INTERNAL REVENUE SERVICE --
OR HOW TO CATCH A THIEF!
By Jan Bergemann
Published December 5, 2009
I know that the three letters IRS are really looking pretty scary. But sometimes the IRS can be of help in order to catch a thief -- or thieves -- in your community association.
Remember Al Capone? He wasn't convicted of murder, theft, racketeering and/or bootlegging; he was jailed for income-tax evasion.
You will ask: What does my community association have to do with Al Capone?
Easy explanation: When the FBI couldn't find enough evidence to convict Al Capone of the actual crimes he was notorious for, they turned to the IRS -- and they finally put him away.
we all know -- or have found out in the meanwhile -- Florida's law
enforcement is not very much inclined to prosecute embezzlers and scam
artists in our community associations. Their normal excuse: It's a
But the attempt (H1397) to create a DBPR "police force" of specialized employees knowledgeable in condo law and accounting was met by harsh resistance from attorneys and board members -- I wonder about their motive for opposing these "safeguards" -- who used about every excuse known to mankind to kill this proposal. From violation of constitutional rights to outrageous cost -- we heard it all.
To me it is very obvious why so many board members and/or attorneys are opposed to stricter supervision, and/or punishment of the bad guys! To me it looks like too many of these folks have their hands in the cookie jar.
And that is exactly where the IRS comes into play. Don't forget, even ill-gained money is taxable! Some directors are straightforward -- they just take the money. Others are more sneaky. They just "forgive" their own monthly dues, play kickbacks with contractors, pay themselves as "managers" and/or use association credit cards to do the shopping.
I call it "ill-gained extra income" -- the IRS calls it "inurement." Please check the explanation given by the IRS:
The IRS has a special form -- Form 3949 A -- that was created to report suspected Tax Fraud activity:
You are not required to state your name, but you may want to -- in case your complaint is successful and the IRS is paying a reward:
Here is some more information, especially interesting if your complaint doesn't meet the high thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less that $200,000. If you don't meet the threshold, the Informant Claims Program kicks in:
As to protection of the informant: WHISTLEBLOWER is the magic word. To mind comes the "Sarbanes-Oxley Act of 2002"
There is another issue that everybody has to be concerned about: HOAs and Condos have to fulfill all the needed obligations to be tax-exempt as a not-for-profit corporation. Please read: Form 1120-H -- U.S. Income Tax Return for Homeowners Associations. The danger: Expenses that are "not substantially related to the exempt purpose" could kill the exempt status. And it happens all the time that money is used for purposes that only benefit a few -- not the whole community!
Scumbags don't like to declare their ill-gained money on tax returns. It would create proof against them. Always remember: If law enforcement doesn't want to prosecute the scumbags fleecing your community -- there is always the IRS. Worked with Al Capone, why shouldn't it work for board directors and community association managers?
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