Stallone sues Warner Bros. over accounting for ‘Demolition Man’

Actor Sylvester Stallone and his production company are suing Warner Brothers over the movie studio’s accounting for the 1993 movie Demolition Man.

According to Stallone’s contract, he was due 15 percent of the gross earnings of the movie once it earned over $125 million, but the suit brought by his production company, Rogue Marble Productions, alleges that the studio simply stopped reporting to it after 1997, and when explicitly asked for a profit participation report in 2014, Warner Bros. said that the movie was still $66.93 million below the payout threshold.

When Rogue Marble questioned that reply, it claims, the studio sent along a check for $2.82 million with a one-page statement that “did not contain any detail for the figures presented, nor did it contain any detail covering the reporting period since the last statement” in 1997.

Stallone and Rogue Marble are seeking a complete accounting of the movie’s earnings from tickets, DVD, VHS and BluRay sales, and other sources, with the expectation that that will reveal that Stallone — “one of the greatest American talents of the last and present century,” as the suit describes him – is owed significantly more than the $2.82 million he was sent.

“The motion picture studios are notoriously greedy,” the suit notes. “This one involves outright and obviously intentional dishonesty perpetrated against an international iconic talent.”

Through a spokesperson, Warner Bros. declined to comment.

Voices Sorry, America — your taxes aren’t high

(Bloomberg) Americans generally feel they’re being over-taxed, especially around this time of the year. Even their president agrees.

“With lower taxes on America’s middle class and businesses, we will see a new surge of economic growth and development,” Donald Trump said this month, expanding on an earlier promise to cut Uncle Sam’s bill “massively.” But the reality is that the average U.S. worker pays quite a bit less than he would elsewhere in the developed world. And what’s more, this has been the case for a long time.

The Organization for Economic Cooperation and Development analyzed how 35 countries tax wage-earners, making it possible to compare tax burdens across the world’s biggest economies. Each year, the OECD measures what it calls the “tax wedge,” the gap between what a worker gets paid and what they actually spend or save. Included are income taxes, payroll taxes, and any tax credits or rebates that supplement worker income. Excluded are the countless other ways that governments levy taxes, such as sales and value-added taxes, property taxes, and taxes on investment income and gains.

Guess who came out at the top of the list? No, not the U.S. At the top are Belgium and France, while workers in Chile and New Zealand are taxed the least. America is in the bottom third.

A single worker earning an average wage in Belgium ends up paying a tax rate almost eight times higher than the average single worker in Chile, the OECD found.

But one simple number can be deceiving if you’re trying to paint a national picture. Married people and those with children tend to pay different tax rates than single, childless taxpayers. And in most countries, including the U.S., the well-off pay far more than lower-income people.

When the OECD analyzed married couples with children, the rankings looked a little different. New Zealand ends up with the lowest rate, while France ranks number one.

But let’s get back to America. The average single U.S. worker with no kids earned $52,543 last year and paid a combined $13,649 in payroll taxes, federal income tax, state and local government taxes. Their employer pitched in another $4,020 in payroll taxes. That overall rate, of 31.7 percent, might seem like a lot, but it’s more than 4 points below the OECD average.

In every other scenario analyzed by the OECD in its 584-page “Taxing Wages” report, the U.S. tax burden was also below average, from 3 points to almost 6 points depending on the taxpayers’ wages, marital status, and number of children. In fact, the tax burden on most American workers hasn’t budged much over the last two decades, despite tax cuts under former President George W. Bush and upper-income tax hikes under former President Barack Obama.

Workers in two of the world’s highest-taxed countries did get some relief last year. The average tax burden for singles fell by 2.5 percentage points in Austria and by 1.3 points in Belgium from 2015 to 2016. Otherwise, the OECD data suggest that a country’s tax burden usually stays remarkably consistent from year to year and decade to decade.

The only reliable way to change your tax burden may be to move.

Jersey Shore’s ‘The Situation’ indicted on additional tax evasion charges

Reality TV star Michael “The Situation” Sorrentino and his brother Marc are facing more tax evasion charges in a long-running case.

The U.S. Justice Department’s Tax Division in New Jersey announced the additional charges Friday against the former star of the MTV reality series “Jersey Shore” and his brother. The Sorrentino brothers were originally indicted in September 2014 on charges alleging they failed to pay taxes on $8.9 million in income received from promotional activities (see Gym, tan, laundry –and tax: Jersey Shore’s ‘The Situation’ charged with failure to pay taxes). Their tax preparer, Gregg Mark, pleaded guilty in December 2015 (see Tax preparer for Mike ‘The Situation’ Sorrentino pleads guilty in tax fraud case).

Friday’s superseding indictment against the Sorrentinos includes new charges against both the brothers. Michael Sorrentino is now also charged with tax evasion and structuring funds to evade currency transaction reports, while Marc Sorrentino has now been charged with falsifying records to obstruct a grand jury investigation. An arraignment is scheduled for April 17 in a Newark federal court.

“Michael Sorrentino will enter a not guilty plea on April 17, 2017, and will vigorously contest the allegations in court,” said attorney Kristen Santillo of Krovatin Klingeman LLC in Newark. Marc Sorrentino’s attorney did not immediately respond to a request for comment.

The superseding indictment alleges that the brothers conspired to defraud the United States by not paying all federal income tax owed on approximately $8.9 million that Michael earned between 2010 and 2012. The brothers allegedly filed false tax returns understating their gross receipts, claiming bogus business deductions, disguising income payments made to the brothers and to others and underreporting their net business income. The Sorrentino brothers also allegedly commingled funds among their business and personal bank accounts and used the money from the business bank accounts to pay for personal items, such as high-end luxury vehicles and clothing.

Michael Sorrentino allegedly made multiple cash deposits on the same day in amounts less than $10,000, in different bank accounts he controlled so he could evade the banks’ reporting requirements. Banks are typically required to file reports with the U.S. Treasury for any cash deposits they receive over $10,000 identifying the person who conducted the transaction, and for whom the transaction was completed.

After being served with grand jury subpoenas seeking the books and records of the brothers’ businesses, Marc Sorrentino allegedly altered and reclassified taxable payments to himself as non-taxable payments and as legitimate business deductions before handing over the books and records to the grand jury.

If convicted, the Sorrentino brothers face up to five years in prison on the conspiracy count and three years for each count of aiding in the preparation of false tax returns. Michael Sorrentino also faces up to 10 years in prison for each structuring count and five years for the tax evasion count. Marc Sorrentino faces up to 20 years in prison for obstruction. Both men also face a period of supervised release, restitution and monetary penalties.

IRS revives private debt collection program

The Internal Revenue Service is relaunching the much criticized private debt collection program this month after Congress required it to do so as part of legislation passed at the end of 2015.

The IRS said Tuesday the program will be getting underway this month, starting with a few hundred taxpayers who have owed debts for years and received repeated notices from the agency. Four private debt collection companies have been contracted to help collect debts on behalf of taxpayers, but the IRS said it has put in place protections to safeguard taxpayers from harassment and to avoid confusion with scammers pretending to call from the IRS.

“The IRS is taking steps throughout this effort to ensure that the private collection firms work responsibly and respect taxpayer rights,” said IRS Commissioner John Koskinen in a statement. “The IRS also urges taxpayers to be on the lookout for scammers who might use this program as a cover to trick people. In reality, those taxpayers whose accounts are assigned as part of the private collection effort know they have a tax debt.”

Taxpayers assigned to a private debt collection agency will have had multiple contacts from the IRS in previous years and still owe unpaid taxes.

The program will start this week with approximately 400 taxpayers receiving mailings, followed by phone calls. Each of the four debt collection agencies will get around 100 taxpayers to contact initially. Later in the spring and summer, the program is expected to grow to thousands per week, if all goes well. Taxpayers with overdue taxes will continue to receive multiple contacts, letters and phone calls initially from the IRS, but not the private debt collectors.

“Beginning in early April the IRS will begin the program by sending letters to a few hundred taxpayers,” said Mary Beth Murphy, commissioner of the IRS’s Small Business and Self-Employed Division, during a conference call with reporters Tuesday. “We will be letting them know that we have assigned their overdue tax account to one of four firms we have chosen to collect tax debts under this program. The number of letters will gradually increase in the months ahead, eventually reaching several thousand a week by end of summer.”

She emphasized that the private debt collection firms will be handling only a very small portion of overdue tax accounts. “The taxpayers whose accounts have been selected have already been contacted by the IRS multiple times under our normal collection processes, so they’re well aware they have an issue with back taxes,” said Murphy. “Taxpayers with unpaid taxes will continue to first receive letters and phone calls only from IRS employees, not private debt collection firms. I also want to make clear that anyone whose account is turned over to a private company will first be notified by letter from the IRS before they hear from a private collector. When we contact these taxpayers, we will give them the names and contact information for the company along with additional information about what the private debt collection process involves.”

Murphy noted the IRS remains extremely concerned about the many con artists who masquerade as IRS employees or contractors. “They want to trick people into giving them money for sensitive financial information, so we urge everyone to be on the lookout for any scammers who might use this program as a cover to swindle taxpayers,” she said. “We will be watching closely for any such schemes as the private collection program gets underway. This effort will include working with our partners in the tax preparer community and law enforcement agencies to stop emerging scams.”

Past Failures

The National Treasury Employees Union and the National Taxpayer Advocate have long criticized the private debt collection program when it has been tried in the past.

“Every time this has been tried before, it has failed,” said NTEU national president Tony Reardon in a statement Tuesday. “But once again Congress has forced this policy on the IRS, and we expect the results to be the same: collection agents getting paid to harass taxpayers, many of whom need assistance, not threats.”

National Taxpayer Advocate Nina Olson has said the program places “a bulls-eye on the back of low income taxpayers.”

The NTEU pointed out that a 1996 pilot program for IRS private debt collection was so unsuccessful it was canceled after 12 months. The contractors participating in the pilot programs were found to have regularly violated the Fair Debt Collection Practices Act, and the program resulted in a $17 million net loss. The IRS again attempted to use private collection agencies in 2006. The program was projected to bring in $2.2 billion in new revenue, but data from the IRS indicated the program resulted in a net loss of almost $4.5 million to the federal government, after subtracting $86.2 million in program administration costs and more than $16 million in commissions to the PCAs. The Treasury Department and the IRS again decided to cancel the program.

Murphy noted that the IRS has been coordinating with the union, as well as the Taxpayer Advocate Service and the Treasury Inspector General for Tax Administration, on the latest version of the program. “We’ve been working with the National Treasury Employees Union and working with Tony Reardon and his staff, briefing them, as well as providing information to our employees and our bargaining unit members, working closely with the Taxpayer Advocate, Nina Olson, working through some of her concerns, as well as working with the Treasury Inspector General on ensuring we are protecting taxpayer data and taxpayer rights to make this program as successful in implementing the requirements as dictated by Congress,” she said.

If taxpayers or their tax practitioners are unsure there’s an unpaid tax debt from a previous year that might be assigned to a private debt collection firm, they can go to IRS.gov and check the account balance at www.irs.gov/balancedue. If the account balance says zero, it means no money is due, and the taxpayer typically will not be contacted by the IRS or the private debt collection firm.

Bill Banowski, lead executive of the private debt collection program, said the IRS has been taking steps to make the program more successful this time. “The criteria for assigning accounts to the private collection agencies is defined in the law that was passed and it’s outlined according to age and includes also ‘unable to locate taxpayers.’ So any case, regardless of dollar amount, that reaches that age criteria is eligible for assignment to a private collection agency,” he said. “We are starting with simpler cases, so some of the cases will be lower dollar, up to $50,000 as we start, but will progress to higher dollars and more complex cases as we go forward. In terms of what’s different, I think we learned some things from the last iteration. One of those was to be more careful about ensuring that taxpayers have confidence that they’re talking to a private collection agency, so we put some things in place to help promote that confidence for taxpayers as they work to resolve their account. We also learned that it is important for us to share enough information with the private debt collection agencies so they can work the case to completion. One of the difficulties we had last time was the back and forth with the PCAs and the approval of things that we can share now with the private collection agencies to help expedite resolution of a taxpayer’s account.”

Debt Collection Procedures

The IRS always plans to notify a taxpayer before transferring their account to a private collection agency. The IRS will initially send a letter to the taxpayer and their tax representative telling them their account is being assigned to a private firm, providing the name and contact information of the private collection agency. The mailing will include a copy of Publication 4518, “What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.”

Only four private businesses have been contracted to participate in the program: CBE Group of Cedar Falls, Iowa; Conserve of Fairport, N.Y.; Performant of Livermore, Calif.; and Pioneer of Horseheads, N.Y. The taxpayer’s account will only be assigned to one of the four agencies, but never to all of them. No other private company is authorized to represent the IRS for debt collection matters.

After the IRS letter has been sent, the designated private company will send a separate letter to the taxpayer and their representative confirming the account transfer. To protect the taxpayer’s privacy and security, both the IRS letter and the collection agency’s letter will include information that will help taxpayers identify the tax amount owed and assure taxpayers that future calls they may receive from the private firm are legitimate.

The private collectors will be able to refer to themselves as contractors of the IRS collecting taxes. However, their employees will be required to follow the provisions of the Fair Debt Collection Practices Act. Like IRS employees, they are required to act courteously and respect taxpayer rights.

The private firms have been authorized by the IRS to discuss payment options, including setting up payment agreements with taxpayers. But as with cases assigned to IRS employees, any tax payment must be made, either electronically or by check, to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the United States Treasury. IRS officials stressed that if payment is demanded through a prepaid debit card or iTunes gift card, that is a sign of a scam. For more information about the available payment options, visit www.IRS.gov/Payments.

The private collection firms are not authorized to take enforcement actions against taxpayers, however. Only IRS employees can take these actions, such as filing a federal tax lien notice or issuing a levy. For more information, visit the Private Debt Collection page on IRS.gov.

People trust accountants more than politicians when it comes to taxes

Approximately two-thirds of residents of Group of 20 countries distrust politicians about the tax system, according to a new survey by a trio of accounting organizations.

The survey, by the Association of Chartered Certified Accountants, the International Federation of Accountants, and Chartered Accountants Australia and New Zealand, polled more than 7,600 people across G20 countries, which account for two-thirds of the world’s population. The survey found that 67 percent of the respondents said they either distrust or highly distrust politicians about the tax system.

In contrast, the poll respondents were more trusting of accountants. The survey found 57 percent of people in G20 countries trust or highly trust professional accountants when it comes to the tax system, compared to 49 percent who trust tax attorneys, and 35 percent who trust non-governmental organizations.

In addition, 58 percent of the people polled in G20 countries said they believe the work of professional accountants is contributing to more efficient tax systems, while 56 percent said the work of accountants is contributing to more effective tax systems, and 49 percent who indicated it’s contributing to fairer tax systems.

“Two-thirds of respondents distrust or highly distrust politicians on the topic of tax,” said IFAC executive director of external affairs Russell Guthrie in a statement. “They are cutting through the political rhetoric, and instead place their trust with the experts. Governments have work to do to rebuild public trust in tax systems. The accounting profession has always advocated for a ‘big picture’ approach to tax policymaking in the global economy—the complexity that exists now is counterproductive to the public interest.”

Asked about cooperation versus competition in the tax arena, nearly three-quarters of the survey respondents indicated they are more concerned that their government cooperates with other countries for a more coherent international tax system, than competes for national interests such as increasing tax revenue or attracting multinational business. The poll found 73 percent of the respondents believe it is important or very important for governments to cooperate with each other on tax policy to create a more coherent international tax system. They were more than 3.5 times more likely to favor cooperation over competition.

The survey respondents were generally more supportive of tax incentives for a variety of social and economic goals, with 76 percent of the respondents indicating they support government tax incentives for green energy projects, 74 percent supporting tax incentives for retirement planning, and 68 percent for infrastructure projects.

“While I wouldn’t support constant tinkering with the tax system by governments of G20 countries—as tax regimes need to be long-term and properly bedded down—it is interesting that people highly favor utilizing tax systems to achieve broad social and economic objectives,” said ACCA head of tax Chas Roy-Chowdhury in a statement.

The survey results differed across countries when respondents were asked about tax minimization strategies. Residents of English-speaking countries of the G20 generally expressed more skepticism about tax minimization. Poll respondents in Australia, Canada, the U.S. and the U.K. tended to indicate they believe high-income earners and multinational companies are not paying enough taxes.

Besides those countries, the survey also polled respondents in Argentina, Brazil, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.

CPA, Taxes, Bookkeeping, Payroll, Accounting Services, Insurance

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