Charlie Sheen Gives Lindsay Lohan $100,000 to Pay Back Taxes

In an interesting turn of events, Charlie Sheen has given Lindsey Lohan $100,000 to help pay off her IRS back taxes, reports Fox News. According to sources, the two Hollywood stars formed a friendship several months ago while filming cameos for Scary Movie 5.

Lohan, whose erratic behavior has landed her in hot water often over the last few years, reportedly owes the IRS over $233,000 for the 2009 and 2010 tax years.

If Charlie Sheen wanted to ensure that the money he gifted Lohan for her tax debt would actually go toward the debt, tax attorneys predict the money would have been directly paid to the IRS, which they note is not uncommon.

Regardless of the manner in which the money was received to pay the tax debt, there is a strong likelihood that Lohan will have to pay taxes to the IRS on the money as well, as it would be marked as income for 2012.

Both Sheen and Lohan declined to comment when asked about the gift.

 

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Founder of Bumble and Bumble Salon in Trouble with the IRS

According to a recent article in the New York Times, court documents filed late last week indicated that the founder of the salon and hair-product company Bumble and Bumble failed to pay taxes on the $29.6 million dollars.

Michael Gordon, the salon tycoon who grew the company from a single salon to an international company of salons and hair care products, received the money after selling his stake in the company, but failed to report the sale proceeds on his 2006 tax returns, according to prosecutors. Mr. Gordon only reported only his yearly income on his returns, and did not the millions he made off the sale. Instead of paying taxes, he reported that he was owed a refund of over $39,000 from the IRS.

When confronted with the failure to report the money on his returns by an IRS agent, Mr. Gordon denied knowing that the money from the sale had not been included on the returns. Unfortunately for Mr. Gordon, the IRS agent had information from a confidential informer close to Mr. Gordon who stated otherwise. Eric Nieves, the IRS agent, received information that Mr. Gordon had not only knowingly failed to disclose the income, but was also actively engaged in finding ways to avoid paying taxes.

According to a spokesperson for the United States attorney prosecuting the case, investigators arrested Mr. Gordon at his place of residence last week. The spokesperson confirmed charges had been filed against Mr. Gordon for lying to a federal agent, but he declined to give any further information regarding the case.

Because the judge deemed Mr. Gordon a flight risk, police held Mr. Gordon after his arrest in Manhattan. Mr. Gordon was released on Thursday after he agreed to a $4 million bond.

Michael J. Rosen, Mr. Gordon’s attorney, assured people that Mr. Gordon’s arrest was a result of the assessment that he was a flight risk. He promised that they are seeking to resolve the tax issue quickly.

 

Segal, Cohen & Landis
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Beverly Hills, CA 90212
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Be Mindful of IRS Donation Requirements, Tax Professionals Warn

A recent article in the Wall Street Journal discussed the trouble taxpayers will sometimes encounter when writing off charitable donations. When donating an amount over $250 to a charity, a donor must provide proof that the donation was provided with no strings attached. For IRS donation requirements, if a thank you note is the type of record provided, it must include the phrase “No goods or services were received in exchange for the contribution” for the note to be deemed acceptable as proof.

Obtaining such proof is essential, as donors are at risk of losing their write-offs and possibly incurring penalties if the documentation is not provided.

Examples of the essential nature of the documentation can be found in two cases in tax court that the IRS won this year. The decisions in these cases have tax professionals worried, as they might mean that extra care might have to be taken when dealing with the charitable contributions of their clients. One of the court cases dealt with a couple in Texas who donated $25,171 in cash gifts to their church. The thank you notes the churches provided were not enough though, and the donation was not classified as a charitable donation and the write-off was in jeopardy.

While many charities provide form letter thank you notes that include the necessary language, some charities do not. Tax professionals warn that large donors are the ones most at risk, as they often receive personal notes from the leaders of the charitable organization that do not include the correct wording. Sometimes it is necessary to as the organizations for an additional letter that meets the requirements of the IRS.

According to tax attorney Neil T. Kawashima, if donors do not receive a letter with the necessary wording, they may request an official receipt from the accounting department of the organization. The official receipt must include several pieces of information: a description of the donation, the date the donation was made, and the assessed value of the donation. In the case of gifts other than cash or securities, an assessment of the value of the donation can be complicated. Art or other donations fall under the “complicated” category.

Those who give to charity are often familiar with the rules governing such donations. They are also made aware that with bigger donations, their risk of audit increases.

The days of uncomplicated proof of donations, found on receipts and other loosely-kept records, are no longer here. Strict documentation and accounting is a requirement when donating to charity.

If you have any questions regarding these, or any other tax issue, please contact your knowledgeable tax professional. It could mean the difference.

 

Segal, Cohen & Landis, LLP
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Tax Lien Filed Against Maryland Unemployment Offices

According to an article in today’s Baltimore Sun, the Internal Revenue Service filed a tax lien in October against the property of the Maryland Unemployment Office.

Court records indicate that the tax lien is based on a back tax assessment made by the IRS for about $85,000. The lien, formally filed against the Maryland Department of Labor, Licensing and Regulation’s Office of Unemployment Insurance, was filed as a means in which to catch the attention of the department, and to see to it that the debt is paid. The Department of Labor, though, filed an appeal back in August, stating that it does not owe the taxes that the IRS has billed.

Dennis Morton, the unemployment office’s director of contributions, said that this recent filing after their appeal is a timing issue, and that the department fully expects the issue to be resolved. This isn’t the first time the office has faced improper back tax assessments, he said. He did remark that this is the first time that a tax lien has been filed as a result of the tax discrepancy.

As a result of unemployment benefits being classified as taxable income, the Department of Labor follows suit with most employers in the United States and offers tax withholding for its clients.

The taxes that are withheld are systematically transferred to the Internal Revenue Service by the “Electronic Federal Tax Deposit. According to Morton, the way the department’s accounting system and the IRS’ electronic payment system are set up, there is a possibility for delay and subsequent determinations of delinquency.

Morton notes that the withholding and transmittal service used by the Agency was provided by the U.S. Department of Treasury.

If you find that you have been improperly assessed a tax liability, it is in your best interest to contact your competent and knowledgeable tax attorney as soon as possible. Penalties and interest will accrue as time passes, leaving you with a more complicated, and more expensive tax issue on your hands.

 

Segal, Cohen & Landis, LLP
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Do You Owe the IRS Taxes? Bill Proposes Passport Loss As Result of Tax Debt

Included within Senate Bill 1813 that was passed in the Senate on March 14 is a law that would give the State Department the authority to revoke, deny or limit passports for individuals who have delinquent IRS tax debts over $50,000 dollars. The bill, aiming “to reauthorize Federal-aid highway and highway safety construction programs, and for other purposes,” is one for taxpayers to keep an eye on in the coming year.

It is important to note that this would not apply in all situations. If the taxpayer is currently paying the back taxes in a timely manner, if there is an emergency or if the taxpayer is traveling for humanitarian reasons, they may be exempt from passport revocation. This is an important change, for such revocation of passports would no longer be limited to tax cases with criminal implications or situations in which the government thinks there is a possibility of taxpayer flight in the face of tax debt.

A recent article in Forbes regarding this topic gave a very succinct example of the possible implications of the bill on the average taxpayer owing over $50,000. If the bill passes, an individual’s passport could be revoked if he or she had a delinquent tax bill of $60,000 accompanied by a federal tax lien. While liens are routinely filed in the case of tax debt, this lien could prevent a taxpayer facing delinquency from traveling.

While the bill must still pass in the House of Representatives, it may still be a good idea to settle your IRS tax debts. Speak to your competent and experienced tax professional as soon as possible. This could prevent you from being “grounded” if the law passes.

 

Segal, Cohen & Landis, LLP
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

The IRS, the Tax Code and Partisanship Investigation

According to a recent article from the Associated Press, the Internal Revenue Service has not been adequately investigating allegations of partisan activity. The article states that this failure to investigate has allowed religious entities to either endorse candidates with unabashed directness or with thinly veiled statements.

Conflicting reports as to the validity of this claim have emerged from Internal Revenue Service. Russell Renwicks, a manager in the IRS Mid-Atlantic region, state that the IRS had suspended audits of churches that had fallen under suspicion for engaging in political activity that would be contrary to federal regulations. On the other hand, an IRS spokesperson in Washington, Dean Patterson, stated that Mr. Renwicks “misspoke.” Although he would not provide any specific details, he did say that the IRS continues to investigate allegations of noncompliance in a balanced manner.

This issue has garnered the attention of tax attorneys who specialize in tax law as it relates to religious groups, as well as advocate groups who monitor any and all cases that come through. They agree that there have been no inquiries into allegations of partisan activities by religious organizations for the past three years. According to legal scholars, this lack of inquiry has led to an emboldening of those who would cross the line.

This issue, with its implications on both sides of the debate between church and state, has many who closely watch any developments.

Two competing organizations, Americans United for Freedom of Church and State and the Alliance Defending Freedom, are two organizations that are paying particular attention to cases and potential cases. Americans United for Freedom of Church and State, an organization devoted to a strict division between church and state, gathers evidence it hopes the Internal Revenue Service can use in investigations of entities it believes are crossing the church-state line. When they are made aware of Americans United efforts to gather evidence, Alliance Defending Freedom will then jump in to defend the entity. Since the 2009 federal ruling that required the IRS to clarify which officials are authorized to conduct audits over the tax code’s political rules though, neither side has heard of any IRS investigations into allegations of church-state impropriety.

Tax lawyers from across the country from various scholarly institutions and tax law firms agree that no news of the IRS inquiring into such cases has come across their desks. These tax attorneys and tax law experts, who specialize in tax-exempt law, have always been keenly aware of the involvement or the lack of involvement of the IRS in church-state cases.

Marcus Owens, a Washington attorney who worked for the IRS until 2000, remarked that the IRS was known to initiate around 30 cases a year in regards to religious organizations and alleged partisan activity. That number has drastically fallen, with only two recent cases regarding religious organizations. In these cases though, partisanship activity was not the issue at hand.

While the tax code does allow a broad range of political activity, including commentary on social matters and encouraging civic participation, it does not allow for churches to endorse a candidate or to become a partisan advocate. This recent election has seen a controversial number of statements that critics allege fall under the categories of endorsement prohibited under the tax code.

With the political atmosphere increasingly divisive, tax attorneys predict that there is an extreme uneasiness for IRS that accompanies allegations of partisan misconduct. Some churches are perhaps wary of strict oversight of an IRS agent in the congregation placed for scrutiny, and, according to many tax law experts, the IRS agent doesn’t want to be there, either.

 

Segal, Cohen & Landis, LLP
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Receiving Notices After Your Case is Resolved? You’re Not Alone

Taxpayers have been heard to say, “I’ve already resolved my case. Why am I still receiving notices from the IRS?” Unfortunately, the issue is not uncommon, as computer glitches and other issues can cause a flood of ominous IRS notices, even though a taxpayer may have already reached an agreement with the IRS. Unfortunately for the taxpayer, once an issue is in the system it can be difficult to remove. Some of the taxpayers who came forward to participate in the Offshore Voluntary Disclosure Program (OVDP)—paying the 8 years of taxes, as well as the penalties and interests on the offshore accounts that were previously undisclosed—are now finding themselves in the middle of the IRS notice deluge for several reasons.

The first reason may have to do with the misapplication of payment. When the IRS receives a payment with amended returns for the taxes owed, as well as the interest and penalties accrue, there is a possibility that the IRS will misapply the payment. For example, if your amended returns for the year 2009 required a payment of $20 dollars and your 2010 amended returns required a $300 dollar payment, you may send in a check for $320, thinking the money would be appropriately applied. Unfortunately, all $320 may be applied to 2010. That misapplication would result in an overpayment of $20 for 2010 and an underpayment for 2009.

When this occurs, the IRS computers will see the underpayment as a failure to comply, despite the OVDP promise of protection, and will begin the send notices. There have been cases in which individuals receive Second Notices without ever receiving a first notice. Notices of Levy have also been issued to taxpayers who have had payments erroneously applied.

Taxpayers may also encounter a situation in which they continue to receive notices for the same years for which they had reached an agreement with the IRS. In extreme cases, taxpayers—after exhausting all other resources within the IRS itself—have been instructed to send the erroneous notices to the voluntary disclosure contact at their local IRS CID, who will then forward the letter to the IRS CID office in Washington, D.C.

The IRS is also known to erroneously calculate interest when resolving issues. Interest should cease to accrue after the taxpayer has paid the taxes, interest, and a 20% penalty, but there are times in which the IRS continues to calculate interest up until the closing agreement is signed. According to an article on this topic in a recent edition of Forbes, IRS agents seem to be unable to assist in resolving the erroneous interest charges, but they do say that the taxpayer can expect to receive a refund or an offset on the next return filed.

While you may not be dealing with issues associated with reporting offshore accounts, you may still find yourself the recipient of unwarranted notices from the IRS. The important thing to remember is to always, always follow up on the notices. It can only do you harm as a taxpayer to ignore them. Speaking to a qualified tax attorney regarding your case could mean the difference. The attorneys at Segal, Cohen and Landis, LLP are prepared to answer your questions and deal with IRS issues as they arise. Contact them today:

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999