Tuesday, November 29, 2022

Filing a Fraudulent Tax Return Is Bad, Filing More Than 3,000 Is Outrageously Bad 

Though as I’ve shared not long ago, I don’t write about every tax return preparer who gets into trouble because most of the cases aren’t very different, if at all, from previous ones. Yet I’ve written dozens of commentaries about misbehaving tax return preparers, in posts such as Tax Fraud Is Not Sacred, More Tax Return Preparation Gone Bad, Another Tax Return Preparation Enterprise Gone Bad, Are They Turning Up the Heat on Tax Return Preparers?, Surely There Is More to This Tax Fraud Indictment, Need a Tax Return Preparer? Don’t Use a Current IRS Employee, Is This How Tax Return Preparation Fraud Can Proliferate?, When Tax Return Preparers Go Bad, Their Customers Can Pay the Price, Tax Return Preparer Fails to Evade the IRS, Fraudulent Tax Return Preparation for Clients and the Preparer, Prison for Tax Return Preparer Who Does Almost Everything Wrong, Tax Return Preparation Indictment: From 44 To Three, When Fraudulent Tax Return Filing Is Part of A Bigger Fraudulent Scheme, Preparers Preparing Fraudulent Returns Need Prepare Not Only for Fines and Prison But Also Injunctions, Sins of the Tax Return Preparer Father Passed on to the Tax Return Preparer Son, Tax Return Preparer Fraud Extends Beyond Tax Returns, When A Tax Return Preparer’s Bad Behavior Extends Beyond Fraud, More Thoughts About Avoiding Tax Return Preparers Gone Bad, Another Tax Return Preparer Fraudulent Loan Application Indictment, Yet Another Way Tax Return Preparers Can Harm Their Clients (and Employees), When Unscrupulous Tax Return Preparers Make It Easy for theblo IRS and DOJ to Find Them, Tax Return Preparers Putting Red Flags on Clients’ Returns, When Language Describing the Impact of Tax Fraud Matters, Injunctions Against Fraudulent Tax Return Preparers Help, But Taxpayers Still Need to Be Vigilant, Will the Re-Introduced Legislation Permitting Tax Return Preparer Regulation Be Enacted, and If So, Would It Make a Difference?, Can Fraudulent Tax Return Preparation Become An Addiction?, Tax Return Preparers Who Fail to File Their Own Returns Beg For IRS Attention, Using a Tax Return Preparer? Take Steps to Verify What Is Filed on Your Behalf, When Dishonest Tax Return Preparers Are Married, There Was Nothing Magical About This Tax Return Preparation Business, Don’t Get Burned By a Tax Return Preparer, Tax Fraud School: When It’s Not Enough to Be a Fraudulent Tax Return Preparer, It’s Not Just Tax Return Preparers Assisting in the Preparation of Fraudulent Tax Returns, Overused Fraudulent Tax Return Preparation Ploys, It’s Not Just Law Enforcement That Confronts Misbehaving Tax Return Preparers, and When An Injunction Doesn’t Stop a Tax Return Preparer from Filing False Returns.

Today I read a Philadelphia Inquirer story about a tax return preparer, and then re-read part of the story to make certain I had seen what I thought I saw. According to the story, a New Jersey woman was sentenced to 159 months in federal prison and ordered to pay $565,091 in restitution for her role in a conspiracy to file fraudulent income tax returns using stolen identities. What made me re-read part of the story wasn’t the identity theft, the filing of false returns, the receipt of undeserved refund checks, and the hiring of people to cash the checks, because at this point those misdeeds aren’t novel. What caught my eye was the number of fake tax returns the group filed. The schemers filed more than 3,300 fraudulent tax returns for 2013 alone. The woman who was sentence cashed 13 of the checks, each of which for an amount exceeding $5,500. She also provided some of the runners involved in the scheme.

It's unfortunate that each guilty member of the conspiracy hasn’t been sentenced to one month in prison for each fraudulent return. Even one week for each fraudulent return could cause other would-be fraudsters to think twice about getting involved in this sort of antisocial conduct. The sentence handed down to this woman amounts to about one and a half days in prison for each fraudulent return. And what of the more than 3,300 people whose lives have been turned into misery because of the identity thefts?

Thursday, November 24, 2022

One Day of Thanksgiving, A Year of Thanks 

Today is Thanksgiving. For as long as I’ve been writing this blog, I’ve been sharing a Thanksgiving post to express my gratitude for a variety of people, events, and things. Aside from 2008, when I did not post and I don’t have any recollection of why or how that happened, I’ve dedicated a post on or around Thanksgiving. I started in 2004, with Giving Thanks, and continued in 2005 with A Tax Thanksgiving, in 2006 with Giving Thanks, Again, in 2007 with Actio Gratiarum, in 2009 with Gratias Vectigalibus, in 2010 with Being Thankful for User Fees and Taxes, in 2011 with Two Short Words, Thank You, in 2012 with A Thanksgiving Litany, in 2013 with “Don’t Forget to Say Thank-You”, in 2014 with Giving Thanks: “No, Thank YOU!” , in 2015 with Thanks Again!, in 2016 with Thankfully Repetitive, in 2017 with Never-Ending Thanks, in 2018 with Particularly Thankful This Time Around, in 2019 with Quest'anno è il Ringraziamento, in 2020 with Different, But Thanksgiving Nonetheless, and in 2021 with Still Different, But Thanksgiving Nonetheless.

As I stated the past nine years, “I have presented litanies, bursts of Latin, descriptions of events and experiences for which I have been thankful, names of people and groups for whom I have appreciation, and situations for which I have offered gratitude. Together, these separate lists become a long catalog, and as I have done in previous years, I will do a lawyerly thing and incorporate them by reference. Why? Because I continue to be thankful for past blessings, and because some of those appreciated things continue even to this day.” When I re-read those lists, I realized that the people, events, and things for which I am appreciative are far from obsolete.

So once again on this one day I will look back at the past twelve months, and remember the people, events, and things for whom and for which I give thanks and have given thanks throughout the year. If some of these seem repetitive, they are, for there are gifts in life that keep on giving:

Sixteen years ago, in Giving Thanks, Again, I shared my Thanksgiving advice. I liked it so much that I repeated it again, in 2009 in Gratias Vectigalibus, yet again in 2013 in “Don’t Forget to Say Thank-You”, still again in 2014 in Giving Thanks: “No, Thank YOU!” , even yet again in 2015 in Thanks Again!, even still again in Thankfully Repetitive, yet once more in Never-Ending Thanks, yet even once more in Particularly Thankful This Time Around, again in Quest'anno è il Ringraziamento, once more in Different, But Thanksgiving Nonetheless, and last year in Still Different, But Thanksgiving Nonetheless. For me, it does not lose its impact:
Have a Happy Thanksgiving. Set aside the hustle and bustle of life. Meet up with people who matter to you. Share your stories. Enjoy a good meal. Tell jokes. Sing. Laugh. Watch a parade or a football game, or both, or many. Pitch in. Carve the turkey. Wash some dishes. Help a little kid cut a piece of pie. Go outside and take a deep breath. Stare at the sky for a minute. Listen for the birds. Count the stars. Then go back inside and have seconds or thirds. Record the day in memory, so that you can retrieve it in several months when you need some strength.
I am thankful to have the opportunity to share those words yet again. And I am thankful that it is possible for even more of us to do all of those things, and for others of us to most of those things.

Saturday, November 12, 2022

Alleged Ignorance of the (Tax) Law: A Justification or an Excuse? 

According to various reports, including this one, the controller of the Trump Organization, Jeffrey McConney, testified that “he followed instructions from former Chief Financial Officer Allen Weisselberg and other high-level Trump Org. executives” to provide fringe benefits and bonus checks to organization employees in ways that permitted those items of compensation to go untaxed, both for the organization and the employees, not only for federal and state income tax purposes but also for purposes of payroll taxes such as Social Security and Medicare. In the case of the bonus checks, not only were they wrongfully reported on Forms 1099 as though the employees were independent contractors, testimony and other evidence revealed that these employees “did not report those bonuses as income on their personal taxes.” The list of fringe benefits provided free of taxation is an indictment of how the wealthy can manufacture tax advantages that the ordinary employee is unable to arrange. McConney also testified that when he filed returns for high-level Trump Organization executives, he “improperly” reported that they did not keep residences in New York City, when in fact they did, and this made it possible for them to evade New York City taxes.

According to the reports of the trial, “McConney testified that Trump Org.’s tax consultant from Mazars, Donald Bender, never told him the practices of underreporting taxable income were illegal,” though he also “acknowledged that Bender told him that he ‘wasn’t a fan’ of the practice of issuing bonuses using 1099 tax forms when they could be booked as part of annual compensation from the Trump Corporation and taxed using a W2 tax form.” Interestingly, in about “2011, Bender advised McConney to stop cutting a bonus check to an in-house lawyer at the company because they could lose their law license for receiving it as an independent contractor, but McConney testified that he never questioned whether the illegality of how they handled bonuses would apply to anyone else.” McConney explained that he and other Trump Organization accounting personnel stopped these practices in 2017 at about “the time that a tax consultant conducted an internal review for Trump Org. and President Donald Trump took office.”

Is it sufficient for a corporate controller to rely on an external tax consultant’s alleged failure to point out the illegality of what the controller is doing, whether or not the controller is acting at the direction of higher-ups? I think not. According to RoberHalf, “Candidates for controller jobs should have a minimum of a bachelor’s degree in accounting or business, but preferably an MBA. They should usually have at least seven years of experience in the accounting field, and some public accounting experience is often required.” According to accounting.com, a controller should “Earn a Bachelor's Degree . . . in accounting or finance, . . . Obtain a Master's Degree, . . . like a master's in accounting or an accounting MBA, . . . Take the CPA Exam, . . . Earn CPA Licensure, . . . Obtain Professional Accounting Experience, . . . [and] Pursue Employment as an Assistant Controller.” Similar or identical advice can be found in educational, career planning, and employment web sites.

Based on this advice, a controller should have an education, licensure, certification, and work experience that includes exposure to basic tax principles. Business and accounting education includes exposure to basic tax principles. It’s one thing for someone whose education and career are not focused on tax to rely on tax professionals’ advice for the tax aspects of complex international transactions, but it doesn’t require an LL.M. (Taxation) degree to know that treating an employee as an independent contractor, providing false residence information, and underreporting employee income are illegal. Those principles are taught in business and accounting programs. The tactic of blaming others for one’s own misdeeds, whether in the form of alleging someone else did the wrong act or in the form of alleging that someone else failed to prevent the commission of the wrong act, has become a feature of present-day culture, perhaps fueled by a widespread parenting technique of making children feel good by telling them that their misdeeds are the fault of others.

There is a fine line between a justification and an excuse. Both terms often are used interchangeably in common conversation but in law there are technical differences. A justification is a claim that the act occurred but that the act should not be punished because it is consistent with societal principles. An excuse is a claim that the act occurred but that the person committing it should not be held responsible because of circumstances beyond the person’s control.

There is no way that underreporting income, misreporting income, and misstating facts on a tax return can be justified. Nor should an excuse based on blaming someone else for something that the actor knew or should have known be accepted as relieving the actor from responsibility. Blaming someone else isn’t justification. It’s an excuse, and in this instance it’s an unacceptable excuse.

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