Taxable Talk

If you've ever tried for a government contract, you know that there's plenty of paperwork involved. For example, you have to disclose any past fraud convictions. If you don't, you could find yourself facing even more problems.

That's allegedly what Richard Hudec, Jr. of Naples, Florida did. Back in 2001 he was released from prison after serving time for bank fraud, mail fraud and aiding and abetting. He was also facing civil judgments from New Jersey, the IRS, and various companies that he had allegedly defrauded.

Now, if you've been convicted of fraud, and you've even served time at ClubFed, you know that disclosing that on your paperwork might negatively impact your chances of getting a government contract. And what government contract was Mr. Hudec attempting to get? His wife purchased Holiday International Security, Inc., and changed the name to USProtect. USProtect apparently got some government contracts as the company provided security at 120 federal installations through a GSA (General Services Administration) contract.

How did USProtect get the contracts? Well, one method that they allegedly used was bribery. The former owner, Michael Holiday, pleaded guilty to bribery and tax evasion. Mr. Holiday used bribes to a former GSA official to secure contracts in California and Maryland.

Indeed, Dessie Nelson of Oakland, California has been charged with receiving over $100,000 in bribes and a cruise from Mr. Holiday. And tax evasion for not declaring the income from the bribes.

As for Mr. Hudec, he's been charged with concealing material information and tax evasion. He allegedly did not report over $500,000 of income from USProtect that he received on his 2002 tax return.

News Story: Naples Daily News

There are some things it's just impossible to do. One of those is to sign a tax return when you're dead. Of course, the Tax Code allows for a deceased individual's final return. The individual who signs the return is usually the spouse or the Executor/Administrator of the Estate, and that individual signs noting their authority.

But what if you have no authority, and get the not-so-brilliant idea of filing tax refunds for some individuals who won't complain? After all, if they're dead they're not going to call the IRS. Unfortunately, someone else might just prepare that return...like the actual former spouse. Or worse, the taxpayer might have died in a previous year. And even the IRS might wonder why a dead man filed a tax return.

Well, someone actually did just what I described. Candy Atohi, formerly of Linwood, New Jersey, decided to file 28 tax returns claiming refunds for individuals who were dead. She also filed a tax refund for herself that was wrong and another phony refund claim for her sister. All told, she sought over $100,000 in refunds that she wasn't entitled to.

Ms. Atohi pleaded guilty last week to one count of of making a false claim for a refund and one count of knowingly transferring without legal authority the identity of a deceased individual. She'll likely spend some time with the people who reside at ClubFed and have to make restitution.

This is one scheme that was truly Bozo, and Ms. Atohi is a likely nominee for our 2007 Tax Offender of the Year.

Various tax agencies are giving relief to individuals, businesses, and organizations impacted by the brush fires in Southern California.

The IRS announced today that they will extend various deadlines for taxpayers impacted by the disaster:

Taxpayers in the Presidential Disaster Area –– consisting of Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura counties –– will have until Jan. 31, 2008, to file returns, pay taxes and perform other time-sensitive acts.

The extended deadline applies to items due on or after Oct. 21, 2007, when the fires began, and on or before Jan. 31, 2008. This includes the federal withholding tax return, Form 941, normally due Oct. 31, and the estimated tax payment for the fourth quarter, normally due Jan. 15.

In addition, the IRS is waiving the failure to deposit penalty for employment and excise deposits due on or after Oct. 21, 2007, and on or before Nov. 5, 2007, as long as the deposits are made by Nov. 5, 2007.

The Franchise Tax Board is letting impacted taxpayers obtain free copies of their tax returns.

"If taxpayers impacted by the fires need copies of state tax returns to replace lost or damaged ones, they should complete Form FTB 3516, Request for Copy of Tax Return. Print “Southern California Wildfires 2007” in red at the top of the request. Disaster victims receive free copies of tax returns."

The FTB may issue other relief at a later date.

Any client impacted by the disaster should contact us when they have a chance. You may be eligible for a Casualty Loss deduction. The casualty loss can be taken by either amending your 2006 return or by taking it as part of your 2007 return. Which is right will depend on your tax situation.

And let me end this post with a heartfelt thanks to the firefighters and other emergency personnel who battled the fires. The Santiago fire burned just a few miles north of my home and office. Today, I drove to Foothill Ranch along the 241 Toll Road. The fire burned to the toll road...and even burned a little brush on the south side of the highway. A grove of avocado trees was damaged. The fire burned the hills all around the community of Foothill Ranch. Yet the homes and businesses of Foothill Ranch appeared to have escaped damage.

Back in March, I ran a post titled, "Be Afraid. Be Very Afraid." I asked the question, "Did anyone really believe that with a Congress controlled by Democrats we would be looking at lowered spending and/or a decrease in taxes?"

The answer has been clear from day 1, and it came more into focus today. Representative Charlie Rangel (D-NY), chairman of the House Ways & Means Committee, proposed sweeping tax legislation today. The legislation, which has no chance of being enacted into law in its current form (see below), would:
- Lower the top corporate tax rate from 35.0% to 30.5%;
- Eliminate LIFO (last-in, first-out) accounting for inventory;
- Defer deductions of foreign subsidiaries of corporations until funds are repatriated into the U.S.;
- Eliminate the Alternative Minimum Tax (AMT) after 2007;
- Add a 4% surtax on incomes above $150,000 (single)/$200,000 married filing jointly (MFJ);
- Add an additional 0.6% surtax on incomes above $500,000;
- Increase the Earned Income Credit, and the Child Tax Credit; and
- Have a one-year patch for the AMT.

The devil is in the details, of course, and I haven't seen them. And since except for the last part of the bill (the one-year patch), this bill will not be signed into law in this legislative term (the term ending in 2008), it just gives a flavor of what might be if we have a Democrat in the White House in 2009.

Why am I harping on this? Because of what's not mentioned in this legislation. Many of the Bush tax cuts will expire (beginning in 2009). Ask your legislators whether they will vote to extend them. The legislation introduced today implies that they're dead (at least in the view of Congressman Rangel). We're looking at a $200 Billion stealth tax increase!

Much of this legislation seems good to me. For example, I'm all for simplifying the Tax Code. However, a major issue—one which Democrats seem to ignore—is that if you increase the tax rate, the tax collected tends to decrease (the Laffer curve). This is definitely the case when this occurs on the wealthy. Indeed, because of the prevalence of S-Corporations and LLCs, much of the income of the "wealthy" is actually business income. If taxes increase on business income, business owners have far less incentive to innovate and provide additional jobs.

One day the American people will realize that a simple flat tax system is the way to go. Until then, be afraid.

Link to New York Times article here

If you ever go and see the Harlem Globetrotters, you'll be treated to a great show. And, of course, there's a basketball game, where the Globetrotters beat the Washington Generals (or today, the New York Nationals).

Meanwhile, attorney Larry D. Harvey has represented quite a few taxpayers—48 by my count—alleging that Antarctica is a separate country and that the taxpayers can exclude income earned their (using the foreign earned income exclusion). Unfortunately, he's 0 for 48. Today the Tax Court handed down the 48th defeat.

Joe Kristan compares Mr. Harvey to Wile E. Coyote and the government attorney, Randall Preheim, to the Roadrunner. No matter, use your own comparisons (for me, the Generals or the old Washington Senators come to mind). Well, there's always hope that the 49th time will be the charm....

Case: Grant v. Commissioner, T.C. Memo 2007-318

In March 2006, I wrote about Renato Medina, the principal owner of Lucky Chance's. Lucky Chance's is a cardroom located in Colma, just south of San Francisco. Mr. Medina and his niece and nephew were accused of tax evasion and conspiracy. At the time, they all stated their innocence. Mr. Medina's attorney (then) said, "This is a simple tax case...[and Mr. Medina] asserts his innocence."

Not anymore. As part of a plea agreement, Mr. Medina pleaded guilty to three counts of tax evasion (the remaining charges were dropped). He agreed to pay back the back taxes, penalties, and interest, which will likely total about $1 million.

Mr. Medina's arrest and the charges stem from a corruption probe of the small town of Colma. The first victims were two former mayors of Colma, Philip Lum and Ronald Maldonado. Both were accused of accepting free airline trips to the Philippines from Mr. Medina but not disclosing the gifts on required disclosure forms.

Mr. Medina has also agreed, as part of his plea deal, to serve between 15 and 21 months at ClubFed. Additionally, under California law he must give up his 100% ownership of Lucky Chance's. That had already been in the works, ostensibly for estate planning reasons, with the ownership transfer to his sons approved by both Colma and the California Gambling Control Commission.

Finally, Mr. Medina asked the government to drop the charges against his niece and nephew. The Department of Justice has yet to decide whether or not to do so.

News Story Here

Dan Meyer of the TickMarks blog made a request of me: "Present or past entertainers O. J. Simpson, Sinbad (Adkins) and Dionne Warwick are part of California's Delinquent Taxpayers List. Each owes over $1,000,000 in income taxes and each have had tax liens initiated prior to 2000...Meanwhile, Russ Fox of Taxable Tax is likely to have more on this story."

We covered this list a week ago, but we didn't highlight all the names. So here are some more famous names:

Dionne Warwick, S. Orange, NJ; $2.655 million
Sinbad Adkins, Oak Park, IL; $2.139 million
Orenthal Simpson, Miami, FL; $1.435 million
Brian Holland, Las Vegas, NV; $984,000

It's difficult for the FTB to impose judgments against out-of-state taxpayers. True, the rulings are on the books, and interest (and penalties) can continue to accrue. Dionne Warwick, though, lives in New Jersey. If she doesn't set foot in California, the FTB would have to fight in New Jersey courts to get any money. Luckily for the FTB, Dionne Warwick is "working with the FTB to resolve her tax problems," according to this article. She blames the problems on negligent business managers.

Similar situations exist for entertainer Sinbad, and composer Brian Holland. Nevada is an especially tough jurisdiction for California--because of various actions of the FTB, including the Hyatt case.

And then there's O.J. Yes, Mr. Simpson, who has his own current legal problems, probably doesn't care too much about the FTB. In any case, if he ever raises money--or finds the real killer--that money will be heading to the Goldman family.

I do think that listing these names is a good strategy. Some people will pay because they will be 'shamed' into it. Some, perhaps like Dionne Warwick, are shielded and had no idea that they owe money. Of course, some are scofflaws and no amount of posting names will have an impact. In a few months, I'll inquire with the FTB and see how much of an impact this listing has made.

As I reported earlier, the IRS has revisited Revenue Procedure 2007-57, which would have required withholding on all poker tournament payouts of more than $5,000. I had been told by someone at the IRS that the IRS was going to try to put into place the Binion's closing agreement ($600), which would have sent lots of paper to the IRS.

Apparently, the American Gaming Association has some good negotiators. This IRS Press Release states that reporting will be required on, "...tournament winnings of more than $5,000, usually on an IRS Form W-2G."

So instead of more reporting and withholding, there will actually be no change in withholding and less reporting of winnings! Casinos that currently follow the Binion's Closing Agreement will now only have to issue W-2Gs if a poker tournament winner receives more than $5,000 rather than $600.

The only caveat I'll place on all this is that the IRS still must re-release the Revenue Procedure. But it really appears that this is very good news for both poker tournament organizers and for poker players.

News Story: Reuters

Every time I think I can finally put to bed Western Tax Service I see yet another story on them. Yesterday, the only two individuals who went to trial as part of the Western Tax Service saga found out their fate. Kelly Agbonmoba David (aka David Kelly) and Anthony Stefani each received terms at ClubFed. Mr. David will spend 46 months while Mr. Stefani received 27 months.

Both individuals were tax preparers at Western Tax Service. Western, as I've written about before, was very successful. Indeed, they prepared 1146 returns in 1998 and 8645 returns in 2001. Of course, their methods—phony and false deductions—weren't legal. And their fee structure was unique, too. The larger your refund, the larger their fee. Preparers at Western shared in the bounty; they received 15% commission on each return.

No matter who prepares your tax returns, remember that you are responsible for them. Always review your returns in case you find yourself in front of a bozo tax preparer. Luckily, these bozos won't be preparing returns any time soon.

Press Release Here

Having returned from a trip to Connecticut, I needn't have worried that the tax fraud artists would be missing. They're out in force this morning.

First, from Clarksville, Tennessee comes a woman who had a bookkeeping business. She named it "Nunya Business." I'm not sure that's a great name, and it became less of a good name when she decided to try a new career as an embezzler. She managed to get $63,000 from her clients. She decided that one good crime deserved another, so she failed to report that income on her tax return. And she left off another $160,000 for good measure. She agreed to plead guilty, and she'll likely be spending 30 months at ClubFed.

Meanwhile, the City of Brotherly Love has had its own corruption problems. Joseph Moderski, a Bryn Mawr, Pennsylvania business consultant, will be spending 37 months at ClubFed. He got ensnared in a city hall corruption investigation. Earlier this year, he got 14 months for a "pay to play" scheme at Philadelphia's airport. He pleaded guilty in July to defrauding the city and his ex-employer...and not paying $764,000 in taxes. Besides the jail time, he must make restitution of $1.3 million to the IRS.

Finally, in Florence, South Carolina, a doctor has probably learned that if you make up phony deductions and get caught, the jail you're sentenced to is very real. Dr. Erik Dehlinger worked in an emergency room in Florence. He heard about Anderson's Ark & Associates. They promised to make his tax liabilities disappear through phony expenses and false loan deductions. Instead of disappearing, his tax liabilities still exist, along with interest and penalties...and a probable fine and a short stay at ClubFed. Joe Kristan wrote in 2002, "If it sounds too good to be true, it almost always is." I agree completely.

The House of Representatives passed legislation yesterday that would extend the current ban on taxes on the Internet for another four years. The vote was nearly unanimous--405 to 2. The legislation now heads to the Senate, where it likely will pass before year-end.

This legislation will inhibit local government from adding connection taxes for Internet use. For example, you likely pay a city tax for your telephone and cellphone but you don't for your cable modem. Nine states that had taxes in place before 1998 can continue their taxes under this legislation.

California's Legislature approved AB198, and the Governor recently signed the legislation into law. The bill changes how California's LLC fee is calculated.

This legislation changes the LLC fee so that it is apportioned, in the same manner as the income tax is apportioned. This should make the fee constitutional for 2007 and onwards.

However, according to Spidell Publishing, the Franchise Tax Board is asserting that this legislation is retroactive to prior years. Two companies have successfully sued the FTB; courts ruled that the fee was unconstitutional. What the FTB will try to do in appeals court is to only have to refund the non-apportioned portions of the LLC fee.

I doubt this argument will hold up. This law was not in place in the years in question, and I don't believe any legislature can go back into the past and change the law for prior years. I expect the FTB will lose this argument, and the state will have to refund the fees sometime in the future.

By the way, AB1546, another bill that would have fixed the LLC fee, was moved into the inactive file at the end of this past year's term. This bill would have had many other deleterious impacts to California taxpayers, so I'm glad it's dead.

The Franchise Tax Board (California's Income Tax Agency) has published its list of the top 250 debtors to the FTB. You can find the list here.

Rapid America Corporation heads the list, with a debt of $26.8 Million. The largest individual debtor is Waheed U Begum who owes $10.6 Million. Some famous individuals are on the list; for example, Dionne Warwick owes $2.7 Million.

The list will be updated semi-annually. The goal is to shame people into paying their taxes. It will be interesting to see if it works.

In news that won't shock anyone who does business in California, the Bronze Golden State now ranks 47th out of 50 states in a business tax climate survey done by the Tax Foundation. Meanwhile, Nevada ranks 3rd in the Nation. I have a feeling this news will soon be on the website of the Nevada Development Corporation.

So what ten states have the worst tax climate?
41. Maine
42. Minnesota
43. Nebraska
44. Vermont
45. Iowa
46. Ohio
47. California
48. New York
49. New Jersey
50. Rhode Island

Meanwhile, the ten best states are:
1. Wyoming
2. South Dakota
3. Nevada
4. Alaska
5. Florida
6. Montana
7. New Hampshire
8. Texas
9. Delaware
10. Oregon

What do you think the California Legislature's reaction to this will be? My guess is more proposals for tax increases.

You can read the Executive Summary of the Tax Foundation's study here. The full study is here.

The Hollywood Reporter is saying that Wesley Snipes' tax evasion trial has been continued. Apparently Judge Terrell Hodges changes his mind after speaking with Mr. Snipes.

It appears that the new trial date has not been set.

More on the TaxProf Blog.

California is a great place to live. The climate in Orange County is wonderful. I like the people. But the taxes are high.

I'm in Connecticut for the rest of the week (there won't be many posts this week because of that), and when I tell people that California's maximum tax rate is 9.3% (it actually is 10.3% for millionaires), they look at me like I'm crazy.

I'm not. Yet our state has a structural budget deficit, conservatively estimated for next year at $6 billion.

There are only two ways to fix a budget deficit: increase revenues or decrease spending (or some combination of both). So what is our Governator proposing? A mandatory health care insurance program (government run, so that's an increase in spending), with it thrust on the back of businesses (who will pay more in taxes--but that will be passed on to customers, or the businesses will be much less likely to expand in California; all of these will lead to decreased revenues).

When I got my MBA, one of my instructors was Arthur Laffer, inventor of the Laffer Curve. Generally, the Laffer Curve holds that a decrease in tax rates can lead to an increase in tax revenues—there's a sweet spot for taxes (as far as tax rates). By whatever measure you use, California has exceeded that.

Do I expect our Legislature to look at cutting programs? Well, Stanford did beat USC last Saturday, so anything is possible...but I think this would be the equivalent of Youngstown State beating USC.

The IRS announced a new Revenue Procedure 2007-62 yesterday, which will allow an S Corporation to make a late election--later than the 2.5 months currently allowed. Indeed, you'll be able to make the late S Corporation election with your first S Corporation tax return. The IRS will be modifying Form 2553 for this new Revenue Procedure.

Hat Tip: Joe Kristan, Roth Tax Updates

Wesley Snipes fired his attorneys for his upcoming tax evasion trial. The Ocala Star-Banner reports that Snipes new attorney, Robert G. Bernhoft, told Judge Terrell Hodges, "The scope and prejudicial effect of this pervasive ineffective assistance of counsel only recently came to Snipes’ attention, causing an irreparable breach in the attorney-client relationship with his former attorneys, and precipitating their discharge by Snipes, and the hiring of new trial counsel."

Hogwash, according to Judge Hodges. "This series of events would lead any reasonable person to suspect that the defendant's dismissal of able counsel is nothing more than a ploy designed to force a continuance of the trial," Hodges said, as reported by The Smoking Gun. The trial will start, as scheduled, on October 22nd.

Snipes' former attorney was William Martin. Martin has represented many famous individuals, including Senator Larry Craig, Michael Vick, and Allen Iverson. Interestingly enough, The Smoking Gun notes that Snipes' new attorney has represented several tax protesters in the past. And there's more.

A quick search found that Mr. Bernhoft has faced the IRS before as a defendant in a tax protester case. Back in 1996, Mr. Bernhoft and Robert Raymond operated "Morningstar Consultants" in Milwaukee. They ran advertisements saying "Just Say No": The IRS, according to Bernhoft and Raymond when they operated Morningstar Consultants, has no right to compel you to file a tax return, to require withholding, and a number of other tax protester arguments. The IRS filed suit against them for their "De-Taxing America" program and won at the District Court level; they were permanently enjoined from marketing this program. They appealed, and the District Court ruling was upheld.

The Appeals Court found plenty of problems with the "De-Taxing America" program. "The statements appellants made in the Just Say No advertisement are clearly false representations concerning the government's authority to tax its citizens...We attribute to both appellants a basic knowledge of the law such that they should reasonably be aware that their personal belief that paying taxes is a voluntary activity does not represent the current state of the law."

Anyway, Mr. Snipes appears to have found an attorney who believes—unless his views have changed in the past few years—that taxes are voluntary and that Mr. Snipes is right that only foreign income is taxable. These kinds of arguments have a batting average well below the Mendoza line in court. Of course, at this time Mr. Snipes is only alleged to have committed these acts. But tax protester arguments are extremely unlikely to be successful in this kind of case.

Based on this development, I think we're going to have a lot of humorous moments during Mr. Snipes' upcoming trial. But I have a feeling that Mr. Snipes won't be laughing much at the end.

News Reports:

Ocala Star-Banner
The Smoking Gun

The Las Vegas Sun reports today that the American Gaming Association and the IRS reached agreement that for poker tournaments if a casino/cardroom issues W-2Gs, then withholding at 25% will not be required on wins above $5,000.

From the IRS's point of view, poker tournaments have been seen as a part of the "Tax Gap." Players win, but because few W-2Gs are issued, the IRS hasn't been collecting its fair share. The goal in writing Revenue Procedure 2007-57 was to increase reporting.

It is my understanding that for a casino to not have to withhold, they will have to agree to abide by the Binion's closing agreement. (Many years ago, Binion's Horseshoe Casino and the IRS reached an agreement stating that they would issue W-2Gs on all gross wins of $600 or more, and that the IRS agreed not to require withholding except where the win was at least 300 times the buy-in.) However, casinos that do not agree to this rule will have to withhold 25% of payouts on wins of $5,000 or more.

Withholding will still be required on wins where the payout is 300 times (or more) of the buy-in (this impacts very few poker tournaments), and for non-US citizens where withholding is required either by tax treaty or by other regulations/rules.

While I still think that no withholding is required, and that Revenue Procedure 2007-57 is wrong, I do understand the IRS' motivation. It is very clear that many poker players do not report gambling winnings correctly. (Of course, the fact that gamblers are not well treated under the US Tax Code has something to do with that, too.) Given that no casino wants to get into a battle with the IRS, this outcome was probably the best that could be hoped for.

The bigger they come, the harder they fall. So goes the cliche, and so also go the owners of Circle Industries in Alpharetta, Georgia.

Gerald Marchelletta, Sr., and Gerald Marchelletta, Jr., own Circle Industries. They specialize in drywall construction, and worked on the Olympic Village in Atlanta and the Atlantis Hotel & Casino in the Bahamas. They and their bookkeeper, Theresa Kottwitz, decided that rules were unimportant and they would deduct personal expenses on their business tax returns.

Now, we're not talking about a few pens and pencils here, or a couple of bags of cement. The news story states that testimony in their trial showed that the owners each built million dollar homes with this money. Other personal expenses charged to their business included clothing, landscaping at a New York home, and visits to Atlanta's Gold Club.

Now, I don't know if the trips to the Adult Entertainment club led to the investigation that resulted in the charges in this case. It wouldn't surprise me, though, if that were the case. Somehow, strip clubs and tax evasion go together. But I digress....

US Attorney David Nahmias called this, "This was a case of pure greed, in which the defendants tried to defraud the United States Treasury of over $1 million." Given federal sentencing guidelines, the trio, when sentenced early next year, will have plenty of time to reflect while at ClubFed.

Poor Wesley Snipes. As you may remember, Snipes will soon be on trial for allegedly filing a false claim for an income tax refund. As Joe Kristan of Roth Tax Updates reports, Mr. Snipes lost the lead in Spike Lee's new World War II film. His passport has been seized pending the trial.

If found guilty, Snipes will likely lose a lot more roles as he'd probably be spending some time at ClubFed.

Three Congressmen proposed on Monday a war surtax—a measure that would increase income tax rates from between 2% and 15% (the top tax bracket would become 50% if enacted). The move is a publicity stunt that has no chance of passage.

Even Speaker Nancy Pelosi (D-CA) is against the measure. In an election year, raising taxes is a sure way to raise your opponents' vote totals. Democrats David R. Obey of Wisconsin, John P. Murtha of Pennsylvania and Jim McGovern of Massachusetts are very much in the anti-war section of the Democratic party, and would like to bring all the troops home immediately.

Along with Charlie Rangel's proposals to increase taxes, measure like this will do much to help the Republicans in 2008. Don't expect anything like this to become law until a Democrat is in the White House.

Karen and Charles Petersen of Nowthen, Minnesota were indicted back in 2005 for tax evasion. The government alleged that they hid their income in a trust, and then used the trust to pay personal and business expenses. After they were convicted in March 2006, the couple decided to evade the sentence by becoming fugitives.

That worked for a while, but US Marshals caught the couple in December. Yesterday, Karen Petersen found out her sentence (her husband passed away before sentencing): 15 months, restitution of $181,500 in tax (plus penalties and interest), and a $7,500 fine.

When you become a fugitive, judges tend to be quite strict when sentencing. Ms. Petersen may have had a few months extra of freedom, but she paid with a tougher sentence.

I must admit that I laughed when I read this story. From Canton, Georgia comes the tale of Larry Black. Mr. Black decided to set up a booth at a check-cashing store in suburban Atlanta. He said he was a CPA. He then took the personal information he obtained, and filed phony tax returns where he got most of the refunds, and his clients got small amounts.

What was his take? A measly $46,000. Oh, and 15 months at ClubFed, plus likely restitution to the US Treasury. It hardly seems worthwhile....

A 166-page indictment was unsealed today in Dallas charging 16 individuals with bribery, receiving kickbacks, and tax evasion. The individuals, including State Representative Terri Hodge (D-Dallas), former Mayor Pro-Tem Donald Hill, and others face long terms at ClubFed if convicted on all counts.

The investigation, according to this report in the Dallas Morning-News, began 27 months ago when Mr. Hill's then City Hall office was raided by federal agents. US Attorney Richard Roper described the scheme as a "complex bribery and extortion scheme."

Mr. Hill told the Morning-News that he, and the others, are innocent. "We're not guilt of any of the things alleged here...We’re just going to prepare for the fight."

The tax charges are listed in counts . Mr. Hill is accused of not timely filing tax returns from 2001-2004, and failing to file in 2005 & 2006. His evasion allegedly totals over $200,000. Darren Reagan is accused of evading over $100,000 in taxes. (The more serious charges are the bribery, extortion, and fraud charges.)

All-in-all, the Dallas political scene received a jolt today. It will be interesting to see what comes of this.

When an economy is having problems and jobs are leaving your state, the normal thing to do is to help businesses. Michigan has other ideas.

The Detroit Free Press' headline screams, "Chaos averted with deal to raise income tax, add tax to services." What does that mean for residents of Michigan?

Directly, your state income tax rate has just increased from 3.9% to 4.35%. Additionally, services will now be subject to the 6% state sales tax.

Indirectly, Michigan has just become an even less competitive state for businesses. Why would anyone in their right mind locate a business in the state where the only sure thing is big government?

"Chaos" may have been averted, but the people of Michigan will be long-term losers because of this budget. Interestingly (but not surprisingly), all but one of the Democrats in Michigan's state senate voted for the tax increase, and all but three Republicans voted against it.

Another alleged bozo tax preparation firm has apparently been put out of business. From Gilbert, Arizona (suburban Phoenix) come the story of Accountable Business Services.

If you've read this blog before, and have noted the tale of Western Tax Service, this may look familiar. Accountable Business Services prepared tax returns and appeared to have a good business; the firm prepared somewhere between 5,000 and 7,000 returns annually according to news reports. The firm allegedly got most of its business through referrals; clients noted that they allegedly received large refunds and elimination of tax debt.

Sound too good to be true? The Arizona Department of Revenue and the Arizona Attorney General think it was.

They've charged eight individuals with fraud and forgery and allege that the firm bilked Arizona out of $10 million in taxes. The owners, Alfred and Cheryl Decker, face up to 46 1/2 years in prison if convicted on all the counts that they each face.

Meanwhile, if you happen to have been a customer of Accountable Business Services, you can expect to receive a friendly letter from the Arizona Department of Revenue. Yes, if your tax returns were wrong, you will owe the tax and interest. And as Arizona shares information with the IRS, expect a similar 'Dear Valued Taxpayer' letter from the IRS, too.

Earlier this year I noted the sad tale of Robert "Tractor" Traylor, the former NBA player with Milwaukee, Cleveland, Charlotte, and New Orleans. On Friday, Traylor was sentenced to three years probation for aiding and assisting in the preparation of a false tax return.

Traylor could have received up to 14 months at ClubFed. Traylor does have to submit any untiled tax returns to the IRS within 90 days. Traylor now plays professionally in Puerto Rico.

News Story Here