Ex-IRS Agent Pleads Guilty to Ordering Hit Job on Tax Clients

A former Internal Revenue Service revenue agent and tax preparer has pleaded guilty to charges that he tried to hire a hit man to kill four of his former clients who were scheduled to testify against him in a tax fraud case.

 

Steven Martinez pleaded guilty August 10 in a federal court in San Diego to criminal charges including murder-for-hire, witness tampering involving attempted murder, solicitation of a crime of violence, mail fraud, filing false tax returns, Social Security fraud, aggravated identity theft, and money laundering. Martinez pled guilty to a total of 12 counts in the superseding indictment.

As part of his guilty plea, Martinez admitted that in late February 2012, he solicited a third party to murder four former clients who were victims of his fraud and were slated to testify against him in his pending criminal tax case. Martinez reportedly directed his limousine driver, Norman Russell Thellmann, to deliver cash to a hit man who had been promised $100,000 to carry out the hit job.

he purported hit man instead contacted the San Diego division of the FBI on Feb. 28 to report the murder-for-hire plot by Martinez. According to the complaint, a subsequent meeting between the third party and Martinez was recorded and videotaped by the FBI.

According to the complaint, Martinez told the would-be assassin “he could make him rich for the rest of his life, $100,000 cash, if he eliminated the lady in Rancho Santa Fe and the lady in La Jolla.” The third party said Martinez “suggested that the former employee use two different pistols for the murders and that he acquire a silencer.”

Martinez admitted in court that he tried to prevent the former clients’ testimony by offering the third party $100,000 to murder them. He admitted he provided the hit man with four written packets of detailed information about the former clients, including photos of the soon-to-be murder victims, their homes and personal information. Martinez admitted that once the murders took place, he would pay the perpetrator $40,000 in cash, followed by the remaining $60,000 in cash within 72 hours of the murders.

In addition, Martinez admitted that he filed false tax returns and defrauded his clients by stealing over $11 million in tax payments. Martinez admitted that he presented his clients with completed tax returns indicating that they owed a significant amount of tax. He requested that his clients write checks payable for the amount of taxes due and owing to an alleged client trust account, instead of directly to the IRS or the California Franchise Tax Board.

Martinez also convinced the same clients to write checks during the tax year for estimated tax payments to the same alleged client trust accounts. Instead of depositing the checks into a true trust account, Martinez admitted that he took the checks and deposited them into several nominee bank accounts. In an attempt to conceal his fraud, Martinez admitted that he filed a different set of false tax returns indicating that his clients owed little or no income tax. Martinez admitted that he converted approximately $11 million in stolen taxpayer funds for his own personal benefit, and used them to make home improvements, purchase real estate, purchase a beach home in Mexico, pay for the use of a private airplane, make investments of more than $2 million in other entities, and make payments of more than $2 million for his personal use credit cards and loans.

As part of his fraudulent tax scheme, Martinez admitted that he committed Social Security fraud and aggravated identity theft by using the Social Security numbers of his clients without authorization when he filed the false tax returns with the IRS. Martinez admitted he committed mail fraud by mailing the false tax returns to the IRS. Martinez also admitted that he laundered approximately $2 million through nominee bank accounts for his own business and personal use. Finally, Martinez admitted that he knowingly and intentionally filed false personal income tax returns for tax years 2004, 2005, 2006 and 2007.

This case is being investigated by Special Agents with the IRS’s Criminal Investigation division, and the Federal Bureau of Investigation. A sentencing hearing has been scheduled for Nov. 30.

For more information: www.onts9.com

Tax Tips for Recently Married Taxpayers

IRS Summertime Tax Tip 2012-19

If you’ve recently updated your status from single to married, you’re not alone – late spring and summertime is a popular period for weddings. Marriage also brings about some changes with your taxes. Here are several tips for newlyweds from the IRS.

  • Notify the Social Security Administration  It’s important that your name and Social Security number match on your next tax return, so if you’ve taken on a new name, report the change to the Social Security Administration. File Form SS-5, Application for a Social Security Card. The form is available on SSA’s website at www.ssa.gov, by calling 800-772-1213, or visiting a local SSA office.
  • Notify the IRS if you move  IRS Form 8822, Change of Address, is the official way to update the IRS of your address change. Download Form 8822 from IRS.gov or order it by calling 800-TAX-FORM
    (800-829-3676).
  • Notify the U.S. Postal Service  To ensure your mail – including mail from the IRS – is forwarded to your new address, you’ll need to notify the U.S. Postal Service. Submit a forwarding request online at www.usps.com or visit your local post office.
  • Notify your employer  Report your name and/or address change to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
  • Check your withholding  If you both work, keep in mind that you and your spouse’s combined income may move you into a higher tax bracket. You can use Publication 505, Tax Withholding and Estimated Tax, to help determine the correct amount of withholding for your marital status, and it will also help you complete a new Form W-4, Employee’s Withholding Allowance Certificate. Fill out and print Form W-4 online and give it to your employer(s) so the correct amount will be withheld from your pay.
  • Select the right tax form  Choose your individual income tax form wisely because it can help save you money. Newlywed taxpayers may find that they now have enough deductions to itemize on their tax returns rather than taking the standard deduction. Itemized deductions must be claimed on a Form 1040, not a 1040A or 1040EZ.
  • Choose the best filing status  A person’s marital status on Dec. 31 determines whether the person is considered married for that year for tax purposes. Tax law generally allows married couples to choose to file their federal income tax return either jointly or separately in any given year. Figuring the tax both ways can determine which filing status will result in the lowest tax, but filing jointly is usually more beneficial.

Bottom line: planning for your wedding may be over, but don’t forget about planning for the tax-related changes that marriage brings.

For more information: www.onts9.com

 

 

 

Organizing Tax Records This Summer Can Help You Keep Your Cool

IRS Summertime Tax Tip 2012-16

If the sweltering dog days of summer aren’t incentive enough to get out of the sun for awhile, the IRS suggests another reason to head indoors: organizing your tax records. Devoting some time mid-year to putting your tax-related documents in order may not only keep you out of the sun, but it should also make it easier for you to prepare your tax return when the filing season arrives.

Here are some things the IRS wants individuals and small business owners to know about recordkeeping.

  • What to keep – Individuals.  In most cases, keep records that support items on your tax return for at least three years after that tax return has been filed. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed. You should typically keep records relating to property at least three years after you’ve sold or otherwise disposed of the property. Examples include a home purchase or improvement, stocks and other investments, Individual Retirement Account transactions and rental property records.
  • What to keep – Small Business Owners.  Typically, keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Also, keep records documenting gross receipts, proof of purchases, expenses and assets. Examples include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices, credit card charges and sales slips, Forms 1099-MISC, canceled checks, account statements, petty cash slips and real estate closing statements. Electronic records can include databases, saved files, e-mails, instant messages, faxes and voice messages.
  • How to keep them – Although the IRS generally does not require you to keep your records in any special manner, having a designated place for tax documents and receipts is a good idea. It will make preparing your return easier, and it may also remind you of relevant transactions. Good recordkeeping will also help you prepare a response if you receive an IRS notice or need to substantiate items on your return if you are selected for an audit.

For more information: www.onts9.com

 

Ex-IRS Employee Sentenced for Identity Theft and Tax Fraud

A former Internal Revenue Service employee has been sentenced to two years in prison for identity theft and filing fraudulent income tax returns.

George Albright, 57, of Antioch, Tenn., was sentenced last week by a federal judge in in Nashville after he pleaded guilty in May to one count of filing a false tax return and one count of using the identities of others to do so.

Albright was employed by the IRS as a taxpayer service representative from 1995 until March 2012. He admitted that, between February 2008 and January 2011, he used his position as an IRS employee to obtain the names and identifiers of taxpayers from IRS records. He then used this information to file several fraudulent federal income tax returns. Albright directed that the tax refunds from those returns, totaling $9,669.00, be electronically deposited into bank accounts under his control.

In imposing the two-year sentence, U.S. District Judge Todd Campbell noted that Albright, who has no prior criminal history, had engaged in an egregious abuse of the public trust.

“Tax fraud, or any crime committed by a government employee, occupies a high priority for federal investigators and prosecutors in this district,” said U.S. Attorney Jerry Martin in a statement. “Anyone filing a fraudulent tax return and anyone employed in a position of public trust should take note of the prison sentence they risk if they engage in this sort of criminal conduct, even if they have no criminal record. They should also be reminded that there is no parole in the federal system.”

Albright will remain under federal supervision for one year after completing his prison sentence. He was also ordered to forfeit the computer that he used to commit the crimes and will be required to repay the tax refunds he stole.

For more information: www.onts9.com

 

Moving This Summer? Here are 10 Helpful Tax Tips

IRS Summertime Tax Tip 2012-15

School’s out for the summer, and summer is a popular time for people to move – especially families with children.  If you are moving to start a new job or even the same job at a new job location, the IRS offers 10 tax tips on expenses you may be able to deduct on your tax return.

1. Expenses must be close to the time you start work  Generally, you can consider moving expenses that you incurred within one year of the date you first report to work at a new job location.

2. Distance Test  Your move meets the distance test if your new main job location is at least 50 miles farther from your former home than your previous main job location was from your former home.  For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.

3. Time Test  Upon arriving in the general area of your new job location, you must work full time for at least 39 weeks during the first year at your new job location. Self-employed individuals must meet this test, and they must also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test. There are some special rules and exceptions to these general rules, so see Publication 521, Moving Expenses for more information.

4. Travel  You can deduct lodging expenses (but not meals) for yourself and household members while moving from your former home to your new home. You can also deduct transportation expenses, including airfare, vehicle mileage, parking fees and tolls you pay, but you can only deduct one trip per person.

5. Household goods  You can deduct the cost of packing, crating and transporting your household goods and personal property, including the cost of shipping household pets. You may be able to include the cost of storing and insuring these items while in transit.

6. Utilities  You can deduct the costs of connecting or disconnecting utilities.

7. Nondeductible expenses  You cannot deduct as moving expenses: any part of the purchase price of your new home, car tags, a drivers license renewal, costs of buying or selling a home, expenses of entering into or breaking a lease, or security deposits and storage charges, except those incurred in transit and for foreign moves.

8. Form  You can deduct only those expenses that are reasonable for the circumstances of your move. To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses.

9. Reimbursed expenses  If your employer reimburses you for the costs of a move for which you took a deduction, the reimbursement may have to be included as income on your tax return.

10. Update your address  When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. Use Form 8822, Change of Address, to notify the IRS.

More details are available in IRS Publication 521 and Form 3903. IRS publications and forms are available on IRS.gov or by calling 800-829-3676.

For more information: www.onts9.com

 

Tips and Service Charges

Issue Number:  2012-7

Rev. Rul. 2012-18 provides guidance in a question-and-answer format regarding social security and Medicare taxes imposed on tips under the Federal Insurance Contributions Act (FICA), including information on distinguishing between tips and service charges, the credit under Sec. 45B for employer social security and Medicare taxes, and the rules for reporting the employer share of FICA under the notice and demand provisions of Sec. 3121(q).

If a business adds service charges (such as “auto-gratuities”) to customers’ bills which it distributes to employees, the business should characterize the distributed service charges as non-tip wages, not as tips.

Although not listed in the revenue ruling, common examples of service charges or auto-gratuities in service industries are:

  • Large Party Charge (restaurant)
  • Bottle Service Charge (restaurant and night-club)
  • Room Service Charge (hotel and resort)
  • Contracted Luggage Assistance Charge (hotel and resort)
  • Mandated Delivery Charge (pizza or other retail deliveries)

The facts and circumstances around a payment are the determinative factors in the proper treatment of a payment, not the employer’s or employee’s characterization.

For more information: www.onts9.com