Taxable Talk

Al Franken, the likely Democrat-Farm Labor candidate for U.S. Senate in Minnesota, told the Minneapolis Star-Tribune that he has paid over $70,000 in back taxes to 17 states. That's not just California, but includes Delaware, Kentucky, Massachusetts, Michigan, New York, and Wisconsin.

Among the revelations in the Star-Tribune article are that he did not pay workers' compensation and disability insurance premiums for New York-based workers between 2002 and 2005, and that a default judgment was entered in New York last year for $25,000.

The Associated Press article states that Franken's communications director, Andy Barr, told the AP that none of the 17 states attempted to contact Franken or his accountant about the unpaid taxes. That's likely splitting hairs given that New York did attempt to collect the insurance premiums.

In any case, Republican Senator Norm Coleman (who Franken will likely be running against) made the obvious remark, "Paying taxes is an obligation that I think Minnesotans expect to be adhered to, and that Minnesotans do."

Do I think this was deliberate evasion by Franken? No; the amounts are too small. Will this be political hay for his opponent? Definitely for now, and depending on how Franken handles this, it could derail his campaign.

It reached 98 F here in Irvine today. That's hot. But I have three stories where the individuals involved have faced the heat of tax evasion.

First, yet another Bozo tax preparer. Well, she really wasn't a tax preparer but she did prepare returns. From Greenville, South Carolina comes a truly Bozo scheme. A mother, Martha Vernon, stole social security numbers and names from her job, and then filed tax returns with phony W-2s where the refunds were direct deposited into her bank account and that of her daughter, Tiffany Dunbar. All told they received $188,931 in refunds out of the $396,573 they looked to get. Why was this scheme truly Bozo? First, it's inevitable that the actual individuals would file their own tax returns, so the crime was destined to be discovered. Second, the mother and daughter had the money sent into their own bank accounts making it quite easy to figure out who was behind the crime. They pleaded guilty to tax evasion charges last week in Greenville; a sentencing date hasn't been announced.

Next, we head to Long Island, New York where Jay Kuhn was sentenced to six months at a halfway house, three years of supervised release, and restitution of $400,000. Mr. Kuhn employed illegal aliens in construction on Long Island and he paid them off the books. He didn't remit the income and payroll taxes owed, and that's tax evasion. He pleaded guilty and is cooperating in an investigation of building trades in the New York metro area.

Finally, we have a case of a slight difference of opinion. Perry Lee Rempas ran Norfolk Airport Express, presumably taking customers to and from Norfolk's airport. He told the IRS that his business was defunct in 2000 and 2001, but he had $1 million in gross receipts. Indeed, the business had the contract for ground transportation at Norfolk International Airport from 2003 through 2006 until it was canceled when the business didn't pay the airport. Mr. Rempas pleaded guilty to tax evasion and will have to make restitution of $79,000 and will spend five months at ClubFed. He also, according to this article in the Norfolk Pilot, faces a state court judgment of $86,987 for his failure to pay the airport authority.

It remains a lot cheaper to pay your taxes up front then to commit tax evasion, especially if you elect a truly Bozo method of evasion.

That's the headline of an article in Canada's National Post. The article looks at some notable (for all the wrong reasons) films that Wesley Snipes made. My favorite from the article:

Crime: Blade: Trinity (2004)

Verdict: The film that ruined Snipes' career; just look at the movies he made after this: 7 Seconds; The Marksman; Chaos; The Detonator; Hard Luck; The Detonator. Have you heard of a single one? How they messed this up after the awesomeness that is Blade 2 is a mystery to film geeks everywhere.

Sentence: Garlic and sunlight.

Read the entire article and I hope you're not sentence to three years of airline food.

Al Franken has had an interesting career. He's been a comedian and a screenwriter, and now he's running for the US Senate, hoping to get the nod of the Democrat-Farm Labor Party in Minnesota (and then, of course, in the general election).

However, Mr. Franken (or his accountant) has forgotten about California's rules on corporations. A California corporation must make a minimum franchise/income tax payment of $800 a year, even if the corporation has no income (or lost money, for that matter). Mr. Franken has a California corporation, Alan Franken Inc., which the Secretary of State's website shows as forfeited (it did not pay its state registration fees).

This is apparently becoming big news in Minnesota, as the Minneapolis Star-Tribune is covering this story. Andy Barr, a spokesman for the Franken campaign, is quoted by the Star-Tribune: "Al feels that because his name is at the top of the organization, he takes ultimate responsibility for everything that goes on. But if there's a mistake that's been made, he's pretty insistent that the accountant fix it. He's been pretty vocal with [the accountant] on this point."

We're not talking big bucks here. The tax owed (including penalties) is $5,800 for not making the required minimum payments from 2003 - 2008. The corporation will likely also the Secretary of State's office $25/year plus a $250 penalty for each year that the required registration form wasn't filed. Once all of that paperwork is filed, and the state income tax returns for 2003 - 2008 are filed, Mr. Franken can dissolve his corporation.

So is Mr. Franken the next celebrity tax scofflaw? Only if he allows this mess to percolate for several weeks rather than insisting to his accountant that he prepare the appropriate returns and file them. Otherwise, the DFL in Minnesota will likely have to find a different candidate to run against Republican Senator Norm Coleman.

Joe Kristan has an excellent round-up of tax bloggers' reactions to Wesley Snipes' sentencing. Joe's conclusion is worth noting (especially if you have ideas of following Mr. Snipes' attempts at not paying federal taxes):

Mr. Snipes' acquittal on the felony charges still is important - I estimate that he would have served at least 3 more years had he been convicted. Still, the sentences ought to give some food for thought to the "show me the law" crowd -- especially that given to Eddie Kahn, who refused to recognize the authority of the court. If you don't think there is a law requiring them to pay income tax, but the federal judges, U.S. Marshals, and the Bureau of Prisons think there is such a law, your opinions won't help you avoid prison any more than it helped Eddie Kahn or Wesley Snipes.

Wesley Snipes will be spending three years at ClubFed. Judge William Terrel Hodges sentenced Snipes to the maximum possible sentence on his three misdemeanor charges. The Associated Press noted that Judge Hodges said that Snipes had shown a "history of contempt over a period of time."

During the sentencing hearing Snipes' Attorney Daniel Meachum handed Judge Hodges three envelopes containing $5 million in checks. The judge didn't accept them, nor did Assistant US Attorney Scot Morris. Later, an agent from the IRS did accept the funds. However, Morris later noted, "Your honor, that was a grandstanding move. It's essentially a down payment on his taxes. It is in no way a settlement of his taxes. It will be a fraction of what he owes."

Snipes will also spend one year on supervised release following his prison sentence. Snipes requested, and Judge Hodges will recommend, that he serve his time near his family's home in New Jersey. Snipes will report at a date to be determined by the Bureau of Prisons.

Also sentenced today were Snipes' co-defendants. Eddie Kahn also got the maximum sentence, 10 years at Club Fed, and Douglas Rosile received 4 1/2 years.

After the sentencing, Linda Moreno, another of Snipes' attorneys, told Ocala.com, "We were hoping for a complete acquittal. I have faith in the process, and I have faith in the jury system. We will appeal."

I've been on the phone all morning, but Joe Kristan has been watching Ocala.com. The sentencing hearing has broken for lunch (I suspect since it's 4:09 p.m. as I type this they've reconvened), and Judge William Terrel Hodges remarked:

He noted that the maximum three-year sentence - which is one year on each misdemeanor count - is "squarely in the middle of that sentencing range.

"Why should I go any further than that," Hodges asked.

This doesn't look good for Mr. Snipes.

I'll have the sentence when it's announced.

Wesley Snipes will be sentenced tomorrow in Ocala, Florida, for his conviction on three misdameaner charges of failure to file a tax return. The prosecution has asked that Snipes get the maximum sentence: three years at ClubFed. Snipes' attorneys are asking for probation.

Linda Moreno, one of Snipes' attorneys, told the Orlando Sentinel, "Mr. Snipes has led an otherwise exemplary life and is deeply sorry for his wrongful conduct. He has retained reputable tax professionals to assist him in resolving his tax liability and will make amends."

Actors Denzel Washington and Woody Harrelson both wrote letters to Judge William Terrel Hodges asking for leniency. Judge Hodges will make his decision tomorrow, and I'll let you know what the sentence is when it's released.

It's getting more and more difficult to avoid the tax system. There are currency transaction reports (cash transactions of $10,000 or more) and suspicious activity reports (theoretically can be done on any transaction, but usually starts at $3,000 or more) done with cash. Businesses must send out 1099s on payments of $600 or more to individuals. Barter organizations must send out 1099s.

But that doesn't stop the Bozo contingent. "They'll never catch me," they believe. Until the IRS or the Franchise Tax Board (substitute your state tax agency if you're not in California) knocks on their door. There's no statute of limitations if you don't file.

Paying taxes isn't fun. Avoiding the system and living on the edge may give you a thrill, but if you get caught you'll be given a bill...and possibly a trip to ClubFed.