Wesley Snipes' Lawyers want to Adjust Appeal Request After Adviser's Arrest

From SF Gate.com:

Wesley Snipes' attorneys are requesting that judicial officials in Georgia dismiss their petition appealing the actor's tax evasion conviction following the arrest of his former financial adviser.

The "Blade" star was convicted of three misdemeanor counts of willful failure to file his income tax return in 2008. He is currently free pending an appeal to reduce a three-year prison sentence on U.S. federal tax charges.

Meanwhile, Snipes' one-time accountant, celebrity investor Kenneth Starr, was busted in May and accused of embezzling a massive $30 million from stars including the action star, Uma Thurman and Martin Scorsese.

Starr has been charged with wire fraud, investment adviser fraud and money laundering amid claims he used the stolen cash to buy a luxurious Manhattan apartment.

Snipes' lawyers are hoping Starr's arrest will help the actor's own case, and they filed papers in the 11th Circuit Court of Appeals in Atlanta on Wednesday, asking for judges to ignore their petition for an appeal.

Instead, Snipes' attorneys want to lodge a new petition asking to have the star's conviction dismissed, or set up a new trial on the grounds that the actor was the victim of a "miscarriage of justice."

IRS 'Wealth Squads' On The Way

From Forbes.com:

Those who by anyone’s measure would be considered wealthy should be on notice: How you acquire and now maintain the wherewithal to be so labeled may soon be called into question by the Internal Revenue Service. That’s not to say that the questions can’t be answered and the matter closed with no further tax due, but the means to that end could get complicated.

Last Fall, IRS Commissioner Doug Shulman unveiled his vision for a Global High Wealth Exam Group--the latest addition to the agency’s arsenal of compliance strategies. Its goal is to ensure that these high-end Form 1040 filers are not shirking their federal tax responsibilities. While the exact amount of “wealth” that will arouse IRS interest was not disclosed, the Commissioner suggested a threshold in the neighborhood of tens of million of dollars. According to the most recently released IRS estimates, in 2004 there were approximately 47,000 individual taxpayers with a net worth of $20,000,000 or more.

That some of these taxpayers play fast and loose with regard to federal taxes should come as no surprise, given the deluge of news stories last year revealing the extent to which the well-off in the U.S. as well as other countries secreted assets in offshore accounts to avoid the prying eyes of revenue bodies worldwide. By last November, in the U.S. alone, almost 15,000 individuals had “voluntarily” reported to the IRS previously undisclosed foreign bank accounts.

However, as troublesome as this behavior is, it alone is not the principal factor for this new program. Instead, it is the scope and complexity of the tax planning in which such individuals engage that challenges the current exam strategy and dictates a different approach for certain wealthy taxpayers. Gone are the days when Forms 1040 filed by such taxpayers reported for the most part, wages, dividends, interest, capital gains, and perhaps distributions from a law firm, accounting firm, business partnership, or small business corporation. Instead, they now often reflect the taxpayer’s participation in such ventures as multi-tiered partnerships, trust arrangements, private equity and hedge funds, and private foundations. To complicate matters from an IRS exam perspective, many of these entities in whole or in part are foreign based.

10 Arguments Against Paying Taxes (that will not work)

In honor of Tax Day, I saw a list on JD Supra of “10 arguments against paying taxes” (as seen on the IRS website and written in the blog, Mental Floss). “Most of these arguments have gone to the courts numerous times and found to be without merit. So if you don’t want to pay your taxes, you’ll have to dream up something more creative than these 10 examples.” Enjoy!

1. Taxes are “voluntary”
This argument comes from a misunderstanding of the word “voluntary,” which appears in a few tax-related sources, including the instructions that come with your 1040 tax form. Unfortunately, the legal definition of the word “voluntary” in this case refers to the process by which taxpayers report and pay taxes on voluntarily reported income, as opposed to a system where the government just tells you what to pay and you fork it over. And don’t think that you can be tricky and say that filing a tax return might be mandatory but paying the taxes is voluntary. They’ve already thought of that one, too.

2. Compensation is not income
Here’s the argument: If I work for compensation, then I’m not actually profiting. I’m just bartering my time for money, which is a zero-sum transaction, and, consequently, I have no gain or profit that can be legally taxed. This can be misconstrued as an “exchange” and not actually income. The IRS rebuttal: Clever, but not convincing.


3. Taxes in America aren’t for Americans
Apparently there’s a sentence or two in the tax code (which is over 50,000 pages, by the way) that discriminates between U.S. and non-U.S. source income. It’s just a small point explained so that folks don’t pay double taxes if they happen to have income from multiple countries. A few individuals have plucked this one little idea and claimed that no taxes are due on income earned in America by Americans. Only aliens have to pay. The IRS rebuttal: Read the other 49,999 pages and get back to us.

4. Money isn’t legal tender
Some folks are a little peeved that they can’t take a couple of Benjamins into their local banks and exchange them for equal amounts of silver or gold. They therefore claim that the income they earn paid in such “worthless” tender cannot be taxed, as it inherently has no value. Truth is, they’ve got nothing to be peeved about. Article I, Section 10 of the Constitution says that the states cannot declare anything as legal tender other than gold and silver, but imposes no such limits on the Congress. 


Read the rest of the arguments by clicking here.

Internet Tax Avoidance Hurts Jobs, Public

San Francisco Gate author Lenny Goldberg recently published a great article on how the legislatures avoidance of taxing Internet sales is hurting all Californians. Check out a portion of the article below, or you can find the full post here.

The demise of Cody's Books in Berkeley and Stacey's in San Francisco is a symptom of one of the key changes of our new era: the shift to the massive use of Internet sales instead of community businesses.

We are in a difficult period of transition for retailing in general and booksellers in particular. But it's particularly frustrating when the state's tax policies conspire with out-of-state sellers to inflict major damage on local businesses.

State-sanctioned tax avoidance is in fact what has been happening as a result of the failure of the state Legislature and of the state's sales tax agency, the Board of Equalization, to collect taxes on sales into California by companies with substantial presence in the state. Not only is Amazon.com abusing the law with regard to its massive sales into California, but a whole Web-based cottage industry has grown up based heavily on a business model of avoiding sales tax.

The issue has come to a head over a bill by Assemblywoman Nancy Skinner, D-Berkeley, whose legislation, AB178, is really about enforcing the sales tax law, which the Board of Equalization has failed to enforce. It says, simply, that Internet sellers with agents or representatives in the state have presence sufficient for them to be obligated to collect tax on sales to California and send it to the state.

The business model used by Amazon for years, and now by other businesses, is their "affiliate" program, by which thousands of California organizations and individuals solicit sales under a contractual relationship and receive a commission on the sales. Amazon's long-standing approach has been to gain a competitive advantage over other businesses by avoiding the collection of tax.

Founder Jeff Bezos has said he originally wanted to locate in Alameda rather than Seattle but wanted to sell tax-free into the huge California market. And somehow the company has managed to avoid the law that says that if it has representatives in the state - its affiliates - it must collect the tax.

California is not on the cutting edge of this issue. New York passed legislation that serves as the basis for Skinner's bill. Amazon did two things in response: It started collecting the tax from New York purchasers immediately, because it did not want to be liable for the money; and it filed suit. A New York court dismissed the suit, holding that Amazon had a presence in New York, and upheld the state. As a result, a number of states, California included, are attempting to follow the New York law.

The 5 Biggest Tax Protests in U.S. History

There have been many instances throughout United States history where citizens and taxpayers have stood up to revolt against taxes they felt were being unfairly imposed. Recently, we saw the libertarian and conservative inspired “Tea Party” rallies on tax day, but this was neither the first nor the last time we will hear about tax protests. As long as governments are levying taxes, there are always going to be people who do not want to pay them. To help my readers gain a better understanding of the history of tax protests, I have put together the following list of the 5 biggest tax protests in US history.

The Stamp Act of 1765

After the British victory in the Seven Years War, the British government felt the American colonies should pay off some of the war’s debt with a new tax. They chose to tax a wide selection of printed materials, such as stamps, to repay the debt. Since the English bill of rights – the Magna Carta – granted citizens the right to only be taxed with proper consent, the colonists felt the new tax was unfair and revolted. By 1766, the tax was repealed, but not before the British Parliament was given the power to legislate over the colonists in the future, which would lead to the American Revolution.

The Boston Tea Party

One of the most famous protests in history, the Boston Tea Party, has become a symbol of American independence. The historic event took place when hundreds of Boston residents dressed as Native Americans and threw hundreds of pounds of East India Trading Company tea bags in to the sea. There were several different reasons they did this, but the most common of which was the lack of colonial representation in the British government.

The Whiskey Rebellion

In 1791, during Washington’s presidency, taxes were raised in the U.S. on whiskey to pay off a national debt. The Secretary of Treasury at the time (Alexander Hamilton) said it was both a way to raise revenue and to enforce social policy. However, it upset the American public enough to start a tax rebellion that led to a series of violent protests.

Proposition 13

The people of California approved Proposition 13 in 1978, which resulted in a cap on property tax rates in the state, reducing them by an average of 57%. In addition to lowering property taxes, the initiative also contained language requiring a two-thirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. It also requires two-thirds vote majority in local elections for local governments wishing to raise special taxes. The act of passing the legislation is claimed to be one of the most successful acts of tax protest in American history, and pre-saged the election of Ronald Reagan to the U.S. presidency in 1980. It was upheld as constitutional by the United States Supreme Court in the case of Nordlinger v. Hahn in 1992.

The Tea Party Protests of 2009

The recent “Tea Party” protests have been called the biggest protest in the country’s history. However, there has yet to be any official confirmation on the exact number of participants. Estimates say that roughly 650,000 decided to protest federal taxation on April 15, 2009. The people involved stated many reasons for their protests, including but not limited to out-of-control federal government spending and federal bailouts. The protesters also objected to alleged future tax increases, including those on capital gains and dividends, energy, death tax, and those earning more than $250,000 a year. As of late, there have been calls by party organizers to host another round of protests on July 4, 2009.

Chrysler Owes U.S. Tax Payers 350,000 Cars---That You'll Never Drive

In filing for bankruptcy, Chrysler will be able to avoid paying back a $7 billion bailout debt owed to US taxpayers. You can read a segment of an Examiner.com article examining the topic below, or read the full post here.

You know when the sentence begins with the words, "This revelation was buried within Chrysler's bankruptcy filings," it can't be good news.

And it certainly is not good news for the Obama administration or for Chrysler.

CNN is reporting that, "Chrysler LLC will not repay U.S. taxpayers more than $7 billion in bailout money it received earlier this year and as part of its bankruptcy filing."

The story goes on to detail how Chrysler recent bankruptcy was structured, and I fear you can probably guess the rest.

The rest being that a deal that was struck in some back rooms in Washington leaving the U.S. tax payer with pretty much nothing to show for the $7 billion bailout given to Chrysler so far.

"The reality now is that the face value [of the $4 billion bridge loan] will be written off in the bankruptcy process," said the official, who added that the 8% equity stake that Treasury will be receiving as part of the company's reorganization is meant to compensate taxpayers for the lost money," CNN goes on to report.

If you do the math, and as a journalist I must confess that I'm really bad at math, you'll eventually arrive at the number 350,000.

That's the number of Chrysler cars the Federal government could have purchased with $7 billion dollars---if you consider that each car costs $20,000.

It is hard not to wonder what 350,000 more car sales would have meant to Chrysler's business had the Fed decided to use the money to buy cars instead of underwrite questionable---no make that---bad loans.

It might have meant that Chrysler would not be in bankruptcy as 350,000 car sales would have represented a serious boost to its bottom line.

It probably would have have meant that President Obama would now be answering fun questions about that brand new orange Challenger sitting in the White House garage, instead of hard questions about why exactly his task force struck a backroom deal that lost tax payers billions, and why the details of that deal were, "buried within Chrysler's bankruptcy filings" and not discussed openly and publicly.

Report Shows Most Companies Avoid Federal Taxes

From the Associated Press:

“Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.

The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate.

‘It's shameful that so many corporations make big profits and pay nothing to support our country,’ said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.

An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called ‘S’ corporations pay taxes under individual tax codes.

‘Half of all business income in the United States now ends up going through the individual tax code,’ Edwards said.

The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes due to operating losses or because of tax credits.

More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.

The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005. For 2005, for example, it reviewed 110,003 tax returns from among more than 1.2 million corporations doing business in the U.S.

Dorgan and Levin have complained about companies abusing transfer prices - amounts charged on transactions between companies in a group, such as a parent and subsidiary. In some cases, multinational companies can manipulate transfer prices to shift income from higher to lower tax jurisdictions, cutting their tax liabilities. The GAO did not suggest which companies might be doing this.

‘It's time for the big corporations to pay their fair share,’ Dorgan said.