generated leads.
“We make an assumption that because someone requests information, they are a prospect,” Johnson said. “Unfortunately, until they are qualified, they continue to just be a lead. Understanding how to communicate with that lead is the key to moving them to a prospect. Also, understanding that not all your leads will move to a prospect is normal.”
Tolin added: “The early bird gets the worm. A first impression means a lot. The prospect went to your site and liked what they saw enough to contact you. Now you must wow them with speed and show that you understand their issues.”
Brian Swanson is a principal with Flashpoint Marketing, a marketing and lead generation company focused on serving the accounting industry. He has over 14 years' experience in traditional marketing, business development and lead generation for various CPA firms across the United States. Brian is also search engine marketing certified and focuses on providing accounting firm SEO.
Thursday, March 10, 2011
Your Membership Makes a Difference
As the 2010–2011 membership year draws to a close, I want to thank you for your membership and support this year. Your dedication has enabled us to enhance our products and services to meet your needs and protect CPAs’ interest — from advocating for you at the state and national level to getting you access to online CPE vendors that provide the CPE credits you need at the prices and convenience you want. They say that TEAM stands for “Together Everyone Achieves More.” That couldn’t be truer of the VSCPA.
In fact, I think Andrew Martin, a VSCPA member from Chesapeake and “Top 5 Under 35” award winner, said it best earlier this year:
“I think it’s important to support the CPA community. You can get more accomplished as a group than any single person can on their own.”
So true.
But, I think there’s something that’s even better than collectively achieving great things for the CPA profession. It’s helping our communities in the process. I’m so proud of the more than 600 CPAs who rolled up their sleeves during our CPA Day of Service on September 24 and of the CPAs who serve their employers and clients everyday by providing sound financial services and advice. These acts of service are what make me so proud to be a part of the VSCPA.
Because of your dedication, the VSCPA membership has never been stronger. This year, we exceeded 10,000 members — an important milestone in the VSCPA’s history and a testament to the commitment, character and quality of our professional community.
As our new membership year begins, I hope you will continue your dedication to the VSCPA and the CPA profession by renewing your membership with us. Membership renewal officially begins on May 1, but our online renewal system is ready for those who would like to renew now. (Site login required.)
Thanks, again, for your membership this year. I’m looking forward to a great year in 2011–2012. I hope you are, too.
In fact, I think Andrew Martin, a VSCPA member from Chesapeake and “Top 5 Under 35” award winner, said it best earlier this year:
“I think it’s important to support the CPA community. You can get more accomplished as a group than any single person can on their own.”
So true.
But, I think there’s something that’s even better than collectively achieving great things for the CPA profession. It’s helping our communities in the process. I’m so proud of the more than 600 CPAs who rolled up their sleeves during our CPA Day of Service on September 24 and of the CPAs who serve their employers and clients everyday by providing sound financial services and advice. These acts of service are what make me so proud to be a part of the VSCPA.
Because of your dedication, the VSCPA membership has never been stronger. This year, we exceeded 10,000 members — an important milestone in the VSCPA’s history and a testament to the commitment, character and quality of our professional community.
As our new membership year begins, I hope you will continue your dedication to the VSCPA and the CPA profession by renewing your membership with us. Membership renewal officially begins on May 1, but our online renewal system is ready for those who would like to renew now. (Site login required.)
Thanks, again, for your membership this year. I’m looking forward to a great year in 2011–2012. I hope you are, too.
Friday, March 4, 2011
Snipes Takes Tax Appeal to Supreme Court
Think you’ve got a lot to deal with during tax season? “Blade” and “Passenger 57” star Wesley Snipes is taking his appeal of his three-year sentence on tax charges to the U.S. Supreme Court.
According to Forbes.com, the actor’s lawyers filed their appeal on the grounds of a provision in the Bill of Rights that says criminal cases must be brought in the judicial district where the crime was committed. Snipes was tried in Ocala, Fla., despite his attorneys’ argument — brought up during the trial and in an appeal — that he had not lived in Florida since childhood.
Snipes was convicted in February 2008 of three misdemeanor charges of failing to file his federal income tax returns from 1999–2001. He was acquitted of felony charges and has launched several unsuccessful appeals and began serving his prison sentence in 2010.
Snipes said he had lived in New York, New Jersey and California during most of the period in question. Prosecutors countered that he maintained a home in Florida and listed that address on various forms, while also citing his many tax protestor practices, including his claim of a homestead exemption as a “citizen of the Republic State of Florida.”
Snipes’ lawyers also claim that the judge in his trial instructed the jury that they had to accept the Florida venue based on the standard of “preponderance of evidence,” rather than the customary “beyond a reasonable doubt” and want the Supreme Court to rule on the level of evidence needed to establish the proper venue.
According to Forbes.com, the actor’s lawyers filed their appeal on the grounds of a provision in the Bill of Rights that says criminal cases must be brought in the judicial district where the crime was committed. Snipes was tried in Ocala, Fla., despite his attorneys’ argument — brought up during the trial and in an appeal — that he had not lived in Florida since childhood.
Snipes was convicted in February 2008 of three misdemeanor charges of failing to file his federal income tax returns from 1999–2001. He was acquitted of felony charges and has launched several unsuccessful appeals and began serving his prison sentence in 2010.
Snipes said he had lived in New York, New Jersey and California during most of the period in question. Prosecutors countered that he maintained a home in Florida and listed that address on various forms, while also citing his many tax protestor practices, including his claim of a homestead exemption as a “citizen of the Republic State of Florida.”
Snipes’ lawyers also claim that the judge in his trial instructed the jury that they had to accept the Florida venue based on the standard of “preponderance of evidence,” rather than the customary “beyond a reasonable doubt” and want the Supreme Court to rule on the level of evidence needed to establish the proper venue.
Tuesday, March 1, 2011
Accounting Majors Lead Class of 2011 in Job Offers
Accounting majors are currently receiving the most job offers among college graduates in the class of 2011, according to a survey conducted by the National Association of Colleges and Employers (NACE).
NACE’s Winter 2011 Salary Survey indicates that private (first) and public (third) accounting positions are near the top of the list of top jobs for 2010-11 bachelor’s degree graduates.
Consulting was second, financial/treasury analysis was fourth and sales fifth.
NACE’s Winter 2011 Salary Survey indicates that private (first) and public (third) accounting positions are near the top of the list of top jobs for 2010-11 bachelor’s degree graduates.
Consulting was second, financial/treasury analysis was fourth and sales fifth.
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