Inside this edition of the April SFS Tax Problem Solutions Newsletter you can read about: What To Do When You Receive the Dreaded Letter from the IRS, The Court Case: IRS vs. Facebook, Leaving the Art House for the Big House, How Many Scientific Calculators Does It Take to Send an Executive Assistant to Jail?, The ABCs of Tax Resolution Explained – J is for Jeopardy Assessment, More Interesting Reading… Question and Answer, Kind Words From a Satisfied Client, For the foodies and A Bit of Tax Humor.
April 24, 2020
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In the News!
The Court Case: IRS vs. Facebook
The IRS is claiming that social media giant Facebook grossly undervalued its intellectual property when it sold it to a subsidiary in Ireland in 2010 to avoid taxes.
Facebook’s subsidiaries pay a royalty to the U.S. parent company for its user base, platform technologies, and trademark, among other elements. Facebook Ireland paid its U.S. counterpart more than 14 billion dollars from 2010 to 2016.
The IRS claims that the valuation Facebook gave its intellectual property is too low and should be taxed accordingly. Facebook claims the low valuation reflected the risk involved with its international expansion since the sale happened before its IPO and the development of its advertising systems.
According to Facebook spokeswoman Bertie Thompson, at the time of the 2010 valuation, Facebook, “Had no mobile advertising revenue, its international business was nascent, and its digital advertising products were unproven.”
The process of setting up a subsidiary in Ireland to take advantage of low tax rates is a common accounting maneuver for large corporations, with companies like Apple doing the same thing.
If the IRS wins, Facebook would have a tax liability of up to nine billion dollars, plus interest and penalties.
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Leaving the Art House for the Big House
Philip Righter has pleaded guilty to the sale of paintings he claimed were created by artists such as Keith Haring, Andy Warhol, and others. He admitted to lying on his income tax returns.
Righter attempted to bilk victims out of six million dollars by forging authenticity papers for paintings he claimed were legitimate. He caused losses of at least $758,265, and his fraudulent tax returns cost the United States more than $100,000.
One victim loaned Righter $24,000 based on a painting by Jean-Michel Basquiat that Righter put up as collateral. The victim discovered the picture was a fake when Righter defaulted on the loan, and he tried to sell it.
On his 2015 tax return, Righter submitted a false W-2 and a false donation of fraudulent art to a charity, which resulted in a tax refund of $54,858. He later filed an amended 2015 return and claimed a loss of $2,575,000 for the artwork he said was stolen and had no value. The amended return resulted in false carryback refunds totaling $52,485.
Righter faces a maximum of 25 years in prison.
How Many Scientific Calculators Does It Take to Send an Executive Assistant to Jail?
Kristen Martin, an executive assistant from Denver, pleaded guilty to mail fraud and federal tax evasion for a scheme that cost her employer $846,441.
From 2013 to 2016, Martin used her employer’s Staples accounts to purchase unauthorized items she either kept for herself or sold online through eBay and other companies. Due to changes in her assignment within the company, Martin came to have access to 23 different Staples accounts, making her nefarious activities easier to hide.
According to court documents, Martin fraudulently ordered 4790 scientific calculators, 250 iPads/tablets, 440 Apple TVs, 178 Kindles, 159 headsets, and five cameras. She resold the goods for a total of $571,725 and used the company’s Federal Express account to ship the items to her buyers. Shipping charges cost her employer an additional loss of $7896.
When questioned by management about some of the purchases, Martin lied. She said that the items were purchased for a project in a different division of the company.
Martin hid her earnings from the sale of the illegally obtained items from the IRS by filing false federal income tax returns for the years 2013 – 2016.
She has agreed to pay restitution up to $872,337 to her employer and in the amount of $161,864 to the IRS.
The ABCs of Tax Resolution Explained
When you have a tax problem, your best bet is to work with a Certified Tax Resolution Specialist (CTRS),and Enrolled Agent (EA). During the process, there are many terms that you are likely to hear that are unfamiliar to you and notices that you will probably receive from the IRS or state.
We have a series of ongoing blogs, “The ABCs of Tax Resolution Explained” that will provide you with an overview of many of these terms and concepts.
Learn more about audits in our latest blog, J is for Jeopardy Assessment.
Read A-I at The Tax Resolution ABCs Explained
For a complete explanation about the notices you may receive, download
Now What? I Got a Notice from the IRS. Help!
For Your FREE copy click here, https://www.nowwhathelp.com/
Question:
Things are not going well for my business because of the COVID-19 pandemic. What happens if my company cannot pay the payroll taxes, am I personally responsible?
Answer:
When a business fails to remit payroll taxes, the IRS has the authority to collect those taxes from “responsible persons,” including certain shareholders, partners, officers and employees. The IRS takes an expansive view of who constitutes a responsible person.
In this scenario, a “responsible person” includes anyone — within or outside the company — with significant control or influence over the company’s finances. This control or influence can be derived from an ownership interest, job title, check-signing authority, hiring or firing authority, control over the company’s payroll, or power to make federal tax deposits.
If you don’t pay payroll taxes for your business, you’ll receive a bill from the IRS and likely a penalty, too. According to the IRS, employers who don’t follow employment tax laws are subject to civil and criminal penalties.
Our clients generally NEVER meet or speak with the IRS. We handle everything for you so you don’t have to take time away from your job or business to deal with all of the IRS’s paperwork. Don’t let them walk all over you. We know the law. We know your rights. We can help!
The Now What Help! Series
How can I help you?
If you have a state or federal tax problem or just want to refer a friend, relative or client, I’d love to hear from you. I provide a no-obligation, confidential consultation to help you solve your IRS problems.
Call us today and let’s get to work solving your tax problem 877.355.8010 or book your appointment online, https://meetme.so/SFSTax
877.355.8010
Jeffrey Schneider,
EA, CTRS, ACT-E NTPI Fellow
Email: jeff@sfstaxacct.com
738A Colorado Ave
Stuart, FL 34994
www.sfstaxproblemsolutions.com
Chewy Chocolate Chip Cookies
Working from home has not been difficult for me. I can pretty much stay in my routine, however, sometimes the cravings for sweets just hit me. When that happens it is time to bake my favorite comfort food, chewy chocolate chip cookies. These cookies are so chewy and chocolatey that they are addictive.
Our son, Cameron, who attended Ross Veterinary School in St Kitts was home as they closed his campus due to the pandemic. He had less than a month to complete the program before heading to LSU for his clinicals and stayed with us to complete the program online. He also crushes on chewy chocolate chip cookies. And being the good mother that I am I pulled out the chips and went to work.
Before he headed to Pensacola to visit friends and be ready to head to LSU when the campus opens I packed up all the cookies for him to take with him. It is time for me to make another batch as the craving is creeping up.
Find the recipe on the SFS Tax Problem Solution Pinterest page along with other pins and videos.
A Bit of Tax Humor…
An IRS agent is walking through the park when a mugger jumps out and yells “Give me all your money!”. The IRS agent says, “You can’t do this after all I work for the IRS.” At which point, the mugger yells:
“OK, give me all MY money!”
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