IRS want $1.6 Billion in Taxes, Penalties from Bankrupt NYRA
Associated Press
Updated: November 1, 2007, 6:17 PM ET
NEW YORK — The Internal Revenue Service is seeking $1.6 billion in taxes and penalties from the bankrupt New York Racing Association, a major hurdle for the group’s bid to exit Chapter 11.
But in a filing Tuesday with the U.S. Bankruptcy Court in Manhattan, NYRA, which owns and operates the three biggest race tracks in New York state, said it owes the IRS no more than $5 million.
“The claim … far exceeds any amount NYRA could potentially satisfy,” the association said in a court filing. “Because of its magnitude, [the claim] presents a significant impediment to NYRA’s ability to accurately analyze any proposed creditor distribution scheme that would be part of a plan of reorganization.”
NYRA wants the bankruptcy court overseeing its Chapter 11 case to intervene in the dispute and estimate the amount it owes the government. The agency, which has run thoroughbred horse racing in New York since 1955, oversees operations at Aqueduct, Belmont Park and Saratoga.
Under bankruptcy law, a company operating in Chapter 11 can ask a bankruptcy judge to estimate a disputed creditor claim blocking its exit from Chapter 11.
The IRS claim dwarfs NYRA’s total assets, which according to its November 2006 bankruptcy filing, were $153.3 million.
A hearing on NYRA’s bid for bankruptcy Judge James Peck to estimate the claim is scheduled for Nov. 28.
As part of its three-year audit of the association, the IRS requested 16 adjustments to the group’s tax returns filed before the NYRA went into bankruptcy, for the years 2000 through 2005. The IRS said the adjustments would result in an increase of the NYRA’s taxable income by more than $1.3 billion.
Among other things, the IRS said the NYRA should have reported the “handle,” or all the money bet at race tracks and offsite betting locations as income on its tax return. The NYRA only reported a portion of those proceeds, its “takeout,” as income on its returns.
According to court documents, the IRS believes NYRA understated its taxable income by some $761 million during the five-year period. The IRS also said NYRA improperly deducted about $443 million on its income tax returns.
NYRA said the IRS does not fully understand its business.
Last month, NYRA filed a Chapter 11 reorganization plan under which the association agreed to surrender its claim of ownership over the three racetracks in exchange for the right to run the state’s racing franchise for 30 years.
NYRA’s franchise to operate racing at Aqueduct, Belmont and Saratoga expires in two months. New York Gov. Eliot Spitzer has said he prefers a 30-year extension for NYRA over other bidders for the franchise, but a final deal hasn’t been struck with New York state lawmakers.
A key bankruptcy court hearing on NYRA’s outline of its reorganization plan is scheduled for Nov. 20 in Manhattan.
Copyright 2007 by The Associated Press
Tax Debt Help – “Be Prepared for the Preparers!”
With the recent news that overall nationwide tax preparation fees will increase by 30% for the 2007 filing season, It’s time to get folks to remember their Boy and Girl Scout days and “Be Prepared” to get the best bang for your bucks.
I’ve often wondered what percentage of taxpayers would prefer going to an incompetent tax preparer if it meant that they would file an incorrect return and taking the risk of betting with Uncle Sam. While reading several articles on the IRS website recently on the Return Preparer Fraud program, there was some very valuable information that I want to pass along. This is an excerpt from those articles:
“Return Preparer Fraud generally involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients. Preparers may also manipulate income figures to obtain fraudulent tax credits, such as the Earned Income Tax Credit.In some situations, the client (taxpayer) may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on their tax returns. However, when the IRS detects the false return, the taxpayer must pay the additional taxes and interest and may be subject to penalties and criminal prosecution.While most preparers provide excellent service to their clients, the IRS urges taxpayers to be very careful when choosing a tax preparer. You should be as careful as you would in choosing a doctor or a lawyer. It is important to know that even if someone else prepares your return, you are ultimately responsible for all the information on the tax return.”
If you are a “joint jumper” and run from one tax professional to another to get the result you want, just remember, you can go to ten different tax professionals and get a different answer for any one question. There are volumes and volumes of tax code and laws, no one professional knows the answer to every question. A good professional should be upfront and let you know that they don’t know the answer, but they’ll find it. That’s true professionalism, someone worth trusting and someone worth sticking with.
Here are my tips for Choosing a Return Preparer:
- Avoid “I can get you more” tax preparers
- Avoid preparers who base their fee on a percentage of the amount of your refund.
- Find out the person’s credentials. Ask if they take continuing education classes each year for tax updates. If they can’t look you in the eye and say yes, then that’s your cue to say no!
- Never use a tax professional who will not sign your tax return or who doesn’t provide you with a copy for your records.
- Make sure that your preparer can be contacted during the year to answer any questions you may have after the return has been filed.
- Review your return before you sign it and ask questions on entries you don’t understand.
- Never sign a blank tax form.
- Find out if the preparer is affiliated with a professional organization that holds them to a code of ethics.
- Ask questions, there are no stupid questions when it comes to your financial future.
On the other hand if you do find that preparer who finds you that refund be prepared for the wrath of the IRS. You might make it through the first, second and third year without a word. But suddenly one day that letter comes in the mail. After opening the letter, you find that you are being audited and the scrambling begins for receipts, which by the way, you don’t have. Now think about this, after the audit and the adjustments, you’re facing three years of additional liability and accrued interest.
Tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine. If you don’t believe me, check out the criminal investigation statistics from the IRS themselves.
| FY 2002 | FY 2003 | FY 2004 | Investigations Initiated | 254 | 229 | 206 |
| Prosecution Recommendations | 89 | 169 | 167 |
| Indictments/Information | 61 | 109 | 121 |
| Convictions | 64 | 67 | 117 |
| Incarceration Rate* | 86.8% | 83.7% | 84.4% |
| Avg. Months to Serve | 23 | 19 | 19 |
*Incarceration may include prison time, home confinement, electronic monitoring, or a combination.
As a year round tax preparer, I find myself amending returns that have been prepared by every profession whether it be an accountant, CPA, independent firms and of course, the self-preparers. And as the years pass, I realize that there is no one sector of tax professionals who shouldn’t be questioned on their credentials or education. Working with clients who have received that audit letter and find themselves in major “tax debt” trouble, I understand the overwhelming need for “tax debt help” to avoid an “IRS Levy”. They find themselves in a situation of having to hire the services of Tax Resolution firms such as Effectur, Inc.
The final result of being “prepared” can be paying four to five times the amount you would have paid had the returns been completed correctly. Seems to me the only one who is truly prepared is Uncle Sam as he “prepares” to take your money.
Sharon R. Raines, Sr. Financial Advisor/Tax Preparer
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