The Human Element

The Human Element

Sometimes I complain (mostly to myself, and sometimes to other people who don’t care) that the IRS customer service employees are like robots. They tend to go by the book even when there presents itself a more common sense and just solution. There is very little emotion or sensitivity for the struggling taxpayer who is burdened by a bank levy or wage garnishment. However, sometimes I am reminded that the flip side can be just as bad: the human response can at times be ugly too. The employees who make up the IRS are actually human beings with all the same passions and foibles as regular folks, and there’s no better reminder than when we hear of IRS agents accepting bribes.

After IRS Agent, Paul Hurley, allegedly saved a medical marijuana dispensary owner a million dollars in an audit, he suggested that, in exchange for the good deed, the owner give him $20,000. As if he thought he was being wire tapped, or as if it is somehow less obviously bribery when no words are used, the IRS agent rubbed his thumb over the top of his index and middle finger in the universal sign for “cash money.” He should have gone with his gut on this one because later, when payment day arrived, the FBI would be watching the whole thing. These kinds of deals almost always end badly for the IRS employee because as much as the IRS doesn’t trust taxpayers with delinquent tax accounts (especially when tied to a medical pot store), taxpayers trust IRS agents even less. As you can imagine, our guy in this story didn’t take long to decide before he was on the phone with the authorities tipping them off. Hurley’s trial begins this week.

The puzzling thing about this story is that Hurley demonstrates a significant amount of remorse in his resignation letter but his attorneys state that he denies soliciting a bribe. In fact, his attorneys say that Hurley was actually being offered a job to assist with the company’s books and the $20k was just up-front payment for this little side job! Even though I am one, I find it incredible what attorneys will say sometimes.

Florida Man Charged with Violent Threats against IRS

There are some pretty fierce-sounding gangster names in the history of American white collar crime.  You’ve got your “Greasy Thumb,” your “Pistol Pete,” “The Butcher,” and “Big Tuna,” just to name a few.  I gotta believe that some of these guys imagined their thuggish names in print or revelled in the thought of becoming a household name.  But the latest tax criminal out of South Florida clearly didn’t give his nickname much thought.

“The Squirrel” borrowed an acquaintance’s phone to call the FBI and inform them that a nearby IRS building would “go up in smoke” in two hours.  The police traced the call to the phone’s owner who thought the perp’s name was “The Rabbit,” (obviously not a memorable enough name) but when he was found, he was quick to correct the authorities, telling them that his true moniker was actually The Squirrel (because that’s so much better, right?).  I can imagine him spelling it out for the FBI and making sure they got it right.  Maybe this is just me, but if I’m caught and I’m going to go through the trouble of correcting my thug name, I’m going to come up with something a little better than “Squirrel.”

And, although he did confess to placing that call to the FBI, the lawyer in me sees at least a couple harmless interpretations of the phrase “go up in smoke.”  Maybe he saw a vision of the place burning down and he called to warn them.  Maybe.  By the way, Florida seems to be a gathering place for not just anti-tax folks, but the serious IRS-haters and tax criminals.  I’m still not sure why.

If this article has inspired you to work on your own nickname, you might want to check out this gangsta name generator, although I personally have to question the results as mine came out “La Llorona,” which I think means “the crybaby” (feminine form).  Gangstaname.com generated a more accurate name, I think: “Machete Masta Crab Whacka.”

IRS Impersonation Scams More Prevelant Than Ever

TIGTA big shot, Timothy Camus, recently testified before the US Senate Finance Committee on the topic of “Tax Schemes and Scams.”  By TIGTA, I of course mean the Treasury Inspector General for Tax Administration.  And by “big shot,” I of course mean that he is the Deputy Inspector General for Investigations, and he wears a nice looking mustache, and he tells tax criminals that their day will come.

According to his testimony, IRS phone impersonation scams have quickly become one of TIGTA’s top concerns.  The agency had received only scattered reports of phone scams prior to the summer of 2013.  TIGTA started to track this crime in October 2013, and ever since then has kept statistics and concentrated efforts on eradicating this terrible, frustrating crime.

The way it works is the scammers call and threaten you with criminal penalties if you don’t pay a certain sum to address a tax problem that usually doesn’t even exist.  The victim is asked to load money onto a prepaid debit card and then call back with the card number.  These criminals used to target primarily the elderly or recent immigrants; the most vulnerable people who do not have sufficient command of the English language and/or those who do not have an understanding of the US tax system.  But Camus says that they have not been discriminating much lately.  He describes having received a call himself, at home, the weekend before his speech, and he told the guy, “your day will come.”  I have received phone scam calls too, most recently a very generic sounding recording using robo-call technology.

Here are some of the key phone scam statistics from Camus’ Senate testimony:

  • TIGTA has received over 366,000 complaints of phone scam calls (9,000 – 12,000 per week)
  • 3,052 victims paid out about $15.5 million
  • one poor fool paid over $500,000
  • 296 of these victims gave more than just money (i.e., social security number or other sensitive identifying information)

Camus says that this scam is the subject of an “ongoing multi-agency investigation.”  Let’s hope they figure out how to catch these guys because the IRS public service messages about how to avoid phone scams aren’t working as effectively as they should.

Protect Yourself Against Identity Theft

Identity theft can be a huge headache, especially when it affects your federal tax record.  There are at least a couple ways how that might happen.  An identity thief may use your personal identifying information, including your social security number, to file a false tax return and obtain a fraudulent refund.  Or a thief may use your identity to obtain a job, claim the maximum number of exemptions, and basically collect tax-free income.  Then, these W-2 wages are reported to the IRS under your social security number.  When the information on your legitimate tax return does not match up with the W-2s the IRS has on file (i.e., when you fail to report the income earned by the identity thief) then the IRS sends you a letter asking you to explain the discrepancy.

The IRS provides a comprehensive list of tips for those whose identity has been stolen.  However, some of their most useful tips explain how to avoid identity theft in the first place. What it all comes down to is safeguarding your personal and financial information, including your credit cards, social security number, even address.

Some identity thieves steal wallets and purses.  Protect your personal effects when you carry them around and never leave them in open sight in your vehicle.  Never leave a bag or purse unattended in a store or airport.  It is human nature to misplace small items such as these, but we tend to be very habitual in the handling of our wallets and purses.  The more safe habits we can acquire, the better, so that it becomes second nature to protect our personal effects.

Some identity thieves try to obtain information from you through a phone call or electronic means (especially emails).  The IRS has issued extensive and repeated warnings regarding phony IRS emails and phone calls.  The IRS has made it abundantly clear that they do not contact taxpayers through email and they do not request credit card information over the phone.  It is actually really easy to identify a phony IRS contact if you know what to look for, but very easy to be deceived if you don’t.

Some identity thieves sift through your trash.  Once you take your trash out to the curb, it is easy to consider it “gone,” but that is usually the point at which the identity thief just begins his work.  The idea here is to take steps to destroy identifying information before you throw it in the trash can.  Invest in a good quality shredder and make a habit of shredding anything with your name on it.

Some identity thieves obtain your information through unsecured websites.  Do not share your personal and/or financial information on obscure, unknown websites that cannot be trusted.  If you’re making purchases online, stick with the big time, well known websites like Amazon, eBay, and nationwide retailers.  If you ever have a question as to whether a website can be trusted, do a quick Google search of the company or, better yet, just move along to something else.

Lavish Spending is Not Tax Evasion

A recent court decision took up the question of whether lavish spending alone, in the face of a tax debt, should be considered willful tax evasion.  Trip Hawkins, founder of Electronic Arts, is one of those super wealthy, elite class Americans who fell on hard times — a different sort of “hard times” than most people are familiar with, but hard times nonetheless.  He has IRS and FTB (California Franchise Tax Board) tax debts up to his eyeballs, something like $25 million, which he sought to have discharged in bankruptcy.

The government asked the bankruptcy court to exempt his tax debts from being discharged because he acted in a willful, tax evasive manner.  After acknowledging the tax debt, it was shown that he was spending up to $78,000 more each month than he was earning.  He was maintaining a $3.5 million home and a $2.6 million ocean-view condo.  He was buying $70,000 cars and cruising around in a private jet.  However, the court concluded that this sort of spending behavior, extravagant as it seems to regular folks, was not enough to prove willfulness.

I don’t imagine there are too many people living this lifestyle in valley towns like Modesto, Tracy, Turlock, or Oakdale, and its not simply for lack of ocean-view condos.  However, this issue does tend to crop up here in other contexts and on a much smaller scale.  For example, I have seen the California Board of Equalization (BOE) and FTB draw adverse conclusions on the grounds that a taxpayer was living too lavishly.  In the process of resolving a tax debt, these taxing entities look closely at bank statements to see how taxpayers are spending their money.  I have seen them raise an eyebrow at things like going out to much on weekends, eating out too much, taking too many trips, etc.  While this lifestyle is not going to land somebody in prison for tax evasion, it can sometimes make it more difficult to obtain an accepted installment agreement, or offer in compromise.

I’m not sure I really have to spell it out, but their thinking is “why should this taxpayer be allowed to live like this when he owes taxes; he needs to curb his spending so he can pay off his tax debt.”  This is just something to keep in mind when dealing with California taxing entities.  In my experience, the IRS is concerned with this kind of thing too, but to a lesser degree.

The Unlikely IRS Phone Scam Victim

Have you heard about those IRS phone scams?  No, it’s not what you’re thinking; not scams sponsored by the IRS.  They are scams perpetrated by individuals posing as IRS personnel, and they have been more prevalent than ever in the past couple years.  If you haven’t heard of them then maybe the IRS isn’t being aggressive enough with its public announcements and warnings.  If you do know about these schemes then maybe you have pondered the questions “Who are these people that pay thousands of dollars to phony IRS agents?  Can’t they tell it’s a scam?  How can someone be so gullible?”

I have definitely had these kinds of thoughts, that is until reading the story of Halah Touryalai, staff writer for Forbes.  She was recently contacted by one of these scam artists and almost fell for it.  This is an expert on finance and investing; somebody who should probably know better.  And even though she stopped short of doling out the $5,000 that they were demanding of her, they definitely had her going.  This is somebody who has always paid her taxes and never had a reason to doubt herself.  It only goes to show that if these scam artists call with enough urgency and authority in their voices, they can successfully dupe just about anybody.

Touryalai was told a whole host of lies on the phone that day:

  • The IRS had launched an investigation against her
  • She had attempted to defraud the government by not reporting all her income
  • The IRS was going to get a warrant for her arrest
  • The IRS was going to seize her property
  • The IRS had already issued a bank levy to collect the tax debt
  • The IRS had suspended her driver’s license and passport
  • Her social security number had been “blacklisted”
  • Somebody was waiting at her office to arrest her when she arrived
  • She could avoid further action if she paid $4,900 within the next hour

Be careful out there!  As long as you know how the real IRS operates, you’ll be fine.  The IRS will never demand that you make payments over the phone.  They will rarely contact taxpayers by phone without first sending notices by mail (and certainly not for a measly $4,900!).

EIN Refund Fraud

Tax Refund Fraud.  We’ve seen this happening across the nation in a variety of communities.  The fraudster demographic is also quite diverse: some perpetrators are operating from within experienced fraud rings, some are regular street criminals (or inmates), some are even IRS insiders.

Most people are probably aware of individual refund fraud, which involves the filing of a false tax return using a stolen Social Security Number in hopes of obtaining a refund.  Many of these schemes are built upon the idea that the IRS doesn’t bat an eye if the requested refund is small enough.  And fraudsters can get pretty rich if they file in bulk.

But did you know that the same thing is happening with EIN numbers?  An Employer Identification Number is used to identify business accounts.  People steal them and obtain them fraudulently just like they do with social security numbers.  The statistics are staggering: “277,624 stolen EINs used to report false income and withholding on 752,656 tax returns with potentially fraudulent refunds issued totaling more than $2.2 billion” (2011 numbers).  The Treasury Inspector General for Tax Administration (TIGTA) released a report this week asking the IRS to do more to prevent EIN refund fraud.

The IRS Agent with a Weakness for Shrimp

photo via farm4.static.flickr.com

TIGTA (Treasury Inspector General for Tax Administration) often includes in its semiannual report to Congress highlights of the past 6 months and high profile cases that the agency has resolved.  The most recent semiannual report tells of the bribery of an IRS Revenue Agent by the owner of a seafood company in Louisiana.

An unnamed IRS agent paid a visit to Vihn Q. Tran, the owner of St. Vincent Seafood Co. in Louisiana, back in August 2007 with the intent to schedule an in-person audit of his books.  At that first encounter Tran offered to take the agent to lunch and also dropped a hint that he was hoping for some special treatment when he told the agent, “I’ll take good care of you.”  The IRS agent declined these initial offers, but then in subsequent meetings accepted 75 pounds of jumbo shrimp and $6,000 cash.  In April 2011 Tran confessed to the crime.  In January 2012 he pled guilty to bribery of a public official, and he was sentenced to three-years’ probation this past March.

TIGTA’s report does not specify, but it appears to me that the IRS agent was culpable at least for violating the guidelines set forth in the Internal Revenue Manual (IRM).  According to IRM section 4.2.4.2.3, IRS employees are required to do the following when presented with a bribe:

  • Avoid any statement or implication that you will or will not accept the bribe.
  • Attempt to hold the matter in abeyance.
  • Report the matter immediately to the Inspector General Special Agent.
  • Avoid any unnecessary discussions of the matter with anyone.

Unless some key facts are being left out of this report, it does not appear that the agent complied with these rules.  By accepting the cash and the shrimp, the agent violated the first two rules, and although the agent must have reported the bribes at some point, it does not appear that he did so immediately.

As for Mr. Tran, I would guess that he has since gone out of business.  It looks like his tax problems were just one of a variety of issues he had been dealing with as a business owner.  The US Food and Drug Administration (FDA) sent him a letter in 2002 pointing out some “serious deviations” from federal seafood regulations, one of which had to do with, not surprisingly, record-keeping.

IRS Expands ID Theft Program to All 50 States

Around this time last year, the IRS began a pilot program in the state of Florida that allowed IRS personnel to share confidential taxpayer information with local law enforcement to simplify the finding and prosecuting of identity thieves. Then in October 2012, the IRS opened up the program to eight more states: California, Texas, Alabama, Oklahoma, Georgia, Pennsylvania, New Jersey, and New York. Now effective Friday, March 29, 2013, the “Law Enforcement Assistance Program” has been opened to all 50 states.

This is basically how the program works:

  • Local law enforcement identifies potential identity theft situation
  • With the help of IRS, local law enforcement reaches out to identity theft victim to request consent for disclosure of personal tax records
  • If victim agrees to disclose the information, the victim completes a special IRS disclosure form
  • Law enforcement submits paperwork to IRS Criminal Investigation
  • IRS Criminal Investigation processes the paperwork and disclosure forms, then forwards the relevant documents to the requesting local law enforcement officer(s)

This appears to be an important and successful program, with more than 1,560 waiver requests received over the last 12 months. However, it is also apparent that the goal of helping the victims of identity theft will be achieved with or without the cooperation of local law enforcement. The IRS says it has resolved a whopping 200,000 identity theft cases since the beginning of 2013!

The IRS follows a three-pronged approach to combating identity theft:

  1. Prevent it from ever happening in the first place
  2. Where it cannot be prevented, detect it as early as possible
  3. Assist those who have been victimized

Kookie or Not, You Still Have to Pay Your Taxes

photo via starpulse.com

In his Twitter profile, Stephen Baldwin describes himself as “an actor, author, Jesus Freak, Radio Talk Show Host, and the kookiest of the Baldwin brothers.”  Stephen, also the youngest of the Baldwin brothers, was arrested in New York yesterday for failing to address his tax problem properly.  Ok, that’s a nice way to put it.  He is being charged with failure to file (and pay) his 2008-2010 New York state tax returns.

The state of New York is without question trying to drive home a bold message here. You can’t live in NY and take advantage of the its public benefits (especially in this economic climate) and expect everyone else to pay the bills.  I am not familiar with the New York state taxing authority, but it is uncommon for the IRS to take such a heavy-handed approach with similarly-situated taxpayers.  However, the cardinal rule is that you should always file your taxes, even if you know you can’t pay.

If the Kook portion of Baldwin’s persona is responsible for getting him into this criminal tax debt debacle, then maybe the Jesus Freak will be able to set him free.  Yesterday he found time to address his followers in a somewhat penitent tweet:

Thnx4all the prayers, Been trying2 work this out4some time! Want2correct this&of course pay what I owe! Difficult situation. God is good.