According to Kay Bell, tax blogger for this recent article published by bankrate.com, I did not necessarily need to report my winnings since the amount was less than $5,000 and less than 300 times my amount bet.  Plus my little office pool was not a regulated gambling establishment or entities such as state lotteries, casinos,  the tracks or any other betting operation. But with any IRS tax matter, there can be many different interpretations to consider.

With gambling on the annual Super Bowl estimimated to be over $100,000,000 there are certain to be winners with purses over $5000. Did they report their bounty to the IRS? Most did not and probably didn’t even consider reporting their winnings to the IRS.  Some estimates of off the books sports betting surpass $380 billion annually. The IRS would love to get a fraction of this windfall.

How would the IRS know if they won in the first place? The answer is if the gambler wagered in a regulated betting establishment, the IRS requires them provide a tax ID aka social security number to collect the payout. What if one  refuses to provide that information? The licensed casino or track will withhold 28% of the winnings before releasing the balance of the winnings.

Think you can win big in off shore internet gambling sites and not pay Uncle Sam? Think again. The IRS has gotten wiser to not just the winners but to the sites owners who promote and manage the sites and the executives that process the financial transactions. Serious charges including bank fraud, illegal gambling, and money laundering, have been successfully brought against these businesses.

So how do you know what to claim on your taxes and what not to? Simply, if you had to provide your social security number to the betting establishment to claim your financial prize, then yes you do.

If you consider yourself  a professional gambler, meaning you gamble regularly in order to support yourself or your family, then yes you do need to declare your winnings as income.

What if you are just a recreational gambler that has not necessarily hit it big but wins smaller amounts consistently? Yes, you should declare your winnings as ‘other’ income and itemize your losses to offset the tax liability of the wins. Losses can also be used to offset the tax implications.

If you are in doubt that you should claim that good guess in your office Super Bowl pool or your casino winnings have caught the attention of the IRS , feel free to call us at The Pappas Group.  We have handled many gambling related tax returns for our clients  for the past 20 years. We can be reached at 407-648-2555 or visit pappastax.com for answers to all your tax related questions.

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What do Ben Franklin, Albert Einstein and Plato have in common? All have provided memorable quotes about taxes over the last 100 years.

Since the American Tax Code is celebrating it’s 100th birthday tomorrow, it is only fitting to revisit the notable commentary provided by such a diverse collection of Americans, all with the same thing in common…paying taxes.

In honor of this auspicious day, February 16th, 1913, when  the 16th Amendment to the Constitution was ratified enabling the Federal government to collect taxes from the American people, let’s remind ourselves that this government centenarian is responsible for some of the most famous quotes  in the last 100 years.  

Some quotes are funny, some are bitter, but all are worth reading.

Read below for the top 10 best tax quotes of all time  from such distinguished taxpayers as a former president, a legendary Hollywood movie star and current billionaire. Very different people but all feeling the same pain.

1.  “In this world nothing is certain but death and taxes.” — Ben Franklin

2. “The hardest thing to understand in the world is the income tax.” — Albert Einstein

3. “The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.” — Mark Twain

4. “The income tax has made liars out of more Americans than golf.” — Will Rogers

5. “While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.”  — Warren Buffett

6. “I have always paid income tax. I object only when it reaches a stage when I am threatened with having nothing left for my old age — which is due to start next Tuesday or Wednesday.” — Noel Coward

7. “The income tax created more criminals than any other single act of government.”  — Barry Goldwater

8. “Hating the Yankees is as American as pizza pie, unwed mothers, and cheating on your income tax.” — Mike Royko

9. “When there is an income tax, the just man will pay more and the unjust less on the same amount of income.”  — Plato

10. “Income tax returns are the most imaginative fiction being written today.” — Herman Wouk

 

 

 

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Just as you wouldn’t choose a doctor that promised  a cure without reviewing your past medical history or had  suspect credentials or  billing practices, you shouldn’t choose a tax preparer with similar red flags.

Remember, saving a few dollars by having a relative, family friend, friend of a friend, neighbor, friend of a neighbor (you get the picture) is not the wisest choice to make when dealing with your income taxes and financial future.

At The Pappas Group, your tax returns will be personally prepared and managed by a team of credentialed and experienced professionals including Mr. Peter Pappas, a Certified Public Accountant and Tax Attorney since 1992, and  highly trained IRS Enrolled Agents, Judy Infinger and Vicky Helle.

With over 75 years of accounting and tax preparation experience, there is little the staff of The Pappas Group has not encountered and assisted our clients with. We can help you too.

For a complimentary review of your last  tax return (to put  to rest any doubts about how your taxes were previously prepared), please call our office today to schedule an appointment at 407-648-2555. We are located in Baldwin Park, Orlando.

We look forward to helping you with your personal and corporate taxes and providing you confidence that your taxes were prepared accurately with highly trained and experienced professionals.

The post Uncle Sal preparing your taxes this year? 5 signs to make you reconsider appeared first on The Pappas Group.

As published in the Winter Park/Maitland Observer, Thursday Jan. 3, 2012 Edition

Offers in Compromise (IRS settlements) are very difficult to get, but the IRS does grant them.

I put together this short questionnaire for taxpayers to use to determine whether or not they qualify for an IRS settlement.

Form 656 is the Offer in Compromise (Offer) form. On its face the form seems simple enough, but if you read the instructions carefully you will soon see that most of the work is in assembling and presenting detailed financial information in support of the Offer.

Far too many taxpayers have tried to file an Offer themselves only to get rejected for failure to comply with the instructions.

The IRS receives hundreds of thousands of Offers in Compromise each year, most of which do not comply with the instructions or are incomplete. A thorough Offer filed in compliance with the instructions stands out.

The proper initial filing of an Offer greatly increases the chances of IRS acceptance.

The Questionnaire

In deciding whether or not to pursue the Offer in Compromise option, you should ask yourself the following questions:

1. Are you in bankruptcy proceedings?

If so, the IRS cannot consider and will not accept your offer.

2. Are you current with all your tax returns?

The IRS will not consider an Offer in Compromise unless you are completely current with all of your tax filing requirements.

3. Are you paying taxes on your current income?

A condition of the Offer is that you are now complying with the tax laws. This means you must have the proper amount of taxes withheld from your paycheck and remitted to the IRS or, if you are self-employed, you must make your quarterly estimated tax payments.

4. Do you own assets having a value (after deducting encumbrances mortgages and secured loans) that is exceeds the amount you owe the IRS (including penalties and interest)?

If the answer is “yes”, you do not qualify for an Offer in Compromise based on doubt as to collectability.

Points to Remember

If after answering the above questions, you believe an Offer in Compromise might be right for you, remember the following:

The IRS Will Ask for Additional Financial Information after the Offer is Filed

You can count on the IRS making several requests for additional information and clarification of the information already provided. You must respond to these requests thoroughly and on a timely basis or the IRS will reject the offer.

You Must Pay a 20% Non-Refundable Down Payment on the Offer at the Time of Filing

Remember, when you first submit your Offer in Compromise (if it is based on doubt as to collectability) you must include 20% of the amount offered and the $150 dollar application fee. If your offer rejected, your money will not be refunded but the 20% will be applied to reduce your liability.

If an Offer is Worth Filing, it’s Worth Filing Properly: Seek the Advice of Experienced Tax Counsel

The Offer in Compromise is a complex document that must be completed carefully and thoroughly.

The IRS is not going to give up something for nothing. You have to prove that it is in the government’s best interest to accept your offer.

We recommend that you consult with an experienced Tax Lawyer before submitting an Offer in Compromise.

Author Bio:  Peter Pappas is a tax attorney and Certified Public Accountant. He and his firm, The Pappas Group, have been assisting both federal and state taxpayers with their tax problems for more than 25 years.

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As published in the Seminole Voice Newspaper, July 13-July 26, 2012

The IRS Aggressively Pursues Business Owners who Fail to Remit Payroll Taxes

We have been helping business taxpayers with their IRS tax problems for a very long time. One of the worst tax violations we encounter is the failure of an employer to remit payroll taxes it has withheld from its employees’ pay. But despite its gravity, it is one of the most frequent tax problems we encounter.

Payroll Tax Delinquencies are Treated Harshly

The IRS is required by law to give employees the benefit of all taxes withheld by their employers whether or not such taxes were remitted to the government. Consequently, when an employer fails to turn over withheld taxes the IRS loses money. The IRS doesn’t like to lose money.

Withheld Taxes are Held in Trust for the Government

The payroll taxes an employer holds back from an employee (called the “Trust Fund”) never belong to the employer, but rather are held in a constructive trust for the federal government. Thus, every employer is a Trustee whose sole beneficiary is the United States. As a Trustee, the employer has a fiduciary duty to properly report and turn over all withheld taxes.

If you don’t do it, it is considered by the feds to be theft of government funds and the IRS may refer the case to its criminal investigation division.

Installment Payment Plans for In-Business Taxpayers

Employers who are behind in their payroll tax deposits can count on immediate and aggressive collection action by the IRS. There is good reason for this: The IRS is concerned that a delinquent payroll tax employer who is still in business will continue to use the Trust Fund for its own purposes.

The IRS calls this “pyramiding” and will shut your business down if you continue to do it or if it has a reasonable belief that you will continue to do it.

Fortunately, there is a solution. If the business can show that it has corrected the problem and is now keeping current with its payroll tax deposits and can show that it is profitable enough to allow it to remain current and make payments on the unpaid payroll taxes (plus penalties and interest), the IRS will consider an Installment Payment Agreement.

The Trust Fund Penalty

But there is more bad news. The IRS is empowered to assess a penalty against individuals working for the company who are deemed responsible for the failure of the business to remit payroll taxes. This penalty is called the Trust Fund Penalty because it imposes a fine that is equal to the portion of the payroll taxes that was withheld from employees’ pay and held in trust for the government. For example, if you paid an employee annual gross wages of $50,000 and withheld $10,000 in federal income taxes and $3,825 (7.65% x $50,000) in FICA and Medicaid taxes, the Trust Fund penalty is $13,825.

The Trust Fund Penalty may be assessed against more than one individual and the IRS often assesses it against people within the organization who were neither shareholders nor officers.

Advice: Seek Professional Advice

Before you attempt to deal with the IRS yourself, we strongly recommend that you consult with a tax attorney or CPA experienced in dealing with these matters. The early involvement of a tax professional will usually allow you to avoid criminal prosecution, remain in business and get more favorable repayment terms.

Peter Pappas is a tax attorney and Certified Public Accountant. He and his firm, The Pappas Group, have been assisting both federal and state taxpayers with their tax problems for more than 25 years. For more information call Peter at 407-648-2555, email him at moc.walsappapnull@sappapp or visit www.pappastax.com

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The IRS criminal investigation division investigates and refers for prosecution some tax crimes more than others. Here are the three most frequently prosecuted tax crimes:

Failure to File Tax Returns

The Law

26 U.S.C. § 7203 – Willful failure to file return, supply information, or pay tax

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution.

Comments

In the past, the U.S. rarely brought criminal charges against taxpayers for failing to file their tax returns. However, in the last five years we have seen an increasing number of failure to file cases referred to criminal investigation. Most of these criminal referrals involve self-employed taxpayers who have not paid any tax during the year through wage withholdings or estimated tax payments. Remember, it’s a crime to intentionally fail to file your income tax return. It is not a crime to be unable to pay your taxes. Just ask Wesley Snipes.

Recommendations

File your tax returns before the IRS prepares a return for you and before it begins a criminal investigation. Voluntary compliance, even at a late date, will usually forestall a criminal prosecution. Once you have filed your return, your case is more likely to be referred to an IRS collection agent for payment negotiations rather than to a criminal investigator or government prosecutor for criminal prosecution.

False Tax Returns

26 U.S.C. § 7206(1) – Fraud and false statements

The Law

Any person who willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.

Comments

Violations of this statute involve the intentional failure to report income and/or the intentional claiming of a fraudulent deduction. In this case, the taxpayer files his tax return and signs it under penalties of perjury even though he knows that he has not reported all of his income or has claimed a bogus deduction.

In cases involving unreported income, an IRS criminal investigation is usually initiated in one of the following ways:

• Informant Tip (Whistleblower program)
• Audits
• State Referral

Recommendations

Obviously, the best way to avoid a criminal prosecution under this federal statute is to make sure you file an accurate return. The first step in doing this, is keeping good books and records. A second step would be to hire an experienced and qualified tax preparer to prepare your tax returns.

If you know that tax returns you filed in the past are materially wrong, you have a duty to amend those returns. Remember, while the IRS generally has only 3 years to audit a taxpayer’s tax return, that period is extended to 6 years in the case of omitted income.

Tax Evasion

26 U.S.C. § 7201 – Attempt to evade or defeat tax

The Law

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

Recommendations

The best advice we can give comes in the form of a cliché: If it sounds too good to be true, it’s probably not true. Get a second or even third opinion before you sign onto someone’s grand – and almost always too complex to understand – plan to help you avoid taxes.

Peter Pappas is a tax attorney and a CPA. He and his firm, The Pappas Group, have been helping federal and state taxpayers with their fax and business problems for more than 25 years. Call Peter at 407-648-2555; email him at moc.walsappapnull@sappapp; or visit www.pappastax.com

The post The 3 most frequently prosecuted tax crimes appeared first on The Pappas Group.

For disorganized people April is indeed the cruelest month.

If you haven’t gotten your tax information to your tax preparer by now, it’s probably because you’ve been running around like Robin Williams on Red Bull trying to locate your receipts.

You look in the glove compartment of your car and find a few records there. You look in your wallet and find a few receipts stuffed between a crumpled dollar bill and a business card from someone you don’t ever remember meeting.

But mostly you try to avoid thinking about it because when you do it makes you more nervous than a Chihuahua in the front row at an AC DC concert.

Unless you’re a masochist and enjoy self-torture, you will want to put an end to this by following the 5 steps discussed below.

But remember, without your commitment change simply cannot take place and like a Pavlovian dog you will continue to dread rather than embrace the most beautiful time of the year.

Step One: Keep Your Records Electronically

Every self-employed person or small business owner should keep their books using a reputable accounting software package such as Quickbooks or Quickbooks Pro.

And even if you are not self-employed, it’s a good idea to electronically keep track of your personal records and finances.

Keeping your records electronically is just the beginning, you still must have a system for retaining and organizing your underlying accounting records.

Here is how we recommend our self-employed and small business clients keep their records.

Step Two: Segregate your tax records by tax year

Whether you file your tax returns on a calendar or fiscal year, you report the results of your business operations for a twelve month period.

Consequently, your tax records should be separated by tax year.

This seems like a no-brainer, but more than a few times we’ve had clients give us boxes of records that contained several years receipts rather than just the receipts for the tax year we were handling.

This made our job more difficult and (you guessed it) resulted in an increase of our fees.

Step Three: Group your records into 4 main categories: Receipts, Expenses, Fixed Assets, Inventory, Liabilities

Set up a folder for each category as follows:

1. Include in the Receipts folder a copy of your reconciled bank statements for the year and any cash register slips or other information about your income
2. Include in the Expenses folder copies of all vendor invoices for the year and copies of all cancelled checks and credit card transaction reports
3. Include in the Fixed Assets folder copies of all invoices for the year relating to the purchase of furniture, fixtures, automobiles and equipment and copies of documentation for any sales of such assets you made during the year.
4. Include in the Inventory folder copies of all invoices related to the purchase of inventory or raw materials during the year and records of all physical inventories taken at year end.
5. Include in the Liabilities folder copies of all promissory notes, mortgages, equipment or premises lease agreements and payment schedules relating to same.

Step Four: Further group your Expenses

Your Expenses folder will contain the most documents and, therefore, needs to be organized further as follows:

1. Print out a Chart of Accounts from your Accounting Software
2. Create a folder for each expense account category included in your Chart of Accounts
3. Group in separate sub-folders all vendor invoices and/or canceled checks by expense account category

Step Five: Prepare and Maintain a Fixed Asset Schedule

Prepare a list of all furniture, fixture, equipment, real property and vehicles owned by your business.

The list should include the following information:

1. The date you purchased the asset;
2. A description of the asset;
3. The amount you paid for the asset;
4. The date you began using the asset for business purposes;
5. The date you sold, disposed of or ceased using the asset for business; and
6. The amount you sold the asset for.

Keep everything related to your business and organize it on a daily basis in accordance with the above instructions and you will minimize your accounting and potential tax problems.

Author Bio:  Peter Pappas is a tax attorney and Certified Public Accountant. He and his firm, The Pappas Group, have been assisting both federal and state taxpayers with their tax problems for more than 25 years. For more information call Peter at 407-648-2555, email him at moc.walsappapnull@sappapp or visit www.pappastax.com

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And what will these couple’s do with this windfall? Will it be flowers, chocolates, a nice dinner out to celebrate Love’s most sacred day?  Nope. According to Herb Weisbaum, a Today contributor, in his article Tax Refunds are ‘windfall’ for most American families most taxpayers receiving refunds will do the smart thing and pay down debt and build up emergency funds.

Sorry Cupid.

Remember, if you are getting a big refund it in effect means you gave an interest free loan to the IRS because the IRS does not pay interest on refunds. In other words, Uncle Sam has kept your money for the last year and didn’t pay you a dime of interest. If you would rather keep more of your money in 2013, let The Pappas Group examine your tax returns and recommend the proper withholding exemptions.

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According to state of Florida lottery laws, winnings of just $600 or more must be collected at a Florida Lottery District Office and not the location where the ticket was purchased.

Winners must prove their identity (state approved list below), and that information is cross-checked with the IRS to make sure any past sins such as outstanding back taxes including penalties and interest, have been addressed and settled to Uncle Sam’s satisfaction. Be rest assured that Florida Lottery winnings will be seized to cover such debts. Below is the actual text as found on the Florida Lottery winnings claim form that must be submitted before you receive your prize.

Under the Federal Privacy Act, disclosure of a person’s Social Security number is voluntary unless a Federal statute specifically requires such disclosure or allows states to collect the number. For claimants of Florida Lottery prizes valued at $600 or more, disclosure is required by 26 U.S.C. s. 3402 and 26 U.S.C. s. 6109 for tax withholding and reporting purposes. Social Security numbers will also be used to determine whether a claimant owes an outstanding debt to a state agency or child support collected through a court, pursuant to Section 24.115, Florida Statutes.

Present one form of identification that is current or was issued within the past five years and bears a serial number or other identifying number. Acceptable forms of identification include:

• An identification card or driver’s license issued by a public agency authorized to issue driver’s licenses in Florida, a state other than Florida, a territory of the U.S., Canada, or Mexico.
• A passport issued by the U.S. Department of State.
• A passport issued by a foreign government.
• An identification card issued by any branch of the U.S. armed forces.
• An identification card issued by the United States Bureau of Citizenship and Immigration Services.

So if you find yourself holding that winning ticket, remember, before you make plans to spend it all, Uncle Sam will expect his cut to recoupe any past tax debts as well as a healthy share of today’s bounty. If you have any questions about your winnings and how they relate to your past or current taxes, please give The Pappas Group a call to discuss, it’s free (unlike your lottery ticket.)

The post Just won the Florida Lottery? Uncle Sam congratulates you appeared first on The Pappas Group.

The use of PIN numbers will help reduce identity theft, but it’s not the only thing you should do for protection. Make sure you shred all documents that contain your social security number and other personal information and do not include your social security number in emails or online.

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