Employment Tax Evasion Schemes

All employers must be careful. Employment tax evasion schemes can take a variety of forms. Some of the more prevalent methods of evasion include pyramiding, employee leasing, paying employees in cash, filing false payroll tax returns or failing to file payroll tax returns. To resolve and fix these and other tax problems, call Michael Mandale at 1-888-Lien-Fix.

Filing False Payroll Tax Returns or Failing to File Payroll Tax Returns

Preparing false payroll tax returns understating the amount of wages on which taxes are owed, or failing to file employment tax returns are methods commonly used to evade employment taxes.

Employment Leasing

Employee leasing is another legal business practice, which is sometimes subject to abuse. Employee leasing is the practice of contracting with outside businesses to handle all administrative, personnel, and payroll concerns for employees. In some instances, employee-leasing companies fail to pay over to the IRS any portion of the collected employment taxes. These taxes are often spent by the owners on business or personal expenses. Often the company dissolves, leaving millions in employment taxes unpaid.

“Pyramiding” of employment taxes is a fraudulent practice where a business withholds taxes from its employees but intentionally fails to remit them to the IRS. Businesses involved in pyramiding frequently file for bankruptcy to discharge the liabilities accrued and then start a new business under a different name and begin a new scheme.

Paying Employees in Cash

Paying employees, whole or partially, in cash is a common method of evading income and employment taxes resulting in lost tax revenue to the government and the loss or reduction of future social security or Medicare benefits for the employee.

Other schemes include:

Unreliable Third Party Payers
Frivolous Arguments
Offshore Employee Leasing
Misclassifying worker status
Filing False Payroll Tax Returns or Failing to File Payroll Tax Returns
S Corporation Officers Compensation Treated as Corporate Distributions

For further reading, look at IR-2004-47, titled “IRS Warns Businesses, Individuals to Watch for Questionable Employment Tax Practices.”

To resolve and fix these and other tax problems, call Michael Mandale at 1-888-Lien-Fix.

Wesley Snipes had failed to pay approximately $70,000 in local property taxes, interest and penalties on a home in Alpine, New Jersey, owned by his company, Kymberlyte Production Services International, Inc. In December 2007, the taxing authority of the borough of Alpine, New Jersey sold the tax lien on the home to a third party. Snipes has two years to redeem the property or risk foreclosure.

On October 12, 2006, Wesley Snipes, Eddie Ray Kahn, and Douglas P. Rosile were charged with one count of conspiring to defraud the United States under 18 U.S.C. § 371 and one count of knowingly making or aiding and abetting the making of a false and fraudulent claim for payment against the United States, under 18 U.S.C. § 287 and 18 U.S.C. § 2. Snipes was also charged six counts of willfully failing to timely file Federal income tax returns under 26 U.S.C. § 7203.

The conspiracy charge against Snipes included allegations that he filed a false amended return including a false tax refund claim of over US$4 million for the year 1996 and a false amended return including a false tax refund claim of over US$7.3 million for the year 1997. The government alleged that Snipes attempted to obtain fraudulent tax refunds using a legally discredited tax protester theory called the “861 argument” (essentially, an argument that the domestic income of U.S. citizens and residents is not taxable).

The indictment said Snipes used accountants who already had a history of filing false returns to obtain refund payments for their clients. The government also charged that Snipes sent three worthless, fictitious “bills of exchange” to the Internal Revenue Service (IRS) in the amounts of $1,000,000 (on November 30, 2000), $12,000,000 (January 18, 2001), and $1,000,000 (September 10, 2002), with each accompanied by an IRS tax payment voucher coupon.

Under the alleged deal, the firm American Rights Litigators was to receive, from the clients, an amount equal to 20 percent of the tax refunds obtained for those clients. The government also charged that Snipes failed to file tax returns for the years 1999 through 2004.

In a December 4, 2006 letter from Snipes in response to his indictment, he declared himself “a nonresident alien” of the United States. Snipes said he was a scapegoat and unfairly targeted by prosecutors in connection with the federal tax fraud investigation. He attempted unsuccessfully to get the trial moved from Ocala, Florida on the ground that racist attitudes in that town would prejudice his chance for a fair trial. Snipes faced the possibility of up to sixteen years in prison and substantial fines if convicted on all the charges. The trial began on Monday, January 14, 2008, in Ocala, Florida,with opening statements beginning on Wednesday, January 16, 2008.

On February 1, 2008, Snipes was acquitted on the felony count of conspiracy to defraud the government and on the felony count of filing a false claim with the government. He was, however, found guilty on three misdemeanor counts of failing to file Federal income tax returns (and acquitted on three other “failure to file” charges). His co-defendants, Douglas P. Rosile and Eddie Ray Kahn, were convicted on the conspiracy and false claim charges in connection with the income tax refund claims filed for Snipes.Following the guilty verdicts on the misdemeanor charges, Snipes faces a maximum possible three years in prison. His sentencing is scheduled for April 24, 2008, at 9:30 a.m.

If you owe back taxes th IRS can issue a tax levy to attempt to collect the debt. If you have received notice from the IRS of a tax levy, your IRS Problems have reached a critical point. It is now time for you to explore your options. Here at the Mandale Law Firm We handle situations like these every day. It is important that you get the proper advice on how to best deal with IRS.

What is a tax levy? A levy is tactic used to seize your assets up to the amount of back taxes you owe the IRS or taxing agency. These assets include your bank accounts, home, vehicles, wages, life insurance, inheritances, state income tax refunds, Social Security benefits, and securities.

This type of tax advice can be rendered by a tax advisor orally or in writing. Reliance on oral tax advice from a tax practitioner generally will not relieve the taxpayer from IRS-imposed accuracy related penalties if the transaction in is discovered and challenged by the IRS.

If this happens to you, your ability to pay your expenses and live a normal life will be hindered. If your IRS Problems have grown to the point that you might receive a tax levy, you and your family are already stressed. Now is the time to investigate your options and work on solving your IRS Problems. You should.

The Levy Process.

Three things need to happen before the IRS can seize your assets with a tax levy:

1. You receive a Notice of Demand for payment from the IRS. When you receive a Notice of Demand for payment, your best option would be to pay your tax debt in full. This would also include any penalties or interest your taxes have accrued.

2. You refuse to pay your taxes in full. If you refuse to pay your taxes in full, your options include obtaining an Offer in Compromise or an installment agreement or, if necessary, filing for bankruptcy.

3. You receive a Final Notice of Intent to Levy. If you reach the step where you receive a Final Notice of Intent, your assets will be seized. This notice has to be received at least 30 days prior to the levy taking effect. You will have 30 days to resolve the issue before the levy goes in to effect.

Other Options

Other options you may want to consider include showing that the levy will cause extreme financial hardship on your family, the statute of limitations expires before the levy is served, or that you can prove to the IRS that not seizing your assets will make it easier for it to collect the taxes.

Our firm frequently provides tax advice and written tax opinions for clients on significant and complex federal and state tax matters.

To avoid a tax levy altogether, let our knowledgeable staff help you evaluate your situation and determine the option that will work best for you and your family. Your IRS Problems can be a thing of the past. Contact us today. Call us at 1-888-Lien-Fix or contact us online to schedule an immediate FREE Consultation.

Taxpayers often require tax advice to either report certain transactions on their tax returns or to understand the tax ramifications for particular transactions.

In many cases this tax advice relates to large, and usually, once in a lifetime time transactions, such as the sale of a business or real estate, business or non-profit transactions, employee benefits, or trust and transfer tax issues.

This type of tax advice can be rendered by a tax advisor orally or in writing. Reliance on oral tax advice from a tax practitioner generally will not relieve the taxpayer from IRS-imposed accuracy related penalties if the transaction in is discovered and challenged by the IRS.

Reliance on certain types of written advice from a tax attorney may relieve the taxpayer from IRS-imposed accuracy related penalties. The IRS has promulgated a number of rules for what types of written advice from a tax advisor qualifies for this type of treatment (and it proscribes sanctions for tax practitioners who do not comply with the IRS rules).

Our firm frequently provides tax advice and written tax opinions for clients on significant and complex federal and state tax matters.

Please call us at 1-888-Lien-Fix or contact us online to schedule an immediate appointment or.