Taxable Talk

The IRS is attempting to find some foreign credit card holders who used PayPal to evade taxes. According to this story in the San Jose Mercury News, the IRS wants to find tax evaders who are using PayPal to illegally transfer money. The IRS estimates that $40 billion in tax revenues are lost because of foreign credit card schemes.

If you have a foreign bank account, and it has $10,000 at any time during the year, you must report the bank account on both your tax return (by checking a box on Schedule B) and by submitting a Form TD F 90-22.1 to the Treasury Department by June 30th of the following year. Be forewarned, the IRS is looking into this area.

The current IRS investigation covers 1999 through 2004.

It's simple. During sentencing for tax evasion, just question the judge's credentials and the US government's right to make you file a tax return. The judge involved, Walter Rice of Ohio, said it best, "Why are you doing this to yourself? You're putting yourself in prison. Why?"

The defendant, Walter Maken, will have thirty months to think over his answer. And he'll have to fork over $42,000 in taxes, plus penalties and interest.

Coverage: Dayton Daily News.

John Rigas, founder of Adelphia Communications, and his son Timothy, were indicted on tax evasion charges. According to this article, they diverted $1.85 billion for their personal use from Adelphia. The pair has already been found guilty of fraud and face prison terms of 15 and 20 years, respectively. Both are appealing their convictions.

In another development, two of the auditors of Adelphia were charged by the SEC with professional misconduct. The two engaged in "reckless and unreasonable" conduct when they approved false Adelphia financial reports, according to this story.

I remember watching the television show Bowling for Dollars. Chick Hearn, the late Los Angeles Lakers broadcaster, was the host. Contestants bowled a couple of frames and got paid small cash prizes based on how well they did.

Charles Lanza, of Wolcott, CT, had a better Bowling for Dollars idea. Mr. Lanza owns three bowling alleys in Connecticut and told his employees to fill bags with cash proceeds from his lanes (from everything from bowling, the arcade, and shoe rentals); bags were labeled "O" if they held $500 or "X" if they had $1000. ("O" stands for a split in bowling while "X" stands for a strike. I guess "/", the symbol for a spare, wasn't needed.) The cash was then delivered to him and not included on his books.

What a wonderful scheme. And no taxes to be paid on the $2 million skimmed from his business.

And then the IRS showed up.

Mr. Lanza faces sentencing in December on felony tax evasion and conspiracy charges. He's expected to have to serve 30 to 37 months in prison (the maximum is ten years) and to pay a fine of $350,000 plus make full restitution.

News Story: The Hartford Courant