Taxable Talk

Wesley Snipes will be tried in Ocala, Florida, not New York City. That was just one of the rulings made yesterday by Judge William Hodges. The judge found that a jury in Florida would likely consist of the same racial percentages as one would find in Central Florida, and that's the important constitutional question, not the racial percentage differences between Florida and New York. Additionally, the judge ruled that the trial will not be delayed until April.

So Snipes' trial is set to begin on January 14th in Ocala. We'll see how big of a media circus the trial is in just a few weeks. In any case, Snipes' trial will probably be just the tonic for tax preparers while we prepare 2007 returns.

There's been lots of fraud over the past few days. People seem to be forgetting that cash sales are just as taxable as other sales.

Let's start in New York City. The New York Yankees may be one of baseball's most successful franchises, but one former employee has learned the hard way that tips are taxable income. David Szen is the Yankees' former Traveling Secretary (he arranged for charter buses, hotel rooms, etc.), and, as is customary in baseball, received tips from players and coaches. All fine and good, until he forgot to note the tips on his tax return. Oops. He admitted his wrong-doing last week and pleaded guilty to tax evasion. He'll make restitution of just over $10,000 and may face a short stay at ClubFed or a fine.

Staying in the Big Apple, an art gallery owner found out the hard way that sales tax laws apply to big ticket items, too. Michael Weisbrod owns the Weisbrod Chinese Art Gallery. They feature Chinese objects, such as the beautiful jade horse:



Unfortunately, the gallery forgot to collect sales tax on its purchases, and the owner pleaded guilty to both personal and corporate state tax fraud. The amount of the fraud could be as high as $1.1 million, so that's a lot of fraud. Sentencing is scheduled for April.

Next, from Lansing, Michigan comes the story of a former nightclub owner who decided to double his work on how he kept his books. One set of books wasn't enough for Thomas Donall—he kept two. One was accurate; the other didn't show the cash that he skimmed off the top. He provided the inaccurate one to his tax preparer. All was fine until the IRS discovered the double books. Mr. Donall was sentenced to a fine of $25,000 and two years probation. He must also make restitution of $180,000.

Finally, we head south to Dawsonville, Georgia. Robert Merickle ran East Coast Marketing (aka Blue Haven Pools). He used to methods to lower his tax bill: cash sales didn't make it onto the books and personal expenses did. Neither of those methods is legal, and when the government found out, trouble ensued. Mr. Merickle pleaded guilty to tax evasion, and faces up to three years at ClubFed plus restitution. As U.S. Attorney David Nahmias said, "Those who choose this criminal course of action [tax evasion] face federal prison time, which is far worse than paying the tax that was owed."

I used to work in Stockton. And I know that I have at least one reader who resides there (a former co-worker). He is probably already aware of the problems that the Sang family faces.

Richard Sang, his wife Amber Lao, and their sons Brooke Sang and Richie Sang own several restaurants: Mallards in Stockton and Modesto, the Cedar Creek Inn in Palm Springs, and the Fish Market and Grill on the Lake in nearby Mission Viejo. The Stockton Mallards closed in October; the Modesto Mallards closed in November. Many restaurants fail (it's a very tough business). However, both Mallards failed in spite of the owners allegedly pocketing payroll taxes withheld for the state.

San Joaquin County Deputy District Attorney Sudha Rajender told the Stockton Record that "[The owners] were withholding [the taxes], but they were pocketing it." In total, the four are facing 36 counts of fraud and tax evasion. The elder Sang has been through charges like these before; he was convicted on federal charges in Washington state in 1991.

Meanwhile, California's Employment Development Department (EDD) has already fined the owners $100,000 for not having workers compensation insurance at the Modesto Mallards. And the owners are facing a $1.6 million lawsuit over defaulted loans and owe $10,000 to Stanislaus County for unpaid property taxes.

Currently, the Mission Viejo restaurant remains open. I hope that continues (at least for the short-term); I am part of a group that has a breakfast meeting there every Friday morning. Given that Mr. Rajender told the Marin Independent Journal, "I've never seen a case like this before. These guys have gotten away with this for some time, and nobody has been interested in prosecuting them before. It's very complicated." I suspect we may soon be looking for a new location to meet.

Modesto Bee Story Here

Back in September, I noted the case of Lakeland, Florida dentist Nancy Montgomery-Ware. During her trial for tax evasion, she "figured out" that the income tax isn't allowed under the Constitution. She also said that her husband told her she was crazy. It didn't take long for a jury to find her guilty.

Last week was the sentencing hearing for Ms. Montgomery-Ware. She now said that it was her husband that made her commit the crime and that she didn't want to do it. She also said that she was in an abusive relationship and her attorney asked that the judge stray from the sentencing guidelines so that she could raise her child. And she paid the full $326,000 tax bill.

Still, some time at ClubFed was in the cards. Judge James Moody sentenced Ms. Montgomery-Ware to 33 months and a $25,000 fine. She had to pay the price for committing a crime.