ASA Meeting
2/28/11
BDO Seidman
Leslie Poote - Campus Recruiting
Phil Lator - Loan Auditor
Leslie Burkis - New hire
Caitlin Hondor - New hire
Matt Becker - Tax partner
Presentation on Tax Crimes
Why do we pay taxes?
• U.S. constitution: Article 1
• Section 8 16th amendment
• Responsibility of enforcing these laws delegated to the IRS
• Voluntary compliance
• Each of us must file a tax return when required
• must also determine and pay the correct amount of taxes
• Taxpayers have the right to contest
• Contest their liability
• Cannot violate and diobey tax laws
• Avoidance vs. aversion
People who have gotten in trouble with taxes
• Al Capone
• Indicted for income tax evasion (1931)
Spiro
Agnew
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• Accepted $147,500 in bribes as governor of Maryland
• No jail but paid $10,000 penalty
• Willie Nelson
• Invested in an abusive tax shelter
• Tax liability in 16.7 million
• Hid taxable income in offshore accounts
• Marc Rich
• Involved in fraudulent oil trades that netter $105 million
• Indicted in 1983 for income tax evasion
• 48 million tax liability
• Escaped to Switzerland
• Pardoned by President Clinton
• Pamela Anderson
• In 2009, the IRS filed a 1.7 million tax lien against her
• Richard Hatch
• Survivor TV show winner
• Failed to show 1 million dollar winnings on tax return
• Served 51 months in prison
Simple Tax Crimes
• Tax avoidance activities
• Frivolous filters/ non filers
• Fraudulent return preparers deliberately under-reporting or omitting income
• Overstating deductions
• Keeping two sets of books (“cooking”)
• Claiming personal expenses as business expenses
• False deductions
• Hiding assets or income
• Ponzi Schemes, kitting & Lapping
Avoiding Simple Tax Crimes
• W-2s that are substantially different from previous years
• W-2s that are handwritten, typed or have noticeable corrections
• Multiple refunds going to the same address
• Multiple direct deposits to the same bank account
• Proper documentation for all deductions
• Dependent information
Complex Tax Crimes
• Illegal source tax crimes
• Untaxed underground economy
• Money laundering
• Narcotics
Money Laundering
• Usually involves some sort of tax evasion
• Easier to prove than many other crimes
• Bank Secrecy Act
• Basis of money laundering regulation
• Ways to launder illegal proceeds
• Move money out of the U.S. and bring it back in a clean form
• Commingle the money through various business activities
Abusive Tax Schemes
• Foreign Trust
• Structure business into two trusts
• Business trust (BT)
• Equipment trust (ET)
• BT pays ET inflated lease costs to nullify lease income
• International Business Corporation (IBC)
• Same name as U.S. business
• Send checks from customers to IBC offshore
• Neil R Brown Tax Scheme
• Client establish foreign corporations/trusts in Bahamas
• Client transfer cash and income to foreign entities as “consulting fees”
• $$$ repatriation back to clients through fictitious loans
IRS Answer to Crimes
• Internal Revenue Service Criminal Investigation (CI)
• Created in 1919 to deal with widespread tax fraud allegations
Accounting Protection
• Forensic accounting
• Sarbanes-Oxley procedures
• Auditing procedures for kiting and lapping
Foreign Bank Account Report (FBAR)
• General purpose is for each U.S. person to disclose a financial interest or
signature authority in financial account
• Must report any foreign account you have
• Most common tax crime reported in problems with FBARs
• On March 23, 2009 IRS stated they would allow any person who haven’t paid
taxes in FBARs in a Voluntary Disclosure
BDO Seidman Summer Leadership Conference
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5 days in Chicago
80 Students from across the nation
Applications accepted until April 15th
Visit bdo.com for more details