Man Convicted Of Threatening To Assault & Kill IRS Agent And Torture The Agent’s Family Over Audit Proceedings

/in /by

While death and taxes are always certain, take lesson from Andrew A. Calcione that you should never mix them together.

In May 2014, a federal judge found 49-year-old Andrew A. Calcione of Cranston, Rhode Island, guilty of threatening to assault an IRS Revenue Agent, rape and kill the agent’s wife and injure the agent’s daughter while the agent watched before murdering the agent. The reason? Mr. Calcione didn’t want to pay his tax bill of $330,000.

According to government testimony as reported in United States of America v. Andrew A. Calcione, U.S. District Court for the District of Rhode Island (Providence County), Case No. 1:13-mj-00291-LDA, Mr. Calcione was selected for audit for the years 2008, 2009 and 2010. Mr. Calcione’s behavior is also so bizarre because for many years worked as a professional tax return preparer and was a partner in a tax preparation business in Rhode Island. As a result of the audit which was being conducted by an agent out of the IRS office in Warwick, Rhode Island, it appeared that Mr. Calcione would be responsible for an additional $330,000 in tax liability.

In April 2013 while the audit was still in progress, Mr. Calcione and his ex-wife Patricia were asked to sign a form allowing extra time to assess their case. As part of the audit process, an IRS revenue agent requested that Mr. Calcione and his ex-wife sign a Consent to Extend Time to Assess Tax. A consent is almost always requested during audit because, by statute, the Service does not have an unlimited time to examine a tax return. As a general rule, the IRS can’t assess tax more than three years after the later of the date the return was due or the date the return was actually filed (this is sometimes referred to as the statute of limitations) though exceptions may apply. If an audit is bumping up against that statute of limitations, it is sometimes (but not always) advantageous to sign a consent to allow more time to argue your case before the IRS issues a notice of deficiency. In short, it’s a question of timing.

Mr. Calcione signed the document, but his wife did not, spurring the agent to leave a voicemail on

Mr. Calcione’s cell phone asking about the consent on July 12, 2013.

Mr. Calcione called the agent back three days later which was July 15, 2013. He did not, however, call to leave a friendly status update. Rather, according to court documents, Mr. Calcione advised the agent that if he called again, Mr. Calcione would show up at the agent’s home and torture the agent’s family before killing all of them. And he said it all on voicemail.

It wasn’t a run of the mill threat either. The initial call lasted over 3 minutes and contained numerous threats.

Court records reveal the following snippet of the call: “I’m just going to show up where you live. Hmm, and that’s a promise, man. It’s not a threat. I will just show up where you live, and then, it will be the end of it, like that. Huh? Hmm, I’m just right up the street, mother f****r, anytime you’re ready. Yeah … hmm, hmm. Security? Hmm (laughs). This ain’t Fisher Karate, karate, Jiu-Jitsu, f*****g kick boxing, or whatever. I have no problem f*****g blowing your brains … no … I won’t even think twice about it. Matter of fact, I’d shoot you in the f*****g knee caps, tie you to a f*****g chair, gag ya … and then f**k your wife in front of ya, and then blow her f*****g brains out in front of ya and maybe kill your f*****g kid and then maybe [inaudible]. So you can deal with that.”

You’d think that he’d stop there. But he didn’t. Mr. Calcione actually called the agent back on the same day, telling him to “disregard my previous voicemail.” Mr. Calcione went on, according to the agent, to say that the message was intended to mess (though he used a more colorful word) with his daughter.

After receiving the threatening calls, the agent reported Mr. Calcione to the police.

Prosecutors were able to establish that both calls came from a cell phone belonging to Mr. Calcione’s wife. The agent also recognized Mr. Calcione’s voice.

Mr. Calcione later switched up his story and told police that the message was actually intended for his ex-wife (and you wonder why she’s an ex). At some point, it must have dawned on him that none of those stories made any sense so he tried another version, claiming that he had been talking to himself in the car and must have accidentally called the agent using hands-free.

What’s really bizarre is Mr. Calcione’s explanation for the call. He told IRS special agents that the call was intended for his ex-wife who was apparently seeking increased child support (and you wonder why she’s an ex). At some point, it must have dawned on him that this story made no sense so he tried another version claiming that he was merely talking out loud in his car and must have accidentally activated his phone’s hands free calling feature.

Court records reveal that prior to this offense, Mr. Calcione ran a successful financial services business and had no criminal record.

U.S. District Court Chief Judge William E. Smith didn’t buy any of Mr. Calcione’s stories. He found Mr. Calcione guilty of threatening to assault and murder the agent and his family after Mr. Calcione waived a jury trial.

Following the conviction, the U.S. government made several statements:

Assistant U.S. Attorney Gerard B. Sullivan had prosecuted the case and his boss, United States Attorney Peter F. Neronha referred to Mr. Calcione’s behavior as “outrageous, threatening, and frankly bizarre noting that “[t]he vast majority of Americans understand the payment of their federal taxes is part of their civic responsibilities.” Mr. Neronha went on to say that his office would be “seeking the toughest, appropriate sense in this case.”

J. Russell George, the Treasury Inspector General for Tax Administration, stated that “the Treasury Inspector General for Tax Administration works aggressively to protect IRS employees from individuals who seek to impair the integrity of tax administration by threatening harm or committing violent acts.”

Special Agent in Charge Robert E. O’Malley of the IRS Criminal Investigation Division stated that “threats and assaults directed against IRS employees are investigated and pursued to the fullest extent of the law.” Adding, “we will continue to place a priority on ensuring the safety of IRS employees by working towards the arrest, conviction, and sentencing of the perpetrator.”

For the record, while bad behavior and threats can always be considered criminal, there are special rules which apply with dealing with the feds. Federal law provides that “knowingly and intentionally threaten to assault and murder a Revenue Agent of the IRS with intend to interfere with the official in the performance of official duties and knowingly and intentionally threaten to assault and murder a member of the immediate family of a Revenue Agent of the IRS are each punishable by statutory penalties of up to 10 years in federal prison and a fine of up to $250,000.”

That meant that Mr. Calcione could face up to 20 years for his crimes.

But on September 27, 2014 in U.S. Federal District Court he was sentenced to a year and a day in federal prison. Although part of the record is sealed, what is public suggests that Mr. Calcione may have tried to claim an anxiety disorder as a reason for his bizarre behavior. If true, he will have plenty of time to meditate while in prison. By the way, his tax bill of $330,000.00 will still be waiting for him when he completes his sentence.

Don’t Take The Chance And Lose Everything You Have Worked For.

Protect yourself. If you are being audited or investigated by IRS or in danger of wage garnishments or bank levies or having a tax lien placed against your property, stand up to the IRS and your State Tax Agency by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including tax audits, criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

Beware Of New E-Mail Scam Using The IRS Name Targeting Foreign Taxpayers With U.S. Bank Accounts

/in /by

An e-mail claiming to come from the IRS claims:

“Our records indicate that you are a Non-resident, and that you are exempted from the United States of America Tax reporting and withholding on interest paid to you on your account and other financial benefits. To protect your exemption from tax on your account and other financial benefits, you need to re-certify your exempt status to enable us confirm your records with us. Therefore, you are required to authenticate the following by completing form W-8BEN attached and return same to us as soon as possible with a valid copy of government issued Identification (e.g., International Passport) through the email at the bottom of the form.”

This appears to be an identity theft scheme to obtain recipients’ personal and financial information so the scammers can clean out their victims’ financial accounts. In reality, a request for a Form W-8BEN, W-8 or W-9 would be made directly by your bank not the IRS.

Why Banks Need Your Social Security Number.

A social security number (SSN) is a nine-digit number issued by the Social Security Administration to all U.S. citizens, permanent residents and temporary working residents. The purpose of a social security number is to track individuals for taxation purposes. Federal law requires private businesses to collect an SSN when the Internal Revenue Service requires notification of the transaction. Banks and other financial institutions require individuals to provide an SSN when engaging in financial transactions.

Banks are required by federal law to participate in a Customer Identification Program for the opening of new accounts. Individuals opening up a checking account, savings account or renting a safe deposit box are required to provide the bank with a valid name, date of birth, current mailing address, and a social security number. Banks are required to verify the accuracy of the information by also requesting proof of identification in the form of a driver license, passport or by contacting a credit reporting agency that would have information on file based on the SSN. Banks are also required to obtain a SSN on existing accounts and where there is no SSN, the banks are required to withhold tax at the source (that means your bank account) and remit your money to the IRS. Banks check the SSN against government terror lists, to limit terrorist financing and fight against money laundering.

How The Scam Works.

Using a technique calculated to get almost anyone’s attention, the e-mail notifies the recipient that he or she to protect their exemption from tax on interest paid to you on your account and other financial benefits you must complete a tax form with their identifying information (such as Form W-8BEN) and email it back along with a copy of a government-issued ID.

Unusual for a scam e-mail, it may contain a salutation in the body addressed to the specific recipient by name. These scam e-mails are sent using the same technique used by spammers, in which hundreds of thousands of messages are sent to potential victims based on Internet address. Because of the volume, the typical scam e-mail is not personalized.

Beware this e-mail is a phony. The IRS does not send unsolicited, tax-account related e-mails to taxpayers. Also, any domain name in sender’s email or reply email address contained in the email are not legitimate as the domain name for IRS is “irs.gov”.

So What Should You Do?

If you get an email from someone claiming to be from the IRS and asking for your identification, here’s what you should do:

Report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

And if you do owe taxes and you have not already resolved this with the IRS or you have not disclosed your foreign accounts as required by the IRS, then that is where we come in. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

Jeffrey B. Kahn, Esq. Discusses taxes, the IRS and undisclosed foreign accounts On ESPN Radio – January 30, 2015 Show

/in /by

Topics Covered:
1. Does The National Football League Deserve Tax-Exempt Status?
2. Hiding Money Or Income Offshore Among The List Of Tax Scams For The 2015 Filing Season
3. Programs And Plans Available To Taxpayers To Resolve Outstanding IRS debts And Avoid Collection Action

4. Questions From Our Listeners:

a. Is there an advantage to hire a former IRS agent over a tax attorney?

b. My CPA who prepared my tax return which has now been selected for audit, wants to represent me – why should I decline his offer and hire a tax attorney?

Yes we are all working for the tax man!

Good afternoon! Welcome to the KahnTaxLaw Radio Show.
This is your host Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
You are listening to my weekly radio show where we talk everything about taxes from the ESPN 1700 AM Studio in San Diego, California.

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into our website at www.kahntaxlaw.com.
I have a lot to cover today in the world of taxes and helping me out will be my associate attorney Amy Spivey who will be calling in later in today’s show.

Today’s Big Story: Does The National Football League Deserve Tax-Exempt Status?

You know that with this weekend being the Super Bowl game it seems everywhere I go somebody is talking about this big event.

Besides the match-up of the Seahawks and the Patriots, people are excited over the entertainment and half-time show, what celebrities will be attending the game and of course – the commercials.

Sponsors present their best commercials during the Super Bowl, and the big game wouldn’t be the same without them. For the advertising community, the Super Bowl is their Super Bowl, and often creates commercials specifically for the enormous viewership that the game provides. For many, watching the commercials is the most entertaining part of the Super Bowl. Advertisers try to get their money’s worth by unveiling their most creative and innovative spots.

And so with the Super Bowl 49 coming up, what does taxes have to do with football?

Well as I said one of the things we look forward to are the commercials. The cost to air a 30-second commercial during the 2015 Super Bowl is $4.5M. $4.5M dollars!

How about the cost of a ticket to attend the Super Bowl? Well the cheapest seat – and this is face value – is $800.00. The more expensive seats (and I am not even talking about suites) go up to $1,900.00. For that price I will pass and instead buy one of those 80 inch screen TV’s which I can enjoy every day! I just can’t justify paying that much to go to a game when I can sit in the comfort of my own home and not have to worry about beer sales closing at the end of the third quarter.

Now here is a fact that is not so widely known – the National Football Association which you figure makes a ton of money is recognized by the IRS as a tax-exempt entity. You heard me right – the National Football League does not pay income taxes as any for-profit-company would.

How can this be?

Section 501(c)(6) of the Internal Revenue Code provides for the exemption from tax entities which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.

Those entities are specifically:

  1. business leagues,
  2. chambers of commerce,
  3. real estate boards,
  4. boards of trade and
  5. professional football leagues.

It’s obviously notable that only professional football leagues are included here, as opposed to all sporting leagues.

It seems inconceivable that the NFL is not “engaging in a regular business of a kind ordinarily carried on for profit.”

How are their efforts to maximize profits any different than those of Major League Baseball, the National Basketball Association or the National Hockey League? Those organizations do not have tax-exempt status.

Well professional football leagues were not always included in this list. This change dates back to 1966, when the tax code was amended to give a professional football league tax-exempt status in order to facilitate the merger of the NFL and the old American Football League.

In order to have that status, the NFL must be run as a charitable foundation. In 2012, they gave away a meager $2.3 million. Almost all of it–$2.1 million– went to the NFL Hall of Fame. Oh by the way, last time I checked the price of Adult admission to the Hall of Fame was $24.00 ($17.00 for a child). The average admission price (including free admission museums) for all museums in the United States is $8.00.

In 2012, NFL commissioner Roger Goodell was paid $29.5 million to run the organization. More crazy: Goodell’s salary is 1/10th of what the NFL claimed in total assets for 2012– $255 million. Even crazier: Goodell made 15 times what the NFL donated to other charities. Extremely crazier: the amount of charitable donations made by the NFL equaled one-one hundredth of their annual income.

Here are the stats: The NFL’s most recent Form 990 filed with the IRS ended on March 31, 2012. They claimed revenue of $255 million, up from $240 million in 2011. So, if you were concerned, things are good. The NFL has assets of over $822 million.

Under “grants”– meaning donations to other non profit organizations, the NFL did increase the number from just over $900,000 to $2.3 million. Generous right? However: the NFL’s executive salaries increased by $27 million to a total of over $107 million.

Here’s the best part: after all that, thanks to creative thinking, the NFL claims it finished the year in the red with negative $316 million.

What else did they spend money on? Well, for one thing, new office construction cost $36 million. That’s thirty six million dollars.

Just to put all this in perspective: going by numbers in Forbes, Goodell would come in at around number 28 of the highest paid CEO’s in 2012. He made more than the heads of FedEx, AT&T, Heinz, Ford Motors, Goldman Sachs, as well as Rupert Murdoch.

And remember, all those other businesses are for profit, not tax free foundations.

And if you’re wondering about the other sporting leagues, neither Major League Baseball nor the National Basketball Association is registered as a charity, foundation or trade organization. They each gave up their tax- free status years ago.

But don’t think that if you go on NFL.com and order super bowl tickets you can claim a charitable deduction. Why?

You see that when you make a donation to a charity and receive a benefit back, the amount deductible is only the excess of your contribution over the benefit you receive. Also, your charitable deduction cannot include the value of any benefits you received from the charity.  An example would be where you paid $200 to attend a charitable ball for which the charity states that the value of the ticket is $75.  In such an instance your charitable deduction would be $125.

Going back to whether the NFL should get to keep its tax-exempt status, the important thing here is that WE THE PEOPLE through our politicians in Washington DC granted the NFL this tax exemption, even if it was decades ago. This is no different that us granting the NFL’s anti-trust exemption for negotiating television broadcast contracts. As a result, should that exemption be revoked if the NFL blacks out its fans, forces fans to pay for personal seat licenses, extorts public money from municipalities by threatening to move teams, etc.? The NFL may technically be a “nonprofit,” but is it really acting in the public interest?

Well it’s time for a break but stay tuned because we are going to tell you about a big tax scam the IRS is following for people who have foreign accounts.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

Calling into the studio from our San Francisco Office is my associate attorney, Amy Spivey.

Chit chat with Amy

Jeff opens with: Hiding Money Or Income Offshore Among The List Of Tax Scams For The 2015 Filing Season

IRS Commissioner John Koskinen was proud to announce that “the recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore and he encouraged taxpayers to come in voluntarily and getting their taxes and filing requirements in order.”

But most taxpayers do not know what they need to report or how to get in compliance which is why we make this offer – PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states, Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, the IRS reports there have been more than 50,000 disclosures and the IRS has collected more than $7 billion from this initiative alone.  The IRS also has conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. Finally, the IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

Jeff asks Amy, now you have information on a multi-national conference dealing with this area.

Amy states, The IRS remains committed to top priority efforts to stop offshore tax evasion wherever it occurs.  Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil. In fact, the Internal Revenue Service Criminal Investigation Division (IRS-CI) and Her Majesty’s Revenue & Customs (HMRC) co-hosted a three-day International Criminal Tax Symposium in Washington, D.C. starting January 27, 2015.  The symposium focused on combating offshore tax evasion and international financial crimes—including cyber-crime—and brought together delegates from criminal tax and enforcement programs from Australia, Canada, The Netherlands, Norway, New Zealand, the United Kingdom and the United States.

Jeff states:

Tax Scam: Hiding Income Offshore

Through the years, offshore accounts have been used to lure taxpayers into scams and schemes which usually peak during filing season as people prepare their returns or hire people to help with their taxes. Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them.

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas.

Amy states:

Big Penalties For Non-compliance – Jail-time Is Possible.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Separate from United States income tax returns, many U.S. persons are required to file with the U.S. Treasury a return commonly known as an “FBAR” (or Report of Foreign Bank and Financial Accounts; known as FinCEN Form 114), listing all non-US bank and financial accounts. These forms are required if on any day of any calendar year an individual has ownership of or signature authority over non-US bank and financial accounts with an aggregate (total) balance greater than the equivalent of $10,000.

Jeff states:

The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes.

Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge you with violations.

Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment. Many violent felonies are punished less harshly.

Amy states:

Voluntary Disclosure.

Since 2009, the IRS has provided several programs for taxpayers to disclose their offshore accounts, potentially reduce their financial liability, and avoid criminal prosecution. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

The IRS further warned that it is obtaining a significant amount of information regarding offshore tax evasion from its enforcement efforts as well as the Foreign Account Tax Compliance Act (FATCA), which will require foreign financial institutions to start disclosing the identities of U.S. accountholders as early as March 2015.

Jeff states, now there are different voluntary disclosure programs available so let’s break them down for our listeners.

Amy please tell us about the regular program.

Amy says, The Offshore Voluntary Disclosure Program (OVDP) provides protection from criminal prosecution and offers fixed terms for resolving civil tax and penalty liabilities. Instead of the multitude of potential penalties, the OVDP generally allows taxpayers to pay a 27.5% miscellaneous penalty on the highest aggregate balance of undisclosed accounts, pay tax on any undisclosed income for the last 8 years, and pay interest on such income. The OVDP offers significant benefits, but a successful conclusion requires multiple complex steps. 

Amy please tell us about the streamlined program.

Amy says, Effective July 1, 2014, the Streamlined Disclosure Programs provide potential alternative methods for taxpayers to address their offshore reporting delinquencies. Under the Streamlined Disclosure Programs, taxpayers file three years of amended or delinquent returns and six years of FBAR’s, but are subject to a reduced penalty structure. U.S. residents pay a penalty of 5% of the highest balance of their offshore accounts, while non-U.S. resident taxpayers are subject to no penalty on their account balances. However, to participate in the Streamlined Disclosure Programs, the IRS requires taxpayers to certify that their failure to disclose their accounts was non-willful.

Jeff states,

What Should You Do?

If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or in 2012 OVDI, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law.

Protect yourself from excessive fines and possible jail time. PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned because after the break we are going to tell you how one person who owed the IRS about $60,000.00 ended up getting $862,000.00 from them.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And on the phone from our San Francisco office I have my associate attorney, Amy Spivey.

Programs And Plans Available To Taxpayers To Resolve Outstanding IRS debts And Avoid Collection Action

Now listen to how one person who owed the IRS about $60,000.00 ended up getting $862,000.00 from them. This is a true story taken from the New York Post.

Jeff to talk about the story.

A taxpayer who met with a Revenue Officer at an Internal Revenue Service office on Long Island successfully sued the IRS for $862,000 after he was injured by tripping over a phone cord.

William Berroyer claimed in his lawsuit that he could no longer play golf or have intimate relations with his wife more than once a month after he fell during a 2008 conference with a Revenue Officer at an IRS office in Hauppauge, N.Y., according to the New York Post. He had visited the offices to work out a payment agreement for a $60,000 tax bill when he tripped on the phone cord and fell against a cabinet.

After leaving the office, he telephoned the IRS Revenue Officer from the parking lot to inform him that he had lost the sense of feeling in his leg and was suffering from shoulder pain. He then spent 17 days in hospitals and rehabilitation centers recovering from his injury.

In his lawsuit he claimed $10 million in damages. Attorneys for the IRS claimed he was exaggerating his injury, but the judge ultimately awarded him $862,000 for pain and suffering. And the big prize is because this was for pain and suffering, he won’t have to pay taxes on the damages!

So now that the IRS has tucked away all their telephone cords, how can taxpayers who owe the IRS avoid collection action? You need to have a plan.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Amy what are some of the plans that persons may incorporate to resolve outstanding IRS debts and avoid collection action?

Jeff to introduce each one, followed by Amy’s explanation and then Jeff to further comment.

1. Extension of Time to Pay — This is different than the extension you file on April 15th which that extension gives you an extra 6 months (to October 15th) to file your income tax return but any monies from that tax return still remain due April 15th. Instead this Extension of Time to Pay is offered by Collections after the tax returns have been filed. You may be eligible for a short extension of time to pay of up to 120 days. This might be a desirable option for you if are able to pay the taxes in full within the extended timeframe – due to an expected sale or liquidation of assets, securing financing, an expected gift or inheritance, or an expected bonus.

2. Offer In Compromise. This is a formal application to the IRS requesting that it accept less than full payment for what you owe in taxes, interest, and penalties.

An offer in compromise may allow you to settle back taxes or IRS liability at a substantial discount on the basis of doubt as to collectability, liability, or effective tax administration.

In addition, while your offer is under consideration, the Internal Revenue Service is prohibited from instituting any levies of your assets and wages.

Most people do not have the necessary skills or knowledge of the IRS collection process to make an offer in compromise that is in their best interest and can be processed by the IRS.

Government figures show that 75% of offers are returned at the beginning due to forms being filled out incorrectly, and of the 25% that are processed, approximately 50% are rejected.

3. Installment Agreement. Allows you to pay IRS debt in full in smaller, more manageable amounts, usually in equal monthly payments.

The amount of your installment payment will be based on the amount you owe and your ability to pay that amount within the time available to the IRS to collect tax debt from you.  However, be aware that because you are financing your liability with IRS, interest and penalties will continue to accrue.

Most installment agreements are set up with level monthly payments but there are also different types and terms of installment agreements which if you qualify may be more suitable for you.  The variations are not publicly offered by IRS – only a seasoned tax professional would know to ask for them.

4. Uncollectible Status. Occurs when the IRS has determined that they are presently unable to collect the taxes from the taxpayer by full payment, through an Installment Agreement or by way of an Offer in Compromise.

Once the account is placed on an Uncollectible Status, the IRS does not pursue collection activity against the taxpayer and the statute of limitations on the tax liabilities will continue to run.

Generally, unless the taxpayer’s financial situation changes, the account will remain on an Uncollectible Status until the tax liabilities expire. However, if the taxpayer’s financial situation improves the account will be taken off of Uncollectible Status so that the IRS can collect the taxes through full payment or an Installment Agreement.

Uncollectible Status although temporary could provide interim relief to taxpayers who all of a sudden run into financial hardship.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned as we will be taking some of your questions. You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team along with my associate attorney, Amy Spivey.

If you would like to post a question for us to answer, you can go to our website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Amy, what questions have you pulled from the kahntaxlaw inbox for me to answer?

1. John of Newport Beach, CA asks: Is there an advantage to hire a former IRS agent over a tax attorney?

Jeff to respond

What I find is that IRS agents are trained to deal with matters that are black and white. However many times matters are gray and that’s where a tax attorney can plead a case to your benefit and get the best resolution possible.

Agents are also typically regulated to a single function in IRS – such as an auditor whose job is solely to conduct tax audits. How can that agent then be able to help you get an Offer In Compromise? A tax attorney is experienced in all these areas so no matter what your tax problem is, you will have effective representation and should get the best possible outcome.

2. Kevin of Escondido, CA asks: My CPA who prepared my tax return which has now been selected for audit, wants to represent me – why should I decline his offer and hire a tax attorney?

Jeff to respond

CPA’s prepare tax returns and there are a lot of CPA’s and other tax professionals who a great in preparing tax returns.

A taxpayer will provide them with information and tax documents and a return will be generated for filing with the IRS. This process I refer to as “compliance”.

But a tax attorney will focus on “representation” – meaning that the cases taken on by the attorney are when the IRS is questioning a return or making other civil or even criminal inquiries of a taxpayer.

A tax attorney being familiar with the “representation” aspect, knows who to speak to at IRS and how to best present your case. The tax attorney can also devote full attention to your attention at any time since the tax attorney’s workload is not jammed like the CPA’s workload during tax season who is busy with tax return preparation and more focused over meeting filing deadlines and therefore cannot provide the needed attention to your case.

Speaking of civil and criminal inquiries, a taxpayer who engages a tax attorney also gets the benefit of attorney-client privilege. This benefit allows that taxpayer to freely discuss with his attorney any matters or issues without the threat of these communications being disclosed to the government or anyone else. You do not get this level of privilege when dealing with non-attorneys.

Lastly with the tax attorney there is no conflict of interest. The best way to explain this is by example – if a great defense is to rely on what the tax preparer did, do you think your tax preparer will put himself under the bus to save you from the IRS – chances are not. A tax attorney who had no involvement in the preparation of your returns can make these arguments thus truly serving your best interests.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Well we are reaching the end of our show.

You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.

Have a great day everyone!

Hiding Money Or Income Offshore Among The List Of Tax Scams For The 2015 Filing Season

/in , /by

IRS Commissioner John Koskinen was proud to announce that “the recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore and he encouraged taxpayers to come in voluntarily and getting their taxes and filing requirements in order.”

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, the IRS reports there have been more than 50,000 disclosures and the IRS has collected more than $7 billion from this initiative alone.  The IRS also has conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. Finally, the IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

The IRS remains committed to top priority efforts to stop offshore tax evasion wherever it occurs.  Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil. In fact, the Internal Revenue Service Criminal Investigation Division (IRS-CI) and Her Majesty’s Revenue & Customs (HMRC) co-hosted a three-day International Criminal Tax Symposium in Washington, D.C. starting January 27, 2015.  The symposium focused on combating offshore tax evasion and international financial crimes—including cyber-crime—and brought together delegates from criminal tax and enforcement programs from Australia, Canada, The Netherlands, Norway, New Zealand, the United Kingdom and the United States.

Tax Scam: Hiding Income Offshore

Through the years, offshore accounts have been used to lure taxpayers into scams and schemes which usually peak during filing season as people prepare their returns or hire people to help with their taxes. Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them.

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas.

Big Penalties For Non-compliance – Jail-time Is Possible.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Separate from United States income tax returns, many U.S. persons are required to file with the U.S. Treasury a return commonly known as an “FBAR” (or Report of Foreign Bank and Financial Accounts; known as FinCEN Form 114), listing all non-US bank and financial accounts. These forms are required if on any day of any calendar year an individual has ownership of or signature authority over non-US bank and financial accounts with an aggregate (total) balance greater than the equivalent of $10,000.

The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes.

Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge you with violations.

Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment. Many violent felonies are punished less harshly.

Voluntary Disclosure.

Since 2009, the IRS has provided several programs for taxpayers to disclose their offshore accounts, potentially reduce their financial liability, and avoid criminal prosecution. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

The IRS further warned that it is obtaining a significant amount of information regarding offshore tax evasion from its enforcement efforts as well as the Foreign Account Tax Compliance Act (FATCA), which will require foreign financial institutions to start disclosing the identities of U.S. accountholders as early as March 2015.

The Offshore Voluntary Disclosure Program (OVDP) provides protection from criminal prosecution and offers fixed terms for resolving civil tax and penalty liabilities. Instead of the multitude of potential penalties, the OVDP generally allows taxpayers to pay a 27.5% miscellaneous penalty on the highest aggregate balance of undisclosed accounts, pay tax on any undisclosed income for the last 8 years, and pay interest on such income. The OVDP offers significant benefits, but a successful conclusion requires multiple complex steps. 

Effective July 1, 2014, the Streamlined Disclosure Programs provide potential alternative methods for taxpayers to address their offshore reporting delinquencies. Under the Streamlined Disclosure Programs, taxpayers file three years of amended or delinquent returns and six years of FBAR’s, but are subject to a reduced penalty structure. U.S. residents pay a penalty of 5% of the highest balance of their offshore accounts, while non-U.S. resident taxpayers are subject to no penalty on their account balances. However, to participate in the Streamlined Disclosure Programs, the IRS requires taxpayers to certify that their failure to disclose their accounts was non-willful.

What Should You Do?

Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or in 2012 OVDI, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Given the complexity of the offshore account disclosure programs and the risk of increased penalties as numerous financial institutions disclose information required by FATCA, taxpayers with undisclosed offshore accounts should hire an experienced tax attorney in Offshore Account Voluntary Disclosures to consider the benefits and burdens of the programs and explore options to craft a workable solution for resolving these issues.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

Does The National Football League Deserve Tax-Exempt Status?

/in /by

Now here is a fact that is not so widely known – the National Football Association which you figure makes a ton of money is recognized by the IRS as a tax-exempt entity. 

Besides the match-up of the Seahawks and the Patriots in Super Bowl 49, people are excited over the entertainment and half-time show, what celebrities will be attending the game and of course – the commercials.

Sponsors present their best commercials during the Super Bowl, and the big game wouldn’t be the same without them. For the advertising community, the Super Bowl is their Super Bowl, and often creates commercials specifically for the enormous viewership that the game provides. For many, watching the commercials is the most entertaining part of the Super Bowl. Advertisers try to get their money’s worth by unveiling their most creative and innovative spots. The cost to air a 30-second commercial during the 2015 Super Bowl is $4.5M.

How about the cost of a ticket to attend the Super Bowl? Well the cheapest seat – and this is face value – is $800.00. The more expensive seats (and I am not even talking about suites) go up to $1,900.00.

The NFL is a non-profit entity.

The National Football Association which you figure makes a ton of money is recognized by the IRS as a tax-exempt entity and does not pay income taxes as any for-profit-company would.

Section 501(c)(6) of the Internal Revenue Code provides for the exemption from  tax entities which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.

Those entities are specifically:

  1. business leagues,
  2. chambers of commerce,
  3. real estate boards,
  4. boards of trade and
  5. professional football leagues.

It’s obviously notable that only professional football leagues are included here, as opposed to all sporting leagues.

It seems inconceivable that the NFL is not “engaging in a regular business of a kind ordinarily carried on for profit”.  How are their efforts to maximize profits any different than those of Major League Baseball, the National Basketball Association or the National Hockey League?

Well professional football leagues were not always included in this list.  This change dates back to 1966, when the tax code was amended to give a professional football league tax-exempt status in order to facilitate the merger of the NFL and the old American Football League.

Let’s Look At The Stats!

In order to have a tax-exempt status, the NFL must be run as a charitable foundation. In 2012, they gave away a meager $2.3 million. Almost all of it–$2.1 million– went to the NFL Hall of Fame. Oh by the way, last time I checked the price of Adult admission to the Hall of Fame was $24.00 ($17.00 for a child). The average admission price (including free admission museums) for all museums in the United States is $8.00.

In 2012, NFL commissioner Roger Goodell was paid $29.5 million to run the organization. More crazy: Goodell’s salary is 1/10th of what the NFL claimed in total assets for 2012– $255 million. Even crazier: Goodell made 15 times what the NFL donated to other charities. Extremely crazier: the NFL only made charitable donations equaling one-one hundredth of their annual income.

The NFL’s most recent Form 990 filed with the IRS ended on March 31, 2012. They claimed revenue of $255 million, up from $240 million in 2011. So, if you were concerned, things are good. The NFL has assets of over $822 million.

Under “grants”– meaning donations to other non profit organizations, the NFL did increase the number from just over $900,000 to $2.3 million. Generous right? However: their total salaries increased by $27 million to a total of over $107 million.

Here’s the best part: after all that, thanks to creative thinking, the NFL claims it finished the year in the red with negative $316 million.

What else did they spend money on? Well, for one thing, new office construction cost $36 million.

Just to put all this in perspective: going by numbers in Forbes, Goodell would come in at around number 28 of the highest paid CEOs in 2012. He made more than the heads of FedEx, AT&T, Heinz, Ford Motors, Goldman Sachs, as well as Rupert Murdoch.

Charitable Deduction Rule

So one may ask – if I go on NFL.com and order super bowl tickets, can I claim a charitable deduction? Well the tax law states that when you make a donation to a charity and receive a benefit back, the amount deductible is only the excess of your contribution over the benefit you receive. Also, your charitable deduction cannot include the value of any benefits you received from the charity.  An example would be where you paid $200 to attend a charitable ball for which the charity states that the value of the ticket is $75.  In such an instance your charitable deduction would be $125.

What Do you Think?

Going back to whether the NFL should get to keep its tax-exempt status, the important thing here is that WE THE PEOPLE through our politicians in Washington D.C. granted the NFL this tax exemption, even if it was decades ago. This is no different that us granting the NFL’s anti-trust exemption for negotiating television broadcast contracts. As a result, should that exemption be revoked if the NFL blacks out its fans, forces fans to pay for personal seat licenses, extorts public money from municipalities by threatening to move teams, etc.? The NFL may technically be a “nonprofit,” but is it really acting in the public interest?

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California resolve your IRS tax problems to allow you to have a fresh start.

 

IRS Targeting California As Its Booming Economy Overtakes Brazil As The World’s Seventh Largest Economy

/in /by

California is overtaking Brazil as the world’s seventh-largest economy, bolstered by rising employment, home values and personal and corporate income, a year after the U.S. most-populous state surpassed Russia and Italy. Brazil has a population five times bigger than California’s 38.3 million; yet the Golden State with GDP of $2.20 trillion in 2013, expanded last year by almost every measure. In contrast, Brazil’s GDP declined 1% from $2.25 trillion. California’s economy has sustained its momentum since 2013, when the value of goods and services produced in the state topped that of Russia and Italy to vault California to No. 8 in the world. California grew an average of 4.1% annually during the last three years. Who is next ahead of California in the No. 6 spot? United Kingdom with a GDP of $2.68 trillion.

 How IRS Targets California Taxpayers.

The IRS is using its extensive Big Data resources to pin-point their investigations to the wealthiest areas in California. The idea being that anyone who is selected for investigation in these areas will result in a higher tax liability than those who live in less affluent areas. The government is looking for non-filers, persons engaged in on-line and virtual currency transactions, businesses cheating or delinquent on employment taxes and individuals with undisclosed foreign bank accounts.

Non-Filers

When a taxpayer does not file and the IRS has information statements indicating a filing requirement, the IRS uses the data to file a return on behalf of the taxpayer if there is a projected balance owed. In 2012, the IRS used information statements to file 803,000 returns for taxpayers under the Automated Substitute for Return program, totaling $6.7 billion in additional taxes owed. And the sad thing about this is in just about every case, the amount actually owed when a tax return is filed by the taxpayer is much lower than what the IRS says a non-filer taxpayer owes. We even had cases where the IRS ended up owing our clients money.

Before contacting a non-filer, the IRS will often attempt to identify the non-filer’s occupation, location of bank/savings accounts, sources of income, age, current address, last file return, adjusted gross income of last filed return, taxes paid on last filed return – amounts and methods of payment (withholding, estimated tax, pre-payments), number of years delinquent, and the non-filer’s standard of living.  They will search public records for evidence of additional unreported income, tax assessor and real estate records for assets held by the non-filer, and records of professional associations and business license bureaus for information on businesses being operated by the non-filer. They will also search sales tax returns and the state records to disclose corporate charter information including principals of any businesses that have failed to file returns. They will contact the last known employer to determine if the non-filer is still employed and the specific occupation of the non-filer.

It is to those individuals, who deliberately fail to comply with their obligation to file required tax returns and pay any taxes due and owing, that IRS Criminal Investigation devotes its investigative resources.  In the most egregious cases or if the Special Agent discovers subsequent acts of tax evasion (false statements, refusal to make records available, etc.), criminal prosecution is recommended to the United States Attorney’s office.

On-line And Virtual Currency Transactions

The increased use of on-line transactions with such services that include but are no limited to eBay and Craigslist and the increased use of virtual currencies such as Bitcoins have also raised interest by the Department Of Justice.

Many people think of online auction sites, such as eBay and Craigslist, as virtual garage sales — a convenient way to clean out cluttered closets and attics stuffed with old clothes, books and knickknacks inherited from relatives.

But if you’re a frequent or big-time seller, the government might consider your proceeds to be income and could come after you for taxes.

The tax law requires the gross amount of payment card and third-party network transactions to be reported annually to participating merchants and the IRS. With this information the IRS can now track your sales and make sure they are being reported on your individual income tax return.

Bitcoins, a widely used virtual currency, are an alternative to money online. Unlike regular money, Bitcoins are not backed by any government or company. The currency is circulated without intermediaries such as banks. As such the government believes that taxpayers are able to avoid reporting income using this currency,

The IRS Criminal Investigation Division has committed a team of IRS Special Agents to master Bitcoin and other virtual currencies. The IRS knows that to use Bitcoins, one needs a virtual wallet along with private keys and public addresses.  Unknown to many Bitcoin users is the fact that every Bitcoin transaction is included in a ledger called a block chain.

The IRS is simply accessing the block chain to review all Bitcoin transactions.  From that point, the IRS works its way back to the public address that was used in the Bitcoin transaction. While the public address itself does not identify the user, the IRS has been very clever in associating the public address with the identity of the Bitcoin user. Thus, Bitcoin and other cyber or crypto currencies do not provide the level of complete anonymity many have ascribed to crypto currencies.

While the IRS has been focusing on the use of virtual currencies and crypto currencies in money laundering cases, the IRS is now focusing on the ability and likelihood that some users are committing tax evasion and tax fraud with virtual currencies. This is especially true because large amounts of virtual currency can change hands anywhere in the world instantaneously. Used correctly, it is another financial tool in our ever-shrinking world.  Used incorrectly, it is a very dangerous tool for those with a leaning towards and involved in illegal activities including tax evasion.

Employment Taxes

The IRS is especially vigorous in going after payroll taxes withheld from wages that somehow don’t get paid to the government.  The IRS calls it trust fund money that belongs to the government.

That makes any failure to pay—or even late payment—much worse.

In fact, that’s so regardless of how the employer or its principals use the money and regardless of how good a reason they have for not handing the money over to the IRS. When a tax shortfall occurs in this setting, the IRS will usually make personal assessments against all responsible persons who have an ownership interest in the company or signature authority over the company accounts.

The practice the government is going after is sometimes called “pyramiding.” The Department of Justice defined pyramiding where the business has made minimal payments of its tax debts and that attempts to induce voluntary compliance failed. To stop the bleeding in a case like this, the Justice Department can seek an injunction to require a company and its principals to make timely tax deposits, to pay all withheld employment taxes, and to timely file all employment tax returns.

The IRS can assess a Trust Fund Recovery Assessment, also known as a 100-percent penalty, against every “responsible person.” The penalty is assessed under Section 6672(a) of the tax code, and the IRS uses it liberally. You can be responsible and therefore liable even if have no knowledge that the IRS is not being paid. If there are multiple owners, multiple officers, multiple check signers, they all may draw a 100% penalty assessment.

When multiple owners and signatories all face tax bills they generally squabble and do their best to sic the IRS on someone else. Factual nuances matter in this kind of mud-wrestling, but so do legal maneuvering and just plain savvy. One responsible person may get stuck paying while another who is even guiltier may get off scot-free.

If the IRS is going after individuals, the IRS will still try to collect from the company that withheld on the wages. The IRS also wants to make sure this kind of bad tax situation doesn’t occur again and the IRS wants to collect as much money as quick as possible from as many parties as it can get to.

Undisclosed Foreign Bank Accounts And Unreported Foreign Income

The 2010 Foreign Account Tax Compliance Act (“FATCA”) which requires foreign banks and financial institutions to report the assets of their American account holders is now in full swing. This information is being transmitted to the IRS and the IRS is comparing this information what was reported on U.S. Federal Income Tax Returns. FATCA was passed as part of the U.S. government’s effort to crack down on U.S. tax evaders.  Initially, the IRS concentrated its efforts on Swiss Banks but now banks in all foreign countries are subject to the severe penalties for noncompliance and lack of compliance would limit their ability to do business in America.

This focus has led to an increase in the enforcement of the requirement that Americans and American residents file a Foreign Bank Account Report on every account held abroad that is worth more than $10,000.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.  U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year.  Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges which if sustain can result in jail time.

U.S. taxpayers with account holdings should seriously consider coming forward and disclosing their assets to the IRS.  If you have never reported your foreign investments on your U.S. Tax Returns, the IRS has established the Offshore Voluntary Disclosure Program (“OVDP”) which allows taxpayers to come forward to avoid criminal prosecution and not have to bear the full amount of penalties normally imposed by IRS.

The Stakes Are High!

So if you receive an audit notice or even worse a visit by government agents, it is important that you don’t ignore this. Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. from their offices located in Los Angeles, San Francisco, San Diego and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

 

Jeffrey B. Kahn, Esq. discusses IRS and taxes on the January 25, 2015 radio show “Talking Money with Mr. C” on 760AM KFMB in San Diego

/in /by

Issues discussed:

1.  IRS becoming less and less reachable and taxes getting more complicated at the same time. Is this setup for a disaster this tax year?

2.  Itemizing deductions is one of the first filters the IRS uses to find people whom to audit. Consumer reports recently gave us this list of Do’s/Don’ts for itemized deductions so I wanted to run those by Jeff and see what HE thinks.

Jeffrey B. Kahn, Esq. Discusses Taxes, the IRS, and Undisclosed Foreign Accounts On ESPN Radio – January 23, 2015 Show

/in /by

Topics Covered:

1. IRS Seizure Of Business Funds – The Plight Of Carole Hinders.
2. Beware Your Hobby Business Could Land You In Tax Court.
3. FATCA Enforcement – Sovereign Management In Panama Now Under DOJ/IRS Investigation.
4. Questions From Our Listeners:

a. What should I be looking for in a tax preparer this tax season to prepare my tax return?

b. How long should I keep my tax papers?

Yes we are all working for the tax man!

Good afternoon! Welcome to the KahnTaxLaw Radio Show

This is your host Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team. And joining me in the studio is our producer Will Maldonado.

Chit chat with Will.

Jeff continues,
You are listening to my weekly radio show where we talk everything about taxes from the ESPN 1700 AM Studio in San Diego, California. When it comes to knowing tax laws and paying taxes, let’s face it everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into our website at www.kahntaxlaw.com.
So let’s get the show going with our top story.

How The IRS Turned Carole Hinders’ Life Upside Down.

Iowa restaurant owner’s fight against the IRS gains national attention

A restaurant owner in northwest Iowa has landed in the national news spotlight over her fight with the federal government. Carole Hinders who at the time was 67 years old and a grandmother has operated Mrs. Lady’s Mexican Food in Arnolds Park, Iowa for 38 years.

Nowadays it is most notable for a small business to be in operation for 38 years – especially if it is a restaurant which we all know “come and go”. Even more notable for Ms. Hinders was that she was always in full compliance with her tax obligations. But despite her clean tax record, on May 22, 2013 while settling into a crossword puzzle with her grandchildren she was visited at her home by a pair of IRS agents who stated that they had closed her business bank account and seized all her money, which at the time was almost $33,000.

As the IRS agents were leaving her house she pleaded “How am I supposed to pay my bills? How am I supposed to pay my people?” The agents replied – we don’t know.

You may ask how could this have happened? You see – she did not have any outstanding liability to the IRS. The problem though is that Ms. Hinders’ restaurant only accepts cash so Ms. Hinders makes frequent trips to the bank to avoid having large sums of money on the business’ premises.

As part of the federal government’s dragnet surveillance of the civilian population, everyone’s banking activities are monitored for “red flag” activities. Under the Bank Secrecy Act of 1970, banks are required to report to the IRS transactions on every individual who deposits or withdraws more than $10,000 in cash to or from a personal bank account on a given day. These reports indicate the financial activities that took place and include the individual’s bank account number, name, address, and social security number.

People who know of this law and are seeking to avoid this level of reporting by the bank will often go to great lengths to make multiple deposits so that no single deposit will be greater than $10,000. This tactic is called “structuring”. The IRS thinking that Ms. Hinders was making small deposits to evade this reporting requirement used its civil forfeiture power to seize Ms. Hinders’ bank account and close down her business.

That’s right – federal law enforcement agencies are invested with the power of civil forfeiture whereby the agency can take cash, cars and other property without charging the property owner with a crime. The property owner need not receive any advance warning or notice before the assets are seized by the federal government. The government need not prove that a person is guilty of a crime – only that he or she is suspected of committing a crime. This law was designed to catch terrorists, money launderers, drug lords and serious criminals – but it can also be used by the government against law-abiding businesses.

Ms. Hinders said she received no warning from either her bank or the government before her money was taken. The reason that the federal government does not have to read you your rights, or advise you that you can have a lawyer, or do any of the things that the constitution is supposed to provide, is that they don’t charge the person with the crime, they charge your money with the crime.

Since then, she’s had to borrow money and use credit cards to pay bills and keep her restaurant in business. But Ms. Hinder was not stopping there – she knew she didn’t do anything wrong and did not owe anything to the IRS. But yet the IRS took her money so Ms. Hinders’ decided she was going to fight the IRS.

The Battle Against IRS Begins

Remember Ms. Hinders was never accused of any crime. The Mexican restaurant she owned, Mrs. Lady’s, did not accept credit cards, and she regularly deposited earnings in a bank branch a block away. She followed this procedure for almost four decades. And all this activity occurred in rural Northwestern Iowa – far from any foreign border and in a region not known for drug dealing and money laundering.

Ms. Hinders and similar business owners were making deposits under $10,000 because that is the kind of money their business is bringing in – not because of a desire to avoid government reporting. Ms. Hinders stated “How can I be committing a crime by depositing money that I worked for, and deposited in my own bank account? In 30 years of banking with the same bank, no one ever mentioned that I was making my deposits wrong.”

Ms. Hinders wasn’t using the money for illegal purposes. Her business doesn’t accept credit cards and the law fails to provide provisions for small businesses with limited cash flow. Ms. Hinders frequently deposited money in order to keep it safe in the bank. 

But yet the government was treating Ms. Hinders like a criminal, just for running an honest cash business.

She hired an attorney to sue the IRS and regain her property. In civil forfeiture cases, the government must file lawsuits “against” property or cash in order to keep it. This one was called United States of America v. $32,820.56 in United States Currency (Case No. 2013-CV-4102). This lawsuit was filed in Federal District Court for the Northern District of Iowa. Weeks later Ms. Hinders was deposed. After her deposition, it became overwhelmingly clear that Ms. Hinders was an innocent and hardworking restaurateur. The Assistant United States Attorney on the case had then informed the IRS that they should not go forward with the case. The IRS agreed and the case was dismissed but without prejudice – meaning that the government can file another action in the future to get Hinders’ money if the court grants its motion.

Are There Any Safeguards In Place For The IRS To Follow So Things Like This Do Not Happen?

Critics say the IRS rarely investigates such cases to see if the business owner has legitimate reasons for making small deposits, such as an insurance policy that covers only a limited amount of cash.

Seizing assets without criminal charges is legal under a controversial body of law that allows law enforcement agents to seize cars, cash and other valuables they believe are tied to criminal activity. The burden of proof falls on owners seeking the return of their property. In fact what happened to Ms. Hinders has prompted the two high-ranking members on the House Ways and Means committee to file bipartisan legislation to curb abuses of the practice, known as civil asset forfeiture. Civil asset forfeiture even become an issue in the confirmation of President Obama’s nominee for attorney general, Loretta Lynch, who as United States attorney for the Eastern District of New York presided over a case involving more than $440,000 seized from a family-run cash-intensive candy and cigarette distributor that has been operating in Long Island, New York for 27 years.

There is nothing illegal about depositing less than $10,000 cash unless it is done specifically to evade the reporting requirement. But often a mere bank statement is enough for investigators to obtain a seizure warrant. In the Long Island case, the police submitted almost a year’s worth of daily deposits by a business, ranging from $5,550 to $9,910. The officer wrote in his warrant affidavit that based on his training and experience, the pattern “is consistent with structuring”.

The IRS has since stated that it would consider more carefully seizures in cases where there is no suspicion that the money involved came from an illegal source. But of course officials did not go so far to drop cases that were already underway or to even stop using this form of power. The IRS made 639 of these seizures in 2012, compared to 114 in 2005. And only one in five was prosecuted as a criminal case. So you are probably thinking was the money from the other 80% of cases returned to its rightful owners?

Well in Ms. Hinders’ case she still faces the possibility of the IRS reopening her case. The IRS claimed that their case was “justified” and requested the right to be able to refile the case at another point in time. You would think that the IRS would have instead simply return the money with interest and apologize to Carole for the nightmare they put her through. Instead the IRS is shamefully attempting to mask their retreat by insisting on the right to refile the case in the future.

Well it’s time for a break but stay tuned because we are going to discuss how your Hobby Business Could Land You In Tax Court.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And joining me in the studio is our producer Will Maldonado.

Beware Your Hobby Business Could Land You In Tax Court

Your hobby business could land you in Tax Court – avoid IRS pitfalls by how you structure your small business.

Many people successfully develop a hobby into a going concern and actually receive income from it. That income must always be reported and taxes paid on that money regardless of your situation. If you leave that hobby as a hobby, under the tax law, you are not allowed to deduct any of the losses incurred by activity in that hobby. That is the reason most people turn their hobbies into businesses once they start making money.

Will asks Jeff: When Are Hobby Losses Deductible?

Jeff replies: By showing that your pursuit of you “hobby” is an activity engaged in for profit, you may be able to deduct those years where you incurred losses if you meet certain presumptions.

Will asks, Jeff, what are those presumptions?

Jeff replies:

For activities not involving the breeding, training, showing, or racing of horses, the presumption is that you business is an activity engaged in for profit where you show annual net income from an activity for 3 or more of the taxable years in the period of 5 consecutive taxable years which ends with the most recent taxable year. So if for the first three years your activity has incurred losses, you must show net income (of at least $1.00) in years four and five in order to still be able to deduct the first three years of losses.

For activities involving the breeding, training, showing, or racing of horses, the presumption will work in the same fashion except you must show annual net income from an activity for 2 or more of the taxable years in the period of 7 consecutive taxable years which ends with the most recent taxable year.

Jeff states, Despite these presumptions, the IRS does not always see your hobby as a viable business, and that is where tax difficulties arise.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states, There are a number of court cases where the question of hobby or business has been decided for the particular business by the IRS, and under challenge, the cases end up in Tax Court. Here are five cases that landed in Tax Court worth discussing.

Jeff to state each category first and discuss. Will can add color commentary.

1. Fishing: In Busbee v. Commissioner, T.C. Memo 2000-182, this taxpayer decided to hold fishing tournaments. These tournaments required him to promote the activity through flyers, speaking engagements, and other marketing efforts. He had to recruit participants and sponsors. He intended his hobby of fishing tournaments to supplement his retirement income as he developed it into a business. Through the process, he became an expert in bass fishing. The Tax Court considered all of this, and allowed his business.

In Peacock v. Commissioner, T.C. Memo 2002-122, this taxpayer began tournament fishing in his retirement. Sailing everywhere on his personal yacht, he and his wife fished specifically for the pleasure of participating in the tournament, especially when these tournaments were in exotic locales. In this case, the Tax Court decided this was not a business but a hobby for the activity was not “motivated primarily by the pursuit of profit.” What probably hurt their case, even subtly, was the fact that they had just sold a business and were now millionaires.

2. Writing: There is an infamous case which always gives people a chuckle, and that is the man who decided to write about prostitution. Vitale v. Commissioner, T.C. Memo 1999-131. Ralph Louis Vitale, Jr., in 1999, claimed on his tax return that he was in the business of writing about prostitution. When this taxpayer began his “research” four years before his retirement, he was still a full-time employee. Over the course of time, he visited a large number of brothels doing his “research” and always paying for services in cash (no records kept). He did keep a journal detailing each of his visits and expenses, and eventually developed a manuscript from his notes. Vitale submitted his manuscript to a vanity publisher, paying $4,375 to publish it. All tolled, after he received $2,600 in royalties, the publisher went bankrupt. Subsequently, the book rights were returned to the taxpayer, and he again began marketing his book throughout the industry. The IRS said this was just a hobby and disallowed Vitale’s deductions. So Vitale went to Tax Court. At first, the Tax Court felt that the taxpayer had a profit motive and overruled the IRS, even though the court also made comments about the “recreational” qualities of the contents of his book. The court did like his record-keeping and marketing and felt it showed his professionalism. Then the Tax Court disallowed all of his deductions, for the taxpayer could prove none of them (remember the cash payments?), but the court did not penalize this taxpayer in any way, saying that he had made a reasonable attempt to comply with the law.

Jeff states:

The U.S. Tax Court weighs “profit motive” most heavily in each of their decisions. Profit is a key decider when considering whether an activity is hobby or business. Is your hobby truly for profit or only for pleasure? That is foremost and basic premise that the Tax Court considers.

Jeff states:

There seem to be two “hobbies” that trigger audits most frequently and those are horses or yachts. Both are money pits, and so if people can figure out a way to make a business out of them, that will provide either tax deductions and/or income to cover the high expenses of each. The IRS knows this, and is very strict when applying the rules to these activities. When structuring these, pay very close attention to business start-up details.

Jeff states, If you follow good business practices when converting your hobby into a business, you have a greater chance of convincing the IRS it is a real business. Your business records must be up-to-date and accurate, and your business plan must lay out a course for creating profit from your activity in the future. That written business plan can be a real asset if you end up in Tax Court versus the IRS.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned because after the break we are going to tell you a new target by the IRS to get information on U.S. taxpayers with undisclosed foreign bank accounts.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And joining me in the studio is our producer Will Maldonado.

Sovereign Management In Panama Now Under DOJ/IRS Investigation.

Jeff states, The government lately has stepped up its efforts in uncovering taxpayers with undisclosed foreign bank accounts and unreported foreign income. Separate from United States income tax returns, many U.S. persons are required to file with the U.S. Treasury a return commonly known as an “FBAR” (or Report of Foreign Bank and Financial Accounts; known as FinCEN Form 114), listing all non-US bank and financial accounts. These forms are required if on any day of any calendar year an individual has ownership of or signature authority over non-US bank and financial accounts with an aggregate (total) balance greater than the equivalent of $10,000.

Will asks: what penalties could taxpayers be facing for non-compliance?

Jeff replies, Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge violations.

Jeff continues, Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment. Many violent felonies are punished less harshly.

Jeff states, PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states, U.S. taxpayers that opened offshore bank accounts through a company called Sovereign Management & Legal, Ltd. Based in Panama, the company offers to help Americans open offshore bank accounts with nominee corporations. Knowing that many people who do take these actions are also committing tax evasion, the IRS and Justice Department obtained a John Doe summons from a federal judge. The IRS hopes to find Americans who used Sovereign to open accounts.

Jeff states, Opening an offshore account isn’t illegal. However, tax evasion and willfully failing to report an offshore account are felonies.

Jeff states, A Federal Judge recently approved the Internal Revenue Service’s issuance of what is known as a “John Doe” summons to several entities in the U.S who utilized the services of Sovereign Management & Legal Ltd. (“Sovereign”). According to Sovereign’s website and the government’s Petition filed with the U.S. District Court for the Southern District of New York, Sovereign provides Offshore Banking, Corporation and Trust services. The U.S. government alleges that U.S. taxpayers used those services to conceal ownership of assets held offshore to evade U.S. taxation.

Jeff states, A “John Doe” summons may be issued when the government is unsure of the exact identity of the person(s) for whom they are seeking the information. These summonses seek information that the government cannot procure through the Foreign Account Tax Compliance Act (“FATCA”) and serves as the latest effort in the IRS’s recent push to achieve global tax compliance from its citizens.

Will asks Jeff, what must the government prove to the Court to get the Court to issue a John Doe Summons?

Jeff replies, For a John Doe summons to be approved, the government is required to make a showing in court that (1) the summons relates to a particular person or ascertainable group, (2) there is a reasonable basis for believing that such person or group may have failed to comply with any provision of the internal revenue law, and (3) the information sought is not readily available from other sources.

The Federal Court found that the government met its burden with respect to these requests. For example regarding the courier companies named in the Summons, the government believes that the John Doe summonses will assist them in identifying U.S. clients of Sovereign through records of shipping services between Sovereign and taxpayers in the U.S.

Will asks Jeff, who was named in the John Doe Summons to be compelled to produce information?

Jeff replies, HSBC USA is among the entities named in the government’s Petition because of its correspondent bank accounts held at the bank by HSBC Hong Kong and HSBC Panama. The correspondent account provides banking services to the foreign bank that does not have a U.S. branch so that the foreign bank may reach U.S. customers. The government alleges that HSBC USA’s records relating to the correspondent accounts will assist the government in determining the identity of Sovereign’s clients who held accounts with HSBC Hong Kong and HSBC Panama through wire transfer information and cancelled checks retained by HSBC USA.

Also named were the New York Federal Reserve, Western Union and Clearing House Payments Company to gather wire and electronic fund transfer information. The New York Federal Reserve Bank maintains the primary electronic funds transfer system for domestic U.S. fund transfers, Western Union could have been used to transfer funds, and the Clearing House Payments Company operates the main electronic funds transfer system for processing international U.S. dollar funds transfers made between international banks. All of these sources are believed to contain information relevant to discovering the identities of U.S. taxpayers hiding assets offshore through services allegedly provided by Sovereign.

Will asks Jeff, I would imagine that documents had to be transmitted to Panama. That being the case who else did the government include in the John Doe Summonses?

Jeff states, The courier companies like FedEx, UPS and DHL were included because they could carry checks and incorporation papers back and forth to Sovereign.

Jeff states, The John Doe summons has already proved to be a powerful tool to help the IRS gather information, including names and account information of U.S. taxpayers with foreign accounts or other foreign financial interests. The IRS has used the John Doe summonses to target individuals with foreign accounts who are hoping to “wait out” the IRS and thus avoid making a voluntary disclosure as well as those intending to avoid future reporting requirements. Once a taxpayer is on the IRS’s radar, IRS Criminal Investigation will no longer clear them to come into compliance under the protections of a voluntary disclosure program.

Will asks Jeff, What Services Offered By Sovereign Management Could Facilitate Tax Evasion By U.S. Taxpayers?

Jeff replies, Curious about the services offered by Sovereign, I visited their website.

One of the services offered by Sovereign is an “anonymous offshore ATM / debit card.” Long associated with tax evasion, offshore debit cards are a popular way for people with hidden assets to repatriate their money into the United States. Transferring money into your US account would leave a paper trial but an anonymous debit card allows one to spend money in the United States and make ATM withdrawals with very little paper trail.

Sovereign advertises that their cards have neither a name imprinted on them nor encoded in their magnetic strips.

Will asks, but don’t you have to produce your identification when opening a foreign bank account?

Jeff replies, Of course, to open a foreign bank account most foreign banks want to see a passport. Sovereign has that covered too. For a fee, Sovereign Management offers “aged” offshore shelf corporations that already have bank accounts. Why present a passport when you can buy a company “off the shelf” that already has an offshore account?

While none of these things alone are illegal, the IRS considers them to affirmative acts of tax evasion. Unless you have some valid business purpose, having a nominee entity will at a minimum get you audited and if you get caught with an unreported foreign account, you could land in jail.

Will asks, Is there a risk of getting caught?

Jeff replies, Absolutely! In the case of Sovereign, because they are located in Panama, their customer lists are beyond the reach of the Justice Department. But the courier companies like FedEx, however, can be subpoenaed and they carry checks and incorporation papers back and forth to Sovereign. The foreign banks themselves are now doing a little of digging to see who actually owns and controls the accounts held in nominee names. And the major credit card companies and ATM networks have records too that the Federal government can reach.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned as we will be taking some of your questions. You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And joining me in the studio is our producer Will Maldonado.

If you would like to post a question for us to answer, you can go to our website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

So Will what questions have you pulled from the kahntaxlaw inbox for me to answer.

Will to ask question and Jeff to respond.

1. Bob asks, What should I be looking for in a tax preparer this tax season to prepare my tax return?

If you’re looking for someone to prepare your taxes, here are a few suggestions: (a) Be “cautious” of anyone claiming to be able to get you a larger refund than other preparers, the IRS says; (b) Beware of anyone who wants to charge you based on a percentage of your income-tax refund; (c) Use a reputable tax professional who signs the tax return and provides a copy; (d) Don’t sign a blank return, no matter how much you trust the person you hire; (e) Check out a preparer’s credentials – ask what, if any, education, training and experience in taxes the candidate has; and (e) If you have a complicated tax situation, consider using a tax attorney, accountant or enrolled agent.

2. Patricia asks, How long should I keep my tax papers?

At least three years, but six years is preferable. The IRS has three years after you file a tax return to complete an audit. For example, if you file your 2014 income tax return on or before April 15, 2015, keep those records until at least April 15, 2018.

The IRS can audit you for up to six years if it suspects that you underreported your income by 25% or more. If the IRS suspects fraud, there is no time limit for an audit, although audits beyond six years are extremely rare.

Keep records of purchases of real estate, stocks, and other investments for at least three years after the tax return reporting their sale was filed.

Jeff states, PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Will for being on today’s show. Will says Thanks for having me.

Well we are reaching the end of our show.

You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.

Have a great day everyone!

Beware Of IRS Scams Extended To Taxpayers Appealing To The U.S. Tax Court

/in , /by

Process Of Appealing To U.S. Tax Court

Under normal audit procedures, the IRS issues a 30-day letter, giving a taxpayer 30 days to file a protest and request an Appeals hearing. On the taxpayer’s failure to request a hearing or following an Appeals hearing, the Service issues a 90-day letter (officially called a “Notice Of Deficiency”), giving the taxpayer 90 days to file a Tax Court petition before collection proceedings begin.

With the reduction in the number of IRS audits and a reliance on computer matching, some taxpayers are facing automatic computer-generated 90-day letters, without first receiving a 30-day letter. IRS personnel call this practice, “smokeout” whereby the 90 days will toll around the time the IRS finally determines whether the tax is due, so that it can institute collection proceedings without delay.

While it is possible that writing letters and contacting the IRS could resolve disputes before the IRS issues a 90-day letter, you do not want to count on fully resolving the dispute within the 90-day period after the Notice Of Deficiency is issued. So in those cases, you will want to preserve your appeals rights by filing a petition in Tax Court.

Once a taxpayer files a Tax Court petition, IRS District Counsel has jurisdiction. Usually about six weeks after the Petition is filed, the IRS District Counsel will respond with a written Answer. Counsel then refers the case to the IRS Appeals Office to determine whether Appeals can settle it. If you are represented by counsel, Appeals and District Counsel will deal directly with your representative who must be admitted to practice in Tax Court.

Scam Artists Now Using The Tax Court Docket As A Means To Scam Taxpayers

For those taxpayers who are unrepresented by counsel and file a petition in the U.S. Tax Court, scam artists are now scouring the Tax Court docket (which is accessible by the public) to obtain information on taxpayers having disputes with the IRS and then calling the taxpayer before the taxpayer even receives the Answer that was filed by IRS District Counsel.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves. They may know a lot about you and may be able to recite the last four digits of a victim’s Social Security Number and your place of business. They usually alter the caller ID to make it look like the IRS is calling – many times they will use a Washington, D.C. area code. The area codes for the Washington D.C. area are 202, 301 and 703. They will also background noise of other calls being conducted to mimic a call site. If you don’t answer, they often leave an “urgent” callback request and if they have your email address, will send bogus IRS emails to some victims to support their bogus calls. After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

How Do You Recognize That This Call Is Fake?

Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:

  1. Call you about taxes you owe without first mailing you an official notice.
  2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  4. Ask for credit or debit card numbers over the phone.
  5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

So What Should You Do?

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

And if you do owe taxes and you have not already resolved this with the IRS, then that is where we come in. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

U.S. Treasury Publishes Official FBAR Exchange Rates for 2014

/in , /by

Anyone filing an “FBAR” (Report of Foreign Bank and Financial Accounts – FinCEN Form 114) or IRS Form 8938 (Statement of Foreign Financial Assets) for calendar year 2014 will be pleased to know that the official exchange rates for 2014 have been published. As U.S. law states that no other exchange rate is permitted, it is really helpful to have these exchange rates available so early in January.

The rates for the major foreign currencies are listed below:

Country / Currency

December 31, 2014

Official Exchange Rate To $1.00

Australia – Dollar

1.2190

Canada – Dollar

1.1580

China – Renminbi

6.2050

Europe – Euro

0.8220

Hong Kong – Dollar

7.7560

India – Rupee

63.2000

Israel-Shekel

3.8810

Japan – Yen

119.4500

Korea – Won

1086.8700

Mexico – New Peso

14.7020

New Zealand – Dollar

1.2750

Singapore – Dollar

1.3210

Switzerland – Franc

0.9890

United Kingdom – Pound Sterling

0.6420

Exchange rates for other currencies can be found by clicking here.

What is an FBAR?

Separate from United States income tax returns, many U.S. persons are required to file with the US Treasury a return commonly known as an “FBAR” (or Report of Foreign Bank and Financial Accounts; known as FinCEN Form 114), listing all non-US bank and financial accounts. These forms are required if on any day of any calendar year an individual has ownership of or signature authority over non-US bank and financial accounts with an aggregate (total) balance greater than the equivalent of $10,000.

These are separate to and in addition to United States income tax returns and are due to be filed by June 30th each year in relation to the previous calendar year. This date cannot be extended and putting your 2014 Form 1040 on extension does not change the June 30th filing deadline.  The 2014 FBAR is due no later than June 30, 2015 and can only be filed electronically through the U.S. Financial Crimes Enforcement Network {FinCEN) which is a bureau of the U.S. Treasury Department that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes.

How The Government Examines Data From Your FBAR.

The electronic filing system on the FinCEN website is called the BSA E-Filing System (BSA standing for the Bank Secrecy Act) and it allows you to save changes to your form, track progress of the processing of your form and receive electronic notices. Either you or your tax preparer can file this form. By having your foreign account information submitted electronically to the U.S. Treasury, the government will be able to more quickly and effectively match this information to foreign sourced income reported on your current and past Federal income tax returns.

Discrepancies would be identified by the government’s computer and those taxpayers would be referred for examination or investigation by the IRS.

Big Penalties For Non-compliance – Jail-time Is Possible.

The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes.

Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge your with violations.

Go to Jail? Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment. Many violent felonies are punished less harshly.

In assessing whether penalties are to be applied, especially willfulness, the IRS looks at such issues as inheritance, how other accounts are treated, etc. Although filing prospectively is easy, determining how to address past transgressions isn’t. With the option for taxpayers to include why FinCEN Form 114 for any prior year is being filed late, taxpayers may be tempted to use this option in an attempt to come into compliance for failing to report foreign income on prior year’s income tax returns and/or failing to disclose foreign bank accounts. Beware that such disclosure does not protect you from the heavy fines and possible criminal charges.

What Should You Do?

If you have not reported your foreign income and you have not disclosed your foreign bank accounts, you should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Program (OVDP) which allows taxpayers to come forward to avoid criminal prosecution and not have to bear the full amount of penalties normally imposed by IRS. Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law.  Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in San Francisco, Los Angeles, San Diego and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.