Archive for August, 2016

Caesars Gets Another Month

Wednesday, August 31st, 2016

Caesars Entertainment Operating Company (CEOC) appealed Judge Goldgar’s decision to US District Court (decisions in a bankruptcy court get appealed to the District Court). Judge Robert Gettleman gave Caesars until October 5th; Judge Gettleman will hold a hearing in Chicago then. As reported in the Las Vegas Review-Journal, Judge Gettleman “…warned CEOC that it faced an ‘uphill’ fight.”

The pause does give time for the two sides to negotiate. That said, the junior creditors who filed $11 billion in claims against Caesars appear unwilling to settle for what Caesars has offered. The claims relate to allegations that Caesars deliberately reorganized to create a “good” Caesars and a “bad” Caesars. A court appointed examiner has already said that the junior creditors are likely to prevail.

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Posted in Gambling | Comments Closed

Fail, Caesar: The Bankruptcy May Grow

Sunday, August 28th, 2016

On Friday, Bankruptcy Judge Benjamin Goldgar ruled that an injunction against $11 billion in lawsuits over how Caesars split itself into various units will be allowed to expire on Monday, August 29th. Given that the first of several court rulings in the various lawsuits is due on Tuesday, August 30th there’s a definite possibility that the rest of Caesars will join Caesars Entertainment Operating Company (CEOC) in Chapter 11 bankruptcy.

The dispute is over whether Ceasars (and its private equity owners, Apollo Global Management and TPG Capital) created a “good” (or healthy) Caesars and a “bad” (or unhealthy) Caesars (CEOC being the unhealthy Caesars). CEOC offered $4 billion extra in its reorganization plan if the junior creditors (they’re the ones who were protesting and suing over this dispute) would agree to the offer. While one junior creditor accepted the offer, most did not. Judge Goldgar wondered why the private equity owners weren’t contributing any of their own money to resolve the dispute. My cynical belief is that Apollo and TPG wanted to have their cake and eat it, too.

While CEOC plans on appealing the ruling, that’s a long shot. Given that a bankruptcy court examiner felt that the lawsuits could succeed (with damages as high as $5.1 billion), one possible means out for Caesars is to put the rest of Caesars into Chapter 11.

This coming week will be very critical for the future of Caesars.

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Kiplinger’s Tax Friendly and Tax Unfriendly States: No Surprises

Saturday, August 27th, 2016

Kiplinger released its list of the tax friendly and least tax-friendly states in the US. There really aren’t any surprises:

Here are the bottom ten:

1. California
2. Hawaii
3. Connecticut
4. New York
5. New Jersey
6. Minnesota
7. Maine
8. Vermont
9. Illinois
10. Rhode Island

And the top ten:

1. Wyoming
2. Alaska
3. Florida
4. Nevada
5. Arizona
6. Louisiana
7. South Carolina
8. South Dakota
9. Mississippi
10. Delaware

Let’s look at my former state (California) and my current state (Nevada) as to the differences. “The Golden State is home to movie stars, beautiful beaches and the highest income tax rates in the U.S., putting it at the top of our list of Kiplinger’s top ten least tax-friendly states. Californians pay lower property taxes than residents of other high-tax states, but, in a state with some of the highest real estate prices in the U.S., they’re no bargain.” There’s not much to add: California is a very high-tax, high-regulation state.

Now let’s look at Nevada. “Another no-income-tax haven, Nevada is one of Kiplinger’s top ten most tax-friendly states. Where does it get its money? Sales tax: the average combined state and local tax rate is 7.98%.” Kiplinger missed another huge source of funding for Nevada: casinos. No matter, Nevada is a low-tax, low-regulation, business friendly environment. I’m happy I’m here.

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Paying Employment Taxes Is Optional…Until You Get Caught

Sunday, August 21st, 2016

Two stories regarding employment taxes from the past week should serve as a reminder that paying employment taxes is only optional until you get caught.

First, an update on the individual who thought he could just create a new business entity every time the IRS asked about his paying employment taxes. Agim Zendeli owned the Ziggies chain of restaurants in Missouri; he pleaded guilty in January to not remitting $1.3 million in payroll taxes. He was sentenced to 37 months at ClubFed and must make restitution of $1.3 million (which he had previously agreed to do).

Meanwhile, out of Germantown, Tennessee (suburban Memphis) comes the story of Larry Thornton. Mr. Thornton was the majority owner of one Memphis business and the sole owner of another. I’ll let the DOJ press release tell the story:

Beginning in the second quarter of 2007, Thornton caused SEI to stop paying over the taxes required to be withheld from SEI’s employees’ paychecks and caused SEI to stop timely filing Employer’s Quarterly Federal Tax Returns, Forms 941, with the IRS. Beginning in the first quarter of 2010, Thornton caused First Touch to stop paying over the taxes required to be withheld from First Touch’s employees’ paychecks and caused First Touch to fail to timely file Forms 941 with the IRS. Between 2007 and 2011, Thornton collected more than $6.8 million in employment taxes from SEI and First Touch employees’ paychecks, but failed to pay those collected taxes over to the IRS. Thornton also failed to pay his companies’ matching share of FICA taxes during those years. During that time period, two of Thornton’s full-time accountants – both of whom were certified public accountants (CPAs) – warned Thornton about his failure to pay over employment taxes. Both CPAs resigned their positions due to Thornton’s unwillingness to comply with his employment tax obligations.

During the same years in which Thornton failed to comply with his employment tax obligations, Thornton spent more than $6.2 million from the business bank accounts on personal expenses, including house and condominium payments; vehicle, yacht and motorcycle loan payments; personal travel; and start-up funding for his wife’s beauty boutique. According to court documents, Thornton also failed to file personal and corporate income tax returns. As part of the guilty plea, Thornton admitted that his illegal conduct caused a tax loss of more than $8.9 million to the IRS.

Of course the IRS will understand spending $6.2 million on personal expenses rather than remitting your payroll taxes. I mean what’s more important: buying a yacht or paying the government? Mr. Thornton was sentenced to full restitution and to spend one year at ClubFed.

As a reminder, all employment tax remission issues are investigated by the IRS. If you want to visit ClubFed, having employees and not remitting payroll taxes is a quick and easy way to do so.

Posted in Payroll Taxes, Tax Evasion | Comments Closed

Three Sets of Books Isn’t Better than One

Sunday, August 21st, 2016

From time to time I’ve seen stories of individuals using two sets of books: One with the actual numbers and one with the (lesser) numbers used to prepare the tax returns. It’s a great idea…until you get caught. A former owner of a Las Vegas liquor store took the double set of books idea a bit further.

Jeffrey Nowak and Ramzi Suliman owned a chain of liquor stores here in Las Vegas. The stores were successful, but the income reported on the tax returns was inaccurate. Mr. Nowak gave his tax professional the second set of books that left out about $4 million in cash receipts. The Las Vegas Review-Journal reports that there was also a third set of books; that set compared the true and skimmed versions of books. The Department of Justice press release notes, “For tax years 2006 to 2009, Nowak reported a total income tax owed of only $313, when in fact Nowak owed more than $400,000. The total tax loss from the conspiracy is nearly $1 million.”

Mr. Nowak was indicted and tried this past week. He was found guilty of conspiracy to defraud the United States, assiting in filing false corporate tax returns, and tax evasion. He’s looking at a lengthy term at ClubFed when he’s sentenced in November. Mr. Suliman pleaded guilty in 2014; he is awaiting sentencing.

For those wondering: Three sets of books isn’t better than two, and two sets of books isn’t better than one.

Posted in Tax Evasion | Comments Closed

Five Sentenced for Tax Fraud; Justice Department Gets ITINs Wrong

Sunday, August 14th, 2016

A Justice Department press release caught my eye. Five individuals, all Mexican nationals residing in the US, were sentenced to ClubFed for terms between 33 months and 121 months. The five individuals had pleaded guilty to conspiracy to commit mail fraud, and they had indeed done so:

Beginning in 2014 and under the direction of Natividad Medina, the defendants conspired to steal money from the U.S. Treasury and U.S. taxpayers by exploiting the ITIN system. The Medina sisters began by collecting Mexican identification documents from unknown people in Mexico and used those to fraudulently obtain ITINs. The Medina sisters then used those ITINs to submit false and fraudulent income tax returns to the Internal Revenue Service Center in Austin. They requested that the IRS mail refund checks to residences or to one of more than 200 post office boxes in and around the Houston area which Lopez had rented and maintained on behalf of the Medina sisters.

Kudos to the DOJ and IRS Criminal Investigation for stopping these individuals.

Unfortunately, either the Department of Justice or the US Attorney’s Office for the Western District of Texas needs to learn more about Individual Taxpayer Identification Numbers (ITINs). Here’s what they say about ITINs:

According to court records, in 1996, the Internal Revenue Service began issuing Individual Taxpayer Identification Numbers, or “ITINs”. By obtaining an ITIN, an individual who is already disregarding federal law by living in the United States illegally is given the opportunity to comply with federal law by filing taxes. If the applicant can furnish sufficient proof (i.e. foreign birth certificate, national identification card, passport, etc.) that he or she is living in the United States illegally, the IRS will issue that person an ITIN.

While that’s true, there are other purposes ITINs are used for. If a US citizen is married to a non-American, an ITIN can be issued for the spouse. An ITIN can also be issued for a dependent of a US citizen. A non-citizen who has a US tax filing responsibility (and who is not in the US illegally) will also be issued an ITIN. One would think that the DOJ or US Attorney’s Office might look at an IRS web page (like this one) to see the legitimate reasons why one would obtain an ITIN.

While I was on vacation came the news that ITINs will now expire, with ITINs with middle digits of “78” and “79” expiring this year. While a renewal application (Form W-7) will be available by October 1st, and you won’t need to file a tax return to renew the ITIN, I’ve had lots of problems with the ITIN office (lost applications, lost paperwork, problems even when the Taxpayer Advocate Office handed the paperwork in) that I’m glad it appears none of my clients are in the first group of renewals. If you get the idea that I’m expecting problems, you’re right. But I digress….

In any case, I do say well done to the DOJ for putting these scofflaws behind bars. However, next time read up on why some people who are either visiting the US quite legally or are related to a US citizen really need an ITIN in order for them (or a US citizen) to comply with their US tax filing responsibilities.

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Posted in International, IRS | 1 Comment »

Exempt Organization Extension Filing Deadline Is Monday

Thursday, August 11th, 2016

The extension deadline for filing Form 990 series returns for tax-exempt organizations is Monday, August 15th. This deadline is for the 501(c) series of organizations that filed extensions back in May, including charitable organizations, welfare organizations, social clubs, and other nonprofits. Most of these entities will not owe any tax unless they have either unrelated taxable business income or are a private foundation with investment income. If filing a paper return I strongly recommend using certified mail, return receipt requested so you have proof of filing. Better yet, just file electronically and you have complete proof of filing.

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Nevada Commerce Tax Filing Deadline Is Monday

Thursday, August 11th, 2016

The deadline for filing Nevada Commerce Tax returns is Monday, August 15th. The tax is a modified gross receipts tax on businesses with more than $4 million of Nevada gross receipts. However, all Nevada businesses must file the returns. Impacted businesses should have received a welcome letter from the Nevada Department of Taxation; however, non-receipt of the letter doesn’t exempt you from filing.

Filing an “exempt” return (less than $4 million in revenues) took me about one minute after I registered with the Nevada Department of Taxation. The online form was simple and straightforward; the hardest part was inputting the NAICS Code for my business (though there’s direct searching within the online form).

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