Skip to comments.Small-Business Owners Fret Over Large IRS Fines
Posted on 09/19/2009 12:24:00 PM PDT by reaganaut1
Five years ago, car-wash owner Orman Wilson set up a pension plan for himself and six employees. For that, he may owe the IRS a $1.2 million tax penalty.
Mr. Wilson, the owner of 19 coin-operated car washes in Houston, says he relied on four advisers, including a certified public accountant, to set up a plan that received approval from the Internal Revenue Service. Then, in late 2007, the IRS found fault with the plan and assessed it $250,000 -- plus special penalties of $1.2 million.
The source of the distress: tax-law changes made by Congress in 2004. At the time, lawmakers were worried that tax shelters, especially from large corporations, were costing the Treasury billions in revenue. To combat it, they imposed enormous fines on taxpayers who failed to tell the IRS of participation in any transaction the agency might consider a tax shelter.
"The fines are not for the shelter itself," says Mr. Brucker, "but merely for failing to file the form disclosing the transaction."
The penalty is $100,000 per offense, per year for individuals and $200,000 for businesses. In order to put teeth into the law, the provisions gave the IRS no leeway in imposing the fines and taxpayers no way to get them reviewed in Tax Court.
As drafted, they hit small businesses particularly hard because their entities of choice, Subchapter S and Limited Liability Companies, can incur both corporate and individual fines for every infraction.
National Taxpayer Advocate Nina Olson, an IRS employee charged with protecting taxpayers' rights, has said the fines "have the effect of bankrupting middle-class families who had no intention of entering into a tax shelter."
(Excerpt) Read more at online.wsj.com ...
“the provisions gave the IRS no leeway in imposing the fines and taxpayers no way to get them reviewed in Tax Court.”
I wonder if the courts will have a bit of say in this. No recourse for a citizen to appeal to another branch of government for relief?
Tell him to apply at ACORN for a job, or send a resume to the White House, he could be the CAR WASH Czar...the fact he is in arrears in his payments on taxes, puts him in top category for consideration. Did he contribute to the Democrats last election? Has he hired any illegal aliens? File for TARP, or some STIMULUS money, there is always a solution, the gub’mint always has solutions to our problems. Always.
The feds doing what they do best: destroying businesses and ruining lives.
Then the azzhats in DC wonder why there’s so much anger out here...
That’s the last thing small business needs to worry about. After their free handout, the banks are now sitting on capital, increasing fees and rates and slashing credit lines, getting ready for the commercial and credit defaults coming their way.
If you own a small business, as I do, you are going to be lucky to stay in business unless you have plenty of operating capital in the next year.
Go through your employees, get rid of any of the liberals that you probably already dislike and are not performing, slash your costs, reduce inventory, increase your cash deposits whenever possible, try to improve any buying advantage possible (I know, a good owner would be doing this already, but do it like your life depends on it, not as a routine) and hold your breath...we are in for a bumpy ride...
Another one of the reasons why Dave Ramsey enveighs against cash value or whole life insurance as being nothing more than a giant rip-off.
Read the article closely, it tells you that ALL the plans that ran into IRS trouble were funded by cash value life insurance plans and that the “experts” advising the businesses received commissions for selling them the plans.
Why should this guy have to pay fines, or taxes at all? OOOOPS...maybe he’s a republican!
This gentleman contributed to the McCain - Palin campaign FYI. Campaign donations are on the internet for all to see.
At almost every level...in almost every way, the government of the United States is completely out of control.
When the government mindset is the “nail” of nationalizing everything, then all that they do is viewed as the “hammer” of morphing to a single-payer employer. In this case, turn the screws (to metaphor switch slightly) on small business... the employees therein will eventually all work for bigger businesses.
How much in penalties and interest did Charlie Rangle pay again?
Is this your default answer for everything? Congress writes laws not the President.
Never mind. We had one and no one is paying attention. What's next?
That’s right - our government - for the people, by the people and TO the people!!!!
I realize you are stating that we will all be govenment employees eventually, but I am not sure how many are going to be willing to work at a car wash and if they did, they would slack off just like at the Post Office and nothing gets done in a timely manner. Now how will Obama pay all those generous Union benefits once we are all under his command and control??
If this happened to me I guess I would just shut down, get a Harley, and join a biker gang.
BTW, you also have to be concerned about LOCKS on the office doors, LOCKS on the building, WHERE are the armed guards, WHAT kind of safety protocol will minimize interaction with deranged (and rightly so) citizens, etc.
I believe that set of tax law changes also ended up devoting 30% of IRS' field audit resources to examining returns filed that claimed Earned Income Tax Credit ~ an item worth about $2 billion.
30%? Madmen wrote that one!
A tax code that’s as complex as ours isn’t just a bad idea, it’s immoral.
I went to a Apple Computer training program in Omaha and sat next to some guy. I asked him what he did for a job before this. He said he worked for the IRS. As I moved away from him I said why did you quit. He said because I used to have to go into the mountains to visit taxpayers at home and people would shoot at me... True story.
There are several counties in the SE where we had to make sure our auditors had civilian state issued license plates before we could risk letting them go there.
Indeed we do. There is already a silent one going on. Many people are doing everything they can to avoid paying, even if it means making less money. Starve the Beast!
Yes they are. I fairly frequently stick a name from a news story into the search at fec.gov to determine political bias. And it is unsurprising to see a small businessman contributed to McCain-Palin.
The owner should send the IRS letter back with a simple note: I invoke the RANGEL RULE!
“Go through your employees, get rid of any of the liberals that you probably already dislike and are not performing, slash your costs, reduce inventory, increase your cash deposits whenever possible, try to improve any buying advantage possible (I know, a good owner would be doing this already, but do it like your life depends on it, not as a routine) and hold your breath...we are in for a bumpy ride...”
Excellent advice. My company has been doing just that for the past year. I, personally, have fired two LibTards, so I’m doing my part to be part of the SOLUTION, not part of the PROBLEM.
just work hard and pay your taxes... /sarc
More fraud from the IRS...
The federal government is totally out of control. The huge code of law for the IRS, the FDA/FTC, Medicare, Interior, EPA, OSHA, and on and on cannot possibly be obeyed. When I looked at a random page of the HR3200 provision, the complexity of its wording was staggering. When reviewing the sections of the code that the bill changes, I realized what we are dealing with. We have a behemoth set of laws that is impossible to reform or reverse. Only a divorce from the beast and starting over will fix the problem.
I am very sad to have to say this, but even if we could remain as we are right now it would take an act of God to make us truly free. Lawmakers would have to repeal laws from now until 2020 or so to even make a start on reversing the juggernaut of legal tools the government uses to protect and wield its enormous power.
The Feds can easily find each of us guilty of something, anything. We are NOT free; we are only allowed to practice a limited form of freedom until government wants to put the hammer down once and for all.
The legacy of freedom bequeathed to us by the Founding Fathers is gone, legislated away by treasonous congresses, presidents and the supreme court.
I live in the mountains... food for thought...
Reminds of the days under the Clintoon IRS regime.
I had relatives and friends who were hauled into IRS for making too much profit, whatever the hell that means, in their small businesses or one person profession.
Those charges disappeared about a week after GW was sworn in for his first term.
If I eat out, I go to a small local place and pay cash. Same with mechanic, groceries etc. Cut out the middle man and starve that beast.
If you take away all the money from those who support Conservative candidates, then only the Liberal(commie) candidates will have money to campaign with.
Not one RED CENT.
In IRS-think, attempting to reduce taxes is de facto Bad Behavior. This kind of rulemaking is particularly evil because it specifically targets citizens who made real, good-faith efforts to operate within the law.
When government views its purpose as extracting the maximum revenue possible, there can be only bad outcomes.
get rid of any of the liberals that you probably already dislike and are not performing, ‘
Walk thru your parking lot and look at bumper stickers.
Standing under the American Flag AND the Gadsden Flag we have in our warehouse, one of the numbnuts who worked out there went on and on about how wonderful he thought Obama was. He is no longer here. Coincidence, I assure you.
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