Tax: April 2008 Archives

What happens when hourly employees are assigned Blackberrys or IPhones by their employer and compelled to respond to emails and text messages after the 8 hour shift? The marketing of such devices offers the plus side that  such technology brings the office home or anywhere the employees happen to be. A number of legal scholars are

Everyone has heard or even uttered the complaint that the new technology puts them on call 24/7. No doubt attorneys and other hourly service providers are beginning to bill their clients for out of office time spent responding to emails. Logic would suggest that employees who find their employers are essentially getting their precious time for free may have a claim under wage and hour laws for the time spent out of the work place working. And employers may need to restrict the use of such devices for work related activity unless they are willing to pay for their employees’ time.

It’s a brave new world.

           A former Internal Revenue Service agent has been sentenced to one year in prison, supervised release for one year and a $10,000.00 fine for carrying out a scheme to obstruct the IRS by fraudulently using net operating losses (typically generated from the operation of a business) to offset his personal income tax liability and for attempting to sell those same losses to other individuals or, what I often call, trafficking in losses. The defendant, Mr. Harry Wilner of New Jersey, was sentenced in the U.S. District Court for the Southern District of New York (Lower Manhattan).

Apparently, Wilner was a "team leader or coordinator" in the Large and Mid-Size Business Division of the New York branch of the IRS and he worked and supervised the audits of large financial institutions. Wilner's scheme went like this: Wilner served as a corporate officer of NIA Advertising, Inc a company that he used to generate a loan of $849,000.00 to another company, Royal Magazine, Inc. where Wilner also held a position. The "loan" it seems never existed, but the effect of recording the loan, and assumedly, repayment of the loan, on the books of those two companies generated losses and of those losses, Wilner claimed some for himself and like all good criminals, got even greedier, and tried to sell some to others. Implied, but not reported, was that Wilner probably communicated the fact of his IRS employment to those from whom he received monies in exchange for the losses, again probably implying that he had some control over audits by virtue of his position. Good stuff, huh.

John M. Hanamirian

APRIL 15 2008: The Department of Justice released it's sentencing memorandum, the document provided to the Probation Department and the court regarding the misdemeanor criminal tax crimes for which Mr. Wesly Snipes was earlier this year found guilty of having committed. In the memorandum, the Department urges the court to sentence Mr. Snipes to a term of 36 months imprisonment and a fine of at least $5 million dollars. This is, unbeknownst to most, in addition to the tax, interest and additions to tax he will be responsible for independent of the criminal tax consequences.

As you may recall,Mr. Snipes was acquitted of the felony charges against him and this recommendation for 3 years in jail and a five million dollar fine is for the three misdemeanor failure to file income tax return charges for which he was convicted.  The three years seems a bit harsh. It's not like he is Martha Stewart or some other dangerous criminal.

John M. Hanamirian

Yes, the Department of Justice announced the creation of a national "tax defier" or TAXDEF (it's the government, there has to be an acronym) inititative the purpose of which is "to reaffirm and reinvigorate the Tax Division's committment to investigate, pursue and prosecute those who take concrete action to defy and deny the fundamental validity of the tax laws". Apparently, the term "tax protestor" is now out of favor due to the potential it had for representing some "noble effort" says Assistant Attorney General Nathan J. Hochman. Hochman further stated:

"These folks link themselves to so-called patriotism, but at the end of the day, all it is about for them is their greedy self-interest." This TAXDEF initiative should send an unequivocal message to honest taxpayers that, to the extent any of their neighbors on their right or on their left engage in tax defier conduct, their neighbors will go to bed knowing that tomorrow may be the day when their crime will be prosecuted to the fullest".

I don't even know where to begin. Okay, first the TAXDEF or Defier Intitiative is obviously a response to Mr Snipes' acquitttal of the felony offenses for which he was charged. Second, I quoted Hochman because if I hadn't, some would have said something was lost in the translation. I actually checked the announcement date to see if it was April 1, but it was April 8. 

Let's make this deal. How about next time you lose a case where a major motion picture actor admits his crimes in a 500 page written statement and there is a website that details how the crimes were committed, we don't thereafter spend tens of millions of dollars on nonsensical deterrence efforts. Next time, just spend the money to prosecute the case. Then, just then, my neighbors might sleep. 

John M. Hanamirian

Senate Finance Committee Chairman Baucus says that his office continues to work towards achieving some certainty in reaching a bipartisan estate tax compromise. The current estate tax legislation is set to expire in the next eighteen months or so and taxpayers and practitioners are in an abyss. The general sense is that the estate tax unified credit may return to $1,000,000.00 per person or $2,000.000.00 per married couple. I know it sounds like a lot of money, but if you look at the middle and upper middle class, and include the value of their homes and any retirment monies they may have accumulated, it adds up very quickly. Stay tuned.

John M. Hanamirian

A district court in Texas ruled today that the State's $5 fee imposed on patrons entering a strip club is an impermissable impediment to the free speech guarantees of the United States Constitution.

The tax, referred to vernacularly as the "pole tax", went into effect in January of this year and, according to the report, most of the proceeds were used in a fund set up to assist rape victims. Ellen Cohen, a sponsor of the legislation, then said “This is an industry that largely employs women, and this gives them an opportunity to raise funds for a crime that affects women." Budget estimates reflected that the anticipated revenue effect of the legislation was $40 million dollars, based upon estimates that 8 million people go to Texas strip clubs annually.  

The Texas court specifically determined that the State failed to meet its burden of demonstrating that the tax is necessary to serve a compelling state interest and is narrowly written to achieve that purpose. The court then concluded that no evidence was submitted to show that the amount of the tax was in any way related to the degree to which the taxed business activity contributes to the secondary effects or to the financial cost of that contribution to the secondary affects of the activity.

 As much as I am opposed to "sin tax" legislation, this one was right on the mark. It is hard to believe that Texas, was pioneering a tax that actually potentially benefitted society.  Now, of course, in the face of a Constitutional challenge, and probably a great deal of pressure from strip club owners, this Texas court determined that the tax was not legally imposed.

John M. Hanamirian 

Mr. Wahid purportedly formed a number of companies, each bearing the acronymn for a governmental agency to whom you would make a check payable. For instance, IRS, Inc. He would then prepare tax returns for his clients showing thousands of dollars of tax due and instruct the client to make a check payable to the appropriate agency and, of course, deposit those checks into the accounts he created for the corporations he owned. He then didn't report the income. Brilliant.

April 15th is coming.

John Hanamirian