by Garrett Spangler on June 1, 2011
Budget battles will continue among lawmakers on capital hill throughout the summer and include discussions about where money is provided, where it can be collected, and where spending best serves the economy. Despite increased oversight, a recent report from congressional investigators reveals that abuse has occurred in federal stimulus spending.
According to a report recently released by the Government Accountability Office, at least 3,700 government contractors and organizations have received money from President Obama’s economic stimulus package who currently have outstanding tax debts. As of September 30, 2009, more than $24 billion was reportedly provided to organizations who owe a combined $757 million in taxes.
While the numbers are staggering and should provide at least one good place for the IRS to begin the increased enforcement efforts to recover money from tax delinquents, the cheats account for only around 6 percent of the 63,000 government contractors who obtained stimulus money. It should be noted that this does not include any contractors who may have underreported their tax due so the total figure is actually higher, although unknown.
As a result, the Office of Management and Budget, the group tasked with stimulus program oversight, has stepped up efforts to prevent tax delinquents from receiving federal contracts. Applicants for all future federal contracts must certify that they do not have significant tax delinquency and therefore is deterring many potential abusers from applying and opening themselves up to scrutiny. The Obama administration continues to promote these efforts through the Recovery Act which implements the highest levels of tax accountability in American history. Even with such efforts though, it is undeniable that cheating has and will continue to occur anytime there is money to be made.
by Garrett Spangler on May 9, 2011
A recent report from the Internal Revenue Service indicates that a little over 5,000 people who passed away in 2009 and 2010 filed tax returns with requests for refunds over the last year. Either the zombie apocalypse is upon us and the undead are feeling the pinch of the recession like much of the living, or identity thieves have discovered its easy to prey on those who can no longer report you.
According to IRS estimates, approximately $1.5 million in fraudulent tax refunds were distributed over the last 12 months for the 2009 tax year. Even more astounding is the fact that nearly all of the claims were processed under the Electronic Filing Identification Number (EFIN) of just one tax preparer in Florida. Investigations revealed that the EFIN was actually obtained by a man with no knowledge of the filings other than that he was paid $1,000 to apply for the IRS number.
This is not the first time that identity thieves have pulled such a scam with the IRS. Several years ago a California man was arrested for filing around 250 false returns with claims for refunds, although with less success. At that time the IRS picked up on the scheme quite early because the man claimed more than $2 million in refunds using the identities of far fewer deceased taxpayers and very little was actually paid out.
To shed some light on how this can happen, dead people actually do need to file taxes as well. When someone passes away, a surviving spouse, executor, or other administrator of the estate must file a tax return for the year in which the person died. In addition, an income tax return must be filed for the estate to account for income and expenses occurring after the date of death. Even using a single EFIN is not completely out of the ordinary as attorneys who routinely handle estates matters may file many returns for their various clients over the course of a year. Only a second, although likely legitimate, tax filing for the same deceased person would tip off the IRS to a potential problem.
While the IRS continues to get to the bottom of who it is that made all these false claims, keep your cricket bat at the ready…….you know, just in case.
by Garrett Spangler on May 2, 2011
Anytime there is a downturn in the economy people start to cut some corners and find ways to get creative with their finances. One common place people cut corners is on their annual income tax return and some early numbers from the IRS suggest that the number of fraudulent returns that have been filed for the 2010 tax year have increased considerably over 2009 levels.
An early audit conducted by the Treasury inspector General for Tax Administration revealed an increase of 181% in claims for refunds the IRS believes to be fraudulent. The IRS has used the advancement of technology to focus its review process and screen returns more vigorously than ever. That hasn’t seemed to reduce fraud however, with more filers than ever opening themselves up to additional scrutiny and audits, perhaps without realizing it.
When you prepare your tax returns, here are a few areas where you might want to pay particular care because they are heavily scrutinized by the IRS. First, deductions and credits associated with children are a common source of error and fraud. The Earned Income Tax Credit is one place that has been a large source of fraud, where people tend to decrease their income or claim children they don’t have to increase their credits. Similar to this, child tax credits have been abused with taxpayers again reporting children they cannot provide legitimate social security information for or claiming large adoption credits that they are not entitled to for various reasons.
Another major source of fraud on 2010 income tax returns has been the credits associated with various purchases. Major offenders include first-time homebuyers who purchased homes outside of the eligibility window but still helped themselves to the full $8,000 credit on their returns. Another includes those who purchased new cars, it seems everyone is now driving plug-in electric vehicles despite the dearth of vehicles that meet these strict standards actually reported as being sold by the auto companies.
In addition to specific areas where the IRS has identified increased fraud, a common finding was the shear lack of correctly prepared returns. The IRS found that a great many people decided to attempt to complete their own tax returns for 2010 due to the loss of their job or just to save a few dollars. Unfortunately, with little practice, late tax law changes by Congress, and new complexities faced by those who transitioned to becoming self-employed, many returns were filled with errors.
With the IRS receiving so many electronically filed returns, reviewing them using electronic software of their own, and the federal government in need of funding, you can be sure that more errors will be caught now and in the future. The IRS employs the audit process through the mail in many cases so if you receive an audit letter, be sure to comply the best you can. While it is usually reasonably painless to straighten everything out if you run into minor tax issues, I wouldn’t recommend lying after you’ve been caught cheating, intentional or not.
In the event you have questions or need a little guidance through any tax related issues, give us a call and we’d be happy to give you a hand.
by Garrett Spangler on March 31, 2011
Copyrights are important to allow authors or creators of a literary piece, musical composition, photograph, sculpture, software application, motion picture, or other original work to maintain a set of exclusive rights. Without such a safeguard in place, those who create these various items would have no means of protecting or profiting from their work.
The internet has become a hotbed for both the creation of such works as well as the violation and enforcement of copyrights due to to the ease with which anyone can post, copy or search for content. While one must often take the bad with the good when it comes to new technologies, some companies may be taking the enforcement of copyrights too far.
Getty Images, Inc. is a large corporation who licenses the usage rights of stock images and film footage. While they certainly are entitled to protect their legal rights, over the last several years they have become increasingly aggressive with scare tactics, threatening legal action without a particularly solid position in many cases.
If you own a website you may have received a settlement demand letter from Getty suggesting you are in violation of their copyrights and demanding payment. The letters often include a copy of the allegedly infringing image but then use some rather tepid language to describe the infringement because they are unsure if a copyright violation has actually occurred. They typically ask the recipient to provide documentation that the image is either properly used through a license agreement or prove to them that in fact it is from another source.
The demand letters get much more stern after questioning an image however, often demanding hundreds, if not thousands of dollars for using their work. The letters point to large potential damages if not resolved quickly because Getty understands that most people are scared by legal claims. The demand letters often require payment less than the cost of hiring attorneys to challenge a claim and therefore prey on those unsure how to properly protect themselves.
Unfortunately, innocence is no defense when it comes to copyright infringement. If someone else posted on your blog or created your website, you are still responsible for the images on the site. If Getty or a similar company is threatening you with a lawsuit, ask them for more information about the specifics of the claim and confirm that they are the owner of the image by asking for copyright registration information. If all else fails, contact an attorney because a little representation can go a long way in these types of matters.
Disclaimer: Please note the the information above is not and cannot be relied upon as legal advice for any particular matter. Matters are specific based upon the facts and circumstances of the situation and therefore you should consult an attorney in your state who is familiar with copyright law for information and advice.
by Garrett Spangler on March 16, 2011
President Obama has given the green light to Victoria Espinel, a member of his administration focused on IP enforcement, to pursue several copyright and trademark law changes. The changes sought would increase investigative authority, permit greater penalties for certain crimes, and put terrestrial radio on the same playing field as internet, satellite and other radio services around the world.
The first major change would allow law enforcement to seek wiretaps for criminal investigation of copyright and trademark offenses. While currently in place for various other offenses, this change would extend the opportunities for US law enforcement to “intercept wire, electronic, and/or oral communications” in pursuit of copyright and trademark offenses. The administration’s legislative recommendations indicate this change should specifically help to target organized crime enterprises engaged in these types of illegal activities.
The second change would increase penalties for various copyright and trademark related crimes. The target areas are associated with the manufacture and distribution of counterfeit drugs and adding to the current definition of felony piracy of copyright protected materials to include “streaming” in addition to “reproducing” and “distributing” such works. These changes target the flood of counterfeit drugs pouring into the country in recent years (although we’ll see if it can reduce the number of “cheap v1agr@” emails in my spam folder) and the migration of websites to stream unlicensed audio/video material instead of offering it for download like past peer-to-peer file-sharing sites and applications.
The final major change would force terrestrial airwave radio stations to pay the artists who record the music they play. While they currently pay the authors of songs, bands and singers who perform the music get nothing. The radio broadcasting lobby is one of the strongest in Washington and has successfully blocked previous such attempts on grounds that they are promoting the artists by playing their music. Satellite and internet radio are required to pay the recording artists however and pressure from other nations around the world who refuse to pay US artists anything until their artists also get paid may finally be enough to address this monopolistic exemption for which removal is long overdue.
We shall see whether such recommended changes are implemented but it appears that Obama has focused his requests on areas that are almost universally accepted by those in the IP community. Other, more highly controversial issues, seem to have been avoided until the administration’s potential second term.
by Garrett Spangler on March 4, 2011
Yes, the answer is yes of course, but first let’s be clear who may rightfully be asking such a question.
According to IRS records, nearly half of US households owed no federal income tax in 2009 and the numbers appear to be similar for the 2010 tax year. While most of these filers need to submit tax returns that include credits and deductions to get to such a place, many have too little income to require filing at all.
So if you are one of the great many households in our country who does not need to file a personal income tax return, why bother?
The answer is simple, the IRS probably still has money that was withheld from your wages or which was submitted as an estimated quarterly payment that you will not receive unless you file. In addition, many people do not know that certain credits actually entitle filers to a refund in excess of taxes withheld or paid during the tax year.
Still not sure it’s worth the effort of submitting a 1040?
Let’s just look at the 2007 tax year for a second. The IRS recently released that it is currently holding over $1.1 billion dollars in potential refunds for non-filers. Don’t wait too much longer to submit a return though because Uncle Sam will only hold the money for three years, so any unclaimed refunds for 2007 will become property of the federal government after April 18, 2011. 2008 and 2009 likely have similar numbers so be sure to get those tax forms in and claim any refund that may be due to you.
Finally, even if you made no money and are sure you are not due a refund, file anyway. It demonstrates a continuity in filing and limits the governments opportunity to question your tax history. Now what are you waiting for, just 45 days until tax day…..
by Garrett Spangler on February 23, 2011
Google isn’t known for running contests but yesterday they announced that they will be awarding a top prize of $5,000 to the creator of the best tax infographic, with smaller awards going to runners up who earn special distinctions.
The efforts of individuals across the country will no doubt be varied in size, type, format, and overall style. The goal, however, is simple, to make it easier for all citizens across the country to understand where tax money is spent once the annual duty of paying income taxes is complete.
The challenge is offered jointly by Google and Eyebeam and entries should be constructed using the data provided at the website WhatWePayFor.com. Acceptable formats will include interactive web apps, graphic images, videos and others. The only other entry requirement is that the offerings meet a minimum standard of quality so they can be properly reproduced.
So if you happen to be a tax professional with little other work to do in the weeks remaining before 2010 tax returns are due, it’s time to grab your crayons and your pencils. Google is waiting for your fancy tax picture page entry by March 27, 2011.
For more information, visit the challenge website.
by Chris Erb on February 17, 2011
I use a lot of cloud services, both individually and professionally, and I certainly enjoy the convenience of keeping files on MobileMe or notes on Evernote. One of the big selling points of these services is security ad reliability, given that it’s much more difficult and expensive to set up, say, your own offsite-accessible data storage system than it is to subscribe to Dropbox. Be aware, though, that there’s one big security risk which has absolutely nothing to do with technology, and which may mean you’re exposing your data more than you’d like. That loophole is the right to subpoena information from third parties as part of a lawsuit or a civil or federal investigation.
In order to get at information located on your home computer, government authorities typically need a search warrant, which is relatively difficult to get. Getting information from your cloud provider is much easier - except with respect to certain content (notably e-mails) all that is required is a subpoena, which is much easier to obtain, and law enforcement will often seek that information with a gag order, meaning your service provider can’t even tell you it’s happening. Twitter’s Wikileaks battle notwithstanding, your service provider interest in spending money on lawyers to defend your information may not be at the level you’d hope. That’s understandable from their perspective, given that you are paying them nothing or a relative pittance compared to legal fees, but it may not be in your best interest.
Civil lawsuits are a little different, in that it’s much more difficult to get your information from a service provider without your knowledge, and much easier to get at the information on your home computer. Many cloud services do notify subscribers of subpoenas before complying, but some don’t, and the aggravation and cost of trying to prevent the service provider from providing that information (”quashing” the subpoena) may well be significant.
Now, this doesn’t mean you shouldn’t use the cloud, but you should be mindful of what’s there, how long you keep it there, and whether you are at all concerned that someone adverse to you might be interested in getting their hands on it.
by Chris Erb on February 15, 2011
Most Americans are vaguely aware of the US system of “discovery,” which allows litigants to seek information from one another and even third parties about the substance of the lawsuit. Many people don’t realize that these provisions extend to all of their online activities as well, including social media such as Facebook and Twitter.
That’s right - although those posts of the last ski trip may look cool, they also may be used to undermine that personal injury lawsuit you brought a few weeks ago stating that you “couldn’t walk or enjoy sports” due to your injuries. Similarly, if those ski trip posts were put up during work time, an employer being sued for back wages may subpoena those records to determine whether you were actually working while you were at work.
There are limits to the power to subpoena, most notably that online service providers cannot provide the content of e-mails in response to a civil subpoena, but otherwise most everything you’ve done with your online service provider is up for grabs. As reported by Evan Brown at Internet Cases, a California court recently found that customers can challenge these subpoenas, and some courts have decided that Facebook content which was not publicly available should be accorded some slightly higher level of protection. It’s unclear what level of protection that should be and, more importantly, tenacious lawyers have devised workarounds, gaining almost unfettered access to social media information.
In short, if you don’t want information getting into the hands of your adversaries, don’t post it on social media.
by Kelly Phillips Erb on February 14, 2011
When is a kiss just a kiss? Harlequin Enterprises believes that a kiss is much more than *just* a kiss and is taking steps to patent it. The Canadian-based book publisher has filed an application with the U.S. Patent office to patent “kissing-patent” (downloads as a pdf). In its seven page application, Harlequin describes “The Kiss” as:
This invention, The Essential Romantic Kiss (”The Kiss”), involves a method by which two people can reciprocate their romantic feelings towards one another in a manner that deepens attachment, provides pleasure and promotes physical and emotional well‐being. Further, this method improves with repetition, can be performed at virtually any time and, if registered by the US Patent Office, will be freely available to all persons everywhere in the interests of enhancing romantic love and generally making the world a better place.
Freely available? Whew, no licensing fee required. If the patent is granted, Harlequin has taken pains to assure the kissing public that the kiss will remain in the public domain.
But will the patent be granted? Probably not. Harlequin likely has a few problems with its application which was filed last week with the USPTO as serial number 61/438360. Most noteworthy is that there’s nothing new here (the legal term is “point of novelty”). To patent an idea, it must be new - or a new take on an existing idea. It doesn’t appear that Harlequin can demonstrate that it’s take on the kiss is anything new.
But it is raising eyebrows - and the profile of Harlequin - on this, the most romantic day of the year. Harlequin has even devoted a website to their cause and introduced a contest encouraging couples to submit photos of their own unique kisses.
So what do you think? Great idea or great PR stunt?
