Blog Migration

June 27, 2012 Leave a comment

I’m about to transfer this blog to a self-hosted blog. The process may take several days to complete, so posting may not resume until next week.


Nevada Tax Commission Approves Comped Meals Tax

June 27, 2012 Leave a comment

Last January the Nevada Tax Commission upheld a decision requiring a major casino company (Boyd Gaming) to collect and remit sales tax on the value of complementary meals provided to its gamblers. Boyd apparently plans to take the case to the Nevada Supreme Court.

In the meantime, the Nevada Tax Commission passed regulations on Monday requiring the state’s casinos and restaurants to pay sales tax on complementary meals provided to its employees and its patrons, reports the Las Vegas Review-Journal.

The Nevada Tax Department issued the regulations last February; casinos and restaurants must remit to the state, by July 15, taxes on meals comped as of February 15, 2012.

The tax base for comped employee meals is the cost of the food when purchased by the employer. The tax base for comped patron meals is the menu price.

Some implicated businesses may stop offering comped meals. Others may refuse to pay up awaiting a court decision and could face a possible 25 percent penalty, plus interest.

Tribal Manufactured Cigarettes Sold out of NYS Not Taxable

June 24, 2012 Leave a comment

In the ongoing war over cigarette taxes between the State of New York and its federally recognized tribes, the latter scored a victory in the most recent battle.

Supreme Court Justice David Demarest issued an order last week requiring the State to return cigarettes seized last January by state police. The 26,160 cigarette cartons and 72 bags of tobacco were sold by the St. Regis Mohawk Tribe to HCI Distribution, Inc., a political division of the Winnebago Tribe of Nebraska.

Some of the State’s tribes began to manufacture and sell their own cigarettes after losing a court case requiring them to pay the $4.35 per pack cigarette tax on their purchase of name-brand cigarettes from wholesalers located off reservation.

NY Tax Law imposes a cigarette tax on on-reservation sales of cigarettes to non-members of an Indian tribe. The consumer bears the responsibility to pay the tax.

In this case, however, the cigarettes were sold to out-of-state purchasers, which, according to Justice Demarest, are not subject to the State’s cigarette tax. Therefore, the State had no authority to seize the cigarettes and loose tobacco en route to Nebraska.

A spokeswoman for NY Attorney General Eric T. Schneiderman confirmed the AG will appeal the decision.

The Indian Country Today Media Network has more.

NY Attorney’s License Suspended for Tax Fraud

June 22, 2012 Leave a comment

Last January, former Sullivan and Cromwell partner John O’Brien was sentenced to two years and four months in prison for failing to pay taxes on over $10 million in partnership income earned between 2003 and 2008.

Earlier this week, his license to practice law in New York was suspended by the Appellate Division, First Department.

The Departmental Disciplinary Committee petitioned the court seeking suspension. Under NY law, any attorney convicted of a “serious crime” shall be suspended from the practice of law.

Although O’Brien did not plead guilty to any felonies, he pleaded guilty to willful failure to file income tax returns, which is considered a “serious crime.”

In a sentencing memorandum, O’Brien’s attorney Russel Neufeld indicated the tax problems initially arose when O’Brien invested $3 million in his domestic partner’s failed rare book business, according to the New York Law Journal.

Categories: Tax Fraud

Pure with Tax Fraud

June 22, 2012 Leave a comment

Yesterday, Kelly Doll, a former employee at the popular Las Vegas nightclub Pure, pleaded guilty to one count of filing a false tax return, reports the Las Vegas Review-Journal.

Tip income is taxable. Over $220,000 in tips he received between 2005 and 2006 didn’t make its way onto his income tax returns.

You may think I sound like a broken record. That’s because this is the third time I’ve written about former Pure employees/owners committing tax fraud. See here and here. I think I’m running out of catchy headlines.

Doll’s sentencing date is September 24.

Offshore Tax Investigations: First Switzerland, Is Israel Next?

June 19, 2012 Leave a comment


The strongest indication emerged last week when a superseding indictment was unsealed, charging three American tax preparers for assisting their clients with concealing assets and income in unidentified Israeli banks.

U.S. residents must report all income earned to the IRS. U.S. residents must report whether they have a financial interest in a foreign financial account worth more than $10,000 in a particular year.

According to the Department of Justice press release:

The superseding indictment alleges that the co-conspirators prepared false individual income tax returns which did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts. In order to conceal the clients’ ownership and control of assets and conceal the clients’ income from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank A and Bank B. Bank A is a large financial institution headquartered in Tel-Aviv, Israel, with more than 300 branches across 18 countries worldwide. Bank B is a mid-size financial institution also headquartered in Tel-Aviv, with a worldwide presence on four continents.

The federal government has aggressively pursued offshore tax evaders since 2008, when Swiss-based financial firm UBS was accused of assisting U.S. residents with committing tax evasion by shielding assets in offshore accounts. In 2009, UBS agreed to pay $780 million to the U.S. in fines, penalties, interest and restitution.

Over the four years since then, the IRS has run three offshore voluntary disclosure programs (in 2009, 2011, and 2012) to encourage taxpayers with undisclosed financial accounts to come forward and pay stiff penalties.

A benefit to participating in the program, if eligible, is that criminal charges will not be pursued against taxpayers making complete and truthful disclosures. Read more about the pros and cons of a voluntary disclosure here.

Undoubtedly the IRS and DOJ have collected a lot of information from these programs. “Enablers” such as those indicted above have not been eligible for the programs, however. It’s very possible these enablers were discovered through disclosures of their own clients.

CNBC is reporting the recent indictment may be the first of a series involving U.S. tax evasion by shielding assets in Israeli banks via “cash-transfer banking,” by which an offshore banker is set up with an American taxpayer seeking to withdraw and deposit the same amount of cash with the foreign bank:

The bankers appear in the U.S., typically at a hotel, and arrange for couriers to bring the cash to the hotel from the depositing customer, and later turn it over to the withdrawing customer, only later crediting each account for the transaction back in the foreign bank offices.

In somewhat related news, yesterday Israeli authorities arrested nine individuals and questioned fifteen more in connection with the possibly largest tax fraud scheme in Israeli history. I don’t see any connections aside from the nature and location of the crimes, however.

Hat tip: Federal Tax Crimes

Trapped by the IRS

June 14, 2012 Leave a comment

TMZ is reporting American singer-songwriter R. Kelly owes the IRS over $4.8 million in back taxes. The balances due:

via Wikipedia

2005 – $1,472,366.77
2006 – $710,520.51
2007 – $376,180.11
2008 – $1,122,694.90
2009 – $173,815.18
2010 – $992,495.24

Kelly is probably best known for his hit “I Believe I Can Fly,” which was featured on the soundtrack to the 1996 film Space Jam.

More recently, Kelly wrote and directed the popular hip hopera series “Trapped in the Closet.” Last March Kelly confirmed a new set of videos for the series will be released later this year.

Kelly’s representative said the artist “is in the process of working everything out with the government and is confident that all his obligations will be satisfied.”

A revenue-sharing agreement with the IRS on proceeds received from the new “Trapped in the Closet” videos would not be the first of its kind. See Willie Nelson.

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