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Monthly Archives: October 2018

Former Colorado Resort Owner, Race Car Driver, Sentenced To Prison Again

October 16, 2018

According to DoJ, a Scottsdale, Arizona man, who formerly resided in Pagosa Springs, Colorado, was sentenced on October 9, 2018 in the U.S. District Court for the District of Colorado to 18 months in prison for filing a false tax return.

According to court documents, William Whittington, 68, filed a false 2010 individual income tax return, on which he underreported income received from his offshore accounts and through the payment of his personal expenses by an entity over which he exercised managerial control.

From 2010 to 2012, Whittington directed that the Springs Resort & Spa, in Pagosa Springs, Colorado, a business managed by Whittington and family members at the time, pay over $1 million of his personal expenses.

The Total Additional Tax Due For Those 3 Years, 2010 Through 2012, Based On Whittington’s Failure To Report The Payment Of The Personal Expenses As Income Is $364,994.00.

 From 2003 to 2010, Whittington failed to report $9.7 million in investment income generated through two offshore bank accounts in Liechtenstein. Combined with the tax loss from the resort payment of his personal expenses, Whittington’s fraudulent conduct created a $1.8 million tax loss.


Whittington is a competitive racecar driver, whose team won the 1979 24 Hours of Le Mans.

Whittington was previously sentenced to prison in 1987 for evading income tax and importing multiple tons of marijuana. See United States v. Whittington, 918 F.2d 149 (11th Cir. 1990).

Some People Never Learn!

In addition to the term of imprisonment imposed, U.S. District Court Judge Robert E. Blackburn ordered Whittington to serve one year of supervised release.

Whittington paid approximately $1.8 million in restitution to the Internal Revenue Service as a condition of his plea agreement.

 
 
Do You Have a Tax Problem?
 
  
Contact the Tax Lawyers of

Marini & Associates, P.A.    
 
for a FREE Tax Consultation contact us at:
www.TaxAid.com or www.OVDPLaw.com or
Toll Free at 888-8TaxAid (888) 882-9243

 

Read more at: Tax Times blog

Wealthy People Pay Enought Taxes – Top 3% Paid Majority of Taxes in 2016

October 16, 2018

Individual income taxes are the federal government’s single biggest revenue source. In fiscal year 2018, which ended Sept. 30, the individual income tax is expected to bring in roughly $1.7 trillion, or about half of all federal revenues, according to the Congressional Budget Office.

If past statistics can offer any guidance, in 2016, $1.44 trillion income taxes were paid by 140.9 million taxpayers reporting a total of $10.2 trillion in adjusted gross income, according to data recently released by the Internal Revenue Service.

Bloomberg looked into the 2016 individual returns data in detail for some additional insights illustrated in the charts below:

Progressive Paying

Source: IRS

The top 1 percent paid a greater share of individual income taxes (37.3 percent) than the bottom 90 percent combined (30.5 percent). The top 50 percent of all taxpayers paid 97 percent of total individual income taxes. In other words, the bottom 50 percent paid 3 percent. Which small percentile of tax payers also paid 3 percent or more? You might have guessed it. It is the top 0.001 percent, or about 1,400 taxpayers. That group alone paid 3.25 percent of all income taxes. In 2001, the bottom 50 percent paid nearly 5 percent whereas the top 0.001 percent of filers paid 2.3 percent of income taxes. The individual income tax system is designed to be progressive — those with higher incomes pay at higher rates, while the indentation, or the reduction in the steepness of the “progressivity” curve, is visible at the highest levels.

The average tax rates paid by the very wealthiest has fallen in recent years from a peak of 24.1 percent in 2013 to 22.9 in 2016 and was a full four percentage points below the 26.9 percent that the top 1 percent paid on average. To put these numbers in perspective, the top 0.001 percent of taxpayers consists of 1,409 returns, the top 1 percent equals 1.4 million returns and the top 50 percent is half of the total 140.9 million returns.

The most extensive rewrite of the U.S. tax code in more than 30 years, known as TCJA act, was signed in law into early 2018. Individuals may start to feel the effects of last year’s tax overhaul when they file their returns in April. Estimates show the law’s biggest benefits go to top earners.

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Contact the Tax Lawyers of
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Toll Free at 888-8TaxAid (888) 882-9243
 

Read more at: Tax Times blog

Skin Care Owner May Need “Frownies” Cream After 2nd Conviction for Tax Fraud

October 16, 2018

According to DoJ. a Germantown, Ohio businessman who controlled the operation of an anti-aging skincare business in Dayton, Ohio was sentenced to 33 months in prison following his November 2017 conviction by a federal jury on seven counts of filing false corporate, individual, and private foundation tax returns.
 
According to court documents and evidence presented at trial, James Wright, 63, ran the day-to-day operations of B&P Company, Inc. (B&P), which manufactured and sold an array of skincare products, including Frownies, a wrinkle reduction product endorsed by celebrities.  Wright’s great-grandmother invented Frownies in 1889 and the product has been sold by his family ever since.  Beginning in the late 1990s, Wright formed a series of entities that he used to divert money from B&P to himself and members of his family.

Instead of receiving a salary from B&P, Wright incorporated a company called The Remnant, Inc., to which B&P paid “management fees.” Wright caused the preparation of false corporate tax returns for The Remnant on which he fraudulently deducted personal expenses, including rent, utilities, and pool and lawn care for his residence.  Wright also used funds from The Remnant’s bank accounts to pay rent for one of his daughters in New York and California.  Wright paid personal expenses directly out of B&P’s bank accounts as well.  He directed employees of B&P to use corporate funds to pay for the rent and utilities at an apartment rented by his mother as well as rent for his daughter in New York.

 

In 2004, Wright applied to the IRS for non-profit status for a private foundation called Fore Fathers Foundation.  Wright caused B&P to make donations to the foundation and then used more than $170,000 of the foundation’s funds over a seven-year period to pay for high school and college tuition for all five of his children. 

According to the testimony at trial, these payments constituted acts of self-dealing that Wright was required to disclose on the foundation’s tax returns and pay excise taxes on.  When Wright filed the foundation’s 2003 through 2009 returns however, he falsely reported that he had not engaged in acts of self-dealing and failed to pay the excise taxes due on the distributions.

 
The evidence at trial established that Wright had a long history of interactions with the IRS.  In 1998, Wright pleaded guilty to tax evasion for using trusts to conceal income from the IRS.
 
In addition to the term of imprisonment, U.S. District Judge Walter H. Rice ordered Wright to serve one year of supervised release and pay $146,404 in restitution to the IRS.
 
 
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Contact the Tax Lawyers of

Marini & Associates, P.A.    
 
for a FREE Tax Consultation contact us at:
www.TaxAid.com or www.OVDPLaw.com or
Toll Free at 888-8TaxAid (888) 882-9243
 
 
 


Read more at: Tax Times blog

IRS' Collection Upheld Even Though Taxpayer Issued Check Directing Application of Payment

October 11, 2018

The majority of the Tax Court has determined that IRS didn't abuse its discretion in declining to apply proceeds of a levy as the taxpayers requested because the payment via levy wasn't voluntary.

 
While the taxpayers had submitted a check to IRS, which would have been considered voluntary and which they would have been free to designate as applying to a certain tax year, the check ultimately bounced when IRS levied on the bank account, so no payment was made.
 
The Court also found no abuse of discretion in IRS's rejection of the taxpayers' proposed installment agreement. (Melasky, (2018) 151 TC No. 9). 

 

The taxpayers argued that their 2011 check should be treated as a voluntary payment toward their 2009 liability because that check was written and accepted before the levy.
 

The Tax Court, however, rejected this argument. The Court, citing case law, reasoned that a payment by check is a conditional payment, subject to the condition subsequent that it be paid upon presentation to the drawee and that there was accordingly no "payment" in this case on Jan. 27, 2011 when the check was written and there was sufficient funds to cover the check , because later when IRS presented the check for payment, it wasn't honored as a result of insufficient funds. Accordingly, the taxpayers weren't entitled to direct the application of payment because no payment occurred.
 
 
The Court also rejected the taxpayers' argument for an equitable exception on account of the fact that the check was dishonored due to an IRS levy, finding no case law or other support for this argument, and further finding that IRS didn't cause the check to bounce but such was rather the result of the taxpayers' chronic failure to pay their taxes.
With respect to IRS's rejection of the installment agreement, the Court found that IRS didn't abuse its discretion. IRS provided two reasons for its rejection, taxpayers' failure to liquidate the equity in their assets as requested, and offering a monthly payment less than they could pay, either of which would be an independently sufficient basis for its rejection. The taxpayers were repeatedly instructed to liquidate the equity in their assets, and despite having received multiple extensions, failed to do so.
The Court also found that IRS reasonably concluded that the taxpayers would be able to rely on distributions from the trust to pay a portion of the living expenses. In so holding, the Court rejected the taxpayers' arguments to the contrary, including that it would constitute a violation of fiduciary duty for Mrs. Melasky to make distributions to herself.
There were two concurring opinions. The first concurrence strenuously disagreed with the dissent, and the second generally emphasized the limited scope of the majority opinion.
A strongly worded dissent opined that the taxpayers' payment should have been considered made on Jan. 27, 2011 and thus voluntary, reasoning that there were sufficient funds in the account at that time and that the check bounced on account of IRS's later actions.

 

Do You Have a Tax Problem?
 
  
Contact the Tax Lawyers of

Marini & Associates, P.A.    
 
for a FREE Tax Consultation contact us at:
www.TaxAid.com or www.OVDPLaw.com or
Toll Free at 888-8TaxAid (888) 882-9243
 

 
 
 
 
 
 
 

Read more at: Tax Times blog

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