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Self-Directed ERISA Plan Prohibited Transaction Chinese Walls

Two 2013 United States Tax Court decisions, Peek[1]and Ellis,[2] evince a clear mandate for taxpayers seeking protection from the plan asset look-through rule’s operating company exception: STOP THE CONSTRUCTIVE OWNERSHIP DISQUALIFIED PERSON ENTITY CHAIN!!!!! In Peek, the self-directed Peek IRA and the self-directed Fleck IRA each owned 50% capital equity interest of the fire extinguisher sales operating company. In Ellis, the taxpayer’s self-directed IRA owned 98% of the used car sales operating company.

In both cases, the Tax Court’s holdings distill the proposition operating company section 4975(e)(2)(G) disqualified person status preempts the operating company exception to the plan asset look-through rule.[3] My paper, “Changes in Form 5498 Reporting And Read more

Starting And Maintaining A Non-Profit Organization

Each year, more than 50,000 organizations apply to the IRS for tax exempt status. There are several steps involved in becoming tax exempt. Many do not realize that there is a difference in a non-profit organization and one that is tax exempt. Not all non-profit organizations hold tax-exempt status. According to IRS statistics, there were slightly over 189,000 returns filed in 2011 by tax-exempt organizations. However, the National Center for Charitable Statistics lists a total of 1,427,807 non-profit organizations. Obviously, many non-profits are not tax exempt, or at least, are failing to file a return.

Forming a Non-Profit Organization

The first step in forming a non-profit organization is to form a non-profit corporation. This involves filing an application with an appropriate official in the state in which the Read more

Why Section 530 of the Revenue Act of 1978 Applies to the States

Section 530 of the Revenue Act of 1978 may already apply to the states, the Affordable Care Act, and title 29 issues. Don’t be surprised if state unemployment agencies and DOL are rabid in pursuing independent contractor misclassification issues in your business or your clients’ businesses. But don’t give up the section 530 issue when those agencies claim it is limited to subtitle C employment taxes.

The Department of Labor and the Internal Revenue Service entered into a Memorandum of Understanding (MOU) on September 19, 2011. The next day, six states joined the MOU melee. Now, a few years later, the tale of the tape is in.

The Obama administration undertook a strategy to attack Section 530 of Revenue Act of Read more

IRS Increases Contribution Amounts for Retirement Plans

The IRS announced in IR 2014-99 increases to retirement plan contributions.

Highlights include the following:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.

• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000. Read more

Chicago Lawyer with Portfolio of Celebrity Clients Indicted On Charges of Tax Fraud

Gary Stern is the latest professional to become ensnared in the coils of the criminal justice system. The once prominent lawyer who represented NFL players, doctors, lawyers, and other professionals has been charged with tax fraud. Federal prosecutors allege that Stern organized, operated, and promoted elaborate and bogus tax schemes, primarily to help his wealthy clients evade federal income taxes. For as complicated a strategy as these tax schemes might have been, they can be reduced to something so simple that even a caveman could do it: claiming millions of dollars in tax credits.

Specifically, the charges relate to preparing fraudulent tax returns and impeding the operation of the IRS. A federal indictment filed Tuesday in U.S. District Court in Chicago alleges that from 2006 to 2010, Gary J. Stern, “corruptly obstructed and impeded” the IRS Read more

Odujinrin v. IRS Commissioner – Reinforces The Significance of Engaging A Reputable Enrolled Agent

In Wole Odujinrin v. IRS Commissioner the petitioner, a hematology oncologist who represented himself, did not have adequate substantiation to support his petition and was not entitled to claim a net operating loss. He was also liable for an accuracy-related penalty under IRC 6662 – the expensive kick in the shorts.

This petitioner moronically showed up with little documentation in support of his claimed deductions and had inadequate evidence to show that he correctly assessed his 2009 tax liability. He testified that he relied on the advice of a tax practitioner but that person was not present to testify at trial nor provide an affidavit.

The Tax Court ultimately ruled in this case that the petitioner failed to establish a defense Read more

Changes In Form 5498 Reporting And Foreseeable IRS Correction of Self-Directed ERISA Plan Fiduciary Abuses

Recent events lead to a conclusion the IRS is on the cusp of launching a nationwide assault on self-directed ERISA plan fiduciary abuses.  Changes in Form 5498 reporting requirements incrementally require non-traditional asset and valuation disclosures.  The IRS commenced a 1-year Form 5500 amnesty program this past June, targeting small business ERISA plan reporting noncompliance. And, in 2013, the United States Tax Court issued decisions in Peek and Ellis substantively holding disqualified person weak-form fiduciary abuses preempt the otherwise taxpayer favorable operating exception to the plan asset look-through rule.

Catching abusive self-directed account holder fiduciaries should net the government a minimum of $10 to $20 billion in unreported UBTI tax, penalties, and interest from the Read more

Ex-Seyfarth Shaw Attorney Case: The Latest in a Series of Department of Justice Prosecutions For Tax Shelter Fraud

Recently, tax shelters have become the target of much prosecution by the Department of Justice. In the largest criminal tax case ever filed, professional services company KMPG LLP admitted to engaging in fraud and generating at least $11 billion dollars in false tax losses. The multi-billion dollar criminal tax fraud conspiracy involved the elaborate design, marketing, and implementation of fraudulent tax shelters.

Since the 2005 KPMG indictment and subsequent guilty plea, the Department of Justice has continued in its quest to uncover instances of tax shelter fraud. The case of Chicago tax lawyer and former Seyfarth Shaw LLP partner, John E. Rogers, is among the latest in a series of tax shelter fraud criminal prosecutions. Starting in 2010, the U.S. Department of Justice targeted John E. Rogers, ex-Seyfarth Shaw LLP partner, with a civil suit alleging he Read more

Amazon Fulfillment – Customer Convenience or Sales Tax Disaster

Now more than ever Amazon has been a one stop shop for many consumers. Not only can you buy just about anything you can think of on the Amazon website, but you can also receive lightning fast delivery of whatever you buy. Over the past few years, Amazon has taken their company to the next level. Now, in addition to selling items, Amazon provides a fulfillment service to online retailers.

As Amazon puts it, their fulfillment business “helps you grow your online business by giving you access to Amazon’s world-class fulfillment resources and expertise.” Simply put, the online retailer sends their products to Amazon. Amazon stores the item at one of its distribution centers. Once the item is purchased, Amazon packs and ships your product to the customer. In addition, Amazon provides customer support. While it certainly Read more

5 “Tricks” To Make Halloween Candy Tax Deductible

You can in fact deduct Halloween candy if you figure out a way to make it business related. The IRS doesn’t say a lot about this topic because they don’t want to give you “permission” to deduct these items, but they also have not specifically stated that you cannot deduct Halloween candy.

Here are five ways to deduct those over-priced bags of snack size chocolates:

1. Make a promotion out of it. Attach your business card or a promotional flyer to packets of M&M’s and voila! Deductible.

2. There are many companies who will print candy wrappers with your logo on it. An even better and more advanced way to promote your business and still have something for Read more

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