gCaptain.com

Kappsized Clarification?!

By James MacGuire

In my last article Kappsized or Scuttled?!, I forwarded a client question which was, “Do I HAVE to file these amended returns?” regarding recent amended returns sent to former clients of Martin Kapp. I answered “no” with respect to the question. It has come to my attention that this may have been incorrectly interpreted. Treasury Regulations, specifically §1.451-1(a) state If a taxpayer ascertains that an item should have been included in gross income in a prior taxable year, he should, if within the period of limitation, file an amended return and pay any additional tax due. This is not an obligation (have, must), but a recommendation (should). Please be aware that not filing an amended return could result in the assessment of additional interest and penalties. Filing an amended return does not excuse you from interest and penalties either. Interest and penalties generally keep accruing until you pay the amount due.

Here’s the bottom line. You cannot deduct meals while onboard a vessel if meals are provided for you. If you took these deductions on prior returns, it was in error, either knowingly or unknowingly. The IRS is entitled to the difference between the original and amended tax due.

Making matters worse, I’m fearful of additional acts that could occur in the future. Generally speaking, there is a three year statute of limitations for the audit of income tax returns. Fraud is NOT subject to this statute. Fraud can be audited indefinitely. It has often been stated that for fraud to apply, it needs to be on the part of the taxpayer and not solely the preparer. THIS NO LONGER APPEARS TO BE THE CASE. A recently released tax court memorandum http://www.ustaxcourt.gov/InOpHistoric/vallen.TC.WPD.pdf held a taxpayer liable for fraud committed solely by the preparer with respect to the statute of limitations. The IRS was allowed to audit past the statute when only the preparer committed fraud. This suggests that the IRS could audit Mr. Kapp’s former clients for years past the current three year period. How far? From the point that the fraudulent positions were taken is my guess. This also suggests that the IRS could wait until you are collecting social security to audit those returns.

I hope this doesn’t happen. To my knowledge there haven’t been any public statements of position from the Service on this issue. The only sure thing is that time will tell…..

___________

This article was written for gCaptain.com by James MacGuire, MaguireTaxes.com

Kappsized or Scuttled?!

By James MacGuire

 

My phones have been ringing constantly regarding the amended returns and letters sent to former clients of Mr. Martin A Kapp.

Here are the top questions –

• Was Kapp required to prepare these amended returns by the court order? NO

• Did Kapp furnish a copy of these amended returns to anyone other than the taxpayer? I do not know. He was not required to, but I have not been able to receive a definite answer.

• Do I HAVE to file these amended returns? NO

• Has the IRS made any public statements as to whether they will not assess interest and penalties even if I voluntarily file the amended return and pay the amount due? NO they have not

• When can I be audited until? Tax year 2004 April 15^th or the applicable extension deadline (if you filed an extension)of 2008,Tax Year 2005 April 15^th or the applicable extension deadline of 2009, Tax Year 2006 April 15^th or the applicable extension deadline of 2010

Have things been made better by recent events? Was your profession considered a contender for the IRS’ dirty dozen tax schemes 15 years ago? Was your accountant sending out amended returns for you to consider filing because of his issues with the Internal Revenue Service, a United States attorney, and a United States District Court Judge? Do you still believe that there is a better good to be served? That the United States of America has formed a huge conspiracy to prevent mariners from taking deductions that were won by several tax court cases? Even though it seems only one accountant interprets the cases this way? That there is only one accountant out there who is looking out for mariners’ best interests? His own former attorney wrote, “even if we are able to convince the IRS that ‘meals’ were not provided, the mariners did not incur their own meal expenses and thus a deduction at per diem rate would not be appropriate”. I goggled “maritime tax” five minutes ago and the first result was an indictment notice by the Department of Justice. Now we’re looking at thousands of mariners who are affected by this. This suggests that thousands of mariners cheated on their taxes. What statement does this make? How do you think this sits with the IRS?
Reading between the lines –

Citing an unsigned form letter [Continue Reading →]