AZ CPA and Attorney indicted

[Demosthenes]

_______________________________________________________________________________
FOR IMMEDIATE RELEASE TAX
THURSDAY, SEPTEMBER 10, 2009 (202) 514-2007
http://WWW.USDOJ.GOV TDD (202) 514-1888

PHOENIX ATTORNEY AND ACCOUNTANT CHARGED
IN OFFSHORE TAX SHELTER SCHEME
WASHINGTON – Steven W. Allen, an attorney who operated a legal practice in Mesa, Ariz., and Allen P. Goodmansen, a certified public accountant who operated an accounting practice in Mesa, were indicted Wednesday for conspiracy to defraud the Internal Revenue Service (IRS) and for aiding in the filing of false income tax returns for clients of an offshore tax shelter scheme, the Justice Department and IRS announced. Goodmansen was also charged with knowingly filing a false personal income tax return for tax year 2002.

According to the indictment, from at least 1997 through 2004, Allen, Goodmansen and others participated in a scheme to help clients unlawfully evade the payment of income taxes. Allen set up a series of three offshore trusts for at least eight clients, including Goodmansen and an IRS undercover agent. These trusts were designed to help hide the clients’ income. Allen helped clients hide their ownership of businesses and assets, and income on which they should have paid taxes, by directing the clients to title their businesses or assets in the name of their foreign trust. Allen charged clients between $10,000 and $30,000, to set up the trust package.
The indictment further alleges that, at Allen’s direction, Goodmansen and an unindicted co-conspirator prepared false trust tax returns that fraudulently reported the clients’ income as though the income belonged to the trusts. Goodmansen also prepared personal tax returns for some of the individual clients that omitted the income that had been concealed through the foreign trusts. To conceal the scheme’s origination in Arizona, Allen mailed the false trust tax returns to the IRS from outside the United States. Goodmansen personally used the scheme in 2002 to hide income he earned that should have been reported on his personal income tax return.
Allen was charged with conspiracy and seven counts of aiding or assisting in the filing of a false tax return. If convicted, he faces a maximum sentence of 26 years in prison. Goodmansen was charged with conspiracy, filing a false tax return, and three counts of aiding or assisting in the filing of a false tax return. If convicted, he faces a maximum sentence of 17 years in prison.
An indictment is merely a formal charge by the grand jury. Each defendant is presumed innocent unless and until proven guilty in U.S. District Court.
This case is being prosecuted by Tax Division trial attorneys Monica B. Edelstein and Michael J. Romano and is being investigated by the IRS, Criminal Investigation Division, Phoenix. Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.

[Judge Roy Bean]

...
According to the indictment, from at least 1997 through 2004, Allen, Goodmansen and others participated in a scheme to help clients unlawfully evade the payment of income taxes. Allen set up a series of three offshore trusts for at least eight clients, including Goodmansen and an IRS undercover agent. ...

OK, let's just give the IRS/CID/Justice Department the benefit of the doubt here and assume that the "IRS undercover agent" was inserted into the game as late as 2004.

Hello - it's 2009 for cryin' out loud.

[Number Six]

...
According to the indictment, from at least 1997 through 2004, Allen, Goodmansen and others participated in a scheme to help clients unlawfully evade the payment of income taxes. Allen set up a series of three offshore trusts for at least eight clients, including Goodmansen and an IRS undercover agent. ...

OK, let's just give the IRS/CID/Justice Department the benefit of the doubt here and assume that the "IRS undercover agent" was inserted into the game as late as 2004.

Hello - it's 2009 for cryin' out loud.

I've seen a number of IRS cases recently coming out in the press releases, dating back to the late 90's. If the object is deterrance, they are probably succeeding. If the objective is both deterrance and getting money for the budget deficit, audits of the richest and loosest hedge funds, going as far back as they legally can (three years?) would probably turn up substantial gaps. But as someone said, if you kill the gold-laying goose to get the motherlode, you will be left with a mess of grease.

[Judge Roy Bean]

...
I've seen a number of IRS cases recently coming out in the press releases, dating back to the late 90's. If the object is deterrance, they are probably succeeding. ...

I would have to disagree. The message going out is "... a few of you will eventually be investigated and we might even get around to filing charges against you." And of course if you are a "somebody" we'll let you get around to fixing your problem without any serious ramifications.

I don't have statistics at hand but it seems to me your chances of being hit by lightning, randomly selected for a road-block sobriety test or winning a major lottery prize are better than facing prosecution for participating in a tax scam for several years even if the IRS is aware of it.

In the mean time, those of us who are playing by the rules are paying for a system that can't enforce those rules effectively.

What Einstein said about doing the same thing over and over again and expecting a different result is true; it's insanity.

[Number Six]

I don't have statistics at hand but it seems to me your chances of being hit by lightning, randomly selected for a road-block sobriety test or winning a major lottery prize are better than facing prosecution for participating in a tax scam for several years even if the IRS is aware of it.

My chances of even being audited are probably less than being hit by a meteorite.

Einstein also said that the hardest thing in the world to understand is the U.S. Income tax code (and that was in the 1950's).

"Business ethics" is finally getting the attention deserved. I'm thrilled to read the press releases. But here in Connecticut one of AG Blumenthal's chief worries is the hedge funds.

[dr poormouth]

...
I've seen a number of IRS cases recently coming out in the press releases, dating back to the late 90's. If the object is deterrance, they are probably succeeding. ...

I would have to disagree. The message going out is "... a few of you will eventually be investigated and we might even get around to filing charges against you." And of course if you are a "somebody" we'll let you get around to fixing your problem without any serious ramifications.
I don't have statistics at hand but it seems to me your chances of being hit by lightning, randomly selected for a road-block sobriety test or winning a major lottery prize are better than facing prosecution for participating in a tax scam for several years even if the IRS is aware of it.
In the mean time, those of us who are playing by the rules are paying for a system that can't enforce those rules effectively.
What Einstein said about doing the same thing over and over again and expecting a different result is true; it's insanity.

A similar fraud that starts in 1988 is that of Tax Preparer Lawrence Sperling, who falsified returns for clients in 2002 and 2003, failed to file himself for eleven years from 1988, and hid his income through use of a "nominee" from 1998 onward.

WASHINGTON, Sept. 2 /PRNewswire-USNewswire/ -- Tax preparer Lawrence Sperling,
was sentenced to 33 months in prison today by Judge Deborah Chasanow in
Greenbelt, Md., for preparing false tax returns for clients, the Justice
Department and Internal Revenue Service (IRS) announced.

In April 2009, Sperling pleaded guilty to one count of aiding and assisting in
the preparation and presentation of a false tax return. According to the plea
agreement and court records, Sperling is a former attorney (now disbarred),
who owned and operated a tax preparation business in Silver Spring, Md., that
operated under several names, including American Tax Service, American Tax
Institute, JAMAR LLC and American Tax Professional Associates Inc.

According to court records, Sperling prepared individual income tax returns
for his clients, along with related schedules and attachments. From
approximately January 2002 through at least May 2003, Sperling prepared tax
returns for his clients that contained fraudulent items that he knew were
greater than that to which the taxpayer was entitled. These false items
included medial expenses, charitable contributions, miscellaneous
employment-related expenses, and child care credits. Sperling conceded that
his practice of preparing false tax returns resulted in a tax loss to the
United States of $804,335.

According to the plea agreement, Sperling also impeded the IRS with respect to
his individual taxes. Beginning in 1988, Sperling failed to file tax returns
for eleven years. In 2001, the IRS penalized Sperling and fined him $10,000
for "willful or reckless understatement of taxpayer's tax liability" with
respect to his tax preparation business. The IRS sent him more than two dozen
notices of taxes and penalties due and other warning letters. Beginning in at
least 1998, Sperling used a nominee to file the tax returns for his clients
and to collect his preparation fees. The nominee held these funds and made
disbursements to Sperling or others at Sperling's request. Sperling never
reported or paid taxes on these funds, although he used a portion of them to
pay business expenses. As a result, Sperling caused a tax loss of $130,847.
The total tax loss related to all of his conduct is $935,183.

Acting Deputy Assistant Attorney General Ronald A. Cimino thanked the
IRS-Criminal Investigation special agents who investigated the case, as well
as Tax Division trial attorneys Jerrod Patterson, Shawn Noud, and Tino
Lisella, who prosecuted the case.

[DoingHomework]

Now a question for you professionals: Is there any LEGAL way we might pay less taxes? My wife and I are mid 40s, professionals, no kids, about $200,000 in salary income from (government) salaries, typically about $25,000 a year in investment income, and $25,000-$40,000 in income from a second home we rent out (in the US). We have a $300,000 mortgage on the second home and no other debt. We have a little over a million in investments (financial assets), about half in retirement accounts and half in plain old taxable accounts. We also have not quite a million in other assets (mostly real estate). All of this is in the US.

We have an estate attorney who has said there isn't much to do, but he is not a tax expert. Our tax accountant is trustworthy and reliable but perhaps not completely up on things that might be available to us.

So, is there anything we should be looking into? I know this is not the right venue for specific advice for our situation but I'd appreciate at least the mention of a topic/vehicle we ought to investigate further with a competent professional, assuming there is one. I'm not looking for anything that would get me an invitation to be a guest of the government, that would expose us to a lot of risk, or that would cost more than it saves.

[Nikki]

If all you're concerned about is taxes, sell everything and put it all into tax-free municipal bonds. All you have to worry about then is your salaries.

Of course, there are some other trivial aspects of estate and financial planning which this doesn't address, but all you're concerned about is taxes, right?

[DoingHomework]

Well, I asked for that. Touche! No, I'm not only worried about taxes hence my note about risk and costs. My goal is to pay the taxes I am required to pay and no more. If there is any way to do that I would like to look into it. For example - we have passive income from the rental, perhaps we could make use of passive losses.

Again, I'm only interested in legal approaches and I am not seeking specific advice (because I am smart enough not to risk my freedom on what someone in an internet forum tells me). I am just trying to determine what questions I should be asking.

[Quixote]

Oops. I tried to split this topic and deleted a few posts. Mea culpa.