Posts Tagged ‘Zerjav’

IRS bags a Tiger.

Monday, July 1st, 2013 by Joe Kristan

20130701-1A St. Louis-area tax advisor who more or less successfully fought an IRS attempt to close down his practice has been more effectively taken out of the 1040 business, reports stltoday.com:

A Wildwood tax advisor, Frank L. “Tiger” Zerjav Jr., was sentenced to 18 months in federal prison Thursday for evading his own taxes.

Prosecutors say that Zerjav, 40, of Wildwood, used multiple companies to collect more than $850,000 in income and then deducted  personal expenses from those companies in a bid to dodge taxes  from 2001-2004.

The IRS attempted to shut down the Zerjav tax practice in 2008 on the basis of spectacular allegations that the practice helped clients form S corporations to hold personal possessions and to deduct personal expenses.  Mr. Zerjav and his father fought the IRS and ended up getting a favorable settlement, considering the initial allegations.

Mr. Zerjav pleaded guilty to reporting much less taxable income than he incurred.  For example, he pleaded guilty to reporting taxable income of $43,124 in 2001 when his taxable income was actually $210,268.  The indictment also said he altered Quickbooks records to conceal his taxable income when they were subpoenaed by a grand jury.  He pleaded guilty to counts 1-4 of the indictment.

So while the IRS didn’t get what they wanted when they first tried to shut down the Zerjav practice, this might do the trick.

Update, 7/3/13.  From the U.S. Attorney’s tax release (my emphasis):

According to court documents, during 2000-2007, Frank L.  “Tiger” Zerjav, Jr., and his father, Frank L. Zerjav, Sr., who is a CPA, were  the principals in two entities: Zerjav & Company, PC, a full service accounting firm that primarily prepared business and personal tax returns, and  the Advisory Group USA, LC, which offered tax planning and asset protection  strategies to clients.  Tiger Zerjav  managed the activities of the ccountants working at the firm and advised  existing clients. Through 2003 he also prepared returns and reviewed the returns  prepared by firm ccountants.  Clients of  the Advisory Group included many small business owners and self-employed  individuals.  They were typically advised  to create S-corporations into which the income from their businesses would be  funneled.  Since the net income from an S-Corporation flows through to the owner for inclusion on the owner’s personal  income tax return, there is an obvious incentive to maximize deductions on the  S-corporation return.  Tiger Zerjav used  this strategy in preparing his tax returns for the years 2001 through 2004.

Just because the man in the patent medicine wagon drinks a lot of what he sells, that doesn’t mean it works.

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Tax Roundup, 12/21/2012: Plan B breaks, Tiger tamed.

Friday, December 21st, 2012 by Joe Kristan

20121221-1Plan C through Z?  House Speaker Boehner’s effort to pressure the White House into compromise with “Plan B,” a proposal to retain 2001 tax rates on incomes below $1 million, died last night.  The Speaker cancelled a vote on the plan when it was clear that it lacked enough support to pass.  The Wall Street Journal reports:

After pulling his bill without taking a formal vote, Mr. Boehner  unexpectedly disbanded the House until after Christmas, leaving behind
uncertainty about whether Congress and President  Barack Obama would be able to avoid $500 billion in spending cuts and tax increases that begin in January.

So what now?

“The House did not take up the tax measure today because it did not have sufficient support from our members to pass,” Mr. Boehner said in a written statement after a brief meeting with House Republicans. “Now it is up to the president to work with Senator Reid on legislation to avert  the fiscal cliff.”

Is it time to panic?  Will we see a filing season delayed until the end of March, a big 2012 AMT hit, and tax increases all around?  Joe Weisenthal at Business Insider says we aren’t over the cliff yet:

Indeed. If Boehner couldn’t even get the GOP to support a law that would let taxes revert on millionaires, how is he going to get GOP support on a deal that would let taxes revert on those making $250K or $400K, as the President would like to sign?

Here’s the thing with that. Boehner doesn’t need to get all of his caucus, because in the end, if Obama supports the ultimate compromise, then it’s safe to say that the Democrats will bring about 100+ votes in the house to support the bill. And this was always true. It was always the case that the eventual compromise would see Boehner lose 70 or more Republicans, to be made up with Democrat support. So nothing changes on that front.

There’s 10 days left before 2012 expires.  Even then it’s possible that they will make a retroactive deal next year with the new Congress.  The legislative and leadership malpractice continues.

Fiscal Cliff Notes:

TaxProf,  The Competing Obama and Boehner Tax Plans

Kay Bell, Republicans reject Boehner’s fiscal cliff Plan B, House breaks for Christmas

TaxGrrrl, Boehner Fails To Push Through Plan B Before House Walks

Christopher Bergin,  Fiscal Surrender (Tax.com):

So, I would suggest that while General Boehner wants things to look like  he is negotiating a budget deal, he is actually seeking the best surrender terms that he can get. And if the President is a good enough general to understand his position, he will not try to over-exploit it.

Paul Neiffer,  Farmers Might Delay Higher Tax Rates for Three Years?  Thanks to income averaging, a trick available only for farmers,  “…you might be able to earn $1 million from farming and have most of it still subject to the old lower tax rates” if rates go up next year.

Nanette Byrnes,  Blue states lose: how avoiding the U.S. fiscal cliff hits some states harder than others (Tax Break)

Tax Policy Blog, Tax Cut Expiration Would Impact States Unevenly

Janet Novack,  A Closer Look At Boehner’s Plan B: Tax Hikes For Parents And Workers

Howard Gleckman,  Should Working Class Families Pay Higher Tax so High Income People Can Pay Less? (TaxVox)

Jim Maule, The Postponed Pain of Foolish Tax and Spending Decisions

 

St. Louis area preparer “Tiger” Zerjav pleads guilty to tax crimes.  A St. Louis-area CPA who survived an IRS effort to shut down his practice through a civil suit lost a much bigger fight yesterday.  Frank “Tiger” Zerjav pleaded guilty to four tax crime counts in Federal District Court. Courthouse News Service reports:

Frank L. “Tiger” Zerjav Jr., 39, of Wildwood, Mo., pleaded guilty to  four counts of tax evasion from 2001 to 2004, prosecutors said.
     He  and his father, Frank L. Zerjav Sr., were principals in two entities:  Zerjav & Company, a full service accounting firm, and the Advisory  Group USA, which offered tax planning and asset protection strategies.      Zerjav admitted that he funneled his income into several S-corporations and failed to include that income on his tax returns.

The IRS attempted to enjoin the Zerjavs from tax practice in 2008, alleging that they set up S corporations for their clients and then deducted personal expenses on corporation tax returns — including a “Precious Moments” figurine collection.   The Zerjavs settled under what appeared to be favorable terms in 2010.

The plea agreement is not yet public.  Sentencing is set for March 26RelatedCopy of indictment.

 

Jason Dinesen, New Preparer Requirements on Earned Income Credit = Higher Fees for Clients.  That’s on top of the increase in fees that will result from the massive contraction of the preparer industry that we may be in for thanks to the IRS preparer regulation regime.

News you can use:  Pot Business May Be Legal In Washington State But There Are Still Rules (Peter Reilly)

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The Critical Question:  Are Holiday Weddings a Form of Tax Planning? (Jana Luttenegger, Davis Brown Tax Law Blog):

Your  marital status for tax purposes is determined as of December 31. That means if you get married on New Year’s Eve, you are considered married for the entire year and can file as a married couple. Likewise, if a divorce is finalized by the end of the year, you will be considered unmarried for the entire year. Trust me, I am not the  only one that has wondered if certain people getting married on New Year’s Eve did it for tax purposes.

It’s a special Friday Buzz at Robert D. Flach’s place!

Madoff’s brother sentenced on tax charges (Wall Street Journal, via Going Concern)

 

Not so Fat Joe not so good at taxes.  A rapper who performs as “Fat Joe” is in tax trouble, reports AP.  The story says Joseph Cartagena pleaded guilty yesterday to not reporting nearly $3 million in income over two years.

Oddly, he’s not so fat, according to the story:

Wearing a navy suit, Cartagena looked fit and considerably slimmer than the former size that had earned him his rapper nickname. He has been very public about his efforts to shed weight after fellow rap stars died from obesity-related issues and was recently in Newark to speak to schoolchildren about health and fitness.

It’s nice that the schools find such good role models for the kids.

 

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Tax Roundup, 12/7/2012: You can’t soak the rich without soaking employers. And: Baby Insane Crips?

Friday, December 7th, 2012 by Joe Kristan

When you tax “the rich,” you tax business.  That’s not going to help a struggling economy, but that’s where we’re going.  The TaxProf reproduces a great Congressional Budget Office chart that shows how how business income has moved from corporate returns to individual returns, mostly through the use of “pass-through” entities like S corporations, partnerships and LLCs:

 

Remember when the IRS Commissioner said they are up against sophisticated criminals?  Not so much,  From the LA Times:

Authorities arrested 11 people and seized piles of cash, guns and vehicles Thursday following an investigation into an alleged $1-million tax fraud scheme operated by a Long Beach street gang.
Thursday’s arrests were the result of “tedious investigative work,” and targeted the Baby Insane Crips, as well as family members and acquaintances, according to Long Beach Police Chief Jim McDonnell. Gang members allegedly used stolen Social Security numbers and other personal information to file false tax returns and then funneled refunds to family members and acquaintances.

When the “Baby Insane Crips” can defeat your financial controls, your controls aren’t that good.  Related: Russ Fox,  Why Rob Banks?

 

Indictment of St. Louis CPA unsealed.  The indictment of St. Louis-area CPA Frank “Tiger” Zerjav has been made public.   Mr. Zerjav survived an IRS attempt to shut down his practice via civil injunction.  This is much more serious, alleging the use of falsified Quickbooks files to conceal taxable income.

Bill Straub,  5 Ways The Fiscal Cliff Drama Could Play Out. (Via Instapundit)

Anthony Nitti,  The Top Ten Tax Cases Of 2012, #4: S Corporation Reasonable Compensation – How Much Is Enough?.  The much discussed Watson case.

 Jack Townsend,  Is Restitution a Criminal Penalty Requiring the Jury to Speak?

 

Patrick Temple-West,  Some in GOP urge lawmakers to back tax hikes for changes in safety-net programs, and more

David Brunori, The Rich Will Pay for Our Sins.  For now.  But not forever; the rich guy isn’t buying. (Tax.com)

Christopher Bergin,  Fool’s Gold and Loopholes:

There are no silver bullets that can fix the fiscal distress facing our nation. The fact that our politicians are trying to convince us to the contrary is not productive and shows that they are small leaders. Unfortunately for us, the chances that leaders who think small can solve big problems are not good.

It’s not about solving our problems, to them.

 

It would make putting up with the politicians easier, anywayDude, Should Marijuana Be Legalized and Taxed?  (Howard Gleckman,  TaxVox)

That makes it a better Friday: Robert D. Flach’s Buzz, SPECIAL FRIDAY EDITION

 

News you can use: The Simpsons’ Montgomery Burns explains (sorta) the fiscal cliff (Kay Bell)

Cruel and unusual punishment:  Brazil Prison Gang Conducted 10-Hour Conference Call (Via Going Concern).   Egads.  I’d rather face thumbscrews.

If she were in Congress, I would believe it.   Ex-Chelsea selectwoman accused of tax fraud claims she is illiterate.  A novel tax evasion defense.

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Tax Roundup, 11/30/2012: IRS makes life difficult for ID-theft victims and Americans abroad, but they make compliance hard for foreigners too!

Friday, November 30th, 2012 by Joe Kristan

When your identity is stolen, the IRS will be happy to bounce you around the bureacracy.  The Taxpayer Advocate testified yesterday at a House hearing on identity theft.  The IRS, which does a bang-up job of rapidly mailing fraudulent refunds, is less streamlined when it comes to helping taxpayers whose identities are stolen:

“Yet today the IRS is moving backward toward a decentralized approach, creating specialized identity theft units within 21 separate functional areas,” Olson told the House Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management. “If, as seems likely, the IRS reduces the role of the IPSU and directs taxpayers to deal directly with the 21 specialized units, I am deeply concerned that we will revert to back where we were in 2008, with large numbers of taxpayers that have cross-functional issues unable to get their problems resolved without multiple contacts with multiple functions, and that would in my opinion be a disaster for the victims.”

She says that the IRS will have to choose between fast refunds and stopping fraud:

Specifically, we may need to ask all taxpayers to wait longer to receive their tax refunds, or we may need to increase IRS staffing significantly. Under current circumstances, I have come to the conclusion that it is simply not possible for the IRS both to process legitimate returns rapidly and to combat refund fraud effectively at the same time.

So it’s too much to ask for the IRS to make better use of existing resources by not wasting them on the futile and expensive return preparer registration program — a program unwisely supported by the Taxpayer Advocate.


IRS makes doing business in the U.S. even more of a hassle for foreigners.  The IRS and Congress are doing their best to make it impossible for Americans to do business abroad with FATCA and the offshore compliance jihad.  Now they are doing a bit of the same for foreigners trying to do business here with new rules for International Tax Identifiction Numbers (ITINs).

ITINs are needed when foreigners invest in US real property or other assets where a US tax identification number is needed.  U.S. taxpayers just use their Social Security numbers.  The process is a hassle, with exacting documentation requirements that often require applicants to send passports to the IRS for extended periods while the IRS processes the paperwork.

While the new rules provide more options for applying for the paperwork, they now make the ITINs expire after five years, requiring taxpayers to repeat the whole process to stay in tax compliance.  This hassle isn’t just an issue for offshore taxpayers; it also makes compliance more difficult for U.S. taxpayers with offshore investors.  Just another little effort by the IRS does to make staying legal as difficult as possible.

Related: Trish McIntire,  Finalized ITIN Rules

 

The injunction didn’t go through, so on to the indictment.  A few years ago the IRS tried to close down the practice of a St. Louis-area tax preparer after making spectacular allegations of malfeasance.  The effort ended in a settlement that looked much like a victory for the preparer.  The IRS apparently didn’t take that well.  Stltoday.com reports:

Frank L. “Tiger” Zerjav, Jr., 39, of Wildwood, has been indicted for allegedly submitting four years of false tax returns and trying to dodge $182,000 in taxes, the U.S. Attorney’s office said Thursday.

Zerjav was indicted on four charges of federal income tax evasion for the returns covering 2001-2004. He also faces an obstruction of justice charge for allegedly producing altered computerized accounting records after receiving a grand jury subpoena.

They couldn’t put Mr. Zerjav out of business through civil procedures.  A tax fraud conviction would do the trick.  They’ll need to make a much more convincing showing than they apparently were able to do on the injuction effort.   This does remind us that if you get on the bad side of the IRS, your own filings had better be squeaky clean.

 

Better this fiscal cliff than the next, bigger one?  Bring On the Fiscal Cliff! (Megan McArdle):

Unless something changes, we’re headed toward one of two uncomfortable places. Either we veer over the fiscal cliff and the economy crashes—or we keep going down the road we’ve been taking for more than a decade, delaying hard choices while assuring voters that no really hard choices need to be made. That road probably ends in an even nastier smashup.

So how are Iowa’s congresscritters dealing with this nasty reality?  “Senator Harkin says the “fiscal cliff” doesn’t exist.” (Radio Iowa)

Howard Gleckman,   What to Read While Hanging Out at the Fiscal Cliff (TaxVox)

Richard Morrison,   The Tax Rate Paid by the Top 1% Is Double the National Average (Tax Policy Blog)

Martin Sullivan,  How To Limit the Deduction for State and Local Taxes (Tax.com)

Jim Maule, Tax Rates and Deduction Caps

 

Jack Townsend,   Major CA2 Decision on E&Y Tax Shelter Convictions.  Two E&Y guys go free.

Jana LutteneggerTax Implications of Holiday Bonuses (Davis Brown Tax Law Blog)  Don’t think that Wal-mart gift card for the employees is tax-free.

Kay Bell,  Lottery dreams and tax realities

The Critical Question:   How Much Tax Would You Owe On A $550 Million Powerball Jackpot? (Janet Novack)

Brian Strahle,   DC Combined Reporting and the Real Estate Investment Industry:  Unintended Consequences?

Tax Trials,  Michigan Court of Appeals Rejects IBM’s MTC Election

 

Robert D. Flach, at his “The Tax Professional” blog, is not thrilled with the “due dilegence” requirements for returns with the Earned Income Tax Credit:

I just posted about the fact “that the IRS is getting more out of hand with its ‘due diligence’ requirements for tax preparers who are claiming the Earned Income Tax Credit for clients” here in “WE ARE NOW NOT ONLY TAX PREPARERS, BUT SOCIAL WORKERS AS WELL!”, which was a response to Trish McIntire’s post “EITC Checklist Expanded” at OUR TAXING TIMES.

At the seminar we reviewed in detail the new Part IV “Due Dilligence Requirements” on Pages 3 and 4 of the form.  In my opinion the new hoops that we are required to jump through are TOTALLY RIDICULOUS!

Like with the preparer regulations, honest preparers are saddled with rules they don’t need in response to tax cheaters who will ignore the rules anyway.

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Roth IRA plan fails for Lake of the Woods investors.

Wednesday, June 20th, 2012 by Joe Kristan

Wikipedia photo

A few years ago the IRS tried to close down a St. Louis-area tax firm based on spectacular charges of book-cooking and improper deductions.  The firm survived, but the pain lingers for their clients.  When the IRS goes after a preparer, pretty much all of their clients get examined to build the IRS case.  That led to bad news in Tax Court last week for a Missouri couple.

The couple, the Repettos, invested in some real estate development activity at Lake of the Woods in the Ozarks.  The St. Louis firm had the couple set up two C corporations, “Yolo” and “WGR,” to be owned by their Roth IRA.  The C corporations were to provide “services” to the real estate company for $4,800 month.   The services:

assistance with entering accounting information into the computer accounting application quickbooks; assistance with computer; assistance with printing reports; accessing internet for material research; processing email; soliciting and receiving bid [sic] from potential subcontractors; assistance with marketing communication; assistance with interior selections; assistance with mail processing; basic office support such as answering telephone, returning phone calls, and sending/receiving packages.

The effect was to get $57,600 into a Roth IRA annually, where the usual Roth limit is $5,000 per year.  The IRS called foul, and the Tax Court upheld the call.  The court said that there was no real substance to the Roth-owned corporations:

The invoices in the record strongly support our conclusion that the services agreements and payments were mechanisms to transfer value to the Roth IRAs. The record contains only two invoices, for $4,800 and $4,000, for the services that Yolo allegedly performed for SGR. The invoice for $4,800 bears as its date a notation “Monthly 2005″, and the invoice for $4,000 bears as its date a notation “Monthly 2006″. The invoices describe the allegedly provided services as “Services for Administrative support”, “Office support”, “Internet: email processing, material research, marketing information”.

The record contains only one invoice for services that Yolo allegedly performed for WFR. The invoice is for $2,116, and it describes the services as “Services for administrative support” and “Office support”. This invoice also bears as its date a notation “Monthly 2005 and 2006″. There are no invoices issued by WFR to SGR in the record.

We agree with respondent that petitioners have failed to prove that the payments under the services agreements were necessary or reasonable. In addition, SGR’s and WFR’s form invoices fall short of satisfying the substantiation requirements of the Code. We sustain respondent’s disallowance of the deductions SGR and WFR claimed for facilities support.

A similar pattern involving a Kansas City-area preparer exploded in Tax Court last year.  As in the Kansas City case, the Tax Court here upheld penalties for the taxpayers — in this case for failure to properly disclose a “reportable transaction.”

The Moral?  When the IRS goes after your preparer, your return may get caught in the crossfire.  The IRS is on the warpath against preparers that it perceives as abusing the system, so keep that in mind if you are considering a preparer who seems to be doing things nobody else is willing to do.

Cite: Repetto, T.C. Memo. 2012-168

Anthony Nitti has more.

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