TAMPA - Before he died last year, conservative powerbroker Ralph Hughes fraudulently took millions of dollars of his companies' assets, leaving the businesses insolvent and owing nearly $300 million to the IRS, the government says in a new court filing.
In July, Hillsborough County commissioners removed Hughes' name from the county's Moral Courage Award. Hughes' family asked that his name be taken off the award after The Tampa Tribune and TBO.com reported the Internal Revenue Service claim that Hughes died owing more than $69 million in taxes.
Hughes' family has disputed the IRS charges, saying he paid millions in taxes and would not avoid his responsibilities to the government.
"My dad paid tax on every dime he ever took out of that company," Shea Hughes said Friday, adding that his father was not responsible for the corporate books.
"We can provide proof of personal tax returns and show the amount of funds paid to the IRS in the millions ... in order to restore my father's good name and reputation that he worked extremely hard to earn," he said.
David H. Simmons, an attorney for the beneficiaries of Hughes' estate and trust, said his clients "believe there is no fraud and feel strongly that they will be able to show that."
The beneficiaries, Hughes' widow and two of his three children, also think the IRS has "significantly inflated" the amount of money that may be owed, while also challenging that there is any liability, according to Simmons and co-counsel Bart R. Valdes.
Now the Justice Department has filed a lawsuit against Wachovia Bank, which is representing Hughes' estate, giving more details of the tax claims against Hughes and his companies, Cast-Crete Corp. and Florida Engineered Construction Products Corp.
In a separate case in Hillsborough County Circuit Court, Wachovia has sued Cast-Crete and John Stanton, a company director and officer, accusing Stanton of responsibility for various "corporate wrongs," including the corporation's failure to file tax returns.
On July 16, the parties entered into an agreement in which Shea Hughes was made Cast-Crete's chief executive officer. The agreement also restricts the company's financial dealings and stock distribution.
Ralph Hughes died June 27, 2008, at age 77. At the time, the IRS was investigating his unpaid tax liabilities, according to the lawsuit, which says the IRS filed a claim against the estate in May based on information available at the time.
The new complaint, filed Thursday, says Hughes' two companies have operated as one consolidated enterprise, which has not filed corporate income tax returns or paid any corporate income tax for the taxable periods ending Dec. 31, 2003, through Dec. 31, 2007.
Fervently against taxes and big government, Hughes helped shape the course of county politics. He backed candidates he liked with advice and money. He aggressively supported county Commissioners Jim Norman and Ken Hagan, as well as former Commissioners Brian Blair and Ronda Storms.
Critics accused him of essentially buying a majority of the commission.
The IRS says Hughes' companies owe $128 million in back taxes, $117 million in penalties and $54 million in interest.
The IRS "found that during the same period that Cast-Crete and FECP were incurring - but not paying - the federal tax liabilities set forth above, the companies had distributed all or substantially all of their cash to shareholders and/or their controlled companies," the lawsuit states.
Of $116 million in transferred assets, $61 million went to Hughes, the director and majority shareholder, the government says. The transfers were intended "to hinder, delay, or defraud creditors of Cast-Crete and FECP, including the United States."
This has left the companies with $11 million in assets to pay toward the $300 million tax liability.
Hughes failed to report $27 million on his personal income tax returns, the complaint alleges. The IRS has calculated Hughes owed $2.3 million in unpaid income taxes, as well as $464,000 in penalties and $792,000 in interest.
Source
Thursday, July 15, 2010
Monday, June 28, 2010
IRS says the late Ralph Hughes and his concrete businesses owe $300 million in taxes and penalties
TAMPA — The late Ralph Hughes, a Republican businessman whose name was recently removed from Hillsborough County's Moral Courage Award, died owing almost $300 million in corporate and income taxes and penalties, the IRS said in a complaint filed Thursday.
The IRS also alleges that while his concrete firms were paying no income taxes, they distributed huge sums to shareholders "and/or their controlled companies.''
The concrete businesses transferred more than $61 million to Hughes, who was their director and majority shareholder, according to the suit.
The IRS says those transfers were "fraudulent'' under state law and designed "to hinder, delay or defraud creditors'' of Cast-Crete and Florida Engineered Construction Products Corp., like the IRS.
And the agency says Hughes tried to conceal them.
Hughes' estate has disputed the government's claim, which was filed against Wachovia Bank, which represents the estate.
"My dad paid taxes on every dime he took," Shea Hughes said Friday. "My dad's good name and reputation need to be restored. He never cheated the government, never cheated anybody." The family has tax returns to prove that, he added, noting that his father didn't do the bookkeeping.
Last May, the IRS put Hughes' tax debt at $69.3 million. But it raised the number based on more research, the suit says.
Hughes' construction product companies, Cast-Crete and FECP Corp., did not file federal corporate income tax returns or make any payments from 2003 to 2007, the government says.
For at least four years, the IRS says, it made repeated attempts to get the returns, determine the amount due and collect taxes. It has also requested information and communicated with the companies' president, employees and shareholders, it says.
Now, the IRS says further examination of records holds the companies liable for about $128 million in taxes, $117 million in penalties and $54 million in interest — for a grand total of more than $299 million.
The complaint also says that even though they weren't paying taxes, the companies were distributing essentially all their cash to shareholders and controlled companies. As of March 1, the complaint says, Hughes' companies had only $11 million to pay toward the tax debt.
The companies were rendered insolvent after those transfers, according to the complaint.
Of the $118 million in distributions, Hughes got more than $61 million. The complaint said that "in an apparent effort to conceal the nature and extent of the distributions," he failed to report $27.9 million on his personal income taxes and reported more than $16 million as interest payments by his companies where there was no underlying debt.
Because of the transfers, Hughes is liable for an additional $2.3 million in taxes, $464,000 in penalties and $792,000 in interest, the IRS says.
David H. Simmons, an attorney representing Hughes' beneficiaries, says the estate paid $17 million in taxes a few months ago. He says the numbers being cited by the IRS are incorrect.
"Wholly incorrect," Simmons said. "Completely incorrect. All the taxes have been paid."
Hughes was 77 when he died in June 2008. That fall, Hillsborough County Commissioner Jim Norman suggested honoring the lifelong advocate for development and smaller government by naming the Moral Courage Award for Hughes. Critics protested, saying Hughes bought government support for a pro-growth agenda.
In July, after news of Hughes' tax problems broke, his family asked the commission to remove his name from the award.
"My father would have been honored yet humbled to have his name associated with the Moral Courage Award," Shea Hughes wrote to Norman. "At the same time, he would not have wanted that association if it caused any dissension, controversy or embarrassment to his family."
Source
The IRS also alleges that while his concrete firms were paying no income taxes, they distributed huge sums to shareholders "and/or their controlled companies.''
The concrete businesses transferred more than $61 million to Hughes, who was their director and majority shareholder, according to the suit.
The IRS says those transfers were "fraudulent'' under state law and designed "to hinder, delay or defraud creditors'' of Cast-Crete and Florida Engineered Construction Products Corp., like the IRS.
And the agency says Hughes tried to conceal them.
Hughes' estate has disputed the government's claim, which was filed against Wachovia Bank, which represents the estate.
"My dad paid taxes on every dime he took," Shea Hughes said Friday. "My dad's good name and reputation need to be restored. He never cheated the government, never cheated anybody." The family has tax returns to prove that, he added, noting that his father didn't do the bookkeeping.
Last May, the IRS put Hughes' tax debt at $69.3 million. But it raised the number based on more research, the suit says.
Hughes' construction product companies, Cast-Crete and FECP Corp., did not file federal corporate income tax returns or make any payments from 2003 to 2007, the government says.
For at least four years, the IRS says, it made repeated attempts to get the returns, determine the amount due and collect taxes. It has also requested information and communicated with the companies' president, employees and shareholders, it says.
Now, the IRS says further examination of records holds the companies liable for about $128 million in taxes, $117 million in penalties and $54 million in interest — for a grand total of more than $299 million.
The complaint also says that even though they weren't paying taxes, the companies were distributing essentially all their cash to shareholders and controlled companies. As of March 1, the complaint says, Hughes' companies had only $11 million to pay toward the tax debt.
The companies were rendered insolvent after those transfers, according to the complaint.
Of the $118 million in distributions, Hughes got more than $61 million. The complaint said that "in an apparent effort to conceal the nature and extent of the distributions," he failed to report $27.9 million on his personal income taxes and reported more than $16 million as interest payments by his companies where there was no underlying debt.
Because of the transfers, Hughes is liable for an additional $2.3 million in taxes, $464,000 in penalties and $792,000 in interest, the IRS says.
David H. Simmons, an attorney representing Hughes' beneficiaries, says the estate paid $17 million in taxes a few months ago. He says the numbers being cited by the IRS are incorrect.
"Wholly incorrect," Simmons said. "Completely incorrect. All the taxes have been paid."
Hughes was 77 when he died in June 2008. That fall, Hillsborough County Commissioner Jim Norman suggested honoring the lifelong advocate for development and smaller government by naming the Moral Courage Award for Hughes. Critics protested, saying Hughes bought government support for a pro-growth agenda.
In July, after news of Hughes' tax problems broke, his family asked the commission to remove his name from the award.
"My father would have been honored yet humbled to have his name associated with the Moral Courage Award," Shea Hughes wrote to Norman. "At the same time, he would not have wanted that association if it caused any dissension, controversy or embarrassment to his family."
Source
Tuesday, June 15, 2010
Obscure Tax Breaks Increase Cost of Financial Rescue
The $700 billion financial rescue package approved by Congress to shore up banks also carries a parallel bailout of the financial sector and other industries through a series of obscure tax breaks.
View Full Image
Tax Breaks
Associated Press
John Stumpf, center, is CEO of Wells Fargo, which is expected to save billions on its Wachovia purchase due to changes in treatment of losses.
Tax Breaks
Tax Breaks
Operating mostly under the radar screen, Congress, the Treasury Department and the Internal Revenue Service have been rolling back various provisions of the tax code to help out industries and investors caught up in the turmoil.
The most costly -- and most controversial -- of the moves provide billions in extra tax relief to big banks such as Wells Fargo & Co. and Spain's Banco Santander SA. Another change gives aid to investors stung by the auction-rate securities meltdown. Still another shift relaxes tax rules to help big multinationals bring back cash from overseas.
The total sums involved aren't clear, but the cost will easily amount to tens of billions of dollars, tax experts say.
The latest such move was unveiled on Tuesday, when the Treasury Department declared that the cash infusions for banks won't be considered "federal financial assistance." Normally, that type of funding would count as taxable income for the recipients, and could trigger other unfavorable tax consequences for banks receiving assistance that take part in mergers.
A Treasury Department spokesman said the agency is seeking to "provide clarity and certainty regarding tax issues that have come up during market turmoil."
Tax experts say some of the changes are justified, including a number of technical fixes to protect taxpayers from unintended consequences related to government actions, such as the takeovers of Fannie Mae and Freddie Mac, or the substantial investments in banks. Plus, the broader bailout legislation passed by Congress earlier this month shut some other tax loopholes, including one that permitted offshore hedge-fund managers to get favorable treatment for deferred compensation.
The most controversial move so far is an obscure IRS ruling that gives banks the unfettered ability to use the "tax losses" of banks they acquired.
Typically, companies are permitted to carry over tax benefits from years when they lose money to help offset taxes when they return to profitability. However, for decades, Congress has restricted the amount of those losses that can be used in a given year, to prevent companies from buying and selling other firms solely to benefit from the tax strategy.
In a one-sentence ruling issued on Sept. 30, the Treasury Department effectively lifted that restriction if the company being bought is a bank and the losses are attributable to a portfolio of loans.
Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, has complained about the sudden loosening of the rules. "Congress should have been informed and consulted before Treasury took such an extraordinary action that likely will add billions of dollars to the deficit," he said.
Some experts argue that the Treasury has effectively shifted from administering parts of the tax code to changing tax laws on its own. "It doesn't seem possible that they have this authority," said Robert Willens, an independent corporate tax analyst.
The biggest beneficiary so far is likely to be Wells Fargo. The big San Francisco-based bank recently agreed to buy Wachovia Corp. of Charlotte, N.C., which has been hammered by huge losses on mortgage-related securities and loans. Wells Fargo has said it expects to take $74 billion in write-downs on the Wachovia portfolio.
Under the old rules, Wells Fargo would have been limited to annual tax deductions stemming from the Wachovia losses of roughly $930 million over the next 20 years, or a total of $18.6 billion, estimates Mr. Willens. Wells Fargo will now be able to use all $74 billion in losses. That will likely mean additional tax savings to Wells Fargo of about $19.4 billion -- or more than the total purchase price for Wachovia's common stock, currently about $14.3 billion.
A Wells Fargo spokeswoman wouldn't comment on the role of the tax change in its decision to bid for Wachovia, which bested an earlier offer by Citigroup Inc. Wells Fargo's offer took place two days after Treasury's move.
The new tax benefit applies to already-completed bank deals done in the past three years, and possibly even older ones, according to the Treasury Department.
Another winner from the new rule is Banco Santander, which recently agreed to buy the rest of Sovereign Bancorp. The Spanish bank will be able to take advantage of Sovereign's $2 billion in tax losses more quickly than under the old regime, which would have required it to wait nearly two decades to use up the losses.
Because of the Sovereign purchase, Banco Santander also will be one of the many beneficiaries of a separate break, aimed at hundreds of banks that lost money on preferred stock in Fannie Mae and Freddie Mac. The shift allows the banks to count those losses as ordinary losses, rather than less-useful capital losses. The change is expected to cost the federal government $3 billion, according to the congressional Joint Committee on Taxation.
Source
View Full Image
Tax Breaks
Associated Press
John Stumpf, center, is CEO of Wells Fargo, which is expected to save billions on its Wachovia purchase due to changes in treatment of losses.
Tax Breaks
Tax Breaks
Operating mostly under the radar screen, Congress, the Treasury Department and the Internal Revenue Service have been rolling back various provisions of the tax code to help out industries and investors caught up in the turmoil.
The most costly -- and most controversial -- of the moves provide billions in extra tax relief to big banks such as Wells Fargo & Co. and Spain's Banco Santander SA. Another change gives aid to investors stung by the auction-rate securities meltdown. Still another shift relaxes tax rules to help big multinationals bring back cash from overseas.
The total sums involved aren't clear, but the cost will easily amount to tens of billions of dollars, tax experts say.
The latest such move was unveiled on Tuesday, when the Treasury Department declared that the cash infusions for banks won't be considered "federal financial assistance." Normally, that type of funding would count as taxable income for the recipients, and could trigger other unfavorable tax consequences for banks receiving assistance that take part in mergers.
A Treasury Department spokesman said the agency is seeking to "provide clarity and certainty regarding tax issues that have come up during market turmoil."
Tax experts say some of the changes are justified, including a number of technical fixes to protect taxpayers from unintended consequences related to government actions, such as the takeovers of Fannie Mae and Freddie Mac, or the substantial investments in banks. Plus, the broader bailout legislation passed by Congress earlier this month shut some other tax loopholes, including one that permitted offshore hedge-fund managers to get favorable treatment for deferred compensation.
The most controversial move so far is an obscure IRS ruling that gives banks the unfettered ability to use the "tax losses" of banks they acquired.
Typically, companies are permitted to carry over tax benefits from years when they lose money to help offset taxes when they return to profitability. However, for decades, Congress has restricted the amount of those losses that can be used in a given year, to prevent companies from buying and selling other firms solely to benefit from the tax strategy.
In a one-sentence ruling issued on Sept. 30, the Treasury Department effectively lifted that restriction if the company being bought is a bank and the losses are attributable to a portfolio of loans.
Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, has complained about the sudden loosening of the rules. "Congress should have been informed and consulted before Treasury took such an extraordinary action that likely will add billions of dollars to the deficit," he said.
Some experts argue that the Treasury has effectively shifted from administering parts of the tax code to changing tax laws on its own. "It doesn't seem possible that they have this authority," said Robert Willens, an independent corporate tax analyst.
The biggest beneficiary so far is likely to be Wells Fargo. The big San Francisco-based bank recently agreed to buy Wachovia Corp. of Charlotte, N.C., which has been hammered by huge losses on mortgage-related securities and loans. Wells Fargo has said it expects to take $74 billion in write-downs on the Wachovia portfolio.
Under the old rules, Wells Fargo would have been limited to annual tax deductions stemming from the Wachovia losses of roughly $930 million over the next 20 years, or a total of $18.6 billion, estimates Mr. Willens. Wells Fargo will now be able to use all $74 billion in losses. That will likely mean additional tax savings to Wells Fargo of about $19.4 billion -- or more than the total purchase price for Wachovia's common stock, currently about $14.3 billion.
A Wells Fargo spokeswoman wouldn't comment on the role of the tax change in its decision to bid for Wachovia, which bested an earlier offer by Citigroup Inc. Wells Fargo's offer took place two days after Treasury's move.
The new tax benefit applies to already-completed bank deals done in the past three years, and possibly even older ones, according to the Treasury Department.
Another winner from the new rule is Banco Santander, which recently agreed to buy the rest of Sovereign Bancorp. The Spanish bank will be able to take advantage of Sovereign's $2 billion in tax losses more quickly than under the old regime, which would have required it to wait nearly two decades to use up the losses.
Because of the Sovereign purchase, Banco Santander also will be one of the many beneficiaries of a separate break, aimed at hundreds of banks that lost money on preferred stock in Fannie Mae and Freddie Mac. The shift allows the banks to count those losses as ordinary losses, rather than less-useful capital losses. The change is expected to cost the federal government $3 billion, according to the congressional Joint Committee on Taxation.
Source
Sunday, March 28, 2010
Be prudent when picking a tax preparer
It has arrived.
The event that summons feelings of dread in even the most stoic has snuck up again this year.
Tax season.
And that means that, for the next few months, Palm Beach County and Treasure Coast residents are going to be bombarded with commercials, signs, people dressed up as Statues of Liberty — all advertising the services of various tax preparers.
Indeed, almost 60 percent of Americans use paid tax preparers to do their taxes, according to the Internal Revenue Service.
But not all tax preparers are created equal. Choosing one who is inept or fraudulent could cost a lot, since it's you who's legally responsible for the information on the tax forms.
"There are several classes of preparers out there," said Ronald Warner, a
West Palm Beach-based certified public accountant and former IRS field agent. He said there are many reputable tax preparers out there, but that there are also "those people who just decide they know tax law and hang out a shingle. They have no requirements; they may not be caught up with current laws and regulations."
Only three states — California, Oregon and Maryland — require all tax preparers to register, according to Tobie Stanger, a senior editor at Consumer Reports.
In addition, some professionals, such as lawyers, certified public accountants and enrolled agents, are licensed by their states or enrolled to practice by the IRS.
Still, the majority of the estimated 900,000 to 1.2 million paid tax preparers undergo no vetting or registration before they do your taxes for you.
The IRS has announced plans to require tax preparers to register with the government, pass a competency test, adhere to ethical standards and take continuing education courses. The IRS says it hopes to have all preparers registered by 2011, meaning that the new regulations will not affect this year's tax season.
So if you're thinking of having someone prepare your taxes for you, consider these tips from experts:
CONSIDER YOUR LIFE AND FINANCES BEFORE DECIDING WHAT TO DO.
"If you have a one-paycheck job, and don't plan to itemize, that's pretty simple," Stanger said. "You may just want to do it yourself and use free tax software to help you."
People or businesses with more complicated filings should also look at their situation, though.
"Identify your needs as a taxpayer," said Jill Senso, education coordinator for the National Association of Tax Professionals. "If you don't have a small business, you may decide you don't need a CPA to do your taxes, since they tend to be a little more expensive."
Pete Sepp of the National Taxpayers Union said people or businesses with complex situations may want to look for specialists.
"If you're a dentist, you may be able to find someone who specializes in dental tax forms, who knows that some piece of equipment depreciates strangely or understands different exemptions," he said.
GET REFERRALS. CHECK ON THEIR COMMUNITY TIES.
"A reputable tax preparer will have no problem giving you references," said Kay Bell, a contributing tax editor at Bankrate.com.
Experts said to make sure to get more than one reference, and to ask how long the preparer has been in the community.
"Make sure they'll be around after filing season is over, in case the IRS comes back to you with questions," Bell said.
ASK ABOUT EXPERIENCE AND TRAINING.
Only CPAs, enrolled agents and attorneys are allowed to represent a taxpayer in front of the IRS in case of an audit, collection, appeal, or other matter. These three professions are also bound by ethical standards and must undergo education and registration or licensing requirements.
But even those with such designations may not deal with taxes on a regular basis. Find out whether the preparer is affiliated with a professional organization with a code of ethics and that provides its members with continuing education.
"Ask questions," Warner said. "Did you attend seminars to get up to date on the latest tax laws? If so, how many hours? Who sponsored it?"
Senso said that continuing education is the only way to find out about certain tax credits — credits that taxpayers often won't know to ask for themselves.
Bell also suggested that taxpayers find someone with at least 10 years of experience. "That's not to say a new person couldn't be good, but someone more experienced will be more comfortable with the process," she said.
LOOK TO SEE IF YOU MIGHT BENEFIT FROM FREE TAX FILING PROGRAMS.
The United Way of Palm Beach County sponsors a Volunteer Income Tax Assistance program that works with the IRS for people whose household income is $49,000 or less. Spokeswoman Dianne Laubert said about 55,000 people in Palm Beach County are eligible.
More than 200 volunteers for the program have to go through training and take a test with the IRS before helping people with their forms.
The AARP also has a free tax assistance program, designed for people ages 60 and up, although tax counselor Bobby Caruso said they won't turn anyone away.
For families and individuals making less than $57,000, the IRS offers Free File computer software programs that help taxpayers prepare their returns at no charge.
WATCH OUT FOR SHADY PRACTICES OR CLAIMS.
The experts said to walk away from anyone who says they can get a bigger refund than other people, or from preparers who try to base their commission as a percent of your return. Remember: you are the one ultimately liable for what goes on the forms.
In addition, shy away from those who try to get you to sign blank returns or who refuse to sign the returns themselves.
Source
The event that summons feelings of dread in even the most stoic has snuck up again this year.
Tax season.
And that means that, for the next few months, Palm Beach County and Treasure Coast residents are going to be bombarded with commercials, signs, people dressed up as Statues of Liberty — all advertising the services of various tax preparers.
Indeed, almost 60 percent of Americans use paid tax preparers to do their taxes, according to the Internal Revenue Service.
But not all tax preparers are created equal. Choosing one who is inept or fraudulent could cost a lot, since it's you who's legally responsible for the information on the tax forms.
"There are several classes of preparers out there," said Ronald Warner, a
West Palm Beach-based certified public accountant and former IRS field agent. He said there are many reputable tax preparers out there, but that there are also "those people who just decide they know tax law and hang out a shingle. They have no requirements; they may not be caught up with current laws and regulations."
Only three states — California, Oregon and Maryland — require all tax preparers to register, according to Tobie Stanger, a senior editor at Consumer Reports.
In addition, some professionals, such as lawyers, certified public accountants and enrolled agents, are licensed by their states or enrolled to practice by the IRS.
Still, the majority of the estimated 900,000 to 1.2 million paid tax preparers undergo no vetting or registration before they do your taxes for you.
The IRS has announced plans to require tax preparers to register with the government, pass a competency test, adhere to ethical standards and take continuing education courses. The IRS says it hopes to have all preparers registered by 2011, meaning that the new regulations will not affect this year's tax season.
So if you're thinking of having someone prepare your taxes for you, consider these tips from experts:
CONSIDER YOUR LIFE AND FINANCES BEFORE DECIDING WHAT TO DO.
"If you have a one-paycheck job, and don't plan to itemize, that's pretty simple," Stanger said. "You may just want to do it yourself and use free tax software to help you."
People or businesses with more complicated filings should also look at their situation, though.
"Identify your needs as a taxpayer," said Jill Senso, education coordinator for the National Association of Tax Professionals. "If you don't have a small business, you may decide you don't need a CPA to do your taxes, since they tend to be a little more expensive."
Pete Sepp of the National Taxpayers Union said people or businesses with complex situations may want to look for specialists.
"If you're a dentist, you may be able to find someone who specializes in dental tax forms, who knows that some piece of equipment depreciates strangely or understands different exemptions," he said.
GET REFERRALS. CHECK ON THEIR COMMUNITY TIES.
"A reputable tax preparer will have no problem giving you references," said Kay Bell, a contributing tax editor at Bankrate.com.
Experts said to make sure to get more than one reference, and to ask how long the preparer has been in the community.
"Make sure they'll be around after filing season is over, in case the IRS comes back to you with questions," Bell said.
ASK ABOUT EXPERIENCE AND TRAINING.
Only CPAs, enrolled agents and attorneys are allowed to represent a taxpayer in front of the IRS in case of an audit, collection, appeal, or other matter. These three professions are also bound by ethical standards and must undergo education and registration or licensing requirements.
But even those with such designations may not deal with taxes on a regular basis. Find out whether the preparer is affiliated with a professional organization with a code of ethics and that provides its members with continuing education.
"Ask questions," Warner said. "Did you attend seminars to get up to date on the latest tax laws? If so, how many hours? Who sponsored it?"
Senso said that continuing education is the only way to find out about certain tax credits — credits that taxpayers often won't know to ask for themselves.
Bell also suggested that taxpayers find someone with at least 10 years of experience. "That's not to say a new person couldn't be good, but someone more experienced will be more comfortable with the process," she said.
LOOK TO SEE IF YOU MIGHT BENEFIT FROM FREE TAX FILING PROGRAMS.
The United Way of Palm Beach County sponsors a Volunteer Income Tax Assistance program that works with the IRS for people whose household income is $49,000 or less. Spokeswoman Dianne Laubert said about 55,000 people in Palm Beach County are eligible.
More than 200 volunteers for the program have to go through training and take a test with the IRS before helping people with their forms.
The AARP also has a free tax assistance program, designed for people ages 60 and up, although tax counselor Bobby Caruso said they won't turn anyone away.
For families and individuals making less than $57,000, the IRS offers Free File computer software programs that help taxpayers prepare their returns at no charge.
WATCH OUT FOR SHADY PRACTICES OR CLAIMS.
The experts said to walk away from anyone who says they can get a bigger refund than other people, or from preparers who try to base their commission as a percent of your return. Remember: you are the one ultimately liable for what goes on the forms.
In addition, shy away from those who try to get you to sign blank returns or who refuse to sign the returns themselves.
Source
Monday, March 15, 2010
IRS rules are changing for paid tax preparers
Filing your taxes is getting so complicated that even the commissioner of the Internal Revenue Service hires somebody to do it.
"I use a preparer," Doug Shulman said in an interview on C-SPAN last weekend. "I find it convenient and I find the tax code complex, so I use a preparer."
Turns out he’s not alone. Around 80 percent of Americans seek help with their taxes. Roughly 60 percent use a paid preparer and 20 percent use tax software, Shulman said. The IRS estimates that there are 900,000 to 1.2 million paid tax preparers in the country.
Those preparers include professionals like certified public accountants, tax lawyers and enrolled agents who undergo years of education, background checks and continuing education. Or, it could be someone with little or no credentials working out of a temporary storefront or a spare bedroom in their house.
"Right now there are no minimal standards," Shulman said.
That’s about to change.
Having studied the issue since June, the IRS announced sweeping changes last week to regulate paid tax preparers. The action could be good for consumers.
Among the changes, preparers will have to:
Register and pay a user fee. Upon registration, the IRS will perform a tax compliance check to make sure preparers have filed and paid their own federal personal, employment and business taxes. From that registration, a database will be available to the public to check preparers.
Pass a competency test. Three different tests covering individuals, small businesses and larger businesses will be created by the IRS. A transition rule will give preparers up to three years to pass the test. While attorneys, CPAs and enrolled agents won’t have to take the test, the IRS said it will be studying their accuracy to make sure the exemption is warranted.
Take continuing education. Preparers will be required to complete 15 hours each year — three hours of federal tax law updates, two hours of tax ethics and 10 hours of other federal tax law topics.
Be subject to ethical standards. The IRS is recommending that all signing and nonsigning tax preparers be subject to Treasury Department standards for unethical and unprofessional conduct, with the same disciplinary measures for infractions.
The regulations, which will start being rolled out next year, could have a big effect on the tax preparer industry, said Tom Karsten, an enrolled agent and owner of Karsten Tax and Financial Management in Fort Worth.
"I think it’s pretty significant for consumers and consumer protection," said Karsten, who has prepared tax returns for 18 years. "The test is not going to be terribly hard, but it will be taking out the most poorly trained preparers straight out of the pool."
Jim Keller, senior tax analyst at the Fort Worth office of Thompson Reuters, said the IRS action is a way to push oversight of individual returns down to the preparer level.
"I think this is an effort to deal with the brain drain at the IRS," he said. "In the next five to 10 years, there is going to be a hefty exodus of IRS employees. At the same time, the agency is being asked to do a lot more than they used to do."
Source
"I use a preparer," Doug Shulman said in an interview on C-SPAN last weekend. "I find it convenient and I find the tax code complex, so I use a preparer."
Turns out he’s not alone. Around 80 percent of Americans seek help with their taxes. Roughly 60 percent use a paid preparer and 20 percent use tax software, Shulman said. The IRS estimates that there are 900,000 to 1.2 million paid tax preparers in the country.
Those preparers include professionals like certified public accountants, tax lawyers and enrolled agents who undergo years of education, background checks and continuing education. Or, it could be someone with little or no credentials working out of a temporary storefront or a spare bedroom in their house.
"Right now there are no minimal standards," Shulman said.
That’s about to change.
Having studied the issue since June, the IRS announced sweeping changes last week to regulate paid tax preparers. The action could be good for consumers.
Among the changes, preparers will have to:
Register and pay a user fee. Upon registration, the IRS will perform a tax compliance check to make sure preparers have filed and paid their own federal personal, employment and business taxes. From that registration, a database will be available to the public to check preparers.
Pass a competency test. Three different tests covering individuals, small businesses and larger businesses will be created by the IRS. A transition rule will give preparers up to three years to pass the test. While attorneys, CPAs and enrolled agents won’t have to take the test, the IRS said it will be studying their accuracy to make sure the exemption is warranted.
Take continuing education. Preparers will be required to complete 15 hours each year — three hours of federal tax law updates, two hours of tax ethics and 10 hours of other federal tax law topics.
Be subject to ethical standards. The IRS is recommending that all signing and nonsigning tax preparers be subject to Treasury Department standards for unethical and unprofessional conduct, with the same disciplinary measures for infractions.
The regulations, which will start being rolled out next year, could have a big effect on the tax preparer industry, said Tom Karsten, an enrolled agent and owner of Karsten Tax and Financial Management in Fort Worth.
"I think it’s pretty significant for consumers and consumer protection," said Karsten, who has prepared tax returns for 18 years. "The test is not going to be terribly hard, but it will be taking out the most poorly trained preparers straight out of the pool."
Jim Keller, senior tax analyst at the Fort Worth office of Thompson Reuters, said the IRS action is a way to push oversight of individual returns down to the preparer level.
"I think this is an effort to deal with the brain drain at the IRS," he said. "In the next five to 10 years, there is going to be a hefty exodus of IRS employees. At the same time, the agency is being asked to do a lot more than they used to do."
Source
Sunday, February 28, 2010
Cordray Alerts Ohioans to Instant Tax Return Schemes
(COLUMBUS, Ohio) With tax return season upon us, some tax preparation companies, payday lenders and even car dealers advertise tax refund products as "fast cash refunds" or "instant refunds." Ohio Attorney General Richard Cordray today warns that, unfortunately, the only "fast" things about many of these "refunds" are the fees that go with them, often turning what would have been extra cash into a high-interest loan.
Commonly referred to as refund anticipation loans or RALs, these products sound good but can be very costly. The loans are provided by companies based on a consumer's expected tax return. The companies then charge filing fees, tax preparation fees and interest that can eat up 25-percent of a consumer's tax refund. If the tax refund winds up smaller than anticipated, the consumer will have to pay the difference in addition to the fees.
"These operations are gouging Ohioans out of hard-earned money," said Cordray. "It is imperative that consumers protect themselves. Read the fine print and research alternative assistance options."
To avoid the scam, Cordray advises consumers to file their own tax returns electronically for free and have the refund directly deposited in a bank account. The average turnaround time is two weeks for refunds. He also reminds Ohioans that they may be eligible for the Earned Income Tax Credit (EITC) and can get free help in filing tax returns if they make approximately $49,000 and below.
Cordray asks Ohioans to report any unfair or deceptive practices by these operations that may include:
Advertising RALs but failing to clearly disclose that they are loans, not early refunds.
Failing to explain that when a consumer takes out a RAL, the IRS will send the tax refund to the RAL provider, not to the consumer.
In advertisements, failing to make clear that by taking out a RAL, the taxpayer is borrowing against the expected refund, not obtaining the refund itself.
Failing to inform consumers that RALs are interest-bearing loans and not a quicker way to receive their refunds from the IRS.
Charging fees as a percentage rather than as a flat rate.
Failing to advise consumers that they may be liable to the lender for additional payment, interest and other fees (as applicable through the RAL) if the refund is delayed or is smaller than anticipated.
Source
Commonly referred to as refund anticipation loans or RALs, these products sound good but can be very costly. The loans are provided by companies based on a consumer's expected tax return. The companies then charge filing fees, tax preparation fees and interest that can eat up 25-percent of a consumer's tax refund. If the tax refund winds up smaller than anticipated, the consumer will have to pay the difference in addition to the fees.
"These operations are gouging Ohioans out of hard-earned money," said Cordray. "It is imperative that consumers protect themselves. Read the fine print and research alternative assistance options."
To avoid the scam, Cordray advises consumers to file their own tax returns electronically for free and have the refund directly deposited in a bank account. The average turnaround time is two weeks for refunds. He also reminds Ohioans that they may be eligible for the Earned Income Tax Credit (EITC) and can get free help in filing tax returns if they make approximately $49,000 and below.
Cordray asks Ohioans to report any unfair or deceptive practices by these operations that may include:
Advertising RALs but failing to clearly disclose that they are loans, not early refunds.
Failing to explain that when a consumer takes out a RAL, the IRS will send the tax refund to the RAL provider, not to the consumer.
In advertisements, failing to make clear that by taking out a RAL, the taxpayer is borrowing against the expected refund, not obtaining the refund itself.
Failing to inform consumers that RALs are interest-bearing loans and not a quicker way to receive their refunds from the IRS.
Charging fees as a percentage rather than as a flat rate.
Failing to advise consumers that they may be liable to the lender for additional payment, interest and other fees (as applicable through the RAL) if the refund is delayed or is smaller than anticipated.
Source
Monday, February 15, 2010
Swiss Banker Blows Whistle on Tax Evasion
From his home in the quiet village of Rorbas, outside Zurich, Rudolf M. Elmer is chipping away at the centuries-old traditions of Swiss banking secrecy.
Mr. Elmer, who ran the Caribbean operations of the Swiss bank Julius Baer for eight years until he was dismissed in 2002, moved to Mauritius in the Indian Ocean and began parceling out to global tax authorities what he said were the secrets of his former employer.
Now back in his native country, he continues to disclose the inner workings of Julius Baer — one of many Swiss institutions that investigators say help clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland.
“It is a global problem, and I am only the messenger who provides the bad news, or even better, the truth,” Mr. Elmer, 54, wrote in a recent e-mail message. “Offshore tax evasion is the biggest theft among societies and neighbor states in this world.”
He said that he would fly on Tuesday to Düsseldorf, Germany, where the tax authorities are putting him up in a five-star hotel as he prepares to divulge client secrets.
Mr. Elmer joins a group of whistle-blowers that includes Bradley Birkenfeld, the former UBS private banker who disclosed the bank’s secrets, pushing it toward a settlement with the United States government, and Heinrich Kieber, a former data clerk at the LGT Group, the Liechtenstein royal bank, who stole client data and funneled it to American and European authorities.
Mr. Elmer’s disclosures are attracting particular interest as the Internal Revenue Service and the Justice Department embark upon a strategy of “it takes a rogue to catch a thief” to encourage insiders who engaged in wrongdoing to reveal the secrets of their employers.
Lawyers and Congressional investigators who have begun to review Mr. Elmer’s claims say that his internal bank and client documents provide fresh ammunition for American authorities as they take their crackdown on offshore tax evasion beyond UBS to clients of other banks.
Mr. Elmer has given documents to the I.R.S., a Senate subcommittee investigating tax evasion and investigators for Robert M. Morgenthau, then the Manhattan district attorney, his lawyer Jack Blum said. They cover more than 100 trusts, dozens of companies and hedge funds and more than 1,300 individuals, from 1997 through 2002, Mr. Blum said.
Mr. Elmer contends that his documents detail the undisclosed role of American investment management companies in funneling American, European and South American clients who wished to avoid taxes to Julius Baer; the backdating of documents to establish trusts and foundations used to evade taxes; and the funneling of trades for hedge funds and private equity firms from high-tax jurisdictions through Baer entities in the Cayman Islands.
“What he has is the confirmation of something very important: that a number of other banks in the voluntary disclosure process are turning up,” Mr. Blum said, referring to 14,700 wealthy Americans, many of them UBS clients, who came forward to disclose their secret accounts last year. The I.R.S. declined to comment on Mr. Elmer’s case but said in a statement that it was “investigating other banks that have enabled Americans to evade taxes.”
Source
Mr. Elmer, who ran the Caribbean operations of the Swiss bank Julius Baer for eight years until he was dismissed in 2002, moved to Mauritius in the Indian Ocean and began parceling out to global tax authorities what he said were the secrets of his former employer.
Now back in his native country, he continues to disclose the inner workings of Julius Baer — one of many Swiss institutions that investigators say help clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland.
“It is a global problem, and I am only the messenger who provides the bad news, or even better, the truth,” Mr. Elmer, 54, wrote in a recent e-mail message. “Offshore tax evasion is the biggest theft among societies and neighbor states in this world.”
He said that he would fly on Tuesday to Düsseldorf, Germany, where the tax authorities are putting him up in a five-star hotel as he prepares to divulge client secrets.
Mr. Elmer joins a group of whistle-blowers that includes Bradley Birkenfeld, the former UBS private banker who disclosed the bank’s secrets, pushing it toward a settlement with the United States government, and Heinrich Kieber, a former data clerk at the LGT Group, the Liechtenstein royal bank, who stole client data and funneled it to American and European authorities.
Mr. Elmer’s disclosures are attracting particular interest as the Internal Revenue Service and the Justice Department embark upon a strategy of “it takes a rogue to catch a thief” to encourage insiders who engaged in wrongdoing to reveal the secrets of their employers.
Lawyers and Congressional investigators who have begun to review Mr. Elmer’s claims say that his internal bank and client documents provide fresh ammunition for American authorities as they take their crackdown on offshore tax evasion beyond UBS to clients of other banks.
Mr. Elmer has given documents to the I.R.S., a Senate subcommittee investigating tax evasion and investigators for Robert M. Morgenthau, then the Manhattan district attorney, his lawyer Jack Blum said. They cover more than 100 trusts, dozens of companies and hedge funds and more than 1,300 individuals, from 1997 through 2002, Mr. Blum said.
Mr. Elmer contends that his documents detail the undisclosed role of American investment management companies in funneling American, European and South American clients who wished to avoid taxes to Julius Baer; the backdating of documents to establish trusts and foundations used to evade taxes; and the funneling of trades for hedge funds and private equity firms from high-tax jurisdictions through Baer entities in the Cayman Islands.
“What he has is the confirmation of something very important: that a number of other banks in the voluntary disclosure process are turning up,” Mr. Blum said, referring to 14,700 wealthy Americans, many of them UBS clients, who came forward to disclose their secret accounts last year. The I.R.S. declined to comment on Mr. Elmer’s case but said in a statement that it was “investigating other banks that have enabled Americans to evade taxes.”
Source
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