Tax Fraud - Report or Ignore?

[1990C4S]

Originally Posted by wayner

You said a holding company, right?

Does that mean his business actually does have income from investments that he is managing?
If so it may actually be a going concern and expenses may be legit??

I wonder if that is possible in this case??

There is no ongoing business, therefore there are no legitimate expenses. There is income, but only because the holdco has some money in the bank.

He withdraws funds, claims an 'office' at home, claims a vehicle is needed and write off the lease, pays zero tax on the income.

[1990C4S]

Originally Posted by MBAtarga

My understanding is that you just can't turn someone in to the IRS (for US citizen) by giving their name. You've got to have social number, bank account number, dates, etc.

In my case I have all that information as part of a sworn deposition.

[wayner]

Originally Posted by 1990C4S

There is no ongoing business, therefore there are no legitimate expenses. There is income, but only because the holdco has some money in the bank.

By that definition shouldn't Warren Buffet be in tax jail?

Is your beef with the person being above board, or is it with the tax laws?

[Fast Freddy 944]

Its not wise to "rat" some one out.....

[wayner]

If the "offender" is loose and free with the tax laws, his annual tax return will trigger an audit at some point, and if there was wrongdoing they will legally be able to go back 7 years to assess any back taxes and fines.

If he is above board, it will be a hassle for him and an unjustified expense for tax payers

If you decide to go ahead, first educate yourself on tax laws, what constitutes taxable income and acceptable expenses for holding companies, and then with that information you can make an educated decision

[1990C4S]

Originally Posted by wayner

If the "offender" is loose and free with the tax laws, his annual tax return will trigger an audit at some point, and if there was wrongdoing they will legally be able to go back 7 years to assess any back taxes and fines.

If he is above board, it will be a hassle for him and an unjustified expense for tax payers

If you decide to go ahead, first educate yourself on tax laws, what constitutes taxable income and acceptable expenses for holding companies, and then with that information you can make an educated decision

LoL. Trust me, I know the tax act very well, so does my lawyer and my CA. We are all on the same page, the expenses being claimed are not related to the business, this is tax evasion. It's not a question of 'if it's happening', it's 'should I report the tax cheat'.

Originally Posted by wayner

By that definition shouldn't Warren Buffet be in tax jail?

Is your beef with the person being above board, or is it with the tax laws?

I don't understand the comment. I have no issue with the tax act, I claim legitimate expenses for my business. I do not try to write off unrelated expenses. The tax act is not ambiguous in this area.

[sc_rufctr]

I think it's best to mind your own business.

Something to think about.

Often people don't agree with how the Government spends money so why give them any if you can avoid it?

Just one "small potatoes" example. A few years ago I worked for a company that supported a federal senator.
iPods were supplied to all of her staff so they could listen to Political pod casts. (This was pre iPhone when iPods were expensive)
The fact was that all of them were full of music and nothing else, all paid for by the tax payer.

I'm not trying to justify not paying your fair share of tax. I think it's important that we do but not everyone agrees.

[wayner]

Originally Posted by 1990C4S

I don't understand the comment. I have no issue with the tax act, I claim legitimate expenses for my business. I do not try to write off unrelated expenses. The tax act is not ambiguous in this area.

Sorry, it's hard to know with the limited details that you provided

You stated that the company generated an income but was not a business.
Since the tax department doesn't treat earning money as a hobby, your comment confused me

[1990C4S]

I said there is 'no ongoing business'. It is a provincial holdco that has no operations, no employees, and is essentially inactive. Therefore there are no legitimate business expenses aside from bank fees and accounting fees.

The person can take a salary, but claiming you need a car and an office for a non-operating business is not allowed. Especially when the 'office' is just 10% of your house.

[wayner]

Has it moved from a product company to a money management company?

I am just curious but the answer doesn't matter to me. You've only raised my curiosity

You've said you have experts at your disposal so it sounds like your all set with what you need to make a decision.

Interesting topic
Thanks for raising it.

[1990C4S]

It was always a 'non-operating' company. The sole asset was a note from a related company. The plan was to collect on the note, take an annual dividend, then wind the company up when the funds were gone.

The company operated in that manner until he needed more money, then the fake expenses started to avoid paying tax on the earned income, and to have the lease payment paid by the company.

I am not going to do anything. My preference is that he gets caught several years down the road when the tax hit will crush him.

[speeder]

I once had a business dispute w someone, (he ripped me off via non-payment). When he asked me for my SS# to 1099 me, (so that he could claim what he did pay me on his taxes), I told him to suck a dick. He threatened repeatedly to "report me to the IRS", for what, I'm not sure. Go ahead.

The IRS will absolutely not investigate anyone based on one person's claims to them on the phone w/o other evidence. Every limp pansy in America would be calling in their neighbors who don't pull their garbage cans in on time. Every schithead in PARF would be reporting every other schithead every other day.

It might be different in Canada but it helps to have a basic understanding of the IRS and how they operate before trying that in the USA. Of course it may be different w documents and proof.

[JJ 911SC]

For the CRA (not IRS)

Originally Posted by AZ_porschekid

Don't they give you a percentage of what is collected...?

If it above $100,000

Originally Posted by recycled sixtie

I believe you can report this tax perp on an anonymous basis...

Informant Leads Program

[Grog]

I can't believe how many of you think he should let the guy keep cheating. The more tax cheats their are, the more honest people have to pick up the slack and pay more. Why wouldn't you want the guy to pay his fair share? Yes the system is corrupt, yes they waste your money, but is that a reason to break the law? Do you want the honest tax payer to pay this guys share of taxes? Yes sit back and do nothing, that's the best thing to do, cower in the corner, that's what makes great people and countries.

[wayner]

I don't know much about holding companies but again my curiosity has been raised.

Someone else knows more about this than me but what is a holding company that is sitting on cash and looking for a new holding to invest in?

How is that company treated by the tax people?

[ossiblue]

After reading the entire thread, it seems to me the OP's quandary is based on revenge. Ordinarily, he would not care nor be involved. However, the tax cheat has cost him a great deal of money, probably through a lawsuit, and there is no love lost between the two. I sense that the OP recognizes his revenge motive and has decided to let sleeping dogs lie (post #51.)

[wdfifteen]

Originally Posted by 1990C4S

He has cost me an enormous amount of money. It's hardly a stranger. If it was anyone else in the world I would ignore it.

OK, so this is about retribution, not about taxes. You could have asked, "Should I go over and kick him in the nuts?" and it would be the same.
So, if you hate the guy, kick him in the nuts or turn him in. Whatever makes you feel better.

[1990C4S]

Originally Posted by wayner

I don't know much about holding companies but again my curiosity has been raised.

Someone else knows more about this than me but what is a holding company that is sitting on cash and looking for a new holding to invest in?

How is that company treated by the tax people?

There is no special treatment and none needed.

You would have earned income (interest or capital gains) and likely some allowable expenses. The net income will be taxable.

You can pay a salary or dividends as you see fit, that income is taxable to the recipient.

What you can't do is create false expenses unrelated to the 'operation' of the business in order to reduce the income to zero.

[Seahawk]

Originally Posted by ossiblue

After reading the entire thread, it seems to me the OP's quandary is based on revenge. Ordinarily, he would not care nor be involved. However, the tax cheat has cost him a great deal of money, probably through a lawsuit, and there is no love lost between the two. I sense that the OP recognizes his revenge motive and has decided to let sleeping dogs lie (post #51.)

Agree and I applaud 1990C4S for working through this, even if he changes his mind and drops Fat Man and Little Boy on the miscreant in question.

[wayner]

I just answered my own question.

Here is what I just found (this is the non legal mumbo jumbo site version but found lots of tax sites as well including fed gov

- - - - - - -
QUOTE TAKEN FROM How a Holding Company Works -

The Reason Tycoons and Investors Prefer Holding Companies
In addition to all of the above reasons, a holding company is often the preferred vehicle of a true investor because it allows you to open an office and have that office devoted to nothing but finding places to put your money to work.

Once you have the capital, all you need is a good fireplace, some nice paintings, a cup of coffee, and a stack of annual reports. Or, if you’re Walter Schloss, a desk next to a water cooler in a space the size of a closet.

You show up each day, try to do intelligent things, avoid stupidity, and keep costs low. As I’ve said a million times, compounding will do the rest. You can pay yourself a salary and watch your net worth, through the holding company’s book value, grow higher each year if you run it well.



Holding companies are as diverse as their owners. Some specialize in hotels and other real estate, some own restaurants, some build coffee shops, some invest only in publicly traded stocks, others focus on making investments in high-tech start-ups, some fund movie projects, while still others acquire silver mines or mineral rights.

The point is, a holding company is worth too much effort and doesn’t provide enough benefits for most small investors. You should never add an extra layer of management unless it is necessary. There are some expenses involved, such as preparing another set of tax returns, that must be taken into account. If those are even a rounding error, you probably should wait until it is going to be worth the expenditure. You should never want a holding company simply for the sake of owning one. They have very specific purposes. An exception might be a family who has a few hundred thousand dollars and wants to invest together through a single entity.