The 5 owners of the Nifty Fifty’s chain of restaurants were charged by the IRS for tax evasion, according to US Attorney Zane Memeger. The case was announced by Memeger, IRS Acting Special Agent in Charge Akeia Connor with the Criminal Investigation Division, and FBI Special Agent in Charge George C Venizelos. In a statement, Memeger confirmed the charge against the 5, namely Robert Mattei, Leo McGlynn, Brian Welsh, Joseph Donnelly, and Elena Ruiz, was that they hid about $15 million in gross receipts from their restaurants between 2006 and 2010. As a result, they avoided paying about $2.2 million in federal employment and personal taxes.

Robert Mattei, 73 is from Del Ray Beach, Florida, Leo McGlynn, 52 from Swarthmore, Pennsylvania, while Brian Welsh, 48 is from Springfield, Pennsylvania, Joseph Donnelly, 49 from Springfield, Pennsylvania and Elena Ruiz, 46 is from Drexel Hill, Pennsylvania.

Memeger said the entire conspiracy was a long-running plan to avoid paying millions of dollars in personal and employment taxes from their restaurant chain. According to the statement, the 5 owners have not paid taxes since the restaurant was established in 1986. On top of that, the 5 defendants are charged with also claiming tax refunds from income tax return forms they allegedly filed claiming they were due refunds based on the erroneous reporting of their incomes. Besides that, Mattei, McGlynn, Donnelly and Welsh are also charged with bank fraud while McGlynn and Donnelly also face charges of aggravated structuring of financial transactions.

The 5 were charged arising from information received on the conspiracy they were conducting. According to the information, in order to hide their taxable income, the 5 paid workers and suppliers out of unreported income and had false tax returns prepared that under-reported their income and falsely inflated expenses and deductions.
However, the 5 owners issued a statement through their lawyers saying:

"We deeply regret our misconduct and accept full and complete responsibility for our actions. We have been fully cooperative with the IRS to resolve these issues and have repaid all back taxes and penalties. We will continue to run each of our five restaurants in full compliance with the law.

We wish to thank all of our employees, friends, and business partners for their continued support as we move forward. Because this matter is still in the court system, we can have no further comment on this matter at this time."

The defendants each face differing lengths of time in prison if convicted, not including fines and penalties. If they are convicted, Mattei and Welsh face up to 40 years of imprisonment and five years of supervised release, while McGlynn and Donnelly face a maximum sentence of 50 years of imprisonment and five years of supervised release. If convicted, Ruiz faces a maximum sentence of ten years’ imprisonment and three years of supervised release.

The IRS has been probing more than 30 state schools and private nonprofit schools such as Harvard University in its latest efforts to ensure tax compliance. The latest blue chip university to be investigated is Cornell University. Its chief executive, Joanne DeStafano told a congressional committee in Washington that the IRS completed its probe in March. At a hearing on tax-exempt organizations, DeStefano confirmed that the university’s tax filings were examined along with its operations that produce so-called unrelated business income, which is liable for federal income tax.

It is not uncommon for top ivy league universities to engage in operations outside of their academic interests. These include starting or running restaurants, bookstores, sports facilities and even hotels. Although the universities themselves are exempted from tax, these other businesses are not. So when universities open these businesses unrelated to their core academic operations, they are liable to tax.

In a survey conducted among 400 universities in October 2008, the IRS has discovered a lack of tax compliance in these operations run by these universities. The survey included questions on compensation and endowments and eventually led to the audit of more than 30 of the universities, including the University of Texas at Austin and the University of North Carolina.

The IRS director of exempt organizations, Lois Lerner said that the IRS expects to complete their audits within this year. Some universities have already paid back taxes on their businesses as a result of the audits. Among them is Lamar University, which is part of the state university system in Texas. In January, the university paid $9,481 in unrelated business income taxes as well as $23,171 in payroll taxes.

A spokesperson for the university, Simeon Moss confirmed that Cornell University’s tax-exempt status is unaffected and the IRS has taken the university’s 990 return as filed. Form 990 is the tax form nonprofit institutions fill up in their federal tax return.

Cornell University, along with Harvard that is also based in New York are two out of the eight universities in the Ivy League in the US Northeast. Both universities have long histories and were founded in 1865.

The economic recession has made it difficult for many taxpayers to afford paying their taxes. So the IRS has done something to help. On February 24, 2011, the agency created a new program known as the Fresh Start program. To many taxpayers, this program is a godsend as it gives those who owe back taxes the opportunity to consolidate their tax debts and pay them off in a convenient and orderly manner.

Under the Fresh Start program the limit of the tax lien is raised to $10,000 meaning the IRS will only impose a lien on your property once your tax debt exceeds $10,000. More significantly, the Fresh Start program allows for the withdrawal of the lien once your back taxes have been fully paid. This is a vast improvement from the previous system where your lien was merely released upon full payment of taxes. If your lien is withdrawn, it is expunged, meaning it will not show on your credit record at all, thereby making it easier for you to apply for credit and loans after paying off your taxes. However, if you are merely released from your lien, your credit record will show that you had a lien filed against you by the IRS and you were released upon satisfying the lien.

If you wish your lien to be withdrawn even earlier, the Fresh Start program enables this also. All you need to do is enter into a Direct Debit agreement with the IRS that allows the agency to deduct fixed amounts from your bank account to repay your taxes every month. Once you have made several installment payments, the IRS can lift the lien even before your back taxes have been fully settled.

If you are currently paying for taxes in installments you can convert to the direct debit program and have your lien lifted immediately by requesting the IRS to do so.

The Fresh Start program also benefits small business owners. Now such business owners can pay their back taxes in installments if their tax liability does not exceed $25,000. Previously the threshold was only $10,000 meaning if your tax debt exceeds this amount, you cannot pay by installments. But now with the Fresh Start program, you can owe up to $25,000 and still pay by installments over 2 years.

If you wish to file for an offer in compromise, you may now do so if you owe not more than $50,000 in back taxes (the previous limit was only $25,000). The offer in compromise allows you to have part of your tax liability forgiven under certain conditions. Also, the offer in compromise is now open to those who earn up to $100,000 per annum.

But there are caveats attached to the Fresh Start program. For instance, the lien withdrawals are only for individuals and not businesses or other entities, and the program is only meant for use with income taxes. The program is not open to those with delinquent gift, estate or employment taxes.

Many people were rejoicing when the Supreme Court decided in favor of Home Concrete & Supply LLC in their dispute with the IRS over the statute of limitations on tax audits. In that landmark case, the highest court in the land judged that the IRS had up to 3 years to audit taxes, not 6 years as contended by the agency. But before you go throwing a celebration party, you should remember a few things.

Firstly, the statute of limitations is still 6 years under certain circumstances. If you under-declare your taxable income by 25% or more, the IRS has 6 years, not 3, to audit you. Furthermore, the civil statute of limitations on Report of Foreign Bank and Financial Accounts (FBAR) errors or misreports is 6 years plus all criminal cases carry a 6 year statute of limitations also.

In 2010, the tax code was amended so an omission of more than $5,000 in gross income from “specified foreign financial assets” extends the IRS time to 6 years. The law is clear that the 6 year statute applies even if you had filed and disclosed your foreign income sources under the Foreign Account Tax Compliance Act (FATCA). So to each case, the statute of limitations may still be 6 years instead of 3 depending on circumstances.

If you filed your 2006 taxes before the deadline of April 15 in 2007, for example, the IRS has 6 years to audit you because the 3 year statute of limitations had not expired on March 18, 2010 when FATCA was passed. This means the IRS has up to April 15, 2013 to audit you. But for your 2005 taxes that were filed before April 15, 2006 the IRS has 3 years (not 6) to audit you because it was longer than 3 years before March 18, 2010.

However, if you consent to extend the statute of limitations before the 3 years is up (i.e. before April 15, 2009) then the IRS gets 6 years since the extension was not expired yet when FATCA was passed on March 18, 2010.

Another circumstance is if you had submitted your taxes late. For example, if you submitted your 2005 taxes in 2007 instead of 2006 and let’s say the 3 year statute of limitation was still open on March 18, 2010 when FATCA was passed, then the IRS has 6 years to audit your taxes. But if you made a late submission and your submission date was longer than 3 years before March 18, 2010 then the 6 year time limit does not apply and the IRS only has 3 years to audit you unless some other exception to the 3 year statute applies.

Finally, let’s say you submitted your 2005 taxes on time but you under-declared your income by more than 25% and more than $5,000 of that came from a foreign source. This means the statute of limitation in this case is 6 years and the IRS has until April 15, 2012.

Due to the IRS action of taxing foreign assets owned by US citizens, a number of Americans have decided to relinquish their citizenship to avoid paying taxes. Among the more prominent ones is Eduardo Saverin, co-founder of Facebook. Last year, 1,780 Americans gave up their citizenship while the year before only 1,485 did so. In 2009, number was 731 and the year before that, only 226.

Since 2009, the IRS has intensified its efforts of tracking down American-owned taxable assets lodged overseas. This action has resulted in thousands of taxpayers being caught and prosecuted for tax evasion because they have not declared their offshore assets. The number of US citizens renouncing their citizenship started to spike in 2009 after the infamous case of UBS Bank of Switzerland that was fined $780 million in compensation for its role in helping its US customers hide their taxable assets in their bank accounts.

More significantly, the bank was forced to divulge the names of thousands of American clients with bank accounts suspected of tax evasion to the American government. This entire episode came about after an ex-private banker of UBS, Bradley Birkenfeld blew the cover off what UBS was doing and subsequently helped the IRS identify thousands of suspected tax dodgers. This inevitably spooked those having foreign assets.

The number of those relinquishing citizenship is expected to increase next year when more legislation is put in force. Among them is one that makes it mandatory for foreign banks to inform the US government of Americans opening bank accounts with them. Some foreign banks are already prohibiting Americans from opening accounts.

One of those in the list of people announced by the IRS who had renounced their citizenship is Eduardo Saverin, the 30-year old billionaire co-founder of Facebook, that is about to make its shares public. Facebook expects to raise as much as $11.8 billion through its coming IPO, the biggest for an Internet company. Saverin’s share in the company is about 4% which would stand to earn Saverin about $3.84 billion after the IPO. All this money will not be subject to tax now that Saverin has given up his citizenship.

But Saverin will still be subject to an exit tax on the capital gains from his stock holdings, even if he does not sell the shares. Saverin plans to become a resident of Singapore, where he intends to live indefinitely. Singapore does not have a capital gains tax but it does tax certain “foreign-sourced income”.