A Kansas City, Missouri federal judge permanently barred former CPA and Nebraska attorney, Allen R. Davison, from promoting tax fraud schemes. The court found that from at least the mid-1990s, Davison had promoted tax-fraud schemes that included arrangements involving sham companies and bogus deductions for the purpose of illegal tax avoidance.

The court order describes schemes Davison set up for clients which included medical practitioners, an insurance broker, and car dealership owners. As provided by the court, Davison’s schemes were “deliberately complex” in order to “evade IRS detection.” In attempts to evade detection, Davison fabricated records, prepared documents after the fact to address IRS concerns, and intentionally provided false information to the IRS during client audits. Davison also “deliberately disguised the nature of his work” and “expressed a willingness to change to new and different tax fraud schemes when faced with the heightened IRS scrutiny of older schemes.”

The court found that Davison “deliberately advised his clients to break the law, and helped them go about doing so.” The court provided examples of some of Davison’s schemes which included sham management companies whose shares were owed by employee stock option plans and Roth IRAs, bogus chicken – flock deductions claimed for clients who were not eligible to claim them because they failed to qualify as farmers under federal tax law, and sham corporations set up for the sole purpose of sponsoring pension plans for the benefit of Davison’s clients who owned businesses.

John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division stated that the “nation’s tax system relies on the integrity of tax professionals.”

At Fuerst Ittleman, PL you can be assured that our professionals will handle your tax matter with professionalism and integrity. Before you hire a professional to handle your financial matters please check their credentials.

If you have any questions or concerns as to the credentials of a financial professional, please contact Fuerst Ittleman, PL at contact@fuerstlaw.com.

Dorothy Lee Anderson of Hopkins, South Carolina was permanently barred by a federal district court judge in Columbia, South Carolina from preparing federal tax returns for others. The court found that Anderson, operating under the name “DL Anderson Tax Service,” fraudulently prepared and filed tax returns using individuals’ names and social security numbers without their assent, authorization, or knowledge. These fraudulent returns generated substantial tax refunds which Anderson deposited into bank accounts she controlled. The court found that Anderson deposited more than $290,000 in fraudulently obtained refunds and then absconded with over $220,000 of these funds for her personal use. After being tried, the court ordered Anderson to provide her customer lists to the government and mail copies of the court order to her former customers.

The Justice Department’s Tax Division has obtained more than 465 injunctions over the past decade to stop tax fraud promoters and tax return preparers. Before hiring a professional to handle your financial records, be sure to inform yourself of their credentials.

If you have any questions or concerns as to the credentials of a financial professional, please contact Fuerst Ittleman, PL at contact@fuerstlaw.com.

On April 26, 2010, the Treasury Department unveiled its regulatory agenda as part of the Unified Agenda of Regulatory and Deregulatory Actions covering IRS projects in the corporate tax, international tax, and exempt organizations area.

In the international tax arena, the agenda provides for projects that include guidance on the application of attribution rules to foreign trusts, clarification of the foreign base company sales income rules, and taxable years of foreign corporations. The agenda also includes international guidance projects dealing with US source income effectively connected with a US business and revisions relating to withholding reporting requirements for US source income paid to foreign persons. In the corporate arena, the agenda provides for projects dealing with reorganizations under IRC § 368(a)(1)(E) or (F), recharacterization of certain qualifying income of publically traded partnerships, and interest on deferred tax liability for contingent payment sales pursuant to IRC § 453A. Projects encompassing payments made pursuant to securities lending transactions or sale-repurchase transactions, deferred discharge of indebtedness income, and deferred original issue discount of corporation are also in the works. Finally, with regards to the exempt organizations arena, the IRS is working on guidance addressing charitable contributions of specific motor vehicles, lookback interest and tax-exempt entities, and qualified tax credit bonds.

From: BNA Spring Version of Treasury Regulatory Agenda Details Dozens of IRS Projects in Many Areas 29 TMWR 590

Regenerative medicine involves the use of tissues, cells (including stem cells), laboratory-made compounds, and artificial organs to treat injuries and diseases. This approach helps repair specific areas of the body, often without the need for traditional, invasive surgery. For example, research is being conducted to use stem cells to replace cardiac tissue in patients with congestive heart failure. Currently, bone morphogenetic proteins, or BMP, which are genetically modified human proteins that spur bone growth, are being used to help vertebrae fuse back together after certain spine surgeries.

The science and technology of regenerative medicine is expanding at a rapid pace. The current market for regenerative medicine technologies now stands at $1.6 billion, but experts predict that this market could swell to $15-20 billion by 2025. Regenerative medicine is growing so rapidly because it is more efficient and effective for both physicians and patients who will undergo fewer steps in surgery and other medical procedures. Regenerative medicine is growing around the world, with the top five producers of regenerative medicine research coming from the United States, Japan, Germany, United Kingdom, and China. China, specifically, has seen a jump in regenerative medicine from 50 publications in the year 2000 to over 1,000 in 2008.

Virtually every sector of the medical and biotechnology industries stand to expand alongside the worldwide market for regenerative medicine. For instance, the medical device industry will benefit from and aid in regenerative medicine with the development of “delivery systems” for these cellular and other therapies. The delivery systems, such as catheters and similar devices, would allow physicians to repair specific areas of the body with site specific implantation of tissues, cells, or other tissue or cellular-based products. In addition to the domestic demand for delivery systems, this worldwide growth provides a global market for domestic medical device manufactures who can export their devices to meet the needs of foreign regenerative medicine markets.

Fuerst Ittleman, PL has experience with stem cell and other regenerative therapies compliance. We also assist medical device and biotechnology companies with regulatory compliance and export requirements. Please feel free to contact us at contact@fuerstlaw.com to see how we can help your company move forward with regenerative medicine therapies.

The U.S. Department of the Treasury issued a press release on June 19, 2009 to mark the successful conclusion of treaty negotiations on a plan to share tax information between the United States and Switzerland. 

From the American perspective, the treaty revisions embody an Obama Administration policy goal:  to edge closer to full enforcement of the tax-code by eliminating havens for tax evasion.  From a global perspective, the treaty revisions mark a broader campaign to meet the requirements of Article 26 of the Organization for Economic Co-operation and Development’s (OECD) Model Tax Convention on Income and Capital.  IRS Commissioner Douglas Shulman indicated participation in this global shift only a month ago at the Forum on Tax Administration, warning those “who hide assets overseas [to] expect an increasing number of revenue bodies to cooperate and share information.”

OECD summarizes Article 26 as a tool for eliminating bank secrecy in the face of warranted searches for financial information outside of signatory nations’ borders.  Several countries that historically manage large amounts of foreign capital have indicated a transition to adherence to Article 26.  Some of these jurisdictions include Hong Kong, Singapore, Austria, and Liechtenstein.  OECD’s Secretary General called these developments “a fundamental change and an important moment in the history of international tax cooperation” and characterized tax enforcement as a critical part of recovery from the global economic crisis.

Negotiations took place over about two months to revise the current treaty on tax information sharing between the two countries.  The Treasury Department expects official signing of the treaty within months.  So far in 2009, the U.S. has come to agreement on similar revisions with France and Luxembourg.

For the complete text of the IRS press release on the U.S.-Swiss tax treaty amendments, please click here.

Our professionals at FHI will be tracking this issue as it develops and the Obama Administration – in Treasury Secretary Tim Geithner’s words – carries out its “commit[ment] to reducing off shore tax evasion to help ensure that all U.S. taxpayers are playing by the same rules.”

For assistance with navigating the changing waters of international taxation and enforcement, please contact Fuerst Ittleman at 305-350-5690 or contact@fuerstlaw.com.

Bio-Nucleonics, Inc., a leading Florida company specializing in radiopharmaceuticals, medical devices and imaging agents, gave a hearty “Thanks” to Fuerst Ittleman in its most recent issue of BioBulletin, the company’s newsletter.

Fuerst Ittleman recently assisted Bio-Nucleonics with gaining FDA approval for the company’s new Doral, Florida product manufacturing facility. The FDA’s approval certifies that Bio-Nucleonics uses “current Good Manufacturing Practice” (cGMP) in all its production at this state-of-the art facility.

The FDA also gave approval to Bio-Nucleonics for its proposed release criteria and timeframes for specific lot release tests to be completed prior to shipment of finished drug products. The importance of this ruling is that no material is lost to radioactive decay and each dose can be shipped immediately to the customer.

FHI assisted Bio-Nucleonics with both of these efforts. We found it such a pleasure to work with clients who were as knowledgeable, dedicated, and thorough as the team at Bio-Nucleonics, and we’re glad that they liked working with us, too. To see the entire BioBulletin newsletter, click here.

Let Fuerst Ittleman help guide your company to its next success. For more information, contact us today at 305.350.5690 or contact@fuerstlaw.com

On June 4, 2009, the IRS announced plans for a comprehensive program aimed at tax return preparers.  According to IRS Commissioner Doug Shulman, the recommendations of the Service will “better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.”

Recognizing that “tax return preparers help Americans with one of their biggest financial transactions each year,” Mr. Shulman announced that the IRS “must ensure that all preparers are ethical, provide good service and are qualified.”  Certainly, the need for such recommendations from the IRS is great.  A recent study by the Treasury Inspector General for Tax Administration found that 61% of tax returns completed by unlicensed paid preparers contained errors.

Moreover, the tax return preparation industry is enormous and getting bigger.  According to IRS estimates, over 80% of taxpayers either hire a tax preparer or use tax-preparation software.  And while enrolled agents, certified public accountants and licensed tax attorneys must register with the IRS and meet minimum training requirements, other, unregulated tax return preparers can work on tax returns without such safeguards.  “Right now, there is no clear national standard regulation of paid tax-return preparers,” said Mr. Shulman.

Although still in formation, the IRS reports that the potential recommendations could focus on:

• a new model for the regulation of tax return preparers
• service and outreach for return preparers
• education and training of return preparers
• enforcement related to return preparer misconduct.

The process will begin with information gathering from agents, lawyers and accountants as well as unlicensed tax preparers and software vendors.  The agency reported that it will also seek the input of consumer groups and taxpayers, and will open “a transparent and open dialogue about the issues,” according to Mr. Shulman.  “At this early and critical stage of the process, we need to hear from the broadest possible range of stakeholders.”

Fuerst Ittleman will continue to monitor this evolving effort by the IRS, both for how it will affect our clients and friends, but also to remain actively involved in developing the recommendations with the agency.

For more information, contact Fuerst Ittleman today at 305.350.5690 or contact@fuerstlaw.com.

Original Article: Mitchell S. Fuerst: Foreign Bank Accounts and the IRS [pdf]

Voluntary Disclosure Guidelines Give Taxpayers Until September 23rd to Reveal Offshore Assets

According to a statement on Offshore Income given by IRS Commissioner Doug Shulman, U.S. Taxpayers and entities that are currently hiding assets in offshore accounts have a limited voluntary disclosure period until September 23rd , of 2009 to reveal those accounts before the IRS takes the offensive. After the voluntary disclosure period, the IRS plans to aggressively pursue both civil and criminal penalties for taxpayers that fail to take advantage of the voluntary disclosure initiative. Furthermore, the IRS revealed that they are actively tracking entities and individuals attempting to clean up their act through “quiet disclosures,” the practice of Taxpayers declaring a prior increase of income through amended tax returns.

The IRS stated, “Those taxpayers making ‘quiet’ disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years.”

It seems that the IRS has decided to take an aggressive position here. In a statement given by the IRS regarding the penalties for the 52,000 holders of undeclared UBS bank accounts, the IRS only mentioned a “reduction of penalties,” for those that took advantage of the voluntary disclosure practice.

Under the new IRS guidance, the quiet disclosure practice is no longer a safe measure to make amends to the IRS. President Obama recently mentioned the appointment of congressional authority to hire an additional 800 IRS agents assigned to track down and pursue illegal tax evasion and the use of undeclared offshore accounts. Though it is legal for Americans to have offshore accounts, the U.S. Treasury Department requires any account containing more than $10,000 to report the existence of the account, and taxes paid on the income as well.

Madoff Ponzi Scheme Victims may be able to receive tax relief and refunds by the new IRS guidelines.

Douglas Shulman, Commissioner of the IRS, announced to Congress that the relief is intended for those who incurred losses by Ponzi Schemes such as the one at issue in the Madoff Ponzi Scandal.

If Madoff investors reported and paid taxes on the earnings from their Madoff investment, they may be due a refund on those taxes because the profits reported were never actually realized.

At a Senate Finance Committee hearing, Shulman stated that the investors in some of the cases were actually entitled to a theft loss deduction which is not subject to limits placed on traditional capital losses.

Mr. Shulman continued to state that theft loss deductions may be taken for the year in which the fraud was discovered, except when the investor may have a “reasonable prospect” in recovering the capital loss.

Shulman went on to say that identifying the actual amounts and times of the losses from Ponzi schemes may be “factually difficult” and could take a considerable amount of time to identify the prospects of the lost money.

Shulman, in his testimony to the Senate, continued:

“Some taxpayers have argued that they should be permitted to amend tax returns for years prior to the discovery of the theft to exclude the phantom income and receive a refund of tax in those years … The new IRS guidelines do not address that argument.”

From the time that the Madoff scandal was made public, roughly $1 billion in assets have been identified for Madoff’s victims. That figure, however, is only a fraction of the $65 billion that Madoff claimed he had possession of. Some have estimated that the Madoff Ponzi Scheme may have cost the IRS as much as $17 billion in lost tax revenues from investors that had earned fictitious profits.

Securities Investor Protection Corp., an organization that backs failed brokerage firms, has already started sending out checks to the victims of the Madoff Ponzi Scheme. Madoff’s victims are eligible for up to $500,000 up until July of 09’ from the SIPC. Furthermore, Mr. Shulman stated that investors should be aware that they need to deduct the amount they receive from the SIPC from their Madoff investment based “theft loss” deduction.

According to Shulman, the financial statements which were provided to Madoff Ponzi Scheme investors, should be sufficient documentation enough to establish losses for filing tax claims.

Do you need to speak with an attorney about IRS tax relief?
Contact us for a consultation about fraud-related tax losses.