Evade at Your Own Risk

Recent stats from the Feds show that criminal prosecutions by Uncle Sam hit a ten year high in 2010 – largely in the area of offshore tax evasion.  IRS info indicates that 1,250 tax cases were prosecuted last year – a 25.3% jump over 2001!

“The time that we’re spending on tax investigations has gone up,” quoth Steven Miller, Deputy Commish of Services and Enforcement in a recent USA Today interview.  “That’s resulted in a lot more prosecutions in that area,” notwithstanding a relatively unchanged level of IRS staffing.

“We are focusing more and more on offshore (tax evasion), there is no question about that,” noted Miller who went on to say that IRS in the last two years has opened new criminal investigation offices in something like ten international locations, including Australia, China and Panama.

And from our “sticky fingered California” department comes a reminder to nonresident landlords to be aware of California’s nasty habit of wanting to withhold state tax from rental collections – notably those administered by property managers.

In general, California requires withholding on a number of various forms of payments from within California to nonresidents – folks living elsewhere.  There are a few options available to nonresidents – to apply for a complete waiver or reduced withholding in certain situations.  Check with your tax pro on this if Jerry Brown suddenly tries to slip his sticky fingers into your back pocket.

And in yet another case of one taxing body (IRS in this case) partnering up with another (California Board of Equalization, f’rinstance), consider this little sleight of hand as recently reported in Spidell’s California Taxletter – In Re:  The Tax Liabilities of John Does, filed December 27, 2010 in a California District Court.

The case has to do with the not particularly uncommon practice of parents transferring title to some or all of a piece of realty to a child or grandchild, without paying particular attention to the estate and gift tax consequences.  And the case has led the IRS to attempt to “summons” the California BOE to produce property transfer records showing transfers between family members.  Consider these sage words of Josephine M. Bonaffini, the Federal/State Coordinator of the IRS Estate and Gift Tax Program:

“Based on information received from examinations across the country and

and information voluntarily disclosed by other states, the IRS has determined

that taxpayers who transfer real property to a related party for little or no

consideration frequently fail to file Form 709, United States Gift (and

Generation-Skipping Transfer) Tax Return, and report this transfer, despite the

fact that they are required to do so by the internal revenue laws.  Thus the IRS

has a reasonable basis to believe that a significant portion of the California

taxpayers who have transferred property to their children or grandchildren

(as reported to the BOE on forms for exclusion of reassessment) for little or no

consideration have failed to report these transfers to the IRS.”

So there.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at www.taxlawtips.com.