Yearly Archives: 2019

According to Law360, a third-party IRS summons on a U.S. citizen's bank records for an investigation into a French company's tax liabilities in France violates federal tax laws because it's not connected to a U.S. debt, an Indiana federal court has been told.

The summons, issued to JPMorgan Chase & Co. seeking Joseph Dadon's bank records, should be quashed because it violates the Internal Revenue Code by requesting information on a tax liability not connected with the U.S., Dadon told an Indiana federal court in an amended petition filed Tuesday.
Under IRC Section 7602(a) , a summons can be issued to determine only if a person owes the U.S. taxes, Dadon said.

The IRS issued the summons to get information on potential value-added taxes that the French company, Société Française de Négoce International, owed the French government, and such a summons is not authorized by U.S. law, Dadon argued. The summons “was not issued in connection with any investigation relating to taxes due to the United States,” the petition said. The case is Joseph Dadon v. U.S., case number 1:19-cv-03862.

But Mr Dadon's attorney must not have read our May 21, 2019 post "Another IRS Summons on Behalf of a Foreign Government" where we discussed that on March 13, 2018 we posted District Court upholds Another IRS Summons Issued Pursuant to a Tax Treaty Request  discussing that a district court had upheld a summons that IRS issued to an American law firm, pursuant to a request from the French tax authorities, with respect to transfers of funds made by an alleged French citizen to a client trust account maintained by the law firm. (Franck Hanse v. US, Case No. 1:2017cv04573).

Furthermore, we previously posted on August 1, 2013 Federal Courts Authorize John Doe Summonses Seeking Identities of Credit Card Use For Norweign Tax Authority!  where we discussed that federal courts in Minnesota, Texas, Pennsylvania, Oklahoma, Virginia and California had entered orders authorizing the Internal Revenue Service (IRS) to serve John Doe summonses on certain U.S. banks and financial institutions, seeking information about persons who have used specific credit or debit cards in Norway. 
We also discussed how the DOJ, petitioned the U.S. District Court for the Western District of North Carolina to authorize IRS summonses to uncover the identities of Finnish residents using U.S.-issued payment cards in Finland. The DOJ and IRS are pursuing this matter under the U.S.-Finland tax treaty and at the request of the Finnish government.

“Our continued success in combatting Offshore Tax Noncompliance has been helped by the Assistance We Receive through the Network of Tax Treaties Around the Globe,” said IRS Commissioner Charles Rettig. 

 

 

 

“Yesterday’s effort reflects that the U.S. will return this help by working under the law with tax administrators in other nations to help them in their fight against tax evasion and avoidance. A global economy should not be allowed to serve as a possible vehicle for tax evasion in any country.”. 

 

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The IRS is stepping up criminally prosecuting business owners for failing to turn over withheld payroll taxes!

In the last week there are no less than five (5) criminal prosecutions of business owners for failing the turnover withheld payroll taxes.

1. Former Kansas City Business Owner Sentenced to Prison for Tax Crime

According to DoJ, the former Kansas City Business Owner Sentenced to Prison for Tax Crime The former owner of a Kansas City, Missouri, business was sentenced on October 23, 2019 to 18 months in prison for obstructing the government’s effort to collect more than $378,000 in taxes owed.

According to court documents and information provided to the court, Barrett Prelogar, 48, was a founding partner of a now-defunct company, Winntech Digital Systems Inc. (Winntech). Winntech produced electronic displays to be used in stores or at trade shows.

In 2002 and 2003, Prelogar withheld payroll taxes from Winntech employees’ paychecks, but he failed to pay the taxes over to the Internal Revenue Service (IRS) and was personally assessed more than $263,000.

Prelogar also filed his personal tax return for 2008 reporting more than $500,000 in gross income, and a tax due of more than $100,000, but failed to pay the taxes due.

Rather than paying the taxes he owed, from 2009 through 2011, Prelogar spent more than $362,000 towards a house at the Lake of the Ozarks, a house near the Plaza in Kansas City, Missouri, a house in Leawood, Kansas, a Porsche, a Jeep, and a boat.

When the IRS tried to collect the unpaid Winntech trust fund taxes, and the taxes Prelogar owed from 2008, he obstructed the IRS’s collection efforts. In particular, from 2011 to 2016, Prelogar used corporate funds to pay his personal expenses, structured cash withdrawals from Winntech’s bank account to avoid federal bank reporting requirements, and cashed his payroll checks from his wife’s company, Bare Skull Innovation LLC, rather than placing the money into a personal bank account.

In addition to the 18 months in prison, U.S. District Judge Stephen R. Bough ordered the defendant to serve one (1) year of supervised release, and to pay over $ 263,959.27 in restitution to the United States.

2. Couple Operating Alabama Construction Company Sentenced to Prison for Payroll Tax Fraud.

According to DoJ, a Crane Hill, Alabama, husband and wife were sentenced to 20 months collectively in prison for failing to pay over payroll taxes.

U.S. District Judge Liles C. Burke sentenced Walter Michael Williams to 13 months in prison and Amy Butler Williams to seven (7) months in prison for failing to pay over payroll taxes.

According to court documents and information provided to the court, Walter Michael Williams and Amy Butler Williams operated Dixie Steel Erectors (DSE), a commercial construction business in Hanceville, Alabama.

Walter Michael Williams, DSE’s president and owner, and Amy Williams, DSE’s bookkeeper and office manager, were responsible for withholding and paying over DSE’s payroll taxes. During 2012 and 2013, DSE accrued payroll tax liabilities and the Williamses withheld those taxes from the pay of the business’s employees, but willfully failed to pay the withheld funds to the Internal Revenue Service (IRS).

Instead, the Williamses caused DSE to pay for a number of their personal expenses, including mortgages, alimony, and football season tickets. The Williamses also failed to file personal tax returns, and failed to file corporate tax returns for DSE.

In addition to 20 months collectively in prison, the Williamses were each ordered to serve three years (3) of supervised release and to pay restitution in the amount of $502,683.23 to the IRS.

3. Owner of New York City Temporary Staffing Firms Indicted for Employment Tax Fraud

According to the DoJ, a federal grand jury in Brooklyn, New York, indicted a New York City resident yesterday on multiple counts of willfully failing to collect, truthfully account for, and pay over federal employment taxes to the Internal Revenue Service (IRS).

According to the indictment, Steven Heppenheimer owned and operated temporary employment staffing businesses located in Long Island City, New York, including PTP Staffing Associates Inc. (PTP), and PPS Associates Inc. (PPS). As the alleged sole owner of PTP and PPS, Heppenheimer was required to collect, account for, and pay to the IRS federal employment taxes withheld from the wages of PTP and PPS employees. As alleged in the indictment, from 2013 through 2017, Heppenheimer failed to report more than $270,000 in employment taxes to the IRS.

If convicted, Heppenheimer faces a statutory maximum sentence of five years imprisonment for each count charged. He also faces substantial monetary penalties, supervised release, and restitution.
An indictment merely alleges that crimes have been committed. The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

4. Owner of Tulsa Software Company Sentenced to Prison for Employment Tax Fraud

According to DoJ, a computer software development company owner was sentenced to 24 months in prison for failing to account for and pay over employment taxes withheld from his employees’ wages.

According to documents and information provided to the Court, as the owner and operator of Tulsa-based Zealcon Corporation, Earenest J. Grayson Jr. was responsible for withholding, and paying over to the Internal Revenue Service (IRS) payroll taxes on the wages paid to Zealcon employees.

For the period January 2014 through June of 2016, Grayson caused a tax loss of approximately $1 million by intentionally not paying to the IRS income and social security taxes withheld from Zealcon employees’ wages and the employer portion of social security taxes due from Zealcon on those wages.

In addition to prison, Grayson was ordered to pay restitution to the IRS in the amount of $904,091, and to serve three (3) years of supervised release.

 5. Miami Business Owner Pleads Guilty to Employment Tax Fraud

According to DoJ, a Miami, Florida, business owner pleaded guilty today to failing to pay over employment taxes.

According to court documents, between 2002 and 2017, Ricardo Betancourt owned and operated multiple parcel delivery businesses in the South Florida area. Betancourt’s businesses earned gross revenues of more than $100 million.

Through his businesses, Betancourt employed hundreds of employees and was responsible for collecting and paying over to the Internal Revenue Service (IRS) the taxes withheld from employees’ paychecks. Betancourt withheld payroll taxes from his employees, but he deliberately failed to pay over those withholdings and other associated taxes to the IRS, despite his obligation to do so.

In 2013 and 2014, Betancourt did not pay over approximately 97 percent of the federal employment taxes he withheld from his employees. In 2015 and 2016, Betancourt did not pay over any of the federal employment taxes he withheld from his employees. For the quarter ending December 2016, Betancourt admitted that he failed to truthfully account for and pay over payroll taxes of approximately $727,478.

Sentencing is scheduled for Feb. 12, 2020. Betancourt faces a statutory maximum sentence of five (5) years in prison as well as a period of supervised release, restitution, and monetary penalties.

 

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According to Law360, The Internal Revenue Service should “touch every neighborhood” in choosing which taxpayers to audit, IRS Commissioner Chuck Rettig said Monday in Philadelphia.

The agency should be able to target different ZIP codes and types of cases in order to increase the rate of voluntary compliance, Rettig said during the 30th Annual Philadelphia Tax Conference.

 

"When I Refer To Neighborhoods, I May Be Referring To Geographic, I May Be Referring To ZIP Codes, If You Will,

I May Be Referring To Types of Issues, Civil or Criminal," Rettig Said. "I Might Be Referring To Type Of Taxpayer.

 

 

We Want To Touch Everyone." 

 

The agency will continue to focus on its enforcement of cryptocurrency transactions, Rettig said. “You now deal in cryptocurrency, again thinking this will make you anonymous,” he said, quoting Don Fort, chief of the agency's Criminal Investigation Division. “But our agents have once again proved that there is nowhere you can hide.”

IRS Chief Counsel Michael Desmond said this month that the agency is working to release additional guidance on cryptocurrencies to address questions about compliance, including the calculation of basis, valuation and information reporting.

In a 2014 notice, the agency established the principle that cryptocurrencies should be treated as property for tax purposes. Last week, the agency released additional guidance in the form of a revenue ruling and frequently asked questions that said the splitting of a cryptocurrency blockchain under a so-called hard fork does not create taxable income if no new cryptocurrency is received, but taxable income is generated by so-called airdrops that deliver new cryptocurrency.

Rettig also said that the agency welcomes the changes Congress instituted by passing the Taxpayer First Act , which was enacted this year. “A lot of our people worked long and hard hours for many years to try and bring that statute home,” he said.

Still, the agency welcomes the comments of practitioners as it begins to adjust to the legislation, he said. “We want to engage with you,” he said. “We want to hear your viewpoint.”

The TFA includes provisions to strengthen taxpayer identity theft protection, create online taxpayer accounts, accept credit and debit card payments and modernize IRS information technology systems.

The legislation also requires the U.S. treasury secretary to submit two reports to Congress, one detailing a comprehensive IRS customer service strategy and the other recommending how to reorganize the agency.

Have an IRS Tax Audit Problem? 

 
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com 

orToll Free at 888-8TaxAid