IRS attorneys have asserted in internal documents that the Fourth Amendment does not protect email and that a warrant is not needed to plant a GPS location tracker on a car in its owner’s driveway.
In documents obtained from the IRS by the ACLU under the federal Freedom of Information Act and posted on the website Wednesday, the agency’s attorneys adopt an extremely aggressive posture toward the requirements the Fourth Amendment might place on its criminal investigators who want to read email or text messages, or use GPS location tracking.
“The Fourth Amendment does not protect communications held in electronic storage, such as email messages stored on a server, because Internet users do not have a reasonable expectation of privacy in such communications,” states a 2009 “Search Warrant Handbook” from the IRS Criminal Tax Division’s Office of Chief Counsel.
According to several reports, the agency will also be collecting personal information from sites like Facebook and Twitter.
It says the effort is to catch people trying to beat the system, but some say it goes too far.
Attorney Kristen Mathews warns to be careful with what you say on social media platforms.
She has concerns the government is pushing the limits of what has historically been considered private.
“There are laws that regulate the government’s ability to get a hold of things like credit card transaction history. But those laws have become more permissive in the last several years, particularly after 9-11, and so some might say those laws are no longer in line with the average expectation of privacy,” says Mathews.
The government has said it would only check a Facebook page or twitter account if there is already red flag in a tax form.
KANSAS CITY, Mo. — Thousands have signed two separate petitions that would classify Topeka’s Westboro Baptist Church as a hate group and strip it of its tax exempt status. The petitions were started after members of Westboro announced plans to protest a Sunday vigil in Newtown, Conn.
After Westboro Baptist Church spokesperson Shirey Phelps-Roper tweeted plans to protest the vigil, “to sing praise to God for the glory of his work in executing his judgement,” the hacktivist group known as “Anonymous” threatened the church via video. In it, an automated voice says, “We will not allow you to corrupt the minds of America with your seeds of hatred. We will not allow you to inspire aggression to the social faction which you deem inferior. We will render you obsolete. We will destroy you. We are coming.”
In addition to the video, Anonymous hacked Westboro’s website and released personal information about church members including names, street addresses, phone numbers and email addresses according to CNET.
Anonymous didn’t stop there. Using its Twitter account, Anonymous asked its followers to sign a petition that would investigate the IRS tax-exempt status of the church. As stated on the White House website, the petition claims: “The Westboro Baptist Church is better-known for homophobic displays, suing people and picketing funerals than for providing Christian care to a community. Due to their harassment and politicking, their IRS tax-exempt status should be immediately investigated.”
A total of 16,062 signatures are needed before the White House will review the petition. As of noon on Monday, nearly 10,000 people had signed it.
Which is why we have to raise taxes and enforcement….
More than 21,000 retired federal workers receive lifetime government pensions of $100,000 or more per year, a USA TODAY/Gannett analysis finds.
Of these, nearly 2,000 have federal pensions that pay $125,000 or more annually, and 151 take home $150,000 or more. Six federal retirees get more than $200,000 a year.
Some 1.2 percent of federal retirees collect six-figure pensions. By comparison, 0.1 percent of military retirees collect as much.
The New York State and Local Retirement System pays 0.2 percent of its retirees pensions of $100,000 or more. The New Jersey retirement system pays 0.4 percent of retirees that much. Comparable private figures aren’t available.
The six-figure pensions spread across a broad swath of the federal workforce: doctors, budget analysts, accountants, public relations specialists and human resource managers. Most do not get Social Security benefits.
Retired law enforcement is the most common profession receiving $100,000-plus pensions, including 326 Drug Enforcement Administration agents, 237 IRS investigators and 186 FBI agents.
The Postal Service has 714 retired workers getting six-figure retirements. The Social Security Administration has 444. A retired Smithsonian zoologist has a $162,000 annual lifetime pension.
The six $200,000-plus pensions include a doctor, a dentist and a credit union regulator, plus three retirees whose occupations weren’t listed.
Pensions are a growing federal budget burden, rising twice as fast as inflation over the last decade. Pension payments cost $70 billion last year, plus $13 billion for retiree health care. Taxpayers face a $2 trillion unfunded liability — the amount needed to cover future benefits — for these programs, according to the government’s audited financial statement. (Read: The Truth About the Post Office’s Financial Mess.)
“These people are highly trained, highly skilled and often put their lives on the line in law enforcement,” says Julie Tagen, legislative director of the National Association of Retired Federal Employees. “It’s a very, very small portion of retirees at that ($100,000) level.”
“Government pensions are vastly more generous than those in the private sector,” says economist Veronique de Rugy of the market-oriented Mercatus Center. “It’s no coincidence that if there is a good plan, it’s available to federal employees rather than in the private sector.”
USA TODAY and the Asbury Park (N.J.) Press— both owned by Gannett — analyzed the Civil Service Retirement System database, obtained under a Freedom of Information Act request. The Office of Personnel Management withheld some information, including names, ages and length of service.
The records cover 1.9 million federal civilian pensions. Congress members were not included, nor were military retirees.
The average federal pension pays $32,824 annually. The average state and local government pension pays $24,373, Census data show. The average military pension is $22,492. ExxonMobil[XOM 88.18 0.18 (+0.2%) ], which has one of the best remaining private pensions, pays an average of $18,250 per retiree, Labor Department filings show.
The federal government has two retirement systems: one for those hired before 1984 and another for those hired after. Under the older system, employees did not participate in Social Security. The older system covers 78 percent of current retirees and accounts for 96 percent of six-figure pensions. All federal retirees receive health benefits.
”Ever get the felling you’ve been Cheated?” ~ Johnny Rotten
Tax cheats were given $1.4 billion in government-backed mortgage loans under President Obama’s economic stimulus, and the government doled out at least an additional $27 million in tax credits to delinquents who took the first-time-homebuyer tax break, according to a government audit released Wednesday.
Under government rules, delinquent taxpayers are supposed to be ineligible for the mortgage insurance program unless they have reached a repayment agreement with the Internal Revenue Service. But the Federal Housing Administration didn’t have the right controls to weed out bad applications, said the Government Accountability Office, Congress‘ chief investigative arm.
That meant FHA insured $1.4 billion in mortgages for 6,327 borrowers who collectively owed $77.6 million in unpaid taxes, or an average of more than $12,000 each.
The auditors said that as a category, the tax cheats had foreclosure rates up to three times as high as other borrowers, which meant the delinquent taxpayers exposed the government to even greater risks.
“In the name of ‘stimulus,’ the federal government gave mortgage insurance to thousands of people we knew were tax cheats and had a bad track record paying their debts,” said Sen. Tom Coburn, Oklahoma Republican, who joined a bipartisan group of other lawmakers to request the investigation. “The federal government needlessly put taxpayers on the line to help tax cheats buy homes. Congress needs to ensure that tax cheats are no longer allowed to take advantage of FHA programs.”
In addition to the mortgages, the auditors found that more than half of the tax-delinquent borrowers claimed the first-time-homebuyers’ credit, worth up to $8,000.
GAO said there is no prohibition against someone claiming the credit, even though they still have unpaid tax bills. The credit is refundable, meaning taxpayers can get a check back from the government if the benefit exceeds their liability. IRS rules generally call for the agency to subtract any unpaid taxes from the refund, but in three of the nine cases that GAO analyzed in depth, it said the taxpayers had declared bankruptcy, meaning the IRS was prevented from docking the refunds.
The report was the GAO’s second study looking at tax cheats and the stimulus.
In the first report, GAO said thousands of contracts and grants were paid out under the American Recovery and Reinvestment Act to those with unpaid tax bills.
Mr. Obama pushed the $831 billion economic stimulus in early 2009 as a means of bolstering the faltering economy, and promised to use strict controls to cut fraud and abuse. At its peak in mid-2010, it was responsible for as many as 3.6 million jobs, but could have funded as few as 700,000, according to the Congressional Budget Office.
Part of the Recovery Act was aimed at shoring up the housing market, which included the first-time-homebuyer tax credit and the mortgage assistance, which let the FHA insure loans at a higher rate in high-cost housing markets.
About 1.7 million individuals claimed the tax credit, while FHA insured more than $20 billion in mortgages for 87,000 homeowners, thanks to the Recovery Act provisions.
Under a White House policy, buyers who are delinquent on their federal taxes are not supposed to receive the mortgage assistance, unless they have worked out a repayment agreement with the IRS. But FHA rules don’t prod private lenders to ask for that information, and the FHA doesn’t have a system to work with the IRS to get that information.
Mr. Coburn joined Sens. Max Baucus, Montana Democrat; Carl Levin, Michigan Democrat; Chuck Grassley, Iowa Republican; and Orrin G. Hatch, Utah Republican, to request a review of the program.
“The stimulus-spending program was ill-conceived, with far too little oversight,” Mr. Grassley said. “It shouldn’t surprise anyone, unfortunately, that tax dollars have gone to tax cheats. It’s another one of many negative consequences of writing checks without enough checks and balances.”
From our friend Keith:
This is just out from the feds…. the Dions are real heroes in my opinion. They actually set up the “backbone” if you will of the business structure that hundreds of people used for their small business. They also set up the trust that owns both the house and commercial property of the Browns (Ed and Elaine). Both of which still haven’t been sold yet, maybe because of the trust? Its a shame that these people went down and I’m sure a lot of people have gone down since – because of the records they kept.
FOR IMMEDIATE RELEASE TAX
MONDAY, APRIL 2, 2012 (202) 514-2007
WWW.JUSTICE.GOV TTY (866) 544-5309
NEW HAMPSHIRE AND MASSACHUSETTS RESIDENTS CONVICTED FOR PROMOTING AND USING TAX DEFIER SCHEMES
WASHINGTON – A federal jury in Worcester, Mass., convicted William Scott Dion and Catherine Floyd, both of Sanbornville, N.H., and Charles Adams of Norwood, Mass., for conspiracies to defraud the United States through the promotion and use of multiple tax fraud schemes, the Justice Department and the Internal Revenue Service (IRS) announced today.
Dion and Floyd were released on electronic monitoring bracelets pending sentencing and Adams was released on call in/voice recognition pending sentencing. Dion’s sentencing is scheduled for June 21, 2012, Floyd’s sentencing is scheduled for June 26, 2012 and Adams’s sentencing is scheduled on June 27, 2012, all before U.S. District Judge F. Dennis Saylor.
Dion, Floyd and Adams were convicted of conspiracy to defraud the IRS by promoting an “under the table” payroll scheme. Dion and Floyd were also convicted for conspiracy to defraud the IRS through the use of an “underground warehouse banking” scheme designed to conceal customer income and assets from the IRS. Floyd and Dion were also convicted separately for corruptly endeavoring to obstruct the IRS’s ability to determine their own income. Adams was separately convicted of tax evasion.
According to the evidence presented at trial, Dion, Floyd and Adams ran a payroll tax scheme in order to pay employees “under the table” without properly accounting for, withholding and paying over to the IRS the payroll taxes required by law. The three promoted the payroll scheme to employers and individuals who wanted to avoid payment of employer payroll taxes and individual payroll taxes. The three ran the payroll scheme under three different names: Contract America, Talent Management and New Way Enterprises. Approximately 150 individuals subscribed to the payroll scheme and in excess of $2.5 million in unreported wages and compensation were paid through the system.
The evidence at trial also proved that Dion and Floyd conspired to defraud the United States by promoting and operating an “underground warehouse banking” scheme which helped subscribers conceal income and assets from the IRS. According to the evidence, the warehouse scheme operated under three different names: Your Virtual Office, Office Services and Calico Management. As part of the warehouse banking scheme, the defendants maintained accounts at several banks and used the accounts to deposit and commingle business receipts and other funds received from subscribers in order to mask the true ownership of the funds. According to evidence presented at trial, more than $28 million in deposits were made into the various bank accounts used in the scheme.
In August 2009, the three defendants were indicted with four other individuals relating to the promotion and use of these schemes. On Dec. 9, 2011, prior to trial, Gail and Myron Thorick of West Warwick, R.I., pleaded guilty to conspiring to defraud the United States by helping operate the “warehouse banking” scheme and for filing false tax returns. On that same date, Gary Alcock pleaded guilty to conspiracy by using the payroll scheme, as well as to tax evasion and willful failure to file tax returns. On Jan. 24, 2012, Kenneth Scott Alcock pleaded guilty to conspiracy relating to the payroll scheme and to multiple counts of tax evasion. All four defendants are awaiting sentencing.
The defendants face up to five years in prison on each count of conspiracy to defraud the United States and tax evasion, together with fines of up to $250,000 or twice the financial gain to the defendant or loss to the IRS, to be followed by three years of supervised release. The charges for obstructing the IRS carry maximum penalties of three years in prison, fines of $250,000 and one year of supervised release.
The U.S. Attorney and the Principal Deputy Assistant Attorney General of the Tax Division jointly announced the verdict.
The case was investigated by Special Agents of the IRS-Criminal Investigation. It is being prosecuted jointly by the U.S. Attorney’s Office in Boston, and the Tax Division of the U.S. Department of Justice in Washington DC. Assistant U.S. Attorney Victor A. Wild, and Assistant Chief John N. Kane and Trial Attorney Jeffrey L. Shih of the Justice Department’s Tax Division prosecuted the case.
More information about the Tax Division and its enforcement efforts can be found at www.justice.gov/tax.
Time to start scaring “taxpayers” as “extortion Day” closes in?
* Tax evasion by ‘transfer pricing’ a top target for IRS
* Talent comes from Big Four audit, law, consulting firms
* ‘The deck is stacked against them’ – academic on IRS
WASHINGTON, March 20 (Reuters) – The U.S. Internal Revenue Service is staffing up with high-powered talent to crack down on companies shifting profits from country to country to lower their tax bills, a strategy the agency has targeted before with only limited success.
The IRS showed its elevated concern on the issue, known as “transfer pricing,” last May by hiring Samuel Maruca to fill the newly created post of transfer pricing director.
He has since brought aboard specialists from Big Four audit firms KPMG and Ernst & Young LLP, as well as law firm Mayer Brown and boutique consultancy Horst Frisch.
Maruca, who came from law firm Covington & Burling, is still recruiting. He told Reuters the agency previously had “had a difficult time attracting and retaining economists.”
Now, he said, the IRS’s international group “has significant external hiring authority.”
Transfer pricing is a booming field of global tax law. It involves multinational corporations that are constantly moving goods, services and assets from one subsidiary to another in different countries and how they account for these “transfers.”
By carefully manipulating the pricing of such moves, companies can effectively shift profits to low-tax countries from high-tax ones, lowering their overall tax costs.
Governments in the developing and developed world, many of them faced with crushing deficits, are working to curb transfer pricing because it reduces corporate tax revenues.
IRS Commissioner Doug Shulman made changes at the agency in mid-2010 that set the stage for bringing in Maruca, who has filled 40 positions so far and plans to bring on up to 60 more staffers.
The IRS, which employs 90,000 people, saw its budget cut by 2.5 percent by Congress for fiscal 2012 to $11.8 billion.
UNDERPAID AND OUT-GUNNED
Federal agencies often struggle to keep up with higher-paid private-sector professionals. The IRS is no exception and there is some skepticism about Maruca’s chances.
“The economic crisis allowed the IRS to attract talented, experienced industry professionals who might not have been available previously,” said ex-deputy IRS Commissioner Michael Dolan, now director of KPMG’s Washington national tax practice.
“The $64,000 question is, what will be able to do … and will he really have enough resources to change the game?”
To curtail tax avoidance through transfer pricing, governments seek to limit the ability of corporations to manipulate transfer prices. National laws, though variable from country to country, generally call for “arms-length” pricing.
In theory, that means corporations must set transfer prices that are at or near market level, not artificially raised or lowered. But enforcement is complex, especially for intangible assets, s uc h as search-engine algorithms or trademarks.
“The valuation problems are insurmountable,” said Edward Kleinbard, a professor at the University of Southern California and former chief of staff at the Joint Committee on Taxation, which analyzes tax policy for the U.S. Congress.
“There are billion-dollar disputes on just the arms-length transfer pricing of intangibles.”
In December, payment transfer firm Western Union Co announced it was part of a $1.2 billion transfer pricing settlement with the IRS for taxes owed from 2003 through 2011. The dispute included intangible property and trademark royalties.
By one measure of transfer pricing enforcement, the IRS lags behind tax treaty partners. In fiscal 2011, 85 percent of transfer pricing audit adjustments were initiated by a foreign country, rather than by the IRS, according to IRS statistics. That was up from 77 percent in fiscal 2010.
Two major transfer pricing court decisions went against the IRS in 2009 and 2010.
“Clearly, the IRS is trying to figure out what to do next on its litigation strategy in these important transfer pricing cases,” said Eric Solomon, a director at Ernst & Young, who called Maruca’s group a “SWAT team.”
As the IRS raises its game, the pharmaceutical and high-tech sectors can expect close scrutiny, tax professionals said.
Businesses are sure to fight back. The IRS has ruffled feathers on transfer pricing before with limited results.
“Anybody who thinks the IRS can ultimately enforce transfer pricing is either an eternal optimist or delusional,” said Richard Harvey, a tax professor at Villanova University and former senior adviser to the IRS’s Shulman.
The staff changes and hiring at IRS “will help them on the margins,” Harvey said. “But they’re still fighting a very difficult battle where the deck is stacked against them.”
One of the reasons the states wanted a limited national government was to avert the tendency of governments to increase in power and authority. It’s no wonder that the Constitutionis a very short document. The more it said on a subject, the more authority the government would have.
The national government only had powers that were listed in the document. To ensure the limited nature of these powers, the states insisted on a Bill of Rights. The Ninth and Tenth Amendments are direct evidence that that states were fearful of their newly constructed national government.
Some founders did not want any more added to the Constitution. Their reasoning was sound. For example, in Federalist 84, Alexander Hamilton asked, “Why declare that things shall not be done which there is no power to do?” In similar fashion James Madison explained to Thomas Jefferson, “I conceive that in a certain degree . . . the rights in question are reserved by the manner in which the federal powers are granted” by Article One, Section 8 of the Constitution which lists them.
We have come a long way from those days. Now we have “agencies,” like the IRS, that are independent of the Constitution’s limitations. While the Constitution gives no authority to any government official to pry into the political affairs of an individual or organization, now we’re learning that the Tea Parties are under scrutiny. Colleen Owens, spokeswoman for the Richmond (Va.) Tea Party, writing in Big Government gives the background:
In January and February of this year, the Internal Revenue Service began sending out letters to various local Tea Parties across the country. Mailed from the same Cincinnati, Ohio IRS office, these letters have reached Tea Parties in Virginia, Hawaii, Ohio, and Texas (we are hearing of more daily). There are several common threads to these letters: all are requesting more information from these independent Tea Parties in regard to their nonprofit 501(c)(4) applications (for this type of nonprofit, donations are not deductible). While some of the requests are reasonable, much of them are strikingly onerous and, dare I say, Orwellian in nature.
Consider these requests: “Please identify your volunteers” and “are there board members or officers who have run or will run for office (including relatives)”? It’s none of the IRS’s business. To ask these questions, coming from the IRS, can make someone think twice of continuing as a Tea Party member. Everybody fears an audit.
Here’s the most blatantly tyrannical part of all of this. A letter was sent to IRS Commissioner Douglas H. Shulman. It was signed by six Senators. The letter “requests that the commissioner investigate 501(c)(4) groups to determine whether they are engaging in substantial campaign activity, including opposition to any candidate. Who signed this letter? Senators Schumer, Franken, Udall, Shaheen, Whitehouse, Merkley and Bennet — all Democrats.”
“Black Panthers” can intimidate voters and an organization like Acorn can use our money to influence elections, but ordinary citizens don’t you dare organize peacefully with your own money to bring our nation back to constitutional sanity.
SACRAMENTO, CA (KXTV) - The federal government has filed a lawsuit to force anti-war activist Cindy Sheehan to provide her financial records to the Internal Revenue Service.
An IRS revenue officer said Sheehan refused to answer any questions about her finances after receiving a summons at her Vacaville home.
The U.S. Attorney’s office on Tuesday filed a petition to enforce the IRS summons.
The summons ordered Sheehan to produce bank account statements for the period from August through early November 2011.
According to IRS revenue officer Jose Arteaga, the financial information may be relevant to the collection of Sheehan’s federal income tax liabilities for tax years 2005 and 2006.
Arteaga said Sheehan first met with him on Nov. 22 and sought an extension to Jan. 17. It was during the January meeting that she refused to answer any questions or produce the requested documents.
Sheehan said she’s always been up front with the IRS and has no intention of paying her taxes. She says the government has already taken enough from her.
“If they (federal government), can give me my son back, I’ll pay my taxes, but that’s not going to happen,” Sheehan said
President Obama’s 2013 budget is the gift that keeps on giving—to government. One buried surprise is his proposal to triple the tax rate on corporate dividends, which believe it or not is higher than in his previous budgets.
Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8%—nearly three times today’s 15% rate.
Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.
In previous budgets, Mr. Obama proposed an increase to 23.8% on both dividends and capital gains. That’s roughly a 60% increase in the tax on investments, but at least it would maintain parity between taxes on capital gains and dividends, a principle established as part of George W. Bush’s 2003 tax cut.
With the same rate on both forms of income, the tax code doesn’t bias corporate decisions on whether to retain and reinvest profits (and allow the earnings to be capitalized into the stock price), or distribute the money as dividends at the time they are earned.
Of course, the White House wants everyone to know that this new rate would apply only to those filthy rich individuals who make $200,000 a year, or $250,000 if you’re a greedy couple. We’re all supposed to believe that no one would be hurt other than rich folks who can afford it.
The truth is that the plan gives new meaning to the term collateral damage, because shareholders of all incomes will share the pain. Here’s why. Historical experience indicates that corporate dividend payouts are highly sensitive to the dividend tax. Dividends fell out of favor in the 1990s when the dividend tax rate was roughly twice the rate of capital gains.
When the rate fell to 15% on January 1, 2003, dividends reported on tax returns nearly doubled to $196 billion from $103 billion the year before the tax cut. By 2006 dividend income had grown to nearly $337 billion, more than three times the pre-tax cut level. The nearby chart shows the trend.
Video: The Purloined Climate Papers
Shortly after the rate cut, Microsoft, which had never paid a dividend, distributed $32 billion of its retained earnings in a special dividend of $3 per share. According to a Cato Institute study, 22 S&P 500 companies that didn’t pay dividends before the tax cut began paying them in 2003 and 2004.
As former Citigroup CEO Sandy Weill explained at the time: “The recent change in the tax law levels the playing field between dividends and share repurchases as a means to return capital to shareholders. This substantial increase in our dividend will be part of our effort to reallocate capital to dividends and reduce share repurchases.”
And that’s what happened. An American Economic Association study by University of California at Berkeley economists Raj Chetty and Emmanuel Saez examined dividend payouts by firms and concluded that “the tax reform played a significant role in the [2003 and 2004] increase in dividend payouts.” They also found that the incentive for firms to pay dividends rather than sit on cash helped “reshuffle” capital from lower growth firms to “ventures with greater expected value,” thus increasing capital-market efficiency.
If you reverse the policy, you reverse the incentives. The tripling of the dividend tax will have a dampening effect on these payments.
Who would get hurt? IRS data show that retirees and near-retirees who depend on dividend income would be hit especially hard. Almost three of four dividend payments go to those over the age of 55, and more than half go to those older than 65, according to IRS data.
But all American shareholders would lose. Higher dividend and capital gains taxes make stocks less valuable. A share of stock is worth the discounted present value of the future earnings stream after taxes. Stock prices would fall over time to adjust to the new after-tax rate of return. And if investors become convinced later this year that dividend and capital gains taxes are going way up on January 1, some investors are likely to sell shares ahead of paying these higher rates.
The question is how this helps anyone. According to the Investment Company Institute, about 51% of adults own stock directly or through mutual funds, which is more than 100 million shareholders. Tens of millions more own stocks through pension funds. Why would the White House endorse a policy that will make these households poorer?
Seldom has there been a clearer example of a policy that is supposed to soak the rich but will drench almost all American families.