Issues discussed:
Topics Covered:
1. Man Convicted Of Threatening To Assault & Kill IRS Agent And Torture The Agent’s Family Over Audit Proceedings
2. America’s Manifest Destiny Still Lives On Today As FATCA Imposes Our Will On Banking Worldwide
3. Tools And Tactics That IRS Criminal Investigation Division Uses To Gather Information About You
4. Questions from our listeners:
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 today will be my associate attorney Amy Spivey who will be calling in later in today’s show.
Man Convicted Of Threatening To Assault & Kill IRS Agent And Torture The Agent’s Family Over Audit Proceedings
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. He was pretty specific, saying things like: “Matter of fact, I’d shoot you in the f****** knee caps, tie you to a f****** chair, gag ya…” The message continued, with Calcione invoking some pretty horrific threats against the agent’s wife and daughter. You can check out my blog if you’re interested in the gory details.
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.
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.”
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.
Well it’s time for a break but stay tuned because we are going to tell you how America’s philosophy of the 19th century is being applied today in targeting 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.
Calling into the studio from our San Francisco Office is my associate attorney, Amy Spivey.
Chit chat with Amy
Jeff then to discuss:
America’s Manifest Destiny Still Lives On Today As FATCA Imposes Our Will On Banking Worldwide
In the 19th century, Manifest Destiny was a widely held belief in the United States that American settlers were destined to expand throughout the continent. Historians have for the most part agreed that American felt they had an irresistible destiny to accomplish this essential duty. This spirit has endured into the 21st century with the application of FATCA over worldwide banking activity.
Never heard of FATCA? You will.
FATCA—the Foreign Account Tax Compliance Act—is America’s global tax law. It was quietly enacted in 2010. And after a four-year ramp up, it is finally in full effect. What is most amazing is not its impact on Americans—although that is considerable—but its impact on the world. Yes, the whole world.
Never before has an American tax law attempted such an astounding reach. And it is clear FATCA has succeeded, after shrewd diplomacy by President Obama and his Treasury Department. FATCA requires foreign banks to reveal Americans to the Department Of Treasury and the IRS with accounts over $50,000. Non-compliant institutions could be frozen out of U.S. markets, so everyone is complying.
Essential Facts About FATCA:
Jeff to read off each one with Amy to explain.
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:
Why You Should Do Something About It Before It’s Too Late
Until the government receives your name and account information and chooses to act on that information, you have the opportunity to avoid the possibility of time in a federal prison and reduce the potential civil penalties for failing to report your foreign account. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, 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 the Tools And Tactics That IRS Criminal Investigation Division Uses To Gather Information About You.
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.
Jeff goes on to discuss:
Tools And Tactics That IRS Criminal Investigation Division Uses To Gather Information About You
A simple mistake, oversight, or your accountant’s malpractice may trigger an IRS criminal investigation. Specifically, unreported income, a false statement, the use of an impermissible accounting or banking service, or declaring too many deductions are things that could initiate an audit, which could then rise to the level of an IRS criminal investigation.
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.
As you can imagine, the IRS Criminal Investigation Division (“CID”) uses a vast array of tools to investigate a suspected tax evasion case or while conducting a criminal investigation. If you think about it, every employee of the IRS has a single task of ensuring that the IRS tax collections are maximized. IRS Special Agents, who work on the criminal tax cases, are no different. If you file your taxes, their goal is to prove that you may have understated or omitted income or sources of income or you may have falsified sources of income or taken deductions or credits for which you do not qualify.
The tools that the IRS Special Agents have at their disposal include interviewing the suspect, summons, search warrants, and use of grand juries.
Jeff asks Amy:
Should I talk to the IRS Special Agent during an IRS Criminal Investigation and what are my rights?
Amy replies:
Since the IRS Special Agents conduct a criminal investigation, you have a right to remain silent and not incriminate yourself and the right to an attorney. At your first encounter, the IRS Special Agent will advise you of your rights. You should exercise them and ask for an attorney. The Special Agent is then required to terminate the encounter.
As you can imagine, nothing you say to a Special Agent is off-the-record! If you choose to disregard this advice, the IRS Special Agent will be more than happy to continue with the encounter. You’ll be surprised how people continue to dig themselves into a deeper hole even after all these warnings.
Jeff asks Amy:
Interview with an IRS Special Agent
Amy replies:
The “interview” is the most obvious and also the most common tool is the old fashioned approach of directly asking you if you are engaged in tax evasion. This interview can take place at your home or your place of business or both. When an IRS field officer comes to interview a subject suspected of tax evasion, that officer doesn’t just ask questions. They are also required to assess your standard of living as compared to the income shown on your tax return. In addition, the Special Agents have the legal authority to examine books and records and take your testimony under oath.
Jeff then states:
During the interview, the Special Agents (they travel in pairs so one can interview and the other takes notes) will find out about other persons who may have knowledge about your sources of income and if there is cash that you may not have disclosed to the IRS. One of the primary goals of the interview is to establish cash on hand because one of the common defenses is uncertainty about cash on hand. If they seem to always appear at the most inconvenient time, it is because they are required to timely obtain confessions or admissions from the subjects and witnesses who may have information about the case. These witnesses may include your spouse, friends, neighbors, your tax return preparer and others including others with whom you may have a business relationship like banks and brokerages.
I must mention here that the tax return preparer must also not talk to the IRS Special Agent without consulting an attorney. This attorney should be different than the attorney who is representing the person who is under IRS criminal investigation.
Amy then asks Jeff:
Methods of Proof that the IRS Special Agents Use to Prove Their Case
Jeff replies:
To prove tax evasion, the IRS Special Agents may use many different methods like:
Amy then states:
Needless to say, each of these methods has its own pros and cons and some defenses. The method that the IRS Special Agent applies depends on the circumstances of the case and in case of businesses, the type of business and the method of accounting employed by that business.
Typically in IRS criminal investigation cases, the Agents are tight lipped about the details of the case. For this reason, at the conclusion of the IRS criminal investigation, your attorney should request a conference with the Special Agents in charge of the investigation. Much can be gleaned from the line of questioning of the Agents.
IRS does give consideration to the fact that you voluntarily disclosed the information that the IRS asked and also your age, health and mental condition. Essentially, the IRS is weighing their chances of winning a case.
Jeff then states:
What Should You Do?
Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, we can determine how to respond to these inquiries and formulate an effective strategy.
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?
One out of five Americans admitted to cheating the IRS. The IRS says that 15.5% of us don’t fully comply with the tax laws. Undoubtedly the cheating would be greater if wage earners did not have taxes withheld by their employers. Small business owners and self-employed people have the most opportunities to play fast and loose.
Arguably, cheating by self-employed people approaches 100%. It may just be a question of degree—did you ever mail a personal letter with a business-bought stamp?
Yes. Filing saves you from the possibility of being criminally charged or, more likely, from being hit with a fine for failing to file or for filing late. Interest continues to build up until you pay. Of course, filing without paying will bring the IRS collector into your life, but she’ll be friendlier if she doesn’t have to hunt you down. The sooner you start filing, the better.
Probably not. Although you can get an extension to file your tax return until October 15, you still must pay by April 15 or the IRS can impose a penalty and charge interest. Try pleading hardship on IRS Form 1127 to get up to six months extra to pay. Few payment extensions are granted. Even then, only penalties, not interest, stop accruing. Form 1127 works best in requesting an extension to pay estate taxes.
Maybe—it is frequently kicked around in Congress. The IRS has always opposed tax amnesty legislation—which lets nonfilers come forward without being criminally prosecuted or civilly fined. The IRS’s reasoning is that after the amnesty period expires, significant numbers of people won’t file, expecting another amnesty. Based on the success of various states trying amnesty programs, I think the IRS is wrong.
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!
A simple mistake, oversight, or your accountant’s malpractice may trigger an IRS criminal investigation. Specifically, unreported income, a false statement, the use of an impermissible accounting or banking service, or declaring too many deductions are things that could initiate an audit, which could then rise to the level of an IRS criminal investigation.
As you can imagine, the IRS Criminal Investigation Division (“CID”) uses a vast array of tools to investigate a suspected tax evasion case or while conducting a criminal investigation. If you think about it, every employee of the IRS has a single task of ensuring that the IRS tax collections are maximized. IRS Special Agents, who work on the criminal tax cases, are no different. If you file your taxes, their goal is to prove that you may have understated or omitted income or sources of income or you may have falsified sources of income or taken deductions or credits for which you do not qualify.
The tools that the IRS Special Agents have at their disposal include interviewing the suspect, summons, search warrants, and use of grand juries.
Since the IRS Special Agents conduct a criminal investigation, you have a right to remain silent and not incriminate yourself and the right to an attorney. At your first encounter, the IRS Special Agent will advise you of your rights. You should exercise them and ask for an attorney. The Special Agent is then required to terminate the encounter.
As you can imagine, nothing you say to a Special Agent is off-the-record! If you choose to disregard this advice, the IRS Special Agent will be more than happy to continue with the encounter. You’ll be surprised how people continue to dig themselves into a deeper hole even after all these warnings.
The “interview” is the most obvious and also the most common tool is the old fashioned approach of directly asking you if you are engaged in tax evasion. This interview can take place at your home or your place of business or both. When an IRS field officer comes to interview a subject suspected of tax evasion, that officer doesn’t just ask questions. They are also required to assess your standard of living as compared to the income shown on your tax return. In addition, the Special Agents have the legal authority to examine books and records and take your testimony under oath.
During the interview, the Special Agents (they travel in pairs so one can interview and the other takes notes) will find out about other persons who may have knowledge about your sources of income and if there is cash that you may not have disclosed to the IRS. One of the primary goals of the interview is to establish cash on hand because one of the common defenses is uncertainty about cash on hand. If they seem to always appear at the most inconvenient time, it is because they are required to timely obtain confessions or admissions from the subjects and witnesses who may have information about the case. These witnesses may include your spouse, friends, neighbors, your tax return preparer and others including others with whom you may have a business relationship like banks and brokerages.
I must mention here that the tax return preparer must also not talk to the IRS Special Agent without consulting an attorney. This attorney should be different than the attorney who is representing the person who is under IRS criminal investigation.
To prove tax evasion, the IRS Special Agents may use many different methods like:
Needless to say, each of these methods has its own pros and cons and some defenses. The method that the IRS Special Agent applies depends on the circumstances of the case and in case of businesses, the type of business and the method of accounting employed by that business.
Typically in IRS criminal investigation cases, the Agents are tight lipped about the details of the case. For this reason, at the conclusion of the IRS criminal investigation, your attorney should request a conference with the Special Agents in charge of the investigation. Much can be gleaned from the line of questioning of the Agents.
IRS does give consideration to the fact that you voluntarily disclosed the information that the IRS asked and also your age, health and mental condition. Essentially, the IRS is weighing their chances of winning a case.
What Should You Do?
Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, the experienced tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and San Diego and elsewhere in California can determine how to respond to these inquiries and formulate an effective strategy.
Description: Working with a tax attorney lawyer is the best way to assure that your freedom is protected and to minimize any additional amount you may owe to the IRS.
In the 19th century, Manifest Destiny was a widely held belief in the United States that American settlers were destined to expand throughout the continent. Historians have for the most part agreed that there are three basic themes to Manifest Destiny: the special virtues of the American people and their institutions; America’s mission to redeem and remake the west in the image of agrarian America; and an irresistible destiny to accomplish this essential duty. This spirit has endured into the 21st century with the application of FATCA over worldwide banking activity.
Never heard of FATCA? You will.
FATCA—the Foreign Account Tax Compliance Act—is America’s global tax law. It was quietly enacted in 2010. And after a four-year ramp up, it is finally in full effect. What is most amazing is not its impact on Americans—although that is considerable—but its impact on the world. Yes, the whole world.
Never before has an American tax law attempted such an astounding reach. And it is clear FATCA has succeeded, after shrewd diplomacy by President Obama and his Treasury Department. FATCA requires foreign banks to reveal Americans to the Department Of Treasury and the IRS with accounts over $50,000. Non-compliant institutions could be frozen out of U.S. markets, so everyone is complying.
Ten Essential Facts About FATCA:
1. FATCA Blew In On a Perfect Storm. FATCA grew out of a controversial rule. America taxes its citizens—and even permanent residents—on their worldwide income regardless of where they live. In 2009, the IRS struck a groundbreaking deal with the Swiss banking giant UBS for $780 million in penalties and American names. Recently, Credit Suisse took a guilty plea and paid a record $2.6 billion fine. Since then, all 106 Swiss banks accepted a U.S. Department Of Justice (DOJ) deal and with many other subsequent developments, banking is now more transparent than could ever have been imagined. FATCA was enacted in 2010, when only some of those developments were unfolding. The idea was to cut off companies from access to critical U.S. financial markets if they didn’t pass along American data. And boy did that idea work.
2. Everyone Around the World is Complying. More than 80 nations—including virtually every one that matters—have agreed to the law. As for those few rouge nations that remain that have not signed on, I would question how safe is your money anyways in those countries. So far, over 77,000 financial institutions have signed on too. Countries must throw their agreement behind the law or face dire repercussions. Even tax havens have joined up. The IRS is so proud of this accomplishment that it maintains a searchable list of financial institutions on its website. Click here to check out this list.
3. Even Russia and China Agreed to FATCA. If you think money anywhere can escape the IRS, think again. Even notoriously difficult China and Russia are on board. Which is more amazing? Probably Russia. The U.S. and Russia were negotiating a FATCA deal until March, 2014, but Russia’s annexation of Crimea caused the U.S. to suspend talks. That meant Russian financial institutions faced being frozen out of U.S. markets. Russia took last minute action to allow Russian banks to send American taxpayer data to the U.S. when President Vladimir Putin Signed a Law in the 11th Hour to Satisfy U.S. Treasury. By the way, now that the embargo on Cuba has been lifted, the U.S. Treasury will be looking for Cuba to promptly sign on to FATCA as a condition for opening banking relationships.
4. FATCA is America’s Big Stick. Cleverly, FATCA’s 30% tax and exclusion from U.S. markets would be so catastrophic that everyone has opted to comply. Foreign financial institutions must withhold a 30% tax if the recipient is not providing information about U.S. account holders. The choice is simple, and that’s why everyone is complying.
5. Everyone is on the Lookout for American Indicia. Foreign Financial Institutions (FFI’s) must report account numbers, balances, names, addresses, and U.S. identification numbers. For U.S.-owned foreign entities, they must report the name, address, and U.S. TIN of each substantial U.S. owner. And in what is a kind of global witch hunt, American indicia will likely mean a letter. Don’t ignore it.
6. FBAR’s Are Still Required. FBAR’s predate FATCA, but get ready for duplicate reporting. FATCA just adds to the burden, including Form 8938, but it doesn’t replace FBAR’s. The latter have been in the law since 1970 but have taken on huge importance since 2009. U.S. persons with foreign bank accounts exceeding $10,000 must file an FBAR by each June 30. These forms are serious, and so are the criminal and civil penalties. FBAR failures can mean fines up to $500,000 and prison up to ten years. Even a non-willful civil FBAR penalty can mean a $10,000 fine. Willful FBAR violations can draw the greater of $100,000 or 50% of the account for each violation–and each year is separate. The numbers add up fast. Court Upholds Record FBAR Penalties, Exceeding Offshore Account Balance.
7. FATCA is Compelling Compliance. U.S. account holders who are not compliant have limited time to get to the IRS. The IRS recently changed its programs, making its Offshore Voluntary Disclosure Program a little harsher. Yet for those not willing to pay the 27.5% penalty—which rose to 50% August 4, 2014 for some banks—the new IRS’s Streamlined Program may be a good option for those who qualify. The latter applies now to both foreign and U.S.-based Americans. Some still want to amend their taxes and file FBAR’s in a “quiet disclosure” which could bring civil FBAR penalties or even prosecution. Thus, caution is clearly in order.
8. Banking Will Never Be the Same. FATCA is making banking transparent worldwide. With Swiss bank deals, prosecutions, John Doe Summonses, and FATCA, the IRS has quicker, better and more complete information than ever.
9. Forget Repeal or Dismantling FATCA. Republicans have mounted a lackluster repeal effort, but there’s no serious push to repeal FATCA. Some say FATCA will be like prohibition, lasting for a time but doomed. We’ll see, but it sure doesn’t look that way now.
10. Don’t Count on Other Passports. Some dual nationals or U.S. Green Card holders think they can bypass FATCA—and other U.S. tax rules—by using a non-U.S. passport and non-U.S. address with their foreign bank. Don’t succumb to this – you may just make it worse, handing the IRS another badge of willfulness. Your bank and the IRS will likely find out eventually, even if not right away.
Until the government receives your name and account information and chooses to act on that information, you have the opportunity to avoid the possibility of time in a federal prison and reduce the potential civil penalties for failing to report your foreign account. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, 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. 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 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.
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.
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.
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.
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:
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!
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.
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:
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.
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.
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