45% of Americans Pay No Federal Income Tax


Many Americans don’t have to worry about giving Uncle Sam part of their hard-earned cash for their income taxes this year.

An estimated 45.3% of American households — roughly 77.5 million — will pay no federal individual income tax, according to data for the 2015 tax year from the Tax Policy Center, a nonpartisan Washington-based research group. (Note that this does not necessarily mean they won’t owe their states income tax.)

Roughly half pay no federal income tax because they have no taxable income, and the other roughly half get enough tax breaks to erase their tax liability, explains Roberton Williams, a senior fellow at the Tax Policy Center.

Despite the fact that rich people paying little in the way of income taxes makes plenty of headlines, this is the exception to the rule: The top 1% of taxpayers pay a higher effective income-tax rate than any other group (around 23%, according to a report released by the Tax Policy Center in 2014) — nearly seven times higher than those in the bottom 50%.

On average, those in the bottom 40% of the income spectrum end up getting money from the government. Meanwhile, the richest 20% of Americans, by far, pay the most in income taxes, forking over nearly 87% of all the income tax collected by Uncle Sam.

The top 1% of Americans, who have an average income of more than $2.1 million, pay 43.6% of all the federal individual income tax in the U.S.; the top 0.1% — just 115,000 households, whose average income is more than $9.4 million — pay more than 20% of it.

When it comes to all federal taxes — individual income, payroll, excise, corporate income and estate taxes — the distributions of who pays what is more spread out. This is partially because nearly everyone pays excise taxes, which includes taxes on gasoline, alcohol and cigarettes.

Written by Catey Hill of MarketWatch

(Source: MarketWatch)

Beware of IRS Phone Scams

The Internal Revenue Service (IRS) is seeing a growing number of tax-related phone scams. They can happen to anyone, at any time of the year —but it’s especially prevalent around the end of the year and tax time. Scammers are typically after your money and possibly your identity as well. By staying alert and knowing the warning signs, you can keep your family safe.

Scammers prepare to defraud

Man Checking phone at a coffee shop

Scammers often gather a lot of personal information about you even before they call, such as your:

  • Full name
  • Address
  • Family member names
  • Employer
  • Education
  • Last 4 digits of your Social Security number

They use this information to make themselves seem knowledgeable and official. The scammers also alter the name and phone number that appears on your Caller ID to make it look like they are calling from the IRS. Their goal is to scare you into acting immediately, before you have time to think.

The phone scam

A scammer will call you and identify himself as an IRS agent, complete with a fake name and a bogus badge number.

  • He’ll say you owe delinquent taxes and demand immediate payment.
  • The scammer will convincingly try to force you to give your bank account or credit card information, or he might instruct you to get a prepaid debit card to make your IRS payment.

If the call goes to an answering machine, the scammer will leave a message with a dire warning, demanding that you call back as soon as possible or risk arrest.

A slightly different phone scam

An alternative ploy is for the scammer to tell you that the IRS discovered it owes you a large refund and wants to pay you immediately. The scammer will then ask for your Social Security number and bank information so the IRS can transfer the money directly to your account.

How to spot an IRS phone scam

Scammers frequently say things the IRS would never say over the phone. Knowing what the IRS won’t say can help you quickly spot an IRS phone scam. The IRS will never:

  • Call about money owed without first mailing you a bill
  • Demand immediate payment by phone
  • Demand payment without allowing you to question or appeal the amount
  • Ask for your bank account or credit card information
  • Require that you pay taxes in a certain manner, like with a prepaid debit card
  • Threaten to send the police to arrest you

What if I get one of these calls?

If you get a phone call by someone claiming to be from the IRS:

  • Don’t talk to the caller or give out any information
  • Hang up immediately
  • Report the call to the Treasury Inspector General for Tax Administration, either online at IRS Impersonation Scam Reporting or by phone at 800-366-4484
  • Report the call to the Federal Trade Commission using the FTC Complaint Assistant

What if I do owe the IRS money?

Even if you owe money to the IRS:

  • Hang up and do not talk to the caller
  • Do not give out any information
  • Call the IRS at 800-829-1040 to sort out what you owe

Written by Intuit Turbo Tax

(Source: Intuit)

IRS: Electronic Tax Scams Surge 400%

File photo taken in 2014 shows the Internal Revenue Service (IRS) headquarters in Washington, D.C.
J. David Ake, AP

Email and texting scams designed to trick U.S. taxpayers into providing personal data have surged 400% so far this year, the IRS warned Thursday in a renewed consumer alert.

The schemes involve so-called phishing messages designed to trick taxpayers into believing the emails and texts represent official communications from the IRS, tax software companies or others in the tax industry.

The messages typically ask for data related to tax refunds, filing status, or seek confirmation of personal information, including ordering IRS transcripts or verification of IRS Personal Identification Numbers, the tax agency said.

When consumers click on the email links, they are sent to what appear to be government websites that ask for Social Security numbers and other personal information that identity thieves can use to file false tax returns and collect refunds, the IRS said. The sites may also contain malware that infect taxpayers’ computers and enable cyberthieves to gain access to files or track consumers’ keystrokes to get personal data.

“This dramatic jump in these scams comes at the busiest time of tax season, IRS Commissioner John Koskinen warned. “Watch out for fraudsters slipping these official-looking emails into inboxes, trying to confuse people at the very time they work on their taxes. We urge people not to click on these emails.”

Summarizing scams reported across the U.S., the IRS said:

  • January featured 1,026 phishing and malware incidents, up from 254 during the same month last year.
  • The trend continued in February, with 363 incidents reported through Tuesday. The total topped the 201 full-month total in 2015.
  • The 1,389 incidents reported to date represent more than half the 2,748 total for all of last year.

Additionally, tax professionals have reported being targeted by similar phishing scams that seek their online credentials to IRS services.

The IRS said it is working with state revenue departments, tax preparation companies and others the tax industry to address the scams.

“We continue to work cooperatively with our partners on this issue, and we have taken steps to strengthen our processing systems and fraud filters to watch for scam artists trying to use stolen information to file bogus tax returns,” said Koskinen.

Written by Kevin McCoy of USA Today

(Source: MSN)

Don’t Overlook These 7 Top Tax Breaks for the Self-Employed

Getty Images/Hemera

Running your own business comes with plenty of challenges. But contrary to what many Americans think, the Internal Revenue Service does not want taxes to be one of them.

That’s because while the tax code does have its quirks, the IRS offers a host of valuable tax breaks for sole proprietors and the self-employed that are intended to help their businesses succeed.

“In its broadest terms, you can deduct all of the ordinary and necessary expenses that relate to the production of income in the business,” said Jeff Warnkin, a CPA at the JL Smith Group in Avon, Ohio.

That means a self-employed individual who keeps good records can write off a host of items come April, and significantly reduce their income taxes as a result.

Here are seven of the most valuable breaks for the self-employed:

• Health insurance deduction. “One of the most commonly missed items is the self-employed health insurance deduction,” Warnkin said. The premium is wholly deductible against your income tax, he said, and the tax savings can be big depending on your plan. Furthermore, in tax year 2015 there is an increase in the “individual mandate” penalty for taxpayers who do not have health coverage, so paying for your own insurance plan also can prevent added fees.

• Travel expenses. You don’t have to drive to a worksite in order to deduct business-related travel, said Chris Kichurchak, vice president at Strategic Wealth Partners in Independence, Ohio. “A person can deduct all expenses for any travel as long as there is at least one hour of documented business discussion,” Kichurchak said. In addition to parking and airfare expenses, you can also get a break-even if you’re just taking a trip in your personal vehicle. The standard mileage deduction is 57.5 cents per mile traveled in tax year 2015 for business purposes. And thanks to online mapping tools, it’s easy to reverse engineer the mileage if you forget to jot down your odometer readings right away.

• Clothing and uniforms. Any specialized clothing is tax deductible as a business expense, including safety goggles, work gloves or a uniform. But take care to remember the IRS specifies these items “not suitable for everyday use,” said Grafton “Cap” Willey, managing director at professional services provider CBIZ MHM. “A claim that you are required to wear a business suit when you normally would not have one in your wardrobe except for business reasons will not work,” Willey said.

• Education and association dues. Books or periodicals relating to your business are deductible on Schedule C of your tax return, as are any courses or continuing education you take. Any professional dues for associations or unions are also tax deductible. Simply make sure you have the proper documentation for both the expense and its relevance to your profession.

• Retirement savings.  You should be saving for retirement anyway, so the IRS offers a generous tax break to self-employed individuals who contribute to a qualified savings plan. One of the most popular is a simplified employee pension plan, or SEP, and can offer big tax advantages and can be created in minutes using any number of online providers. “A SEP is very easy to set up,” said Warnkin at the JL Smith Group. “It’s also very simple to fund.” Contribution limits are up to 25% of your net earnings from self-employment up to $53,000 a year. Those contributions are deductible from your income taxes, and can add up in a hurry if you’re making substantial savings to your SEP plan.

• Home office. Having a home office can unlock a host of valuable deductions, including breaks on your utility bills, property taxes and even upkeep on your home. The IRS allows self-employed Americans to take a break on these and other items based on the site of your office as a percentage of your home. In other words, a 200 square-foot office in a 2,000 square-foot home gives you a 10% break on qualified expenses. The catch, however, is that the tax man demands your office is used for “regular and exclusive” use, according to the IRS. “It can’t just be a corner of the living room,” Warnkin said. “It’s got to be a separate room, like a spare bedroom or something, that’s used exclusively for the business either administratively or because you meet clients there.”

• Tax and financial services. If any of the minutiae of the tax code gets to you or if you need help balancing the books, don’t fret. Professional services from a third-party accountant are tax deductible for your business, so you can get a tax break if you want or need an expert to check the math or regulations around your business activities in the past tax year.

Written by Jeff Reeves of USA Today

(Source: USA Today)

The Taxability of Oscars Gift Bags

The Associated Press: Nominees who don't want any negative tax consequences on their consolation prize can donate to a chosen charity in advance.
The Associated Press

When Oscar night arrives later this month, winners will take home bragging rights and the famous gold-plated statuette. For 21 of the nominees who don’t win, their consolation prize is a gift bag worth over six figures – along with an accompanying tax bill.

In recent years, the IRS has launched an outreach campaign to the entertainment industry about the taxability of gift bags and promotional items. That’s right: In the eyes of the IRS, so-called gift bags aren’t actually gifts because they’re given with the expectation of publicity or other benefits.

Celebs who take home lavish gift bags and freebies from appearing at awards shows and other gatherings are subject to taxes on the value of the items they receive. Similarly, the Super Bowl MVP who receives a vehicle each year also owes taxes on that vehicle (a precedent that goes back to the 1960s, when NFL Hall of Famer Paul Hornung argued unsuccessfully that his Corvette should not be taxable). Winning money or goods on a TV game show would also generate taxable income.

“One might think that it’s a gift out of generosity from all these [brands] providing these goodies in these gift bags, so I‘m sure a number of recipients are very surprised when they get a 1099 in the mail,” says Robert Charron, partner-in-charge of the tax department of accounting firm Friedman LLP.

“For any gift [from a business] that’s valued at $600 or more, you’re supposed to get a 1099-MISC,” says Len Hayduchok, president of advisory firm Dedicated Financial Services. “If you have a gift that’s valued at $100,000 and you’re in a 33 percent tax bracket, that’s costing you $33,000. If it’s worth $33,000 to you, then you’d keep it.”

Last year’s Oscar gift bag was the most valuable collection of items yet, with the contents valued at over $168,000, according to Vanity Fair and other media outlets. Stars received swag including a $20,000 astrology reading, $25,000 worth of custom furniture and a nine-night Italian vacation package valued at $11,500.

However, these gift bags and promotional items don’t generate self-employment tax, according to Tim Speiss, partner-in-charge of accounting firm EisnerAmper’s Personal Wealth Advisors Group. Self-employment tax is the portion of Social Security and Medicare deductions normally covered by the employer (12.4 and 2.9 percent, respectively) that self-employed peoplemust pay themselves in addition to regular income taxes.

Let’s assume that you’re a nominee and you’d rather not pay income taxes on items you don’t plan to use. “One thing that a person can do is refuse to accept it and therefore not be faced with paying taxes on some of the bizarre things that are in the bag,” Charron says. “There’s things in there that people may have very little interest in.”

Rather than refusing the bag, you could donate it to charity. George Clooney reportedly donated his 2006 Oscar gift bag to the United Way, and it sold at auction for $45,100. “Presuming that the charity is a proper exempt organization, they can get a tax deduction, and the deduction would be eligible against the value of the property received,” Speiss says. “Generally speaking, it’s a dollar-for-dollar write-off.”

However, the donation strategy isn’t foolproof either, because you’re generally limited to deducting donations of up to 50 percent of your adjusted gross income. And if you need to hire a professional appraiser to assess the value of the items, that cost is not tax-deductible.

Rather than accepting the bag and having it appraised, Charron says you could plan a donation to your chosen charity in advance. “If the person signs a proscribed form and assigns it to a recognized charity before they actually receive a bag, that will work to provide no negative tax consequences,” he says.

It gets messier when you want some – but not all – items from the bag. In that case, you might keep some items and sell or donate others. “If the net price you get from [selling] them is higher than your tax hit, then you’re ahead of the game,” Hayduchok says. “If you’re a celebrity and you get some stuff you don’t want, I would think some people might be willing to pay something for that on eBay.”

Stars who make millions on one film or endorsement deal may not flinch at paying a little extra in taxes, but it’s smart to consider the implications of supposed freebies and remember that the IRS may view these items as taxable income.

Copyright 2015 U.S. News & World Report

Written by Susan Johnston Taylor of U.S. News & World Report

(Source: U.S News & World Report)

The 6 Tax Deductions That Save You the Most Money

It’s that time of year when the taxman wants your money. But thanks to the tax code, there are many deductions that can help keep cash in your pocket instead of going to Uncle Sam.

“No one deduction is better than any other deduction,” says Jackie Perlman, senior tax research analyst with the Tax Institute at H&R Block. “It depends on your circumstances, your filing status and your tax bracket. Generally, the higher the tax bracket, the more valuable the tax deduction.”

Still, a handful of standby deductions can be very lucrative for many taxpayers. Here are the six deductions you don’t want to miss.

1. Medical expense deduction: 9 million returns used this deduction in 2013, with an average deduction of $9,392.

This can be a helpful deduction if you have a high-deductible health insurance and a big-time medical event in one year. You can deduct qualified medical expenses that exceed 10 percent of your adjusted gross income, or AGI, which is your taxable income minus above-the-line deductions. Say your AGI is $50,000. Ten percent of that is $5,000, which means you can deduct only the amount that exceeds $5,000. If you have $6,500 of medical expenses, you can deduct $1,500 as a medical expense.

This year, taxpayers 65 and older are allowed to deduct medical expenses that exceed 7.5 percent of AGI, an improvement over the 10 percent rule. The IRS spells out which medical deductions qualify. And remember, expenses are only eligible if they were not reimbursed by an insurer or employer.

2. State and local income or sales tax deduction: 42.7 million returns used this deduction in 2013, with an average deduction of $9,336 for income tax and an average deduction of $1,647for sales tax.

Since 2002, taxpayers have been able to deduct state and local sales taxes or state and local income taxes on their federal returns, but not both. For many people, the income tax deduction is usually the higher of the two. But the sales tax deduction option helps residents in states that don’t have income tax, such as Florida, Nevada, Texas, Washington, Wyoming and South Dakota. Residents in states with a high sales tax or taxpayers who made a huge purchase subject to a sales tax like a car, boat or RV, may find the sales tax deduction more beneficial than the income tax one.

3. Mortgage interest deduction: 33.3 million returns used this deduction in 2013, with an average deduction of $8,900.

You can deduct any interest you pay on a loan secured by a primary residence or second home, including a mortgage, second mortgage, line of credit or home equity loan. Generally, the deduction is limited to home loans that total $1 million or less. You can typically deduct interest on home equity debt up to $100,000.

4. Charitable donations deduction: 36.4 million returns used this deduction in 2013, with an average deduction of $5,343.

If you’re a big giver, you can get something in return at tax time. Generally, you can deduct up to 50 percent of your AGI for contributions to public charities, colleges and religious groups. The limits are a lower for gifts to other kinds of nonprofits. When it comes to gifts of appreciated property, the limit falls to 30 percent for gifts of appreciated property, such as securities, real estate, art, jewelry or antiques. If your gifts exceed these limits, then the excess deduction can be carried over to the next tax year.

5. State and local real estate tax deduction: 37.8 million returns used this deduction in 2013, with an average deduction of $4,610.

Real estate tax on a home or other property you own is deductible on your federal taxes. To get the deduction, you must have paid the taxes to the assessor in the tax year, including any prepaid taxes for the following year. Real estate taxes paid on foreign property and school taxes based on the property’s value are also deductible. What’s not deductible includes assessments for local improvements, charges for trash collection or library taxes, or fees that aren’t based on the property’s value.

6. Above-the-line deductions: 37.7 million returns used this deduction in 2013, with an average deduction of $3,714.

Also known as adjustments to income, these deductions can be taken without itemizing and they will reduce your AGI, almost always cutting your overall tax bill. Some of the most useful above-the-line deductions are for tuition and fees up to $4,000, contributions to traditional IRAs, student loan interest up to $2,500 and contributions to health savings accounts. Self-employed workers can deduct self-employment tax, contributions to self-employed retirement plans and premiums for self-employed health insurance. Other items that can be deducted above the line include any penalty on early withdrawal of savings and alimony paid to an ex-spouse, among other things.

Written by Janna Herron of The Fiscal Times

(Source: The Fiscal Times)

A Customer Is Suing Papa John’s Over 16 Cents

Papa Johns Pizza in Thousand Oaks, CA
Moment Editorial/Getty Images

Zachary Tucker of Madison County, Illinois, has filed a lawsuit against Papa John’s alleging illegal taxation.

The lawsuit was filed on Jan. 13 against Papa John’s International Inc. and Papa John’s USA Inc., Madison Record reports. Tucker says that the pizza chain collected taxes on a delivery fee in the amount of 6.85%, which amounted to an extra 16 cents on his bill.

According to Illinois law, “charges for transportation and delivery must not exceed the costs of transportation or delivery. If those charges do exceed the cost of delivery or transportation, the excess amount is subject to tax.” The lawsuit claims that the delivery fee did not exceed the cost of delivery, and therefore it could not legally be taxed. Tucker is seeking class action status, saying that anyone who has ordered delivery from an Illinois-based Papa John’s has been affected by the illegal charge.

Madison Record writes that the lawsuit is claiming “negligence, negligent misrepresentation, breach of contract/breach of duty of good faith and fair dealing, violation of the Illinois Consumer Fraud Act, and violation of the Uniform Deceptive Trade Practices Act.” Tucker is requesting that the court order Papa John’s to stop charging the sales tax on delivery fees, pay damages and restitutions for all who paid the illegal charge, as well as compensation for attorney fees and court costs.

Neither Papa John’s nor Tucker’s lawyers could immediately be reached for comment.

Written by Michal Addady of Fortune

(Source: Fortune)

4 Taxes to Consider When Picking a Place to Retire

American Advisors Group/Flickr
American Advisors Group/Flickr

No matter where you live in retirement, your federal taxes will be about the same if you take the standard deduction. Not so for state and local taxes.

Start with income tax. Seven states–Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming–have no state income tax whatsoever.

Next, consider taxes on Social Security.Thirteen states tax your retirement benefits to some degree: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia.

But just because a state taxes Social Security doesn’t mean it’s a bad place to retire. Overall, Colorado and West Virginia are actually tax-friendly places to live in retirement despite the tax on Social Security.

Then there’s sales tax. Some states exempt food and medicine, while others famously have no sales tax at all. Some states will tax every dime you spend. Most states allow cities and counties to assess sales taxes, too.

Finally, weigh property taxes. Rates vary from state to state and even among cities in the same state. Luckily, many places offer retirees breaks on property taxes. It pays to check.

Taxes are just one aspect of a happy retirement, but they can be a costly one.

Written by The Editors of Kiplinger

(Source: Kiplinger)

Here’s How Donald Trump’s Tax Plan Would Affect You


Donald Trump’s tax plan was revealed with a message for millions of Americans: “You win!”

But as with everything linked to taxes, not everyone would win equally under his plan, which the Republican presidential candidate says is geared toward providing tax relief for the middle class and giving the U.S. economy a boost by lowering business income taxes.

To be sure, there’s a long road ahead before the general election in November 2016, but Trump’s proposal raises evergreen questions about the country’s tax system, such as why it’s so complicated and whether struggling middle-class families should get more of a break. Trump’s plan is geared to appeal to his supporters, one-third of whom earn less than $50,000 a year — the group that the candidate claims would benefit the most from his plan.

Yet the biggest winners under Trump’s plan would be, well, people just like Trump: America’s richest citizens. That’s because he’s proposing a big reduction in income taxes for married couples earning at least $300,000, as well as a plan to eliminate the estate tax, which only kicks in at about $10 million per couple, said Edward Zelinsky, a law professor at the Cardozo School of Law, who specializes in tax issues.

“The truth is most lower income folks don’t pay tax in our system today anyway,” Zelinsky said, who added that Trump is claiming to remove people from the tax rolls who already don’t pay much, if anything, in federal tax. “Thanks to the earned income tax credit and standard exemptions, roughly half of Americans don’t pay significant income taxes.”

Trump’s plan is “really good for high income tax payers,” he added.

One caveat: Trump’s four-page proposal is short on details. As a result, some issues are unclear, such as his assertion that many deductions would be eliminated, although his plan maintains deductions for charitable giving and mortgage interest, which are two of Americans’ most popular deductions.

“This is a surprisingly vague proposal,” Zelinsky added.

Here’s how different groups would fare under his proposal:

The 1 percent. The top 1 percent of taxpayers — the Trumps of America — would see the biggest benefits. With an average income of $1.79 million, the top 1 percent of income earners would see their tax bill plunge by $184,268, according to Citizens for Tax Justice. They would take home one-third of the tax cut proposed by Trump, excluding the estate tax elimination.

Households in the next 4 percent. With average incomes of $323,000, these earners would see their tax bill shaved by $18,158, accounting for about 13 percent of Trump’s tax cut, according to Citizens for Tax Justice.

Upper-middle-income groups. Americans with average earnings of $148,100 (the 80 to 95 percent) would see savings of $7,500, or 21 percent of Trump’s tax cut. Earners making an average of $84,800 (the 60 to 80 percent) would pay $4,943 less in taxes, or 18 percent of the tax cut.

The middle class and the poor. Do these groups really see a benefit, as Trump claims? Well, not so much. These groups would see a small tax benefit that pales in comparison to those that would be enjoyed by the wealthy. The middle 20 percent of American earners would see their taxes decline by $2,571, while the poorest residents would only pay $250 less in taxes – accounting for just 4 percent and 1 percent of Trump’s tax cut respectively, the CTJ noted.

Freelancers: Trump is proposing to lower the corporate tax rate to 15 percent for all businesses, including mom-and-pop stores and independent contractors. Because large corporations already use complex tax strategies to lower their tax bills, small businesses and freelancers might see the biggest benefit. The downside, said Zelinsky, is that Trump’s plan incentivizes employees to strike out on their own as independent contractors. A worker earning more than $150,000 as an employee would be taxed at 25 percent, but that would be lowered to 15 percent if she went out on her own. “I’m struck by the fact that this is very unfair,” Zelinsky added.

Written by Aimee Picchi of The Fiscal Times

(Source: The Fiscal Times)

Wealthy Couple Sentenced To Jail For Obstructing IRS At Audit

© Getty Images
© Getty Images

“You’re two people who have great talent, who’ve been very successful in life, who I am going to send to prison,” Manhattan Federal Court Judge Denise Cote advised Dr. Jeffrey Stein and his wife, Marla Stein, shortly before handing down their sentence.

Both will spend time in federal prison for their respective roles in cheating the Internal Revenue Service (IRS). Dr. Jeffrey Stein, a vascular surgeon, was sentenced to 18 months while Marla Stein, a personal injury lawyer, was sentenced to a year plus one day (by way of explanation, crimes deemed a felony, by sentencing guidelines, are generally punishable by more than one year in prison and may then be eligible for early release). Both had hoped to avoid jail time with Marla Stein asking to serve her sentence at home in order to take care of her minor son.

Instead, the judge opted to have the couple stagger their jail terms, Giudice-style.

The Steins were also ordered to pay restitution to the IRS in the aggregate amount of $344,989.

The sentencing followed charges and a guilty plea filed earlier this year. The couple pleaded guilty to a scheme to lower their tax burden by providing “false and fictitious information” to their accountant. That information involved generating fake deductions to offset actual business income from their respective practices. When their returns were flagged by IRS for audit, the two became even more creative: they made up documentation to support their lies.

The documentation that the Steins created didn’t simply rely on fake names and identities. Rather, Jeffrey Stein used the names of four disabled military veterans including two former patients whose identities Stein obtained through his work for the V.A. Hospital. Stein created bogus invoices to make it appear that those patients had worked for him in such positions as “ultrasound technologist” and “vascular technologist.” Not only was all of it a lie, one of the vets whose name appeared on the invoice was not even alive in the year Stein submitted the invoice.

Not to be outdone, Marla Stein also used names and tax ID numbers of other people to substantiate fake deductions. Stein created fake invoices to prove that a household employee and a family doctor had actually performed work for her law firm when they did not. Additionally, she altered invoices for photos and videos of family religious celebrations to look like they were attributable to her law practice.

Noting that the couple had doubled down on their fraud after they had been caught, IRS Special Agent-in-Charge Shantelle P. Kitchen said earlier this year that the investigation against the couple, “also reinforces the message that falsifying books and records ‘after the fact,’ in preparation for a tax audit, is also a criminal offense and will be dealt with accordingly.”

In addition to jail time and fines, pursuant to New York Law, Marla Stein will likely lose her license to practice law. Stein had already lost her job as a result of the scheme. Similarly, Jeffrey Stein could face suspension of his medical license; in the meantime, Stein, who was previously identified on the Mt. Sinai Hospital website as an Assistant Clinical Professor of Vascular Surgery is no longer listed as active.

Written by Kelly Phillips Erb of Forbes

(Source: Forbes)