06 Dec Newsletter December 6, 2018
Happy Hanukkah to All Our Jewish Friends and Family
Wishing you peace, love, and joy this Hanukkah season.
The SFS Team
December 6, 2018
Inside this edition:
- First Prison Term for Cannabis Related Tax Crimes
- Where in the U.S. is Jeffrey Schneider?
- Former Justice of the Peace at War with the IRS
- Martial Arts Instructor Will Soon be Wearing an Orange Belt
- A Bit of Humor
- IRS Question & SFS Answer
- For the foodies… Korean Short Ribs
First Prison Term for Cannabis Related Tax Crimes
After the November 6, 2018 elections, 10 states have now have legalized recreational marijuana use, and 31 states have legalized medical marijuana.
Even though cannabis is still illegal on a federal level, all income earned must still be reported on an individual and/or business tax return.
Matthew Price, a dispensary owner in Oregon, learned the hard way. He was sentenced to seven months in prison for failing to file individual income tax returns from 2011 to 2014 and disclosing income earned from the dispensary operation.
Cannabis business owners also need to understand IRC Section 280E and how it affects these companies. The code section strictly prohibits the deduction of ordinary business expenses from gross income associated with the trafficking of Schedule 1 or Schedule II as defined by the Controlled Substances Act. So unlike other businesses, cannabis companies must pay taxes on the gross income alone.
Where in the U.S. is Jeffrey Schneider?
December 5 – 9 – Los Angeles – practice advancement workshop
December 12 – Keyes – Stuart – presenting to local Realtors – The Truth That Agents & Brokers Need to Know About Taxes
December 12 – Sarasota – EAs, CPAs & other tax professionals – Taxation and the Cannabis Industry
December 14 – 25- Vacation
When Your Business is Teaching Tax Fraud, the IRS Will Surely Find You!
Winston Shrout, of Hillsboro, OR, was sentenced to ten years in prison on charges of filing fraudulent financial documents to financial institutions and the US Treasury, and for failing to file tax returns.
Shrout held seminars and private meetings to promote and market the use of fraudulent financial documents to pay off debts, including federal taxes. He also sold recordings of his seminars, and templates for fraudulent financial reports, on his website.
From 2008 to 2015, Shrout created and submitted more than 300 fraudulent documents with the intent to defraud financial institutions and the US Treasury. It was also shown in court that from 2009 to 2014, Shrout failed to file tax returns despite having a substantial income from his business and pension payments. He admitted in court that he had not paid federal income taxes for over 20 years.
In addition to jail time, the judge ordered Shrout to serve five years supervised release and restitution to the IRS.
A Bit of Humor…
There was a man who computed his taxes for 1997 and found that he owed $3407. He packaged up his payment and included this letter:
Enclosed is my 1997 Tax Return & payment. Please take note of the attached article from the USA Today newspaper. In the article, you will see that the Pentagon is paying $171.50 for hammers and NASA has paid $600.00 for a toilet seat.
Please find enclosed four toilet seats (value $2400) and six hammers (value $1029).
This brings my total payment to $3429.00. Please note the overpayment of $22.00 and apply it to the ‘Presidential Election Fund,’ as noted on my return. Might I suggest you the send the fund mentioned above a ‘1.5-inch screw’? (See attached article – HUD paid $22.00 for a 1.5 inch Phillips Head Screw.)
It has been a pleasure to pay my tax bill this year, and I look forward to paying it again next year. I just saw an article about the Pentagon and ‘screwdrivers.’
I. Getscrewed Everyear
Martial Arts Instructor Will Soon be Wearing an Orange Belt
Marlene Seo, of Arvada, CO pled guilty in court to one count of willfully making and subscribing to a fraudulent corporate income tax return, which means Seo knowingly filled the false tax return.
Seo was the owner and operator of the National Martial Arts Academy. From 2011 to 2013, she deposited income from her business into bank accounts she did not disclose to the corporation’s bookkeepers and accountants, which resulted in an underreporting of the business’s gross receipts by approximately $650,000 for the years 2011, 2012 and 2013. Seo is scheduled to be sentenced in February 2019, where she faces three years in prison, supervised release, restitution, and monetary penalties.
I’d like to hear from you…
If you have an IRS issue, or just want to refer a friend, relative or client, I’d love to hear from you. I can provide a no-obligation, confidential consultation to help you solve your IRS problems.
Thank you for your kind words
Jeffrey is very knowledgeable in his field, He has always fulfilled his professional obligations. I have and will continue to use and recommend Jeff to anyone requiring an expert in his field.
~Paul Doyle, S. Carolina
Q & A
Answer: Your Tax Resolution Specialist can request a removal (abatement) of penalties 2 ways:
1) “First Time” Penalty Abatement and
2) A Reasonable Cause Argument. The IRS writes off billions of dollars in penalties each and every year, but you must know how to do it correctly.
A First Time Penalty Abatement (FTPA) can be requested if you have a “clean” compliance record, meaning you have not incurred a Failure to File or Failure to Pay penalty for the 3 years preceding the year you are requesting the first time penalty abatement on. FTPA is generally granted in most cases, regardless of what the underlying reason is if you are eligible.
There are 9 primary “Reasonable Cause” arguments to get your penalties removed. They are:
1) Death, Serious Illness or Unavoidable Absence
2) Fire, Casualty or Natural Disaster
3) Unable to Obtain Records (a common issue with couples going through a divorce)
4) Mistakes were made by the taxpayer or tax preparer
5) Erroneous Advice or Reliance on a tax preparer
6) Written/Oral Advice from the IRS
7) Ignorance of Tax Laws
8) Reasonable Cause/Ordinary Business Care and Prudence
9) Undue Economic Hardship.
When using a “Reasonable Cause” argument, the event that caused you to file late or prevented you from paying the tax when it was due must correlate to the tax years involved and supporting documentation is essential.
Your Tax Resolution Specialist will guide through which documents are needed and submit a formal request in writing. For instance, let’s say you were going through a divorce and you ex-spouse withheld records from you that was needed to file a complete and accurate income tax return, and you filed your return last because of this. You could request abatement of these penalties using one of the above reasonable cause arguments, specifically #3 above.
Korean Short Ribs
Before we head into the Christmas season when we will be drinking and munching on decadent hors d’oeuvres like cocktail meatballs and sausage potato puffs I thought I would share an excellent tasting rib recipe that was not too carb loaded.
This rib recipe is not your same old, same old BBQ recipe. It has that asian flavor pallet going on and the marinade is tasty.
Flanken is not the most tender of cuts so the longer you marinade, the softer the meat is likely to become.