Myles M. Mattenson
ATTORNEY AT LAW
5550 Topanga Canyon Blvd.
Suite 200
Woodland Hills, California 91367
Telephone (818) 313-9060
Facsimile (818) 313-9260
Email: MMM@MattensonLaw.com
Web: http://www.MattensonLaw.com
Attention Laundromat And Route-operators:
The Irs Is Watching You!

      Myles M. Mattenson engages in a general civil and trial practice including litigation and transactional services relating to the coin laundry and dry cleaning industries, franchising, business, purchase and sale of real estate, easements, landlord-tenant, partnership, corporate, insurance bad faith, personal injury, and probate legal matters.

      In providing services to the coin laundry and dry cleaning industries, Mr. Mattenson has represented equipment distributors, coin laundry and dry cleaning business owners confronted with landlord-tenant issues, lease negotiations, sale documentation including agreements, escrow instructions, and security instruments, as well as fraud or misrepresentation controversies between buyers and sellers of such businesses.

      Mr. Mattenson serves as an Arbitrator for the Los Angeles County Superior Court. He is also past chair of the Law Office Management Section of the Los Angeles County Bar Association. Mr. Mattenson received his Bachelor of Science degree (Accounting) in 1964 and his Juris Doctorate degree from Loyola University School of Law in 1967.

      Bi-monthly articles by Mr. Mattenson on legal matters of interest to the business community appear in alternate months in The Journal, a leading coin laundry industry publication of the Coin Laundry Association, and Fabricare, a leading dry cleaning industry publication of the International Fabricare Institute. During the period of May 1995 through September 2002, Mr. Mattenson contributed similar articles to New Era Magazine, a coin laundry and dry cleaning industry publication which ceased publication with the September 2002 issue.

      This website contains copies of Mr. Mattenson's New Era Magazine articles which can be retrieved through a subject or chronological index. The website also contains copies of Mr. Mattenson's Journal and Fabricare articles, which can be retrieved through a chronological index.

      In addition to Mr. Mattenson's trial practice, he has successfully prosecuted and defended appeals on behalf of his clients in various areas of the law. Some of these appellate decisions are contained within his website.


Attention Laundromat And Route-operators:
The Irs Is Watching You!

As  a  result  of  examinations of various businesses  or  market
segments  by  IRS  district offices,  the  IRS  has  developed  a
specialized  auditing  approach for approximately  80  industries
known  as the Market Segment Specialization Program (MSSP).   The
program  is  designed  to  develop the  expertise  of  agents  in
auditing specific types of business or market segment.

As  part  of  the MSSP approach, the IRS has also  issued  Market
Segment  Guidelines  which have been  developed  by  the  IRS  in
consultation   with   industry  representatives,   that   address
recurring tax issues, to a particular industry.

The  industries or market segments upon which the IRS has focused
under  the  MSSP  includes, to name a few, bail bondsmen,  casino
gambling,   car  washing  and  detailing,  ministers,  attorneys,
plastic surgeons, and laundromats!

The  MSSP  focuses on industries that can receive  a  substantial
amount  of their income in cash, as well as industries  that  may
not  be fully paying employment taxes for their workers (more  on
this subject next month).

In addition to the audit activity undertaken in the MSSP, the IRS
also monitors cash businesses through the vehicle of the Currency
Transaction   Report  (CTR).   The  Bank  Secrecy  Act   requires
financial  institutions to report currency transactions  of  more
than  $10,000.00 to the Internal Revenue Service.   Although  the
law   was   initially  established  to  principally  aid  federal
authorities  in  their  effort to control the  flow  of  currency
generated  from illegal activities such as narcotics,  CRTs  have
also  proven to be helpful in catching taxpayers seeking to evade
taxes regarding cash transactions.

A  CTR must be prepared by your bank for any currency transaction
of  more  than  $10,000.00  or, for  that  matter,  for  multiple
currency transactions totalling more than $10,000.00 in  any  one
day.

It is a violation of federal law to arrange a transaction with  a
financial  institution specifically to avoid the CTR requirement.
An  illustration of such a violation would be the act of breaking
a single deposit of more than $10,000.00 in cash into a series of
small cash deposits or reducing the amount of the deposit to less
than  $10,000.00  when  told  of reporting  requirements  by  the
financial institution.

An  exemption  from large currency transaction reporting  can  be
provided  by a financial institution under certain circumstances.
The  effect of the exemption is to raise the dollar amount  which
can  be involved in the currency transaction before the reporting
requirement  kicks  in.   Financial  institutions  will  consider
raising  the dollar amount of the currency transaction  reporting
requirement for retail businesses primarily engaged in  providing
goods   directly   to  consumers,  amusement  parks,   bars   and
restaurants,  hotels,  theaters, and vending  machine  companies.
Banks  can,  however, lower the dollar amount  of  such  currency
transaction  reporting requirements without notification  to  the
bank  customer, particularly if normal cash deposits  drop  to  a
lower level.

In  a  news  release issued by the U.S. Attorneys Office  in  San
Diego, earlier this year, Wayne McEwan, Chief of the IRS Criminal
Investigation  Division,  stated "that the  IRS  will  vigorously
prosecute  businessmen who succumb to the temptation of  skimming
cash  receipts."   This comment was made in connection  with  the
agreement  of  a  San  Diego route operator to  plead  guilty  to
charges of tax evasion.  The defendant entering the plea was  the
president  and  sole  owner of a San Diego  based  Sub  Chapter-S
corporation  operating  over 10,000  coin  operated  washers  and
dryers installed in, among other locations, "apartment buildings,
condominium  complexes  and college dormitories,  throughout  San
Diego County."

After  collection of the gross receipts, monies from the  various
machines  were deposited directly at Wells Fargo Bank.  According
to the news release, "Rather than receive a credit for the amount
of  the entire deposit, [the defendant] directed Wells Fargo Bank
to  return exactly $7,000.00 in cash from each of the first  five
deposits  his company made each month."  Although this $35,000.00
would  be  reflected  as "less cash" on bank deposit  slips,  the
amount would not appear on monthly bank statements.  As a result,
the defendant received approximately $420,000.00 each year for  a
period  of years from Wells Fargo Bank that was not indicated  on
his  bank  statements.  The news release further states that  the
corporate  return  would  only  reflect  "the  amount  of  income
appearing on the Wells Fargo Bank statements.  In other words, he
failed  to  declare  all of the cash he received  back  form  the
individual  deposits.   As a result, he  evaded  the  payment  of
$1,432,622.00  in taxes which would have flowed  through  to  his
personal returns."

According  to  the  prosecutor  in this  matter,  Assistant  U.S.
Attorney  Phillip L.B. Halbern, the defendant paid the government
$5,100,335.12  in  back taxes, penalties and  interest,  together
with a $100,000.00 criminal fine.  In addition, the defendant was
sentenced  on  or  about April 24, 1995 to a  two  year  term  in
prison.

Skimming  is a dangerous game which can have devastating economic
and emotional consequences for you!  A failure to report all your
cash  receipts  may  result in a visit to your  laundromat  by  a
fellow in a business suit with an attache case.  And he won't  be
coming to see you to do his laundry!

[This column is intended to provide general information only  and
is  not intended to provide specific legal advice; if you have  a
specific  question  regarding the  law,  you  should  contact  an
attorney  of your choice.  Suggestions for topics to be discussed
in this column are welcome.]


Reprinted from New Era Magazine
Myles M. Mattenson  1995-2002