November 11, 2009

IRS News that Matter

Taxed for Clothes They Wear

Normally, if you are a foreigner on US soil, you are not allowed to work. But there are some foreigners who are involved in certain activities that represent a source of income for them. One example is foreign professional golfers and athletes. Unlike amateurs, competing in tournaments and competitions represents what they do for a living. Therefore, should they be taxed on income they earn on American soil even though they are non-resident foreigners? The IRS certainly thinks so.

There are plans afoot by the IRS to tax these non-resident athletes for the clothes and other accessories they wear during tournaments and sporting events. This is because as sportsmen and sportswomen, they are paid endorsement fees for using and promoting a certain brand of sportswear or product. Hence, these athletes are walking advertisements for the companies behind those brands and products.

At present, these foreign athletes report their earnings from endorsements of products as royalties which are subject to a lower tax rate. But if the new proposed IRS tax laws are passed and enforced, their endorsement income would be subjected to as high as a 35% tax rate.

This would likely come up to a sizeable amount bearing in mind that some foreign athletes have become very successful in their sport in the US. South Korea's YE Yang defeated World no. 1 Tiger Woods in the PGA Golf Championships recently, not to mention seven South Korean women golfers who won a total of 11 major golf tournaments to-date. Major corporate sponsorships of all sorts of golf products are likely to await them.

Tax Cheats Sentenced

Norman and Judith Artzt found out the hard way that cheating the IRS does not pay. They were sentenced for their crime of under-declaring the wages they paid to their employees in the W-2 tax forms.

The Artzts operate a hair salon named Norman's of New York with 40 hairdressers. Over the last few years, they have been paying their employees' wages partly by check and partly by cash. Some were paid entirely by cash. When it came time for declaring their expenses, they only declared the amounts paid by check in the W-2 tax forms and supplied their accountants with information as such. They filed their taxes under the name 'Sasha Inc.', a company in which they were the officers and directors. This was revealed by the US Attorney's Office.

By doing so, they evaded paying $372,713 in payroll taxes on their employees' wages between 2000 and 2004. As a consequence, the couple was sentenced to 18 months' jail followed by 2 years of supervised release. In addition, they were ordered to pay a restitution of $243,379.50.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

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