Friday, April 15, 2016

The Taxman Cometh

Don’t ask me what I want it for
If you don’t want to pay some more
Cause I’m the taxman,
Yeah, I’m the taxman.
--- The Beatles

It’s tax season, that wonderful time of year when you realize that the fine print on your cell phone bill is easier to understand than a federal tax form.

And this year, there’s good news and bad news.

The good news is that your taxes, normally due on April 15, this year are due on April 18.  That’s because Emancipation Day, which marks the day in 1862 that President Lincoln signed the Compensated Emancipation Act, freeing more than 3,000 slaves in the District of Columbia and was a precursor to the Emancipation Proclamation, fell this year on Friday, April 15.

Any holiday observed in the District is considered by the IRS to be an official legal holiday nationwide.

Who knew that the IRS could be so warm and fuzzy.

That means that you have a few more precious hours to rummage through that shopping bag full of W-2 forms, sales receipts, sketchy charitable donations and shoot-for-the-moon deductions that will be inspected by a humorless, steely eyed accountant type who hates his job.

The bad news is that if you need help from the IRS, your chances of talking to a human being are slim. Which is better than last year when your chances were zilch.

The IRS soared to new heights this year when it was able to answer 70 per cent of its phone calls. That’s still shoddy for an agency that has “service” in its title.  But last year’s figure was 38 per cent which is a few notches below abysmal.

This year’s dramatic improvement has been fueled by temporary hires. When they go, the relatively good performance will also disappear, according to a story in the Washington Post. IRS Commissioner John Koskinen expects the portion of callers who get telephone service will be just 47 percent for all of 2016.

Although we often think the main function of the IRS is to waterboard taxpayers, in this case it isn't entirely their fault.

The IRS suffered a 21 percent staffing cut, amounting to almost 23,000 full- and part-time employees, from 2011 to 2016. Yet, as the number of staffers fell, the workload grew.

An IRS statement said its budget is “more than $900 million below 2010 levels despite handling more than 10 million additional tax returns a year...since then.”

Some of you may be thinking. “With that kind of work overload, why not try a little creative accounting on my taxes?  They may have nailed Al Capone but chances are they wouldn’t even notice me.”

Alas, a lot of people, including the rich and famous, have trod that path.  And the journey hasn’t been pleasant.

Actor Wesley Snipes used various means to hide a lofty income. He was found guilty on three counts of failing to file a federal income tax return, owing the government $17 million in back taxes plus penalties and interest. His attempt to pay off a portion of what he owed during his trial failed and in 2008, Snipes was sentenced to three years in prison.

Actor Nicolas Gage contributed to the national debt to the tune of approximately $6 million, according to an IRS allegation. Accusing his ex-manager and accountant of making poor investment choices in risky real estate and failing to pay his taxes, Cage set out to make good with the IRS and it cost him $6.257 million in fines.

Celebrity photog Annie Leibovitz famously captured John Lennon and Yoko Ono for the cover of Rolling Stone which turned out to be her ticket to fame and fortune.  But after years of extravagance and poor financial management, it seems paying taxes wasn’t on her to-do list.  In 2009 Leibovitz owed $2.1 million in unpaid taxes for 2004-2007 and was forced to pledge the copyright to every photograph she has ever taken, or ever will, to get the loan she needed to pay her debts.

And then there is Walter Anderson.  You may not have heard of him but he was no stranger to the IRS.

It turns out Mr. Anderson, a telephone entrepreneur, was accused of hiding his wealth in off-shore companies in Panama and the British Virgin Islands in an attempt to avoid taxation on his income. Anderson pleaded guilty to two felony counts of evading federal income tax for filing tax returns in which he failed to report over $126,303,951 of income for year 1998 and over $238,561,316 of income for year 1999.

 As part of the plea agreement, Anderson admitted to hiding $365 million of income by using aliases, shell companies, offshore tax havens, and secret accounts. For the year 1998, the year for which Anderson admitted to having earned more than $126 million, he had claimed an income of $67,939 on his federal income tax return, for which he had paid only $495 in taxes.

His failed sleight of hand cost him a 10-year prison term and he was ordered pay $141,497,773 in tax deficiencies and $105,984,341 in penalties for a total of $247,482,114 owed to the IRS.  Will that be check or cash?

Still want to try some financial shenanigans?  Unless you relocate to north of the Arctic Circle, you’ll get caught.  If you work, the IRS gets a copy of your W-2. If you owe taxes and haven’t paid, they’ve got you.

You probably won’t go to jail. The IRS wants you working so you can pay off your debt. If you owe the government money, you'll have to pay it, plus interest and fines. If you owe money and don't file, the IRS charges a penalty of up to 25 percent of what you owe, and it can charge an additional 25 percent for failing to pay your bill on time. 

If you still don’t pay, you can kiss your assets goodbye.

Robert Rector is a veteran of 50 years in print journalism. He has worked at the San Francisco Examiner, Los Angeles Herald Examiner, Valley News, Los Angeles Times and Pasadena Star-News. His columns can be found at Robert-Rector@Blogspot.Com. Follow him on Twitter at @robertrector1.

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