Manteca Tax Cheat Files Lien Against IRS Commissioner

There was a story I saw in the Modesto Bee recently about a Manteca woman who pleaded guilty to defrauding the IRS out of about $313,000.  It is not really your typical refund fraud case in the sense that the more popular strategy involves preparing a series of false refund returns claiming smaller amounts.  All the returns together may add up to a small fortune, but no single refund claim appears right away to be anything out of the ordinary.  The Manteca woman wasn’t patient enough for the “slow drip” method apparently; she went all in.  And she lost big time.

Esther Robertson, 57, faces up to 5 years in federal prison and a fine of $250,000.  It is not mentioned in the Modesto Bee story, but typically the fine is in addition to the restitution aspect of the sentencing, which involves the taxpayer paying back what was stolen.  Robertson will have a lot of time to stress about the possible outcome since her sentencing is not expected until September 2015.

Court papers also indicate that, in February 2009, after the IRS was onto her, they issued a bank levy to try to recoup at least some of what was taken.  Then Robertson did something that I’m not sure I quite understand.  Presumably in an act of retaliation, she filed a lien against the property of the IRS Commissioner!  This certainly shows her contempt for the IRS, or the federal government, or both.

There are a number of questionable websites and online sources that claim to cite legal authority for filing a criminal suit against the IRS for taking one’s property.  I won’t link to any of these sites because I don’t really have a beef with them but, trust me, there are hundreds of them.  These are the same sites that are managed by tax protestors who believe taxation is illegal and the IRS has no legal authority to collect taxes.  My guess is that Robertson found  something online about filing a lien against the Commissioner of the IRS and she thought she would give it a try.  She probably didn’t have much to loose at that point either, knowing that the IRS had discovered her foul play and it was only a matter of time before she would be getting a visit from Criminal Investigations.  For Robertson’s sake, I hope this doesn’t count against her during sentencing.

 
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IRS Phone Scam Complaints top 90,000

The IRS has long warned taxpayers to be on the look-out for deceptive phone calls from criminals posing as IRS agents.  These scams were once thought to target the elderly, those within specific socioeconomic groups, or those who recently immigrated to the United States.  However, based on the anecdotal evidence I have gathered over the past several years, I don’t think these criminals go through the trouble of targeting specific groups.  Perhaps they did at one time, but now they appear to be just “shooting from the hip” hoping to deceive even a small fraction of the taxpayers that they contact each day.

I have seen how prevalent these phone scams have been in Sacramento, and now with our new office location, I can see that the scams are no less of an issue in the Central Valley towns of Modesto, Ceres, and Turlock.  I was recently privileged to hear a recording of one of these calls and, I must say, the caller’s voice was very confident and convincing.  Of course, the content of what he was saying was laughable, but the tone of the call was professional and authoritative.  I say that about the content because I know what the IRS will and will not say in a phone message.  First of all, the IRS is reluctant to provide details of anyone’s confidential tax account in a voice mail message unless you have previously given them permission to do so.  Second, the IRS does not, in their first contact with a taxpayer, jump right into statements about criminal liability, subpoenas, and arrest warrants.  And the IRS never asks for payments to be made immediately over the phone.  Furthermore, if you do have a tax problem of some kind, such as owing back taxes or missing tax returns, the first contact from the IRS will be by way of a letter, not a phone call.

My anecdotal evidence seems to confirm what the IRS is reporting about phone scams: 90,000 complaints and growing. The best way to report one of these phone calls is to complete an online scam reporting form which is accessible from TIGTA’s website.

 
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Valley Braces for Hidden Gas Tax

There is something ominous coming our way in January 2015; something that has been called a “hidden gas tax.”  Those are three horrifying words.  Most consumers would agree that fuel is taxed enough already and fuel prices are certainly high enough already.  But that is what Californians have to look forward to in January 2015 if nothing can be done to delay it.  It sounds awful, and I think it really could be awful, but is it really a tax at all?

The Modesto Bee describes a cap-and-trade rule “that would require energy companies to purchase greenhouse-gas emission credits for transportation fuels beginning Jan. 1.  The costs of those credits will likely cause the price of gasoline and diesel to go up 12 to 17 cents a gallon – and potentially more, depending on demand for credits in state auctions.”  It sounds like the price of gas is anticipated to go up as a consequence of the mass purchase of emission credits.  Ok, but that’s not a tax!

Assemblyman Henry Perea of Fresno is requesting a three-year delay on said rule as it applies to transportation fuels.  He says that the constituents in his jurisdiction (the Central Valley) would be particularly hard-hit by an increase in fuel prices.  The Bee article states that residents of towns like Modesto often have to drive farther for their business or trade and they have older, less fuel-efficient vehicles compared to folks on the coast.  Also, valley residents spend a larger percentage of their income on gasoline, according to studies.  I don’t dispute the studies, and I certainly would support any reasonable initiative aimed at curbing gas prices, but have you been to San Francisco lately?  Don’t they burn almost as much gas sitting in traffic as we do driving down highway 99?

 
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IRS Doesn’t Hire 20-year-olds Because They’re Used to Stuff that Works

One of the most hilarious things for IT people is to hear non-IT people try to talk about computers and technology.  By no stretch of the imagination am I an IT person, but I do see the humor in that sort of thing as well.  Here is 75-year-old John Koskinen in a recent interview with Tax Analysts’ William Hoffman:

[W]e have a huge turnover in people under 30 because we’re not hiring that many. But when we’re hiring them, we’re obviously not keeping them at the rate that we would like….Part of that is because our technology is so abysmal. You take people, young people coming in at 23, 25, 27, and they’re used to….stuff that works. You know, they’re at the high end and they Twitter and they do all of that stuff. When you come into an organization still moving people onto Windows 7 from Windows XP, that’s not exactly a cutting-edge technological group….Now, on the other hand, we’ve proved technological, technology people because we are doing great things. We don’t have enough resources, and we’re way behind what we’d like to do. But, you know, the apps we’re doing — Where’s My Refund, Get Transcript, and that — so we’re pushing various state-of-the-art stuff, which is why I refer to our IT as a Model T with a great GPS and wonderful sound system….And so that’s some extent, so we’ve got some state-of-the-art apps and, you know, really ancient — you know the average age of our IT equipment is 15 years. So we have to be the only serious large organization of a financial institution running with average equipment age of 15 years. So our computers are too old, our servers are too old. You know, we still got stuff in COBOL programming….So that’s the problem at the front end.

I’m not 27 any more and I feel like I am used to stuff that works too.  It would absolutely drive me crazy to work with 15-year-old computer equipment.  I couldn’t work there for 1,000 other reasons, but that would be a big one.

This quote is so full of awesome lines I don’t even know where to start.  My favorite line: “You know, they’re at the high end and they Twitter and they do all of that stuff.”  It is funny to me that the head guy at the IRS says things like this.  I mean, it’s fine, we don’t need a spry young kid at the high end who Twitters or anything.  As long as he can manager other high end people who Twitter, things should be fine.  The IRS definitely has proved technology people and they’re doing apps and pushing various state-of-the-art stuff.  Oh boy, don’t even get me started on the IRS apps, Mr. Koskinen.  They aren’t that good.  After all, it doesn’t make much sense to put a GPS in a Model T if the Model T can’t go 99.99% of the places shown on the GPS.

 
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Modesto Grand Prix not so Grand for Everyone

I was hoping to find something positive to blog about today.  It does get a little old constantly reading about the problems at the IRS, including the issues with Lois Lerner, their ongoing struggles with customer service, lack of sufficient funding, etc., etc.  It’s impossible to avoid stories about tax refund fraud, phishing schemes, and phony IRS calls meant to trick taxpayers into giving up their private information and their money.  So when I saw that Modesto had hosted its first ever “Modesto Grand Prix” over the weekend, I thought I had found the perfect “feel good” story as a topic for today’s blog entry.  What’s not to love about folks gathering for a good old fashioned street race?  Even better: folks pouring in from all over the Central Valley, filling up hotels and ringing up registers at local eating establishments.  If that had happened.

People came to the event, but not in the numbers that the city had expected.  Downtown business owners had spotty success; some recording higher-than-average sales, and others lamenting a big drop in sales.  Mark Smallwood, owner of a downtown restaurant called Harvest Moon, is most likely not going to be supporting a return of the Grand Prix to Modesto next year.  He said that his business suffered this weekend because the sidewalks were blocked to the extent that it prevented some pedestrians from passing by his store front.  He complained about fencing and banners blocking many from even seeing his restaurant.  This resulted in revenues of less than half what he would bring in during a normal weekend.  He even plans to file a lawsuit against the city.

So much for a positive, feel-good story.  In a few weeks we’ll know if the city lost money on the event.  The mayor, Garrand Marsh, is on record saying that he will not consider bringing the Grand Prix back next year if they did.  I do hope that the mayor and city officials give it another chance.  Modesto needs this type of thing to boost its economy a bit.  It really needs events like this throughout the summer to get things moving financially.  It sounds like with some adjustments the Grand Prix could have been a big success for the city and its downtown businesses.

 
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Lerner Emails not so Benign

There are just as many “crazies” in Sacramento as there are in Modesto, you just have to know where to find them.  And there are just as many Democrat crazies as there are Republicans.  After all, craziness knows no race, religion, or political preference.   Same with “—holes.”  In fact, that group may be more common than crazies.

Of course what I’m referring to here is the content of a couple emails that the now-famous Lois Lerner sent to a friend from her government issue Blackberry in 2012.  Her friend brought up the topic of right-wing radio shows and Lerner referred to the hosts and listeners of such shows as “crazies” and “—holes.”  The emails were released on Wednesday and Republican lawmakers see them as proof of Lerner’s disdain for conservatives and proof that she was targeting conservative groups’ tax-exempt status applications for extra scrutiny.

This new evidence clearly demonstrates why Ms. Lerner not only targeted conservatives, but denied such groups their rights to due process and equal protection under the law.

~ Rep. Dave Camp, chairman of the House Ways and Means Committee

Just to play the devil’s advocate, because that’s what I like to do, there are a number of ways to rebut the accusation that Lerner is biased against conservatives.  For example, maybe she loves conservatives but dislikes the “whacko wing” of the GOP, as her friend put it.  Maybe she specifically dislikes the small faction of radio whackos in the whacko wing of the GOP.  Maybe it’s only the radio wackos in the whacko wing who actually call in and talk apocalyptically about our beloved ‘Merca and the need to protect her borders, hunker down, buy ammo and food, and prepare for the end.  Maybe that’s who she thinks are the crazy assholes that don’t deserve tax-exempt status.  But even so, I think these emails suggest that she was most likely not being fair and impartial in the discharge of her official duties.

 
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Lost Lerner Emails May Still Turn Up

Over the past several weeks, top IRS officials have maintained the position that the Lois Lerner emails were destroyed and cannot be recovered.  But recent testimony to Congress suggests otherwise.  Just as everyone on earth suspected, the emails may still exist in some sort of backup storage device or system.  After all, even the IRS knows that technology fails and you have to back things up.

I don’t know if there is a backup tape with information on it or there isn’t…There is an issue as to whether or not there is a — that all of the backup recovery tapes were destroyed on the six-month retention schedule.

~ Thomas Kane, IRS Deputy Associate Chief Counsel

One of these “top IRS officials” is John Kos-freakin-kinen; he is the COMMISSIONER of the IRS, the highest guy on the totem pole, the captain of the ship.  Oh, and he happens to also be an ATTORNEY.  Lawyers know (every single one of them, especially cum laude Yale-educated lawyers like Koskinen) that when you’re being questioned and you don’t know the answer to the question, then your answer has to be “I don’t know.”  We lecture our clients about this before every deposition and hearing: “Don’t make up answers, and don’t guess.  If you don’t know the answer, it’s fine, just say you don’t know.” It often takes courage, and sometimes a little humility, to admit you don’t know something, especially if you’re in a position where you really should know.

Well, apparently Koskinen said the emails didn’t exist before he had confirmation of such and now his credibility is being questioned.

And isn’t this what it’s all about — the credibility of the IRS and its people?  Every single IRS scandal buries the IRS deeper in a pile of suspicion and mistrust.  How does the IRS expect taxpayers to voluntarily comply with tax laws if the agency is being run by so many incompetent leaders?  Now I know that somebody in a position like Koskinen’s often relies on the expertise and knowledge of a staff and couldn’t possibly have first-hand knowledge of everything going on within the agency.  But it seems to me that he should have at least waited for confirmation before declaring the emails unrecoverable.

 
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Mexican Artists Pay Taxes in Paintings

The Mexican government has figured out a way to dramatically simplify the payment of taxes, at least for one segment of society: artists.  Mexican artists who elect to participate in the program must donate good quality works of art to the government based on the number of works sold during the tax year.  Here’s how it works.  If an artist sells 1-5 paintings, then that artist must pay a tax of 1 painting.  If 6-8 paintings are sold, then 2 paintings must be donated.  The maximum number that any artist is required to donate is six.  The “Payment in Kind” program began in 1957 and is very popular among artists of virtually every skill level.

Virtually every skill level because if you can’t sell your art, then the government doesn’t want it.  In fact, even some art that can be sold is not very good, but tax collectors still accept it.  And what is done with all this artistic “revenue”?  It adorns the halls of government buildings and public spaces all across the country.  Its actually quite a fantastic “win win” for the artist who gets to avoid paying taxes in currency and also may benefit from the public display of his/her pieces.  Those who participate in the Payment in Kind program are required to donate a quality piece of art that is of similar value to the pieces that were sold and also that is representative of the particular artists body of work.  There are art experts on staff at the Mexican Tax Administration Service who make sure the artwork meets these standards.  But since there is a chance the government will display the donation, most artists are motivated to donate some of their best stuff.

The Mexican government has amassed an impressive collection of paintings and other artwork from some of Mexico’s finest contemporary artists.  But, because the program is open to anyone who sells art, it has also accumulated a huge collection of garbage that nobody would dare hang on their wall.  That might be the biggest drawback…that, and all the actual revenue that the country is missing out on.

 
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What’s the Point of IRS Letter 2645C?

My all-time favorite and most ambiguous IRS letter is the 2645C.  The Internal Revenue Manual refers to them as “interim letters” (IRM 4.19.23), which is a nice label given to a letter that is simply saying the IRS has received something from the taxpayer but has not acted on it yet.  And when I say the IRS has received “something,” I literally mean anything — it is up to the taxpayer to figure out what that might be based on the receipt date in the letter that is often inaccurate.  The letter does give a few options as if to jog one’s memory:

  • Correspondence
  • Telephone inquiry
  • Payment
  • Form
  • Response to our inquiry or notice
  • Penalty abatement request
  • Installment agreement
  • Other

Yes, it says “other.”  This list is taken directly from the form letter 2645C.  It goes on to say that the IRS hasn’t resolved the matter because they haven’t completed all the processing necessary for a complete response.  This letter is completely baffling to me, and I am always wary of those times I am told that the IRS hasn’t “finished processing” something.  What that usually means is they haven’t even looked at it.  If they had looked at it, then would it really be that difficult to specify if this something is a payment, a phone call, penalty abatement, or “other”?

Probably the most perplexing option in the list above is “payment” because what kind of processing is really necessary when a payment is received?  Yes, a determination needs to be made as to where to apply the payment (what tax year or period), but what else?  It seems to me that the processing of a payment is the one thing that the IRS would not put off for later.

Next this letter states that the IRS will contact the taxpayer within a specified time frame (usually 45 days).  The letter ends with a friendly reminder about how to make installment payments, including how to annotate your check.  In other words, we’re not sure what you sent us, and we won’t get to it for 45 days, but in the meantime be sure you don’t miss a payment.  Sincerely, IRS.

 
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