The RATE Coalition has been lobbying for a lower corporate tax rate and has released a new report pointing out that there is a growing bipartisan consensus in Washington to lower the rate from its current high of 35 percent.

The House-passed a budget resolution for 2012, which calls for cutting the federal corporate income tax rate to 25 percent. The Obama administration recently released a plan for lowering the corporate tax rate to 28 percent. In the Senate, Senators Ron Wyden, D-Ore., and Dan Coats, R-Ind., have introduced the Bipartisan Tax Fairness & Simplification Act of 2011, which would lower the corporate rate to 24 percent.

Various deficit commissions, including the Alan Simpson and Erskine Bowles commission and Pete Domenici and Alice Rivlin commission have also called for lowering the corporate tax rate, along with the Economic Recovery Advisory Board chaired by Paul Volcker.

  “The U.S. currently has the highest statutory corporate tax rate (just under 40 percent including average state and the maximum federal rate) among developed countries,” said the RATE Coalition report, written by Robert Rizzi and Jonathan Sallet. “Competing nations such as Canada, the United Kingdom, and Japan have lowered their rates in order to attract business activity, but the U.S. has lagged behind. Lowering the federal corporate income tax rate is thus a step towards macro-economic stability and in the direction of sustainable economic growth.”

RATE Coalition co-chair James P. Pinkerton acknowledged that while many corporations pay less than the statutory top rate of 35 percent, their effective tax rate is still high compared to other countries.

“Every economist says if you move measure statutory to statutory or effective to effective, the U.S. is the highest,” he said. “You can always find outriders who are paying nothing. The bulk of corporate America is paying somewhere in the mid-20s as an effective rate. Obviously the current system incentivizes companies to do as much as possible overseas and keep it there. That’s not good for the economy or growth.”

Pinkerton points to a recent study by Ernst & Young that makes the point that the number of Fortune Global 500 companies headquartered in the United States has fallen, with some moving to China. “It’s clear that the U.S. is losing market share among the top companies,” he said. “A lot of that has to do with this disadvantageous tax climate here in the United States. The American economy would do better with a lower corporate rate. That’s the position of most of the political leaders in Washington.”

Tax evasion is a felony under the laws of almost every jurisdiction in the world because it is considered a threat to the government's ability to fund its own operations. Tax evasion can carry both civil and criminal penalties, which can be dangerous because tax rules can be quite complex and innocent mistakes can be costly for taxpayers. Fortunately, in the U.S., criminal intent must be shown in order to convict a defendant of tax evasion. This article provides a general overview of the subject from the perspective of U.S. federal law.

Distinction Between Tax Evasion and Tax Avoidance

• Tax evasion is the use of illegal means to avoid or reduce the payment of taxes legitimately owed, while tax avoidance is the use of legal means (finding loopholes or tax shelters, for example) to accomplish the same goal. Since the line between the two is sometimes not well-defined, some forms of tax avoidance are dangerous because they may be construed as tax evasion by some authorities.

Misrepresentation Versus Concealment

• Avoiding the payment of taxes through misrepresentation can be done in two ways: presenting false information and presenting true facts selectively, so as to leave a misleading impression that underestimates actual tax liability. Concealment occurs when someone hides assets or income or destroys financial records and can result in prosecution, even if the person concealing the assets or income has not yet filed a misleading tax return (prosecution commences before the filing deadline, for example).

Common Forms of Tax Evasion

• Tax evasion through concealment is nearly universal in illegal industries such as drug trafficking, where complying with tax law by admitting income from illegal sources would result in admitting guilt to another, more serious crime. Avoidance of import duties by misrepresenting the nature or value of an imported product is also particularly common.

Common Examples of Tax Evasion The most common type of income tax evasion occurs when an individual taxpayer or a business deliberately under reports taxable income for a particular tax year. People who routinely deal in cash transactions, such as handymen, restaurant owners, hairdressers, and car dealers often fail to report substantial portions of their income, which, in turn, gives them a decreased tax liability. However, doctors, lawyers, accountants, and other professionals are equally guilty of failing to report their taxable income accurately, particularly when they are self-employed.

Another common type of income tax evasion involves false deductions for business-related expenses. For instance, a business owner who claims on his tax return that every meal eaten in a restaurant and every concert attended in a given year is deductible as a business-related expense is probably overstating his deductible business expenses. By including personal food and entertainment expenses, this business owner is claiming expenses that are not legally deductible on an income tax return.

Other common types of tax evasion involve the following actions:

• claiming charitable deductions that were never made
• overstating the value of donated property in order to increase charitable deductions
• omitting property from a tax return
• receiving cash income and failing to report it on a tax return
• intentionally understating the value of an estate on a tax return

Each of these actions is illegal, and may lead to prosecution for the crime of tax evasion.

Failure to File a Tax Return

• Failure to file a tax return can subject a taxpayer to civil penalties of up to 25 percent of the tax due. Willful failure to file a tax return can subject a taxpayer to one year in prison for every year in which a return is not filed (subject to a six-year statute of limitations).

Legal Standards

• In order to violate U.S. federal criminal prohibitions against tax evasion, a person must have: an unpaid tax liability; perform an act that evades or attempts to evade either assessment or payment of the tax: and specifically intend to violate a known tax obligation (negligence cannot result in liability for tax evasion but can give rise to civil liability). Individuals can be prosecuted for avoiding paying their own taxes or for causing a corporation to avoid paying its taxes.
  

Penalties

• In the U.S., tax evasion is punishable by a fine of up to $100,000 ($500,000 for corporations) and/or imprisonment for up to five years. In addition, back taxes and costs of prosecution can be assessed. Since an individual can be charged with more than one count of tax evasion, the foregoing numbers underestimate an individual defendant's actual civil and criminal liability.

CRIMINAL INVESTIGATION:

IRS Investigation of Tax Evasion The Criminal Investigation Division (CID) of the IRS is responsible for investigating all tax-related crimes. One of the major areas of financial investigation is legal source tax crimes, which includes tax evasion. The crime of tax evasion is considered a legal source tax crime because it typically involves a legal job or business, and income that a person has earned legally. Tax evasion also is referred to as white-collar crime, since it is a financial violation that is committed by a person who usually is not engaged in any other types of criminal activities. CID devotes most of its resources to legal source tax crimes.

Prosecution and Conviction for Tax Evasion Once CID has completed its investigation, it refers the case to the Civil Tax Division of the U.S. Department of Justice for prosecution. Ultimately, the Department of Justice will determine whether to pursue the case further. Typically, federal prosecution of tax evasion is reserved for the most high-profile cases where large amounts of taxes are owed to the federal government.

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VisionQwest sent a letter today to Rep. Darrell Issa, Chairman of the Government Oversight Committee to ask for a review of the act and to enhance enforcement of the law that was voted in by Congress and signed by the President.  In review of various issues it has come to the attention of VisionQwest that ABC, the Association of Boxing Commissioners has sent several complaints into the Federal Government and nothing has been done.  Our office has sent several letters out to various government agencies which included the office of the Attorney General of the United States.  As well as the sponsor of the bill Senator John McCain. 

With no enforcement of the laws Promoters and Managers understand that they can be well out of the form of the law and do business as usual.  The boxer looses. If you would like to get involved in this fight please contact me at mlodge@vqrginc.com
 

After many months of reviewing bout and co-promotion contracts, asking questions, and being able to ask questions that affect boxers to promoters, VisionQwest saw that no enforcement is being done by State or Federal governments regarding HR 1832 - Muhammad Ali Boxing Reform Act passed by Congress and signed by the President to protect boxers from Promoters.

HR 1832 formed the ABC or Association of Boxing Commissioners that make up the states that have athletic or boxing commissions.  The law set up rules that all states were to follow regarding rules and regulations that govern the boxing industry.  However, several formal complaints have been made by the ABC regarding promoters and boxers but no action has been taken by the Federal government.

This week we sent a formal letter to the US Attorney General Eric Holder, and two Federal US Attorneys, as well as US Senators that sponsored the bill.  The request asked that the DOJ enforce the laws that govern the relationship between Promoter and Boxer.  After review by this firm we feel that there are too many financial ties between the Promoter and the Boxer that creates an unethical relationship.  There needs to be more arms length relationships to stop conflicts of interest and violations of the rules that govern HR 1832.

In order for the Boxers to be more protected from Promoters that want to have more financial controls over their Boxers, it is vital that the Federal Government enforce HR 1832.

So many times in this office we see so many sports and entertainment individuals where they are being abused by those around them.  A well known sports figure was buying a new car.  The Manager went to the auto broker and tried to make a deal.  Sell his client the car for $200,000 more then what it normally sells for, then give the Manager 70% of the overage.  Lucky for the sports figure the auto broker said no to the deal because if the news got out that he over charged his client his name would be mud. 

Protect your name and your money from those that want to use you.  Remember people will always say.....I never made anything off of him/her.  When they say that they lie.  Everyone tries to get close to the Athlete for their own benefit, no one ever tries to protect you when they say they are trying to protect you. 

So protect yourself.  Have those around you sign an agreement that clearly states there will be no conflict of interest issues and no one will make a deal without you knowing about it or approving it.  Conflict of interest is always a temptation by those around you.  Money is big out there, money is flowing and they want a part of it, even if they have to use you to get to it.  Conflict of interest can be stopped by having everyone sign an agreement. 

Just remember conflicts can cost you a lot of money.  Why pay over $200,000 more for a car just because a friend or manager said it was a good deal.  Conflict of interest agreements must be in place to protect you at all time.  Like a pre-nup helps those that have financial wealth and about to enter into a binding relationship.  Everyone thinks they can trust their friends or those people called your manager, if no one is checking their proposals, lots of money will be waited and leaving your bank accounts.

Protect yourself always.

The story has just been reported through various blogs and on-line news that Mayweather called Pacquiao to agree to fight.  A verbal agreement to fight is great, but if no one is negotiating then the details of a fight are still left blank.  Bob Arum will not negotiate because he wants a few more fights under his promotion contract with Pacquiao.  So what needs to be done?  Someone needs to negotiate.

First, there needs to be a cleaning of house.  There is the law suit between Pacquiao and Mayweather.  Defamation law suits usually mean that that somethings has been said or done that will hurt the earning power of the person being talked about.  However, in Pacquiao's case earning power has gone up, not down.  End the law suit and move on.  Your just waisting dollars on attorney fees.  Now the issue that is outstanding is conflict of interest.  The same law firm that represents Top Ran and Bob Arum now represent Manny Pacquiao.  Who doesn't want the fight to happen?  Bob Arum.  Who has controls over a law suit that is still pending and stopping a fight.  Bob Arum.  So you need to clean the house of law suits and get to a point where that is out of the way.  Plus, the law firm needs to be dismissed because a legal entity should never be representing both boxer and promotor.  If you read the Federal Boxing laws of the United States it clearly states there needs to be an arms length relationship and no financial ties should hold the boxer to the promoter.  Conflict of interest and financial ties have to be severed to bring the boxer to a solid financial place and be independent.

Second, someone needs to negotiate that knows what they are doing.  Parties from both sides need to sit down quickly and start laying out the bout agreements, bout monies, logistics of the fight, and HBO pay per view agreements, sponsorship agreements and the list goes on.  And the negotiator needs to be independent from Top Rank that represents Pacquiao.  The negotiator has to be involved in every aspect of all agreements, including HBO.  Vital - independent negotiator that can pull all sides together.  In every business you have to have in place a good negotiator or else no deal.  Just good business practice.

Third, what has happened in the past has to end.  So much has been said and promoted.  Many things have been done and said so that the fight could not go forward.  But, if we are reading correctly it now appears Mayweather has reached out to Pacquiao and both have agreed to fight.  Again, if no one is negotiating there still is no fight.  So everyone needs to stop talking and someone needs to step up and do something.  Get out of ring side and go into the ring and negotiate.  If you have a good negotiator and a strong independent team of attorney's and accountants, everything can be done quickly.  But if you have someone in the background going behind everyone's back to stop the talks, then you will have a legal challenge. 

Let's negotiate.  That is how a clean fight is done and how a good business is run.

STANDARD DEDUCTION.  The standard deduction amounts for 2011 ae $11,600 for married individuals filing jointly (and surviving spouses),  $8,500 for heads of households, and $5,800 for unmarried individuals nad married individuals filing separetly.  An increase in the standard deduction may also be claimedin 2011 for motor vehicle sales and excise taxes and net disaster losses.

ITEMIZED DEDUCTIONS.  The amount of itemized deductions claimed in 2011 is not subject to phaseout for high-income taxpayers.

EXEMPTIONS.  The amount of a personal exemption, and of each dependency exemption, claimed in 2011 is $3,700.  The exemption deduction is not subjexct ot phaseout in 2011 for high-income taxpayers.

ROTH IRAs.  The modified AGI and filing status requirements for conversions of a traditional IRA to a Roth IRA were eliminated for 2010.  An amount that would be included in income during the year due to a conversion may be included ratably in income in 2011 and 2012 unless the taxpayer elects to include the entire amount in income in 2010.

HOMEBUYER CREDIT.  The first-time homebuyer credit, which is generally unavailable after 2010, is extended for any individual who serves on qualified official extended duty service outside the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010, and, if married, such individual's spouse.

DUE DATE FOR RETURNS.  The due date for filing Form 1040 or form 4868 for the 2011 tax year is Tuesday, April 17, 2012, due to a legal holiday in Washington D.C.  The due date for a calendar-year taxpayer, who have filed for an extension to file Form 1040 is Monday, October 15, 2012.

To make an appointment with one of our qualified tax preparers go to:  www.vqrginc.com and book an appointment or call:  818.547.0497 Ext 3

Tax season is here again! While the filing deadline might be a couple of months away, this month you will receive all required third-party reporting documents: W2s, 1099s for interest and dividends, 1099s for nonemployee compensation if you are an independent contractor, 1099-Bs from your broker reporting proceeds from the sale of stocks and bonds, 1098s from your mortgage holder, K-1s from partnerships, S Corps, estates, and trusts. Hopefully, you’ve set up a file to store all these documents to make data gathering for tax preparation a snap. If not, now’s the time to create one.

Note that the due date for filing this year is April 17. If a tax due date falls on a weekend or a holiday, the next business day becomes the due date. This year April 15 is a Sunday and Monday, April 16 is a federal holiday so the due date falls on Tuesday, April 17. If you are unable to file by the deadline, you may obtain an extension to Oct. 15. Bear in mind that the extension is for filing, not paying. All taxes must be paid by April 17 otherwise you may suffer penalties and interest.

If you pay estimated tax payments throughout the year, the due date for your next quarterly installment for prepayment of 2011 income taxes is Tuesday, Jan. 17. Estimated tax payments for 2012 will be due on April 17, June 15, Sept. 17 and Jan. 15, 2013.

Beginning in 2011, brokerage firms are required to report to the IRS not only proceeds from sales of stocks and mutual funds, but also the cost basis of the investments that are sold. The IRS has designed a new Form 8949 for reporting capital gains and losses. A summary of the information listed on this form is carried over Schedule D. A couple of new columns are added to Form 8949 reporting – one for adjustments to basis (in case your broker has an incorrect figure) and one for coding the transaction to identify the type of sale.

Business mileage rates for 2011 were changed mid-year, so when calculating your mileage for 2011 use the rate of 51 cents per mile for miles driven up to June 30, 2011 and 55 ½ cents per mile from July 1 to Dec. 31.

Mileage rates for 2012 are as follows: 55 ½ cents per mile for business, 23 cents per mile for moving and medical, and 14 cents per mile for charitable purposes.

The temporary payroll tax cut has been extended to Feb. 29; employees will enjoy a continued savings of 2% of wages withheld for Social Security – from 6.2% to 4.2%. The Social Security wage base for 2012 is $110,100 up from $106,800 in 2011. Once your wages exceed this amount, Social Security will not be withheld but Medicare will continue to be withheld.

The self-employment health insurance deduction no longer offsets the self-employment tax. In 2010 only, self-employed workers were able to reduce the amount subject to self-employment tax on Schedule SE by the amounts paid for health insurance premiums. You can still take the deduction on Form 1040 as an adjustment to income.

Foreign financial assets are reported on a new Form 8938. The foreign asset disclosure form is separate and different from the foreign bank account report. Taxpayers with foreign assets may need to file both documents.

The first-time home buyer’s credit is now only available to members of the military or Foreign Service. If you are repaying the first-time home buyer’s credit, you may not need to complete and attach Form 5405.

Also gone for 2011 is the Making Work Pay Credit. For the past few years we enjoyed $400 per year single and $800 married filing joint credit against our tax liabilities.

IRS to Use SAS Analytics to Combat Fraud Cary, N.C. (December 9, 2011)
By Michael Cohn, Accounting Today The Internal Revenue Service has signed a $6.25 million contract with the SAS Institute to use the company’s analytical software to help it identify tax evasion and fraud as part of the agency’s Return Review Program.

The RRP system is being deployed to help the IRS reduce the estimated $345 billion tax gap between taxes owed and paid. The SAS Analytics software will help the IRS improve its fraud detection capabilities and uncover noncompliance at the time a tax return is initially filed.

The IRS is planning to move toward a more real-time tax system in the years ahead that would automatically match electronically filed tax return data with information returns from third parties such as employers and banks. On Thursday, the service held the first of a series of meetings to solicit feedback from accounting and tax practitioner organizations (see AICPA Backs IRS Plans for Real-Time Tax System).

“There is a significant opportunity to avoid improper refunds and payments of large sums of money,” said SAS Federal president Karen Knowles in a statement. “With SAS, the IRS can reduce the number and amount of fraudulent tax refunds, discover emerging fraud schemes and increase tax collections to shrink the tax gap.”

SAS’s analytical software will score tax returns using a combination of business rules, anomaly detection, predictive modeling and social network analysis. Users at the IRS will be able to set up business rules that detect possible fraud and alert investigators and auditors to suspicious-looking returns.

The software searches data for anomalies that could indicate fraud or error. Predictive modeling techniques employ historical behavioral information to identify suspect behavior similar to known fraud patterns. Social network analysis uncovers hidden relationships or linkages that suggest collusion and organized fraud rings.

Another tool to combat fraud, SAS Text Miner, will scour unstructured data, such as from call centers, to detect suspicious activity. Alerts and results will be reported to the IRS via a customizable dashboard. Case management capabilities in the software will also help IRS investigators prioritize and assign cases.

The $6.25 million contract will give the IRS Return Review Program access to many SAS technologies, including SAS Fraud Framework for Government, SAS Social Network Analysis and SAS's data integration, data mining and business intelligence technologies. To analyze the massive amounts of data in the system, the IRS will also be able to leverage SAS In-Database, SAS Scoring Accelerator for Greenplum and SAS Grid Manager.

SAS’s software is also used by other government agencies to detect Medicare and Medicaid fraud, purchase-card fraud, bid-rigging and terrorist financing.