Taxable Talk

Tax protesters Edward and Elaine Brown were convicted in 2007 of tax evasion. They were sentenced to spend some time at ClubFed. Instead of reporting to prison, they decided to barricade themselves in their New Hampshire home. After a stand-off that ran many weeks, US Marshals arrested the Browns. They were tried and convicted on numerous weapons counts and received 37 and 35 additional years at ClubFed, respectively–effectively a life sentence (the Browns will be over 100 when their sentences are up). They appealed their sentences; yesterday, the 1st Circuit Court of Appeals upheld their sentences in a 48-page ruling.

I could go into a long discussion of their meritless claims, but the concluding paragraph of the opinion is enough: “After thorough consideration, we have found no merit in any of Edward’s or Elaine’s arguments. Their convictions are affirmed.”

The moral is simple: There is an income tax, and you must pay it. And armed resistance to a short term at ClubFed leads to a far, far longer term.

If you want to paint a recipe for heading to ClubFed, Carolynne Tilga of Santa Fe, New Mexico couldn’t do it any better. First, begin by investing in a business that’s likely illegal: Distributing pornography over the Internet. Yes, the website she invested in was in Canada but the customers were in the United States.

Next, add not paying taxes on the income. As I’ve said numerous times, illegal income is just as taxable as legal income. Then add some conspicuous consumption: a $1.85 million house in Kilauea, a $1.38 million home in Las Campanas, and other property in Taos, Aspen, and Telluride.

She pleaded guilty to conspiracy, six counts of tax evasion, and filing false tax returns. She received eight months at ClubFed; her husband, who had pleaded guilty to one count of conspiracy, got probation. They must make restitution of $1.7 million to the IRS. If you’re looking for a nice house in Kilauea, I think I know of one that may soon be on the market.

Joseph Cook has been the mayor of Channahon, Illinois since 2003 (Channahon is southwest of Chicago). Given Illinois politics, he has likely helped his reelection campaign by admitting he committed a crime. He was sentenced yesterday to two years probation and must make restitution of $15,000 to the US Treasury.

According to the Chicago Tribune, this isn’t Mr. Cook’s first brush with financial trouble. He’s been sued by Illinois for child support, and faced four other lawsuits over financial issues. As I said, it’s just another day in politics in the Land of Lincoln.

I’m just shocked, shocked mind you, to find out that yet another individual in the adult entertainment industry didn’t tell the truth on his tax return. Well, not really as there might just be a pattern here….

From my old stomping ground, Orange County, comes the case of one Oscar Macias. Mr. Macias was one of the principals of Universal Media Management, a Cerritos, California based adult entertainment firm. Mr. Macias pleaded guilty to one count of filing a false tax return.

Mr. Macias admitted that he did not report all of the cash income from the business, causing a loss to the Treasury of over $32,000. Mr. Macias received 15 months at ClubFed and must also make restitution. Last year, Catherine Shidad pleaded guilty to filing a false tax return and received probation and had to make restitution of $140,000.

Cash income is just as taxable as checks, credit cards, or any other method of payment. Unfortunately, that somehow frequently gets lost in the adult entertainment world. Maybe if I attended this year’s Adult Entertainment Expo–it’s next week here in Las Vegas–I might drum up some business….

There’s nothing like starting 2012 on the right foot. Let’s head to our nation’s capital where City Councilman Harry Thomas, Jr. has something more to worry about than his reelection campaign. In December, the FBI & IRS raided Mr. Thomas’ home and seized an SUV and a motorcycle. Those vehicles may be coming to an auction site near you.

Mr. Thomas has been charged with theft and filing false tax returns. He’s accused of taking $353,000 of funds from the District of Columbia. The charge says he “embezzled, stole, obtained by fraud, without authority knowingly converted to the use of a person not the rightful owner….” Additionally, he’s accused of filing a false tax return for not including the embezzled/stolen/fraud income on his tax return.

Finally, the government is asking for forfeiture of a 2008 Victory Motorcycle and a 2008 Chevy Tahoe.

Of course, Mr. Thomas is innocent until proven guilty. Still, it’s nice to see that our politicians may be hard at work…just not for us, but against us.

With just one week left in 2011, it’s time again for anyone to submit a nominee for the Tax Offender of the Year. To be considered for the Tax Offender of the Year award, the individual must do more than cheat on his or her taxes. It has to be special; it really needs to be a Bozo-like action or actions. Here are the lucky past recipients:

2010: Tony and Micaela Dutson
2009: Mark Anderson
2008: Robert Beale
2007: Gene Haas
2005: Sharon Lee Caulder

Nominations are due by next Thursday night, December 29th.

I’ve been told that a psychic is supposed to know and foretell the future. Nancy Marks was a psychic in Lafayette, Colorado. She had a unique–and quite illegal–method of obtaining income.

She warned her clients that there was evil lurking in the money in their bank accounts. The only way to get rid of the “bad energy” was to withdraw the money and for her to hold onto the funds. There were too many instances of the number “6″ in their accounts and credit cards. Why, there at least one in ten numbers on their statements was “6″. [I made that last line up, but it goes to show the ridiculousness of this whole line of thought.]

In any case, Ms. Marks did know what to do with the money that was withdrawn and given to her: She spent it. There’s another word for spending others’ money without permission: theft. Added to that is not paying tax on that money (tax evasion). Ms. Marks was convicted last week of 14 counts of theft and two counts of tax evasion.

Of course, I do have to ask the obvious question: If Ms. Marks was truly a psychic, didn’t she know that she’d get caught in the end?

First, it was Sharon Kukhahn and her ridiculous decoding strategy. Now, I get the joy of reporting about David Myrland.

Mr. Myrland will be sentenced on December 2nd after pleading guilty to a tax charge. Mr. Myrland is a believer that he is a sovereign citizen and thus immune from the IRS. At least, I think that’s the snake oil he’s trying to sell. But that’s just the beginning.

Mr. Myrland was unhappy about being arrested. So he decided to issue an arrest warrant himself, asking that Joan McBride, the Mayor of Kirkland, Washington, be arrested. Private citizens can make citizen’s arrests when there’s a crime being committed, but private citizens can’t issue arrest warrants.

The federal prosecutor isn’t as amused as I was when I read this. As reported in the Seattle Post-Intelligencer,

“He continues to this day to apparently believe that he was in the right, and everyone else is in the wrong,” Assistant U.S. Attorney Vince Lombardi told the court. “Despite his guilty plea, he continues to argue that he had a legal right to make the threats he made … and that he was in the right in virtually every respect.”

“Myrland’s arrogance, his anger and his inability to even consider the possibility that he is in the wrong in this matter come through in his various letters to the court,” Lombardi continued. “The evidence amply supports (the) conclusion that Mr. Myrland remains a danger to the community and is a virtual certainty to re-offend.”

Somehow, I suspect that the sentencing judge may tell Mr. Myrland something about threatening public officials when he’s sentenced on the 2nd.

Sharon Kukhahn found out what buying a yacht instead of paying her taxes would cost her: seven years at ClubFed. That was her sentence this past week; Joe Kristan has more.

Illegal activities. Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.

So states the IRS in Publication 17 (“Your Income Tax”) and the courts have upheld this. Of course, most people who commit one crime are more than willing to commit a second crime. One Bay Area woman is probably regretting this.

Ann Ray, aka Georgia Engelhart, worked for a family business in San Carlos (in the San Francisco Bay Area). She was their bookkeeper and a trusted employee. She was also an embezzler.

Ms. Ray began liberating funds in the 1980s, and it appears to have started out small. But it kept growing and growing, and by the mid 2000s the take each year was in the hundreds of thousands of dollars. It appears that not only did Ms. Ray have full access to the bank accounts, she also balanced the checkbooks. A standard practice is that the person who balances the bank accounts cannot sign checks in the accounts. But I digress….

Ms. Ray used the funds for personal items, from paying her credit card bills to living the good life on fancy vacations. Somehow, the IRS discovered that something was up, and IRS Criminal Investigations looked into the matter. They discovered the embezzlement, though they apparently could only show that Ms. Ray didn’t pay the taxes on the ill gotten gains. That, though, is a crime, and Ms. Ray pleaded guilty back in July to six counts of tax evasion. Yesterday, Ms. Ray was sentenced to 46 months at ClubFed.

If Ms. Ray had only remembered line 21, she would have been out $1.2 million of the $4.7 million she had embezzled, but would probably still be free. Now, she must also make restitution of the proceeds of her embezzlement and pay the federal government the tax due on the embezzlement.