Tax Strategies

Blues singer Robert Cray is singing the blues about his accountants, and taking them to court. Cray filed a suit in Los Angeles Superior Court against Chapnick, Smuckler & Associates, and its principals Jerry Chapnick and Keith Smuckler, according to CBS. He accuses the firm of cheating him, his wife, and their company, charging them with fraud, negligence, and breach of contract and fiduciary duty. The Crays claim the firm did not inform them it was drawing up to $235,000 from their credit line. They say Chapnick, Smuckler also did not check on whether the Crays were entitled to a $55,000 refund in taxes they paid in the United Kingdom. In addition, the Crays blame the firm for a $2,000 penalty on unpaid property taxes. After they engaged the firm around the end of 2001, the Crays learned the firm was not licensed to operate in the state of California. They sacked the firm in August 2006.

The U.S. Department of Justice has filed suit against Mary Powell, a tax preparer in East St. Louis, Ill., and is seeking an injunction to shut down her service.

The IRS has certified that some models in Mazda’s 2008 line of hybrid cars qualify for the Alternative Motor Vehicle Credit.

Little Rock, Ark. - Arkansas accounting giant Moore Stephens Frost has acquired a North Carolina firm, Lynch and Howard.

Think you've come up with a perfect tax strategy for your high-end clients? Before you go ahead with it, you might want to check if it's been patented. You're liable to be sued for patent infringement if someone else thought of it first.It all started in 1998, when a federal appeals court ruled that business methods could be patented. Since then, more than 60 tax-strategy patents have been granted, and 86 more are pending. And the first infringement suit has been filed over the SOGRAT patent.

One way to judge which are the most significant provisions in the Small Business and Work Opportunity Tax Act of 2007 - signed by President Bush on May 25, 2007, as part of a larger bill focused on war funding - is to look at which provisions are projected to cost the most or to raise the most revenue.The tax breaks included in this legislation are fully paid for with revenue increases. The main premise behind the legislation is that small business should receive some tax breaks to help offset the cost of being required to pay workers more due to the minimum wage increase. It would be a rare small business that finds that the cost of increasing the minimum wage for its workers is fully offset by the tax breaks included in the legislation.

Option One Mortgage, the beleaguered subprime lending unit of tax-prep giant H&R Block, has mired its parent company deeper into financial malaise, losing a $1 billion warehouse credit line from Lehman Bros. Holdings. In a federal filing, Lehman indicated that it did not renew the credit line after it expired late last month. The mortgage unit was one of the primary drivers behind the company posting a year-end loss of $434 million. Block has agreed to sell the arm to private equity concern Cerberus Capital Management, a deal that is supposed to close October 31. Cerberus stipulated that the division needs $8 billion of borrowing capacity in order for the sale to proceed. Block said that despite the non-renewal from Lehman, the company had the requisite borrowing capacity.

A Greenville, S.C. federal judge has permanently barred Robert Barnwell Clarkson and his "Patriot Network" from promoting tax fraud schemes, the Justice Department announced. The court found that Clarkson falsely instructed Patriot Network members that they need not file federal income tax returns, and helped members obstruct Internal Revenue Service efforts to collect taxes. In seeking the permanent injunction, the Justice Department submitted Clarkson's Untaxing Packet, which he sold for $300. The packet contained form letters that he falsely claimed would exempt purchases from federal tax laws. Papers filed in the case showed that Clarkson boasted that he "untaxed" more than 8,000 people over 30 years. The court detailed Clarkson's efforts at interfering with tax collection, including his instruction to transfer property to nominees and to sue IRS agents who attempt to collect taxes. Clarkson, a disbarred attorney from Anderson, S.C., has twice been convicted of federal tax-related crimes. The court ordered Clarkson to give copies of the injunction to people who bought his products and to post the injunction on the Patriot Network Web site.

The Internal Revenue Service has redesigned Form 8857, Request for Innocent Spouse Relief, to help reduce follow up questions and taxpayer burden. The form will ask more questions initially, but collecting critical information early in the process will allow faster processing of the request. The IRS says that the new design will eliminate an estimated 30,000 follow-up letters annually, resulting in a reduced burden and quicker answer for taxpayers and less cost for the government. When a taxpayer files a joint return, both spouses are jointly and individually responsible for the tax. If one taxpayer believes that only his or her spouse or former spouse should be responsible for the tax, the taxpayer can request innocent spouse relief. The redesigned form will be easier to understand and to complete and will help educate taxpayers about the process. Previously, the questionnaire was separate from the form.

-- James A. Smith, managing director at the CPA firm of Smith, Jackson, Boyer and Bovard, was named chairman of the 27,000-member Texas Society of CPAs. Smith will serve a one-year term. Joining Smith as TSCPA officers are Steven R. Goodman, chairman-elect, Houston; Barbara Bass, secretary, Tyler; Jeff Gregg, treasurer-elect, Seymour; and Rance G. Sweeten, treasurer, McAllen. In addition the following will serve on the TSCPA executive board: Rick Baumeister, Fort Worth; John Broaddus, El Paso; Penny Dear, Austin; Dora J. Dyson, Gatesville; Janet B. Johnson, Houston; B. Jean Lein, Austin; Edward L. Lette, Austin; Jerry L. Love, Abilene; Tracy B. Stewart, College Station; and Fred Timmons, San Antonio.