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Friday
Sep262014

Boxer Manny Pacquiao Fighting Tax Battle

Boxer Manny Pacquiao is currently engaged in big money tax battles with both the IRS and the Philippine government over taxes on his winnings here in the U.S. Tax attorney Rob Wood discusses Pacquiao’s tax struggles in this report and in his Forbes article “Manny Pacquiao Lands $75 Million Blow In Tax Evasion Case.”

 

Pacquiao has won championships in eight weight classes. His total winnings exceed $300 million. His tax status is unusual in that he is not a U.S. resident or a U.S. citizen. He is a nonresident alien, and as such he does not pay taxes on earnings in other countries. But he owes U.S. income tax on earnings in this country. In addition, he has problems with the Philippine tax authorities.

Wood says it is easy for all of us to underestimate, for an entertainer or athlete, the many things these people have to go through to satisfy all the tax agencies seeking money. In Pacquiao’s case, both countries want more money. In the Philippines, Pacquiao has had some additional problems relating to collection.

Wood explains that people in entertainment or sports have to hire a number of people to do things for them, to keep track of details and see that things are attended to. But these assistants don’t always do things, or do them correctly, putting the stars in the position of having to battle taxing authorities over issues that shouldn’t be issues.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Friday
Sep262014

Prison Tax Refund Scam Fools the IRS

Two Minnesota men who are already in prison are facing more prison time for collecting over $400,000 in fraudulent income tax refunds from the IRS. Tax attorney Rob Wood reports on this latest tax scam, also the subject of his Forbes article “Tax Refund Scam From Prison Yields More Prison.”

 

Wood says that it’s not unusual for prisoners to be tax preparers. “Any time you read about . . . these tax refund scams, it’s a little frightening.” Over the last five years, with the rise of online filing, it has gotten easier for scams like this one.

The prisoners were able to persuade fellow inmates to provide them with their names and social security numbers to make the scheme work. The perpetrators in this case had accomplices on the outside helping them by cashing the refund checks from the IRS.

Wood says that there are more than 300 tax preparers in prison. But he also says that this is not surprising. The regulation of tax preparers has been controversial. Wood refers to the 2014 case of Loving v. IRS, which basically struck down the IRS’s regulation of tax return preparers. “It’s a controversial subject on which opinions differ.” There is a whole range of people with all kinds of qualifications (or perhaps none at all) offering themselves as tax preparers. Let the taxpayer beware!

“For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Tuesday
Sep162014

Lois Lerner’s Emails—Found After All?

 

Lois Lerner’s missing emails have been the subject of much contention since 2012 when Republicans began to question the way the IRS was treating conservative groups seeking tax exemptions. Recently, the government has said that the missing emails may exist after all. Tax attorney Rob Wood discusses the situation in this report and in his Forbes article “Lost & Found IRS Emails Suggest Smidgen Of Confusion, Or Worse.”

 

Wood says that the whole situation has been confused for some time—“sort of a Keystone Kops routine.” There has been a long investigation, there have been questions about what Lerner did, there have been suggestions of rogue employees in the Cincinnati office of the IRS, and clear answers have been hard to come by.

Judicial Watch filed a lawsuit to look for answers, and that lawsuit uncovered the fact that there was a backup system where the emails should be stored and from which the emails could be recovered. There is still some question what can be recovered and what the recovered emails will show.

Conservative groups have claimed that they were “interrogated incessantly” by the IRS regarding their applications for tax exempt status. Wood explains that there are application forms—over 20 varieties—that can be used to seek some kind of special tax status. It is not unusual for the IRS to have some kind of continuing colloquy with an applicant. The question raised in the Lerner investigation is whether the back and forth between the IRS and applicants was politically motivated. There will almost surely be more to this story before it ends.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Thursday
Sep112014

Ice Bucket Challenge—A Primer on Charitable Deductions

The ALS ice bucket challenge has been wildly successful, raising $100 million in one month. Will donors get a tax deduction? Tax attorney Rob Wood discusses the subject in this report and in his Forbes article “$100 Million Later, The Ice Bucket Challenge May Not Lower Your Taxes After All.”

 

 

Wood notes at the outset that the donations should be deductible; “The question is, is it going to reduce your tax bill.” The caveat Wood raises is that a donation will be tax deductible if it was given with a charitable intent and not deductible if it was given just to avoid a bucket of ice water. There are a lot of tax law cases about the deductibility of a donation, and they all involve charitable intent. It is important to keep good records as to all donations a taxpayer wants to claim as charitable.

Wood also points out that the amount of a charitable deduction is sometimes reduced by the value of something a taxpayer gets in return for the donation. Wood uses the example of a $500 ticket to a charity dinner where the taxpayer gets a meal worth $100. The deductible amount is $400.

Wood opines that some charities have been known to bend the rules to encourage donations. “Many of us don’t want to know what the rules are,” Wood suggests. All kinds of promotions are designed to get people excited and encouraged to take part in the charitable fundraising effort. For example, at a charitable auction, you buy a trip to Europe valued at $10,000 for $12,000, you have made a $2,000 charitable donation. On the other hand, if you take part in a charitable golf tournament, hit a hole in one, and win a new car, you will owe taxes on the car (“the Oprah rule,” as Wood puts it).

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Wednesday
Sep102014

Low Taxable Income + Lavish Lifestyle = IRS Trouble

A recent Italian tax case involves an Italian fish trader who claimed to make only €10,000 annually but was driving a Ferrari. Tax attorney Rob Wood discusses the case and situations like it in the U.S.A. The case is the subject of his Forbes article “Driving Ferrari But Reporting Low Income To IRS Gets Ticket To Jail.”

 

Other Italians have been caught by the Italian tax authorities, who are cracking down. As Wood notes, “This kind of thing does happen in the U.S.” Someone who is “living large” and reporting a very low income is likely to get into tax trouble, possibly even criminal problems. Apparently living beyond one’s income will require a very good explanation. Innocent mistakes may be forgiven by the IRS, but willful tax evasion will not be ignored.

Wood suggests that it is easy for a taxpayer to say the wrong thing in talking to an IRS agent about the taxpayer’s situation. If you are questioned by a federal or state tax agent who has a concern about your return, you should not answer questions but should instead get an advisor. You are likely to make a mistake or a misstatement. It is also important to have good records. Paying for things in cash may make the IRS suspicious. Bank records will be very important.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.