Tag: Taxes

That Orangey Glow Will Be a Little More Expensive Today as Tanning Tax Takes Effect

Everyone in the melanoma-for-sale business is perplexed about the tanning tax that goes into effect today and the Journal reports that the hella confusion is mostly about why some businesses are able to dodge the tax while others are not.

Case in point, health clubs get to offer their George Hamilton specials tax free while video stores (?) that offer tanning do not.

When Jeanne Chamberlain turns up at work Thursday, she’s going to have to grapple with America’s first federal tax on tanning services, a 10% levy designed to help pay for Congress’s health-care overhaul.

Ms. Chamberlain runs a video-rental store.

These would normally be unrelated facts, but 20 years ago, Ms. Chamberlain followed a number of her peers in adding tanning services to smooth out the bumps in her Rice Lake, Wis., business. Today, she wants to offer one free tan for every three rentals. Should that freebie be taxed? Ms. Chamberlain doesn’t know, and even if she did, she doesn’t yet have the software in place to help with the calculations.

For starters, video stores still exist? We had just assumed that they had gone out with powdered wigs. Netflix, Hulu, etc. etc. And since when do they offer tanning services? “Oh I see you’ve got Gigli there, great choice. Would like to hop in one of our tanning beds while I rewind the tape?”

Anyway, back to the tax:

Among the new details: “qualified physical fitness facilities” that include access to tanning beds as part of their membership fee won’t be subject to the tax.

That means customers at Sun Tan City in Owensboro, Ky., will pay 10% more for a dose of ultraviolet rays. But if they go to Anytime Fitness 100 yards away, and tan inside one of its two beds, they’ll escape.

“My jaw dropped,” said Rick Kueber, founder and chief executive of Sun Tan City, a 124-outlet chain based in Elizabethtown, Ky. Then he got to thinking. “If I had six treadmills in each of my stores, can I call myself a health club?”

Can anyone explain this? Our best guess is that since health clubs force you to get you off your ass, while video stores put you back on them, they’re getting a break. That seems to be pretty advanced for Congress logic but we’ll assume that it’s in the ballpark.

But It’s really NBD for the committed to skin cancer crowd however, “[Fifteen-year-old Grace] McCleary and others who lounged last week in the notorious Land of the Tanned – see MTV’s Jersey Shore – said a few dollars tacked on wouldn’t deter them.”

Fortunately, the IRS has advice (as it always does) for those affected and our resident tax sage, Joe Kristan has the details. So, there’s no risk to the industry as a whole – thank god – just a little extra bureaucracy in the pot in the form of Form 720. Enjoy!

Federal Tan Tax Burns Some Badly but Keeps Everybody in the Dark [WSJ]
Tanning-bed enthusiasts say tax won’t deter them [Philadelphia Inquirer]

Turns Out the Guy that Joe Biden Called a Smartass Is Just an Ass

Yesterday we learned about Joe Biden not taking too kindly to a custard shop manager’s suggestion that he can eat all the free custard he wants as long as JB & the rest of the crew “lower our taxes.”

The Veep retorted that maybe the dude in the funny paper hat should try saying nice for change instead of being a smartass. It was the typical Joe Biden charm that you would expect. Perhaps he should have suggested visiting the White House’s tax savings tool instead of name-calling but the past is the past and we’ll just chalk up another Joe Biden moment of hilarity/political liability.

But wait! What if the VP was right about this portly custard slinger? We read over a little mini memoir over at Daily Intel that indicates that the guy probably had it coming:

First of all, as anyone who has ever lived in Milwaukee knows: Kopp’s Frozen Custard is the most delicious dessert on the planet. It’s basically ice cream with twice the fat. So when Smilin’ Joe Biden showed up at Kopp’s in Glendale, Wisconsin, last week, you can only imagine his annoyance at being interrupted in the middle of his first taste — from the looks of things, Friday’s special flavor, chocolate chip cookie dough — by a store manager cracking that the cone was free, as long as the vice-president would agree to “lower our taxes.” Biden being Biden, he called the manager “a smartass.” And who was that smartass? None other than my nemesis of twenty years ago — the first boss I ever hated and feared.

Said smartass is Scott Borkin and the author of this piece, Dan Kois, proceeds to tell a tale of a lunatic boss from hell (thanks, Richard Lewis):

Once, very late on a long, hot night of customers piling in and the custard machines jamming and the store’s owner, Carl Kopp, walking around in his apron and hat terrifying everyone, Scott Borkin came over to collect a shake for order number 87. “What the hell is this?” he asked me.

Inside, I panicked. What had I done wrong this time? But I had the ticket right in my hand — malt with chocolate — and was positive that’s what I had made. “It’s a chocolate malt.”

“No, this,” he said, pointing at my Sharpied “7” on the lid. I’d written it with a line through the center because once someone had mistaken my non-lined 7 for a 2.

“Uh, it’s a seven,” I replied.

“This is a seven,” he said, taking the ticket from my hand and drawing a non-lined numeral. “Do it right or you’re outta here.” He plucked the malt off the counter and stalked away. “This isn’t Germany!” he called over his shoulder.

Christ. Threatening termination because of lined 7 and anti-Germany? PLUS he likes bitching about taxes? This guy could be the next Joe the Plumber. Oh wait, he’s already been on Fox & Friends. Mission accomplished.

Accounting News Roundup: Auditors ‘Portray Worrying Lack of Skepticism’; Are Tax Strategies Patentable?; Method Man Pleads Guilty, Cuts Check for NYC Tax Evasion | 06.29.10

FSA accuse auditors of failing to question management bias [Accountancy Age]
The Financial Services Authority has decided that it was about time it called out a few people, “Auditors have become yes men who don’t adequately question management bias according to concerns raised by the UK’s chief financial regulators. The Financial Services Authority (FSA) and the Financial Reporting Council today released a scathing discussion paper into the profession following concerns raised in the wake of the financial crisis. Among its concerns is that auditors ‘portrays a worrying lack of skepticism’ when scrutinising potential management bias.”

Not onlef=”http://www.accountancyage.com/accountancyage/news/2265630/fsa-audit-report-regulator”>FSA wants new enforcement powers including the ability to ” fine, censure or disqualify audit firms.” The FSA also wants to meet with auditors several times a year, rather than just once, as well as direct access to audit committees.

Alex to Become Hurricane as Swells Reach Gulf Spill [Bloomberg]
“Tropical Storm Alex, the first named system of the Atlantic hurricane season, strengthened today, forcing the evacuation of rigs in the Gulf of Mexico and pushing swells toward the worst U.S. oil spill.

The storm, packing maximum sustained winds of 70 miles (110 kilometers) per hour, was 460 miles southeast of Brownsville, Texas, before dawn today, moving north-northwest at 8 mph, the U.S. National Hurricane Center said in an advisory. The circulating winds were near reaching hurricane status of 74 mph.”

New York state may tax out-of-state hedge fund execs [Reuters]
Desperate idea of the day from the brain trust in Albany, “Recession-hit New York could raise an extra $50 million a year by collecting income taxes from people who work for hedge funds in the state but live elsewhere, according to a legislative plan to raise revenue…A spokesman for Democratic Assembly Speaker Sheldon Silver said by telephone on Monday that it means hedge fund managers would be treated the same way as other commuters.”


Aprill: The Impact of Bilski on Tax Strategy Patents [TaxProf Blog]
In non-PCAOB SCOTUS news, the decision in Bilski v. Kappos addressing “Whether a ‘process’ must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (‘machine-or-transformation’ test), to be eligible for patenting….” was examined by Ellen P. Aprill of Loyola-L.A. regarding the impact on tax strategy patents:

“Bilski is at best a mixed bag for those who think tax strategies should be patentable. It gives little help and does allow business method patents, albeit somewhat begrudgingly. It demonstrates that for those who believe that tax strategies should not be patented, legislation is needed.”

Method Man pleads guilty to NYC tax-evasion charge [AP]
“Hip-hop star Method Man pleaded guilty to a tax-evasion charge Monday, writing a check on the spot for the final $40,000 restitution payment after owing about $106,000.” What, no cash?

U.S. Court to Hear Janus Appeal In Securities Case [Reuters]
“The lawsuit, brought on behalf of those who bought Janus stock from mid-2000 through early September 2003, alleged that the prospectuses of several of Janus funds created the misleading impression that the company would adopt measures to curb market timing, when in fact secret arrangements with several hedge funds permitted such transactions, to the detriment of long-term investors.”

Accounting News Roundup: G-20 to ‘Stabilize’ Debt by 2016; Auditors May Be Forced into Whistleblower Role on Banks; Yes, Taxes Are Historically Low | 06.28.10

G-20 Agrees to Cut Debt [WSJ]
“The wealthiest of the Group of 20 countries said they would halve their government deficits by the year 2013 and ‘stabilize’ their debt loads by 2016, a signal to international markets and domestic political audiences they are taking seriously the need to wean themselves from stimulus spending.”

Once you catch your breath from laughing, the President also cited the tax code specifically and his threatening to put some (i.e. Congress) in a tight spot:

“They might have to make deeper cuts in deficits to comply with its pledge. A White House statement said that government debt in the fiscal year15, would be at an “acceptable level.” President Obama said that next year he would present “very difficult choices” to the country in an effort to meet deficit goals.

The president cited his disappointment with the U.S. tax code. ‘Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, ’cause I’m calling their bluff,’ Mr. Obama said.”

Bank auditors eyed for whistleblower role [FT]
A paper from the UK’s Financial Services Authority puts forth the discussion of requiring auditors to work more closely with regulators on irregularities found during the bank’s audit engagement.

“Experts say bank executives are nervous about the prospect of increased bilateral discussions between regulators and auditors. Auditors have been fearful the paper could thrust the profession into a regulatory spotlight it has so far avoided.”

Koss Fraud: We didn’t bother to look at the endorsements on our own checks, but Grant Thornton should have! [Fraud Files Blog]
Fraud sage Tracy Coenen presents her latest view on the Koss fraud mish-mash and how Koss management has managed to make themselves “look like absolute morons.”


BP Loses $22 Billion in Legacy of Share Buybacks [Bloomberg]
“The sum represents the hole after the 52 percent plunge in BP shares since the Deepwater Horizon exploded and sank, resulting in the worst oil spill in U.S. history. BP bought back more than $37 billion of its stock in a bid to return money to investors between 2005 and 2008. Those shares are now worth $15 billion, excluding dividends.”

Martin Ginsburg, Noted Tax Lawyer and Husband of Justice Ginsburg, R.I.P. [ATL]
Mr Ginsburg was a tax law professor at Georgetown for many years and was known for his great sense of humor, as evidenced by his faculty bio, noted by our sister site, Above the Law:

Professor Ginsburg is co-author, with Jack S. Levin of Chicago, of Mergers, Acquisitions, and Buyouts, a semi-annually updated treatise which addresses tax and other aspects of this exciting subject. The portions of the treatise written by Professor Ginsburg are, he is certain, easily identified and quite superb.

Open Letter to the Securities and Exchange Commission Part 9: Overstock.com’s Excuses Simply Don’t Add Up [White Collar Fraud]
It appears Sam Antar has caught Overstock.com in another disclosure snafu but this time it isn’t really clear whether the company gave the wrong excuse, lied to the SEC or simply doesn’t know what they’re doing, “Overstock.com’s 2008 10-K report claimed that a reportable “gain contingency” existed as of November 7, 2008. However, the company contradicted itself and claimed to the SEC reviewers that reportable reportable ‘gain contingency’ did not exist on November 7, 2008.

If Overstock.com’s 10-K disclosure is true, the company’s explanation to the SEC Division of Corporation Finance can’t be true. Likewise, if Overstock.com’s explanation to the SEC Division of Corporation Finance is true, the company’s 2008 10-K disclosure can’t be true.”

Accounts bodies revise workplan [FT]
Convergence 2.0.

Today’s taxes aren’t too bad [Don’t Mess with Taxes/Kay Bell]
Kay Bell provides some perspective on tax rates over the last century. The following graphic should help clear up any confusion.


Wesley Snipes May Still Be Able to Get Back into the Vampire Game

If it wasn’t for WS, there would be no vampire craze. Sure the last Blade film was six years ago. And sure the first in the series was twelve years ago but it doesn’t mean the man still didn’t start the popularization of bloody-thirsty, sexy undead types.

However, this prison sentence thing hanging over his head has probably made him a bit of a liability. But thanks to some crafty lawyering, he’s been able to stave off the joint long enough to catch a bit of luck.


Since Ponzi-schemer-to-the-stars Kenneth Starr has been outed as a complete shame (not to mention a complete wuss) Wes can get back to the business of making truckloads of cash in this bloodsucking phenomenon:

A federal appeals panel is considering whether the arrest of actor Wesley Snipes’ former financial adviser could pave the way for a new trial on tax evasion charges.

Snipes was convicted and sentenced to three years in prison in 2008, but his attorneys asked the 11th U.S. Circuit Court of Appeals in Atlanta to allow a new request to dismiss the movie star’s conviction or grant him a new trial.

The motion centers on the arrest of Kenneth Starr, the one-time financial adviser to Snipes and other celebrities.
He was a key witness in Snipes’ 2008 trial but was charged in May with securities fraud worth $59 million.

Federal panel considers Wesley Snipes’ appeal [AP]

For the Last Time, Only Tim Geithner Can Blame TurboTax and Get Away with It

Seriously people. We thought that the fog of confusion around this issue had been lifted. We’ll go over it again for those of you just joining us.

If you are not a well-connected bureaucrat with a fabulous coif, you are not afforded the same privileges as though who are/do.

And tax court debunks the latest attempt to draw some likeness between a regular schmo and T Geith:

We shall address briefly petitioner’s contention that the IRS granted “favorable treatment” in a case involving U.S. Secretary of the Treasury Timothy Geithner, which petitioner described as “incredibly similar” to the instant case. According to petitioner, “there should not be different, or favorable rules for the well-connected”. The record in this case does not establish any facts relating to the case to which petitioner refers involving U.S. Secretary of the Treasury Timothy Geithner. In any event, those facts would be irrelevant to our resolution of the issue presented here. Regardless of the facts and circumstances relating to the case to which petitioner refers involving U.S. Secretary of the Treasury Timothy Geithner, petitioner is required to establish on the basis of the facts and circumstances that are established by the record in his own case that there was reasonable cause for, and that he acted in good faith with respect to, the underpayment for each of his taxable years 2005 and 2006 that is attributable to his failure to report self-employment tax.

Turbo Tax

Tax Court Rejects Geithner/TurboTax Defense [TaxProf]

Accounting News Roundup: New Rule from FASB, IASB Will Bring Leases on Balance Sheet; California’s Latest Revenue Idea; Madoff CFO Released to House Arrest | 06.23.10

New Accounting Rules Ruffle the Leasing Market [NYT]
The convergence efforts by the FASB and the IASB have managed to produce a consensus on lease accounting and it has repercussions on both sides of the balance sheet.

“The two boards have come up with a new standard, which will be completed next year and enacted in 2013, that will require companies to book leases as assets and liabilities on their balance sheets. Currently, American and foreign companies list many leases as footnotes in their financial statements. As a result of the change, public companies will have to put some $1.3 trillion in leases on their balance sheets, according to estimates by the See Commission. Because many private companies also follow GAAP accounting, the number could be closer to $2 trillion, experts said.”

Middle-Class Tax Boost Is Broached [WSJ]
Reaction to Steny Hoyer’s call in a speech for Congress to quit lying to themselves was not met with enthusiasm.

The Journal reports that the GOP has different ideas, including House Orange leader John Boehner is quoted in the Journal, “Mr. Hoyer’s speech brought a round of criticism from Republicans, who emphasize spending cuts instead, and oppose allowing any Bush tax cuts to expire. House GOP Leader John Boehner of Ohio said Mr. Hoyer was admitting ‘that he supports raising taxes on the middle class to pay for more government spending.’ “

Rep. Oompa Loompa obviously didn’t hear the part of the speech where Hoyer addressed the “cut spending” broken record, “The eagerness of so many to blast spending in the abstract without offering solutions that come close to measuring up to the size of the problem.”


California could turn license plates into ad revenue space [Silicon Valley/San Jose Business Journal]
The latest out of the brain trust in Sacramento, “As California faces a $19 billion deficit, the Legislature is considering whether to allow license plates to become traveling ad spaces.

When the vehicle is moving the license plate would look like the ones we’re used to now, but when the vehicle stops for more than four seconds a digital ad or other message would flash. The license plate number would always be visible.”

Madoff crony sprung [NYP]
“Earlier yesterday, former Madoff CFO Frank DiPascali Jr. was released to house arrest.

A grizzled-looking DiPascali refused to answer questions about the report in Monday’s Post that Madoff told fellow jailbirds that DiPascali knows the identity of three people the Ponzi king gave money to shortly before his arrest.

A judge initially refused prosecutors’ requests that DiPascali be released so he could assist in their ongoing probe, but in February he won a $10 million bail package based on his extensive cooperation.”

BP confirms Bob Dudley in key Gulf clean-up role [AP]
Knock ’em dead!

Business Leader Slams ‘Hostile’ Policies on Jobs [WSJ]
“In comments marking one of the sharpest breaks between top executives and the Obama White House, [Verizon Communications CEO Ivan] Seidenberg used a speech at Washington’s Economic Club to unleash a list of policy grievances over taxes, trade and financial regulation.

Mr. Seidenberg’s comments are particularly notable because he heads the Business Roundtable, a group encompassing the chief executives of the nation’s largest listed companies whose members have enjoyed frequent access to the president and his top aides. Its leaders have advised the White House on topics from economic recovery to health care to clean energy.”

SEC Self-Funding Is A Mistake! [The Summa]
“In support of SEC self-funding, SEC chairs always argue in public that they lack sufficient and consistent funding to enforce securities laws and regulations. As proof, they point out that Congress occasionally cuts back on SEC funding.

What they don’t mention is that the budgetary review process provides an opportunity for Congressional oversight of the SEC. When the SEC is performing poorly, say due to the atrocious leadership of the Chairs (i.e., Cox and Schapiro), a Congressional budget cut is a natural and effective response. Of course SEC chairs want self-funding, it gives them a pass from oversight. Who wouldn’t want that?”

Gulf Coast Workers Not Really Down with Taxes on Their BP Payments

Wait! You mean we have to pay taxes if we receive cash? When the hell did this happen? What if you’re part of the “self-reliant nonconformists who don’t pay much heed to everyday rules and regulations” community? Does that earn you a pass?

The AP reported on some workers on the Gulf Coast who are simply not aware of the notion of income taxes and would very much like to keep it that way:

Out-of-work Gulf Coast shrimper Todd Pellegal spent his first $2,500 check from BP quickly, paying off bills and buying groceries for his family.

He never even considered putting some of it away for taxes.

Now he’s among the people up and down the Gulf Coast reeling from the oil spill disaster who are surprised — and frustrated — to find out the Internal Revenue Service may take a chunk of the payments BP PLC is providing to help them stay afloat.

Many were already angry about how long the oil giant took to cut the checks. So when they got the money — generally about a few thousand dollars each so far — they spent it fast.

“If they’re going to pay you a lump sum, like for a year, then bam, take the taxes out of the check,” said Pellegal, of Boothville, La. “But a little bit at a time, they shouldn’t.”

Right, because withholding taxes from a paycheck isn’t how it works for every other person in the country who pays income taxes. Whoever heard of “net pay”?? But don’t bother suggesting planning for such a phenomenon as being paid by check:

“They should do a projection of their taxable income and determine if there is going to be a tax liability and have enough to cover that,” said Crystal Faulkner, a partner in the Cincinnati-based accounting firm of Cooney Faulkner & Stevens LLC.

That doesn’t sit well with Cherie Edwards, who is now only working one day a week at her job booking charter fishing trips at Zeke’s Landing in Orange Beach, Ala. The lost hours due to the oil spill are costing her about $270 week.

She said she got her claim number from BP on Thursday and plans to file an application in the coming day. So far, she said, no one has mentioned to her about a potential tax liability.

“I haven’t even thought about taxes. Wow. That makes me mad,” said Edwards, who has one child in college and another in high school. “I’m already losing money, and now I’ve got to figure out how to hold back money to pay taxes?”

Jesus lady, you’re right. Getting used to the $0 tax liability and then all of a sudden learning that you are required by law to pay them would piss off just about anyone.

IRS May Tax Payments to Gulf Coast Victims [AP via Tax Lawyer’s Blog]

Would the IRS Take the Heisman Trophy as Payment for Back Taxes?

Maybe! But we’ll get back to that in a minute.

There was a fair amount schadenfreude aimed at the University of Southern California when the school was slapped with sanctions a couple weeks back and at Reggie Bush for his role in the whole sitch.

How Bush really feels about it seems to be a mystery since he’s been quoted saying, “[This] is the closest thing to death without dying” but also a less passionate response, “Whatever happens, happens.”

Borderline schizophrenia aside, Fox News reports that Reg might have to pay some back taxes on the estimated $300,000 in luxury gifts he allegedly received:

“If the entire $300,000 is determined to be taxable,” Los Angeles-based CPA Mark Greenberg said, “about 50 percent of that would go to the IRS and Franchise Tax Board. And with penalties and interest, it could go up to 60 percent since it’s going back a few years.”

Greenberg estimates that Bush, now the star running back for the New Orleans Saints, “ultimately will wind up paying about $150,000,” but “it could be up to $200,000” if his financial team can’t get the penalties and interest waived.

We’re sure Bush would never have to give up his trophy a la the Juice since A) he didn’t kill anyone and B) his sponsors are still firmly in his corner, so the money shouldn’t be a problem. That being said, having the IRS snooping around your financial situation is about annoying as a Keeping Up with the Kardashians marathon.

Tax Court: Don’t Bet Your Bass on Those Hobby Losses

One of the promised benefits of feminism was that both men and women would reap benefits from allowing women to achieve their potential in the workforce. And for Mr. Steve Lowe, it absolutely worked that way.

The Tax Court gives a hint at Mrs. Lowe’s achieved potential:

During the years at issue petitioner wife (Mrs. Lowe) worked full time as a “controller” for Fry Steel Co., where she has worked for over 38 years. She earned $177,219 and $184,181 in 2005 and 2006, respectively, with an additional $12,000 per year for taking notes at the board of directors meetings.

And how did that work out for Mr. Lowe?

In 2005 Mr. Lowe fits run by either American Bass, FLW Strem Series, or Western Outdoor News (WON) and reported gross income on petitioners’ Schedule C of $4,241. In 2006 Mr. Lowe fished in 15 tournaments run by those same organizations and reported $10,932 of gross income. The entry fees ranged from $280 to $825 with an additional $325 for a “coangler” amateur in FLW events.

Yes, Mrs. Lowe’s empowerment enabled her to hold down a fulfilling and well-paid job, freeing her husband to follow his dreams – to go fishing every day.

The only thing that could possibly be better than fishing every day while your wife brings home a nice paycheck is to get a tax deduction for fishing every day while your wife brings home a nice paycheck. And Mr. Lowe gave it a try, deducting $49,067 of fishing expenses in 2005. Unfortunately, he hooked a snag.

The tax law disallows losses from activities “not engaged in for profit” – the so-called “hobby loss” rules. The Tax Court summed it up (my emphasis):

Mrs. Lowe earned substantial income from her job at Fry Steel Co., and the losses from Mr. Lowe’s fishing activity resulted in substantial tax benefits. During the years at issue Mrs. Lowe earned an average of about $180,000 a year from her job, and petitioners were able to deduct an average of about $41,000 per year on their joint Federal income tax returns due to Mr. Lowe’s fishing activity losses. Mr. Lowe was not employed before the fishing activity and was able to pursue this activity because of Mrs. Lowe’s substantial income. We also note that Mr. Lowe fished for recreation and pleasure long before commencing his competitive bass fishing activity. He clearly enjoyed that activity and likely would have incurred significant fishing costs yearly for personal pleasure had he not conducted his claimed business activity.

The case illustrates some hobby loss red flags:

• The activity loses money and shows no sign of doing otherwise – It’s fishing, for heavens’s sake.

• The losses offset significant other income – If you would be getting the earned income credit otherwise, the IRS doesn’t invoke the hobby loss rules.

• The activity is fun – If your money-losing business can be perceived as fun – like fishing, say, or playing slots – it’s that much harder to convince the IRS that you’re really in it for profit. Remember, though, that even miserable activities (like selling Amway or writing blog posts) can run afoul of the hobby loss rules.

So Mr. Lowe lost his deductions. The Tax Court waived penalties, though, and Mr. Lowe, as far as we know, still can fish every day while his wife works. Millions of red-blooded men would take that deal, even without tax deductions.

Joe Kristan is a shareholder of Roth & Company, P.C. in Des Moines, Iowa, author of the Tax Update Blog and Going Concern contributor. You can see all of his posts for GC here.

Filing a Bogus $1 Trillion Lien Against IRS Employees Proved To Be an Ineffective Intimidation Technique

Who knew!?

Oregon attorney Micaela Renee Dutson and her husband Tony Dutson were convicted of defrauding the U.S. Government of over $7 million but not before doing their damnedest to stave off the IRS and DOJ investigating them.


The Dutsons were a creative couple, selling “pure trust” packages to their clients who were told that their income would be tax free if it were placed in trust. They sold these products despite “several warning letters from the IRS, articles in the Oregonian newspaper warning the public against tax shelter scams, and a complstice Department on behalf of the IRS in an effort to stop them from selling their tax shelters.”

The IRS started auditing the Dutsons’ clients who, prior to engaging the dynamic tax duo, were seemingly compliant taxpayers. The IRS informed these clients that the “trusts” were actually illegal tax shelters and that they were being bamboozled.

This was, of course, unacceptable to the Mr and Mrs and they went on a serious offensive:

[T]he Dutsons began a campaign to obstruct the IRS’s audits and investigation, and to harass and intimidate the individual IRS employees who were auditing or investigating them. First, they created and presented dozens of fictitious financial instruments to the IRS purporting to pay off back taxes for themselves and a number of their clients.

Even though they knew the bogus instruments had no financial value and had never been accepted by a creditor, they continued to sell them to their clients with false promises they would pay off their tax liability. The Dutsons also advised clients to use them to pay off commercial debts, including mortgages and court-ordered obligations. Together, the Dutsons and their clients presented over $44 million worth of these bogus financial instruments over a four-and-a-half-year period.

To further obstruct the IRS, and harass and intimidate its employees, the Dutsons advised clients to file frivolous lawsuits against the IRS employees. The Dutsons charged their clients $3,500 each to prepare court documents and help their clients file them. They continued to advise clients to file these lawsuits — even after a federal court had dismissed the first of these suits as frivolous and without merit — without telling their clients about the dismissal.

After the Justice Department filed the complaint for a permanent injunction, and IRS special agents had notified the Dutsons in person that they were under criminal investigation, the Dutsons filed a $1 trillion lien in California against several IRS employees who had attempted to audit or investigate the Dutsons, as well as the DOJ attorneys who filed the complaint. A federal court later ruled that the lien was null, void and without legal basis, but one week later, the Dutsons prepared a $108 million lien for a client against John Snow, who was then Secretary of the Treasury.

The Dutson probably figured the jig was up and since $1 trillion is a nice round number the figured “why the hell not?!?” Back in the early ’00s a trillion was fantastical number (for the most part), not tossed willy-nilly like it is these days. The Dutsons could have filed the lien for $1 gabizillion and it would have made as much sense.

Oh and while they were at it, just file another one against the Secretary of the Treasury. If it was Tim Geithner, sure we can see that happening for a whole host of reasons but John Snow? Wasn’t he one of the most harmless cabinet members of the Bush Administration? If they would have filed the lien against Dick Cheney they could have garnered a little popular support at least.

Oregon Attorney Convicted of Tax Fraud After Filing $1 Trillion Lien Against IRS [Web CPA via TaxProf]