Here’s “The Situation”: GTL means Gonna Tax Litigate

Here’s “The Situation”: GTL means Gonna Tax Litigate

What Mike “The Situation” Sorrentino Can Teach Us About Tax Fraud

His mantra was GTL for “Gym, Tan, Laundry.”, but it just as well could summarize his tax fraud indictment and mean “Gonna Tax Litigate“. Mike Sorrentino starred on MTV’s Jersey Shore, and his situation-causing ab muscles gave him the name “The Situation”. Today, he is in Federal Prison for tax fraud and known as Federal Correctional Institution, Otisville, NY Prisoner No. 66910-050. The Jersey Shore a long way from our San Francisco and Walnut Creek Tax Litigation offices, but the laws and lessons are relevant for us all.

In September 2014, the U.S. Government charged Sorrentino with tax fraud, for allegedly avoiding paying taxes on $8.9 million. According to the US Attorney, Sorrentino and his brother, Marc, established S corporations that paid for personal expenses and failed to report income. You can read their indictment docs here.

The MTV show Jersey Shore was a big hit around 2010, and a guilty pleasure for many of us here in the Bay Area. Snookie, Paulie D, Sitch, and the gang were household names. Even if you didn’t admit to watching, the ratings don’t lie. Let’s check out the situation with The Situation.

Tax fraud is the willful attempt to evade tax law or defraud the IRS.  Tax fraud can occur when a person or business intentionally fails to file a true and correct income tax return, willfully fails to pay taxes when due, intentionally fails to report, or hides, income, makes fraudulent or false claims or tax returns, and/or prepares fraudulent tax returns. Trying to avoid paying your taxes is never a good idea, but The Situation gives us lots to learn from.

Prepare True and Correct Returns

Michael Sorrentino and his brother Marc filed false tax returns that incorrectly reported millions of dollars made from promotions and appearances.  The brothers understated their gross receipts, even though Mike earned $1,995,757 in one year. Both brothers earned $8.9 million from 2010 to 2012 but did not report all of this correctly and pay the corresponding taxes.  

Do Not Deduct Personal Expenses as Business Expenses

The brothers claimed personal expenses, such as high-end vehicles, clothing, personal grooming expenses, and personal distributions, as business expenses.  They reportedly used two companies they controlled- MPS Entertainment, LLC and Situation Nation, Inc.

Don’t Forget to File All Tax Returns Required

Mike did not file a personal return in 2011, only a business return.  As a result, the IRS suspected tax evasion.  

Don’t Think You Can Outsmart the System

Cash Deposits are Traceable. Mike made multiple cash deposits of less than $10,000, sometimes on the same day.  Banks are required to report cash deposits exceeding $10,000, including the identity of the person making the deposit.  Attempts to circumvent this rule catch the notice of authorities. This type of tax fraud is called “structuring” deposits, also called “smurfing” in bank jargon. 

Don’t Leave Everything Up to Your Accountant

It is normal to hire someone to help you with your returns, but be careful not to rely on your tax preparer too much.  Eventually, the brothers’ accountant admitted to filing fraudulent returns.  

So What is The Situation Now?

On January 19, 2018, Sorrentino pleaded guilty to one count of tax evasion, as part of a plea bargain with prosecutors. Ultimately, Sorrentino received a sentence of 8 months in prison.  On January 15, 2019, The Situation surrendered to the Otisville Federal Correctional Institution to begin his eight-month sentence for tax evasion. He is scheduled to be released on September 12, 2019. However, people make mistakes.  If you fear such a mistake, the tax lawyers at Mendes Weed, LLP are qualified to assist you.  

 

Christina Weed, Walnut Creek Attorney

California Tax Law Specialist

Partner Christina Weed has years of experience helping businesses and individuals with their complex California tax litigation issues. She is a licensed attorney with an LL.M. in Taxation from the University of San Diego and a Bachelor’s Degree in Accountancy. She serves as Chair of the Tax Section of the Contra Costa County Bar Association and is also a member of the Estate Planning Council Diablo Valley and the Tri-Valley Estate Planning Council.

In 2018, Christina became one of the first lawyers to argue a case in front of California’s Office of Tax Appeals.

Christina has been designated a Certified Specialist in Taxation by the State Bar of California.

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Oakland Office

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Oakland, CA 94607

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San Jose Office

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San Jose, CA 94607

(408) 707-1667

Mendes Weed, LLP successfully argues a case in front of the Office of Tax Appeals

Mendes Weed, LLP successfully argues a case in front of the Office of Tax Appeals

The tax litigation and family law firm Mendes Weed, LLP successfully argued a case in front of California’s Office of Tax Appeals, one of the 1st 12 cases heard by the court. There is a complete write up about it on JDSupra titled “California’s Changing Approach to Like-Kind Exchanges” 

An excerpt: Internal Revenue Code (IRC) Section 1031 allows nonrecognition of gain or loss where property held for investment or for productive use in a trade or business is exchanged for like-kind property held for the same purpose. 

An issue arising under Section 1031 involves multiple owners of a real estate business entity holding one or more investment properties, where some owners want to maintain their investment while others want to cash out their investment. 

One common technique when the owners want to go their separate ways with investments is for the entity to redeem the interest of the member in exchange for an undivided interest in the property (a so-called “drop-and-swap”).  Thereafter, the entity and the former owner join in the sale of the property to a buyer.  Following the sale, the former owner can direct its share of the sale proceeds to a qualified intermediary to be reinvested in like-kind property without recognizing gain. 

The full transcript of our case before the Office of Tax Appeals (OTA) is available at https://ota.ca.gov/wp-content/uploads/sites/54/2018/06/Mitchell_Sharon_April-24-2018_Transcript.pdf 

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Read the full article on JD Supra

Christina Weed, Walnut Creek Attorney

California Tax Law Specialist

Partner Christina Weed has years of experience helping businesses and individuals with their complex California tax litigation issues. She is a licensed attorney with an LL.M. in Taxation from the University of San Diego and a Bachelor’s Degree in Accountancy. She serves as Chair of the Tax Section of the Contra Costa County Bar Association and is also a member of the Estate Planning Council Diablo Valley and the Tri-Valley Estate Planning Council.

In 2018, Christina became one of the first lawyers to argue a case in front of California’s Office of Tax Appeals.

Christina has been designated a Certified Specialist in Taxation by the State Bar of California.

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SuperLawyers-RisingStars
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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

The 10 Most Litigated Cases in US Tax Court

The 10 Most Litigated Cases in US Tax Court

The Taxpayer Advocate issued a list of most litigated issues in tax court in a prior year.  These cases are:

  1. Accuracy Related Penalties
  2. Appeals from Collection Due Process (CDP) Hearings
    • Please note: If you have received a notice of levy or lien and notice of your right to a CDP Hearing, it is important you do not miss the deadline to appeal, or you risk losing your right to appeal later.
  3. Summons Enforcement
    • Do you know if you have standing to resist an IRS Summons?
  4. Gross Income
    • Do you disagree with the amount of income asserted against you?
  5. Trade or Business Expenses
    • Do you know how to substantiate your trade or business expenses?
  6. Failure to Pay Penalty, Failure to File Penalty, and Failure to Pay Estimated Tax Penalty
  7. Civil Actions to Enforce Civil Tax Liens or to Subject Property to Payment of Tax
    • Are you facing a civil action that was filed against you in United States District Court?
  8. Charitable Deductions
    • Do you know when you are entitled to claim a charitable deduction?
  9. Frivolous Issues Penalty; and
  10. Trust Fund Recovery Penalty
    • If you are an employer, what are you required to do with respect to payroll taxes?

If you think you are currently facing any of these tax-related issues and would like to speak to a tax lawyer, we encourage you to reach out to us. We assist taxpayers with a variety of tax issues, and we would be happy to speak with you about your questions or concerns. Mendes Weed, LLP is here to help you if you have any questions. (925) 390-3222.

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

SuperLawyers-RisingStars
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Christina Weed - Taxation Law Specialist
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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

Representing Clients with Complex Tax Cases that Need to be Litigated in Court

Representing Clients with Complex Tax Cases that Need to be Litigated in Court

As tax attorneys, we serve clients in California whose complicated tax cases require zealous advocacy against the IRS.

Receiving a Notice of Deficiency

When you receive a notice of deficiency indicating you have proposed tax liabilities or notice of determination, you should meet with a tax lawyer to discuss important deadlines and what your rights are as a taxpayer.

If you have received a notice of deficiency, you will want to go over next steps, whether you should file a petition in tax court, and what your other options are with an attorney.

Possible Matters that Require Litigation

Mendes Weed, LLP litigates complex tax cases including:

Protect Your Future, Assets, and Livelihood. Hire a Professional Tax Attorney

Mendes Weed, LLP represents taxpayers in IRS and State audits, appeals, and in Tax Court. If you have any questions about your tax matter or want to consult with a tax lawyer to provide you with some options, we encourage you to contact the firm.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

[Video] Criminal Tax Defense

At Mendes Weed, LLP, we represent individuals, businesses and tax preparers who may be under criminal investigation by the IRS or the US Department of Justice.

If you believe you may be the subject of an investigation, you should meet with a tax lawyer right away.

Why it’s Important to Seek Legal Counsel

  • Some civil cases have the possibility of being referred to the Criminal Investigation Division.
  • Failures to disclose certain foreign assets also have the possibility of referral to the Criminal Investigation Division.
  • A lawyer can discuss the various possibilities of where your case can go, present your best options, and the possible outcomes.
  • You can gain peace of mind knowing you are in good hands and that someone will monitor and stay on top of your case for you.
  • A lawyer can further assist and guide you if your case does escalate to a criminal matter

Consult Mendes Weed, LLP

Being under criminal investigation or even civil audit can be very stressful and anxiety provoking if you are not familiar with tax law and procedures. Although we hope you never encounter this situation, we hope you will reach out to us if you do. We will gladly discuss your questions with you and hopefully put your mind at ease as much as possible.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

[Video] Federal Tax Litigation

Please find valuable information regarding Federal Tax Litigation in our video blog.

As one of the principal attorneys for Mendes Weed, LLP, I have previously discussed how to initiate a tax court case in U.S. Tax Court if you have not received a desirable result during the course of your audit with IRS Appeals. But, did you know that not all tax cases need to be brought in a U.S. Tax Court?

The majority of cases are brought before the U.S. Tax Court, which is a court that only hears tax cases.  The reason many taxpayers bring their cases before the U.S. Tax Court is that they do not have to pay the tax asserted against them prior to filing their petition in U.S. Tax Court. Even if the case is decided against the taxpayer, the taxpayer will not need to pay until all appeals are exhausted. Appeals of tax court decisions go to the appropriate U.S. Court of Appeals. There may also some benefit to having a judge that is more experienced in tax law.  However, what if a taxpayer would like to have their case heard by a jury?

In this case, a taxpayer may choose to prepare any asserted tax and, after exhausting all administrative remedies, file a claim for refund in U.S. District Court.  This is the only court in which a taxpayer may have a trial by jury.  Any appeals of an unfavorable decision would go to the U.S. Court of Appeals for the particular district court where the case was heard.

Alternatively, a case for refund could be brought in the U.S. Court of Federal Claims.  No jury trial is available, but what if there is a similar case that was previously brought before the U.S. Court of Federal Claims that a taxpayer believes is favorable to her case?  Perhaps, you would want to bring your tax case before this court in that situation.

It is important to meet with a tax lawyer who can discuss your case with you and advise you on which court may be best for your specific case.

Mendes Weed, LLP has experience in matters related to Federal tax litigation, and we may be able to help you. Please contact us to discuss your situation.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667