Weiwei “Lawyered Up” to Challenge Tax Bill

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Ai Weiwei is ready to pony up the cash (8.5 million yuan) to the Chinese tax authorities, but they are not in agreement over the method of payment. According to Weiwei’s lawyer, the law dictates that they must guarantee the funds before they can dispute the assessment, but they have to be careful that the way they do it does not admit liability. They would prefer to provide the government with a bank deposit certificate and hold the funds in Weiwei’s account. The government, of course, wants the money wired directly to them. Full story here.

Weiwei is no idiot.  He has reason to be concerned with wiring the tax authorities the payment, which amounts to $1.3 million. In the United States if your hard-earned money somehow finds its way into IRS coffers (by way of bank levy or wage garnishment), it is significantly more difficult to get it back than if it was never collected in the first place. No comment, by the way, on whether or not the funds earmarked for Weiwei’s tax debt were hard-earned given the fact that it was gifted to him by many of his political allies. I’m sure if Weiwei were to pay them the amount in dispute, and then win his tax case, getting that money back would be a procedural nightmare for his attorney.

The Weiwei Tax Relief Fund

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Last week we learned about outspoken Chinese artist, Ai Weiwei, and his tax problems. Today the news from China is that Weiwei’s supporters are pooling their money to the tune of $800,000 (and rising) to help him pay what he owes.

Weiwei certainly has the money to pay his tax bill, so what’s the motivation behind these donations? Are these wealthy art collectors who don’t want their Weiwei pieces to lose value? Unlikely. This is an artist who is known and adored for controversy; refusal to pay the government will probably only increase his popularity and increase the value of his work. Also, wealthy collectors would probably not make airplanes out of money and toss it over the gate to Weiwei’s home. Certainly some of the donations are coming from the wealthy and politically connected. However, it is clear that many of the donations are from average Chinese protestors who are symbolically “casting their vote” according to Weiwei.

It’s probably only a matter of time before a high-profile tax protestor in the Unites States pulls some publicity stunt designed to lure like-minded citizens to vote with their checkbooks like they have done in China. Good luck getting that to work here though.

Prominent Chinese Artist Hit with Enormous Tax Bill

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The Beijing Local Taxation Bureau says internationally known artist, Mr. Ai Weiwei, owes $2.36 million in back taxes and he has 10 days to pay it.

Weiwei will probably pay the bill in the end (he says he has the means to pay it), but he wants to be sure that the government is applying the law correctly.  Somehow I doubt there is much of an appeal process in China, and I would hate to see what might happen if he doesn’t make good after the 10 days have elapsed.

Weiwei is known for speaking out publicly against the Chinese government and the social problems of his homeland.  He was held by authorities for 81 days earlier this year without any formal charges, which leads Weiwei and others to suspect that the Chinese government wants to silence him one way or another.  Some may see the taxes as a side issue, and just a convenient way for the government to put him away.  We have certainly seen this scenario played out in the Unites States as well.  See full story here.

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Don’t Forget to Report your Cash Bribes

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The number one IRS rule that every taxpayer should remember to avoid tax trouble: you must report all your income, whatever the source.  Even illegal sources.

John Guarini, a former Jersey City housing inspector, pleaded guilty to tax evasion on Tuesday. Here’s what he did:

  1. Accepted cash bribes totaling $20,000 from a government informant in exchange for building permits
  2. Accepted cash bribe meant for another government official, but then pocketed the money for himself
  3. Failed to report any of it on his income tax return

Full story here.

These types of criminals are commonly prosecuted on tax fraud grounds, and this particular criminal faces 3 years in prison and fines of up to $250,000.

Huge Tax Fraud Scheme Uncovered in So-Cal

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Just when I said that multiple-filers were a thing of the past, something very similar turns up in the news . . .

Who: Owners and others affiliated with Old Quest Foundation, Inc. and De la Fuente and Ramirez and Associates (55 indicted in all)

Where: Fontana and Rancho Cucamonga (San Bernardino County)

What: Most of the 55 indictments alleged conspiracy to defraud the United States

How: These groups arranged meetings during which they convinced taxpayers to buy into a scheme that involved claiming refunds to which they were supposedly entitled from a “secret government account.” Many of the people who were duped were required to pay fees to participate in the meetings, even bigger fees to sign up in the program, and then also a cut of the amount obtained from the false refund returns.

How Much: $5 million in refund checks were issued in error. The total dollar amount placed on this scheme is $250 million.

Common tax protestor arguments are listed here on the IRS website.

If you would like further guidance on what kinds of arguments are legitimate and what kinds of arguments might land you in prison, feel free to contact Montgomery & Wetenkamp:  https://www.mwattorneys.com

Multiple-filers and the Martinsburg Monster

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Before the IRS went into full automation mode and before the IRS used computers in any meaningful way, there were the “multiple-filers.” This was the illegal practice of filing false returns (with phony names, wages, and social security numbers) claiming refunds — usually several returns claiming modest refunds so as to not draw too much attention. And it worked. Many refunds were paid out in error this way. But the multiple-filers would get caught sometimes too (the IRS would probably say “most of the time”).

The term “multiple-filing” doesn’t appear anywhere on the IRS website. Today it is more commonly referred to as “refund fraud.”

In the early 1960′s the IRS housed its computers in a single location in Martinsburg, West Virginia. That first IRS computer center began busting multiple-filers and other tax cheats with a computer system known as the “Martinsburg Monster.”

Check out the April 12, 1963 Life magazine story discussing several successful multiple-filer busts by IRS Intelligence Division head, H. Alan Long and his agents.

Cigarette Exec Sentenced in Tax Evasion Case

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Who:  Maurice Goulet, former North Carolinian now living in Idaho, owner of several cigarette-related businesses.

What:  Pleaded guilty of tax evasion; failed to file personal taxes for nearly a decade

Consequences:  6 months home confinement, one year supervised release, and must pay IRS $170,717 in restitution.  He probably go off easy.

Other:  Goulet purchased two motor homes and a vehicle with business funds. He also used false identification numbers on bank accounts.

Richard Hatch Barely Surviving

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On this day in 2000, the first season finale of the reality show “Survivor” aired on CBS, with contestant Richard Hatch winning the $1 million prize . . . that he never paid taxes one.  See full story here.

Hatch spent more than three years in prison for not paying taxes on “Survivor” winnings. He was released in 2009 and ordered to refile his 2000 and 2001 taxes and pay what he owed, but he never did, so he was returned to prison. He is appealing this decision and wants a court-appointed attorney to help him, claiming that he is destitute and completely unable to pay for counsel himself.

Hatch claims the Internal Revenue Service has yet to inform him how much he owes on his winnings from 10 years ago. He also says he has new evidence indicating the taxes are due to the government of Malaysia, where the first season was filmed, and not to the United States. It doesn’t look like he’s going to get a court-appointed attorney, and it is going to be an uphill climb for him to get the tax relief he seeks without one.

United States v. Hoskins

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Who: Jodi Hoskins, former owner of “Companions,” a Salt Lake City escort service.

What: Convicted of tax evasion, and recently lost an appeal on a sentencing issue.

How Much: The government claimed to have incurred a tax loss (due to her evasion) of $485,000. Defendant argued that the tax loss was closer to $160,000.

Other Info: Since her sentencing was tied to the tax loss suffered by the government, defendant tried to show that, had she filed her returns, she would have claimed a ton of deductions which would have reduced the tax owed and, therefore, the actual tax loss was much lower. The appeals court rejected this argument, but did not go so far as to say that a tax evader cannot under any circumstances point to hypothetical unclaimed deductions to mitigate charges.

Hoskins failed to report over $1 million in cash receipts during the period in question; it was a fairly clear-cut case of tax evasion. For legitimate forms of tax relief, contact Montgomery & Wetenkamp.