Description:
Topics discussed:
CPA’s and other professional tax return preparers are bound to the IRS Code Of Professional Responsibility commonly called Circular 230 which if a tax preparer violates could lead to big penalties and sanctions for that tax preparer.
What penalties could tax preparers face?
A tax preparer who is in violation of these rules could be subject to the following:
Internal Revenue Code § 6694(a) provides that if any part of an understatement of a taxpayer’s liability is due to an “unrealistic position” taken on his return, any income tax return preparer who knew (or reasonably should have known) of this position is subject to a penalty of $250. If the understatement is due to a reckless or intentional disregard of rules or regulations the penalty is $1,000 per occurrence.
The tax preparer’s employer, firm or entity also is subject to the penalty if it knew, or reasonably should have known, of the conduct giving rise to the penalty.
While these may not seem like large amounts, if this penalty is assessed IRS employees are instructed to report the income tax return preparer to the IRS Office of Professional Responsibility (“OPR”). A tax preparer who is referred to the OPR, may be subject to suspension, disbarment, or censure. In addition, if the preparer has violated Circular No. 230, the IRS may impose a monetary penalty in an amount up to the gross income derived or to be derived from the conduct giving rise to the penalty.
Additionally, the IRS can go criminal on the tax preparer. Unscrupulous tax return preparers are generally prosecuted for violation of the Internal Revenue Code §7201, Attempt to Evade or Defeat Tax. This is a felony offense and carries a maximum potential penalty of up to five years in prison and a fine of up to $250,000. Internal Revenue Code §7206(1) and (2), Fraud and False Statements, also carries a maximum potential penalty of up to three years in prison and a fine up to $250,000.
What is one of the main obligations that a tax preparer must follow?
Circular No. 230 §10.22 Diligence as to accuracy which states that:
Each tax return preparer shall exercise due diligence:
a. In preparing or assisting in the preparation of, approving, and filing tax returns, documents, affidavits, and other papers relating to Internal Revenue Service matters;
b. In determining the correctness of oral or written representations made by the practitioner to the Department of the Treasury; and
c. In determining the correctness of oral or written representations made by the practitioner to clients with reference to any matter administered by the Internal Revenue Service.
This does not mean that you as a tax preparer have to actually audit or examine the records of your client. Under Circular No 230 §10.34(d), a tax preparer may generally rely, in good faith and without verification, on information furnished by a client. However, good faith reliance contemplates that a practitioner will make reasonable inquiries when a client provides information that implies possible participation in overseas transactions/accounts subject to FBAR requirements.
But what if the client makes certain statements that sound suspicious?
A tax preparer may not ignore the implications of any information provided to or actually known him or her. If the information furnished by the client appears to be incorrect, inconsistent with other known facts, or incomplete, the tax preparer is required to make further inquiry. The practitioner is also required by Circular No 230 §10.34(c), to advise a client of any potential penalties likely to apply to a position taken on a return the tax preparer is preparing or on which she or he is advising.
So if it is determined that the client has foreign income that must be reported on his U.S. income tax return and the client refuses to report this income, a tax preparer to avoid penalties and sanctions by the IRS cannot assist a client in filing a false return or filing a tax return taking a position that cannot be reasonable is not supported by the tax law.
Questions for tax preparers to ask.
With the IRS having more resources and information to detect taxpayers with undisclosed foreign accounts, what changes should taxpayers expect when they next meet with their tax preparer?
1. Does the client have a foreign account?
2. If yes, is it the type of account that is covered by 31 U.S.C. Section 5314?
3. If applicable, has the client properly completed Form 1040, Schedule B, Interest and Ordinary Dividends, Part III, Line 7a?
4. Has the client annually reported the income from the account?
5. Has the client filed FinCEN Form 114 (formerly TD F 90-22.1), Report of Foreign Bank and Financial Accounts (FBAR)?
6. Has the client filed Form 8938, Statement of Specified Foreign Financial Assets, with his or her federal income tax return?
7. Has the IRS already contacted the client about the foreign account?
What should you do?
We encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts. By then, it will be too late to avoid the new higher penalties under the OVDP of 50% percent – nearly double the regular maximum rate of 27.5%.
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. 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.
Jeffrey B. Kahn, Esq. Discusses Taxes On ESPN Radio – October 24, 2014 Show
Topics Covered:
1. Horror stories of people pretending to be the IRS and stealing your identity or scamming you for your money.
2. What to look out for and how to protect yourself from the IRS scam artists.
3. How to make Halloween candy and costumes deductible.
4. Questions from our listeners:
a. I live in San Diego County and work in Irvine. I need to see you but cannot get to your downtown San Diego office during my work day. How can I see you?
b. You always tell us that you are a “Board Certified Tax Attorney”. What does that entail?
c. I always hear on the radio or see on T.V. those commercials for tax relief companies. How are you different from them?
d. Is engaging the Law Offices Of Jeffrey B. Kahn, P.C. expensive and beyond my means?
Listen to the podcast:
Read the show’s transcript:
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.
With Halloween coming up, it is just not the neighbor kids looking forward to trick or treat but also people pretending that they are the Internal Revenue Service looking to steal your identity and scam you for your money. That’s right people are pretending to be the IRS and extorting money from innocent law-abiding taxpayers.
Listen to the story of Debra who lives in Memphis. Debra was at work when she got the call. She was very shaken up at the first call when she was told by the caller that there’s a warrant for her arrest. The caller was a man with a foreign accent and called her by name.
He told her that this call concerns a tax liability because you fraudulently filed some taxes for $11,000 and now there’s a warrant for you. He then proceeded to tell her that she needed to hang up and call him back from her cell phone and ask for a person named “David Chambers”. Debra knew better than to call back from her cell, so instead she got a co-worker, and called back from a conference room on speaker phone. The person who answered the call said “This is David Chambers”. It was the same voice of the caller that had told Debra to call back! Debra knew she didn’t owe the government and, as an accountant, she was also skeptical that such a call would come first. Knowing it was likely a scam, she decided to press the caller for more information. So Debra asked this Mr. Chambers “‘Can you please read me the complaint or can I go home with my husband and call you back”? When he told her no, she ended the call.
Listen to the story of Arati who works in New York City and immigrated to the U.S. from India. Arati received a call from a Brian Cruz who called her house early in the morning before Arati left for work. He left his telephone number, name and noted he was calling from the IRS. Arati put the number in her cell phone without searching for it online first. After all it had a 202 area code which is Washington D.C. so she figured it had to be official. Once she got into her car she called, and the man who picked up the call answered that this was the investigations bureau for the IRS. Arati asked for Cruz, but he wasn’t available. The man who picked up the call told Arati to give him the telephone number where Cruz left the message. She did, and then it began.
After the man confirmed Arati’s home telephone number, he stated that she attempted to defraud the IRS, and that the government was now taking legal action against her including issuing a warrant for her arrest within the next hour. When Arati asked what this was all about, he asked if she aware of an investigation against her. Arati replied “I have no clue about an investigation. This is the first time I’m hearing about any of this”. Arati started to panic. The man asked if Arati had a lawyer, and then told her about the investigation ordering her not to interrupt him while he speaks. He then recited the last four digits of Arati’s social security number and recited where she worked. He seemed to know all of Arati’s personal information. He told Arati that she failed to declare all of her income and engaged in tax fraud. He then told Arati that the government was seizing all property and all assets in her name that it had already froze her bank and credit card accounts, suspended her driver’s license as well as her passport. Furthermore, there would be a massive penalty, plus possible jail-time and that her social security number was now blacklisted.
Arati listened with fear to this man who went on to tell me someone would be waiting at her office to arrest her. Arati asked why this was the first time she was hearing about it. His reply: “This isn’t our first attempt to make you aware. We came to your house but you were not home.” Arati then asked what she owed the government. He replied approximately $4,900. Arati then asked why she couldn’t just pay him the amount owed. He told her that the investigation was beyond the point of payment–it was too late.
The man then asked Arati questions like: Have you been part of any previous tax fraud cases? Are there currently any judgments against you? Are there any lawsuits pending against you? The man then stated she could wirie the amount owed or delivering a check to him.
Now at this point Arati was starting to think that something was wrong. Being an IRS agent, wouldn’t he already have records showing that she has a clean record? Wouldn’t she have been audited if the IRS believed she owed taxes? Why would the IRS look to take such drastic action for only a $4,900 liability? Arati started to doubt the man and when she pressed him to independently confirm that he works for the IRS, he replied: “How would you even find me using the IRS 1-800 number? This is my direct line. Do you want to find out if I’m a real IRS agent? You’ll see in an hour when the arrest warrant is issued.” Then, he hung up. Arati then showed up at work and no agents were waiting for her.
I tell you these true stories so you can get an idea on how far these scam artists are willing to go.
Scam artists are now concentrating on Indian Americans and other South Asian Americans which are predominately located in California as part of our state’s huge and lucrative technology industry. Scam artists pretending to be Internal Revenue Service officials threaten to send out an arrest warrant if money is not paid to them immediately over the phone. It happened to Sumeet.
Sumeet who lives in Fremont, California received a call from such a scam artist. The caller said that she owed the IRS $1,648, which had to be paid immediately; otherwise a warrant would be issued for her arrest. Sumeet asked if she could pay $100 a month towards her debt. The caller replied “Are you crazy?” and demanded that at least $500 must immediately be paid to keep the police at bay. When Sumeet replied she could not immediately obtain $500, the caller abruptly stated: “You are refusing to cooperate. An officer will be at your door in a couple of hours.” The caller then hung up.
Sumeet was shaken up by the call and then she called the Fremont, California police department who said that no warrant had been issued for her arrest. The City of Fremont police have received many similar calls in recent months and that they have an investigation team in place that is following up with local victims of the scheme.
These three people were lucky not to fall for this scam but for many not so.
This has been a big problem for the IRS and despite issuing multiple consumer alerts, the bogus emails, the bogus IRS letters and the bogus telephone calls continue and unfortunately taxpayers are still falling for this. The government estimates that taxpayers have lost roughly $5 million to scammers.
Well I do not want you to become the next victim of any such scam nor do we want to ignore true IRS inquiries so stay tuned because after the break we are going to break down each type of fraudulent communication for you and give you the warning signs and tips that you should be aware of.
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
Well before we continue I want to remind our listeners of our special 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.
The scam artists exploiting innocent law-abiding taxpayers has been a big problem for the IRS and despite issuing multiple consumer alerts, the bogus emails, the bogus IRS letters and the bogus telephone calls continue and unfortunately taxpayers are still falling for this.
Every week our office receives about a half-dozen inquiries from taxpayers asking whether the communication they just received is really from the IRS. I do not want you to become the next victim of any such scam so listen carefully to what we have to say.
The communication methods used by the scammers are email, letters and telephone calls. The scammers are still going strong doing this to people who are unsuspecting and don’t know how systems work and could very easily frighten them to turn over money. So I am going to break down each type of fraudulent communication for you and give you the warning signs and tips that you should be aware of.
Amy please tell us what people should be aware about emails.
Amy states: When identity theft takes place over the Internet, it is called phishing. Phishing (as in “fishing for information” and “hooking” victims) is a scam where Internet fraudsters send e-mail messages to trick unsuspecting victims into revealing personal and financial information that can be used to steal the victims’ identity. Current scams include phony e-mails which claim to come from the IRS and which lure the victims into the scam by telling them that they are due a tax refund.
Remember, too, the IRS does not use unsolicited email, text messages or any social media to discuss your personal tax issue so if this is the form of communication used – avoid it like you would avoid the plague.
Amy please tell us what people should be aware about letters.
Amy states: If you receive a notice regarding your taxes which does not bear the official seal of the Internal Revenue Service and an official verifiable address of an IRS office or Service Center, that is a sign that it really isn’t the IRS sending you a notice.
The most recent scam that the public has told our office involves a sophisticated fraudulent tax collection notice scam targeting taxpayers for which the IRS has filed a Federal Tax Lien.
Here is how it works: The scammers will search public records for the filing of a Federal Tax Lien by IRS and with the information gathered from that filing will generate a form letter and mail it to the targeted taxpayer. The letter is designed to mimic an IRS notice but it is really coming from a third party having nothing to do with the IRS. If the recipient of the notice contacts the number listed, the person answering your call will purport to be working for the IRS. The intended victim is told he or she owes money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, he or she is then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the person who answered your call becomes hostile and insulting.
Amy please tell us what people should be aware about the telephone.
Amy states: These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves. They may know a lot about you and may be able to recite the last four digits of a victim’s Social Security Number and your place of business. They usually alter the caller ID to make it look like the IRS is calling – many times they will use a Washington, D.C. area code. The area codes for the Washington D.C. area are 202, 301 and 703. They will also background noise of other calls being conducted to mimic a call site. If you don’t answer, they often leave an “urgent” callback request and if they have your email address, will send bogus IRS emails to some victims to support their bogus calls. After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
Jeff asks How do you recognize that this call is fake?
Amy states: Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:
1. Call you about taxes you owe without first mailing you an official notice.
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
Jeff states So what should you do?
Amy states: If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484. So far for this year, the government has received more than 90,000 calls.
Jeff states: And if you do owe taxes and you have not already resolved this with the IRS, then that is where we come in.
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 some tax saving ideas including how you can make Halloween candy tax deductible.
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.
So Amy, with Halloween coming up, I understand that you have some ideas on how to make Halloween candy tax deductible.
Amy replies: It is true. You can in fact deduct Halloween candy if you figure out a way to make it business related. The IRS doesn’t say a lot about this topic because they don’t want to give you “permission” to deduct these items, but they also have not specifically stated that you cannot deduct Halloween candy.
Jeff asks, so how can you deduct those over-priced bags of snack size chocolates?
Amy replies – will I have five different ways!
1. Make a promotion out of it. Attach your business card or a promotional flyer to packets of M&M’s and voila! Deductible.
2. There are many companies who will print candy wrappers with your logo on it. An even better and more advanced way to promote your business and still have something for trick-or-treaters.
3. Send a box of candy to potential or existing clients during October. This promotes your business and would likely not be questioned as a business deduction.
4. Donate any leftover candy to the US troops. “Charitable organizations with 501(3)(c) status like Operation Gratitude (EIN 20-0103575) and Soldiers’ Angels (EIN 20-0583415) collect leftover Halloween candy to include in care packages for soldiers. They are two of many 501(c)(3) organizations on the IRS-approved list to donate tax deductible charitable goods. Always be sure to check the IRS list before claiming your donations are tax deductible, as status can change.”
5. Make it a party. You can deduct a portion of a Halloween party if the party is to conduct or promote business. Typically this looks like an open house of some sort where you mingle with current and potential clients, play a few Halloween games, give out candy and treats, and discuss business. The IRS does not specify how much time you must spend discussing the business to claim a deduction but you must invite people that you do business with or are looking to do business with.
Jeff says: Amy those are some great ideas.
PLUG: You know that at the Law Offices Of Jeffrey B. Kahn we are always thinking of ways that our clients can save on taxes. We 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 says: Now when I think of Halloween, I look forward to seeing all of the different costumes that people wear. Some are very extravagant and I am sure pricey. And for some they would like to know how that can be deductible. Since costumes fall under the category of clothing or uniforms, Amy please explain what the tax law requires.
Amy says: The tax law requires three elements for clothing useful only in the business environment to be deductible. They are:
1. The clothing is required or essential in the taxpayer’s employment;
2. The clothing is not suitable for general or personal wear; and
3. The clothing is not so worn for general or personal wear.
If these three requirements are satisfied, not only is the cost of the closing deductible but also its upkeep.
Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.). Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.
Jeff asks: How about a white cap, white shirt or white jacket, white bib overalls, and standard work shoes a painter is required by his union to wear on the job and there is nothing on any of the clothes that indicate the company this person works for?
Amy replies: No that would not be deductible because it is not distinctive. Similarly, blue work clothes worn by a welder are not deductible even if the foreman requires them. However, required protective clothing like safety boots, safety glasses, hard hats, and work gloves are deductible.
Likewise, just by adding the company’s logo on the clothing will make it deductible even if it can be worn outside the scope of employment because you are advertising your company. In that case you are a walking billboard.
Jeff says: Given today’s dot.com and casual era environment, people are not coming to work as dressed up as they used to. So could lawyers and others argue their suits are just like uniforms and therefore ought to be tax deductible?
Amy replies: No. Where business clothes are suitable for general wear, there’s no deduction even if these particular clothes would not have been purchased but for the employment.
Jeff asks: Is being on TV any different?
Amy replies: While these tax rules are pretty circumscribed, they are also intensively factual. Someone is always pushing the tax envelope. Such was the case with an Ohio TV news anchor, Anietra Y. Hamper. She was claiming approximately $20,000 a year in 2005, 2006, 2007 and 2008 in clothing expense that included not only what she wore for each broadcast but also lounge wear, a robe, sportswear, lingerie, thong underwear, an Ohio State jersey, jewelry, running shoes, dry cleaning, business gifts, cable TV, contact lenses, cosmetics, gym memberships, haircuts, Internet access, self-defense classes, and her subscriptions to Cosmo, Glamour, Newsweek, and Nickelodeon. Her argument was that as a TV anchor she was required to maintain a specified appearance described in the Women’s Wardrobe Guidelines. These guidelines say the “ideal in selecting an outfit for on-air use should be the selection of ‘standard business wear’, typical of that which one might wear on any business day in a normal office setting anywhere in the USA.”
Jeff asks: Was that enough?
Amy replies: No. Where business clothes are suitable for general wear, there’s no deduction even if these particular clothes would not have been purchased but for the employment. For this TV anchor, that was no help. She claimed the requirement to dress conservatively made the clothing unsuitable for everyday, and that’s how she treated it. She wore the business clothing only at work and even kept it separate from her personal clothing. But the IRS and Tax Court denied her wardrobe deductions. And they added penalties.
Jeff asks: Well in the history of tax law is there anyone who prevailed in getting their costumes deducted?
Amy replies: Well Jeff you remember the Swedish disco group ABBA?
Jeff replies, I sure do – I know there songs well. Maybe we can get our engineer to play one for our break.
Amy continues: Well according to ABBA: The Official Photo Book, released to commemorate the 40th anniversary of the group career-making Eurovision victory for Waterloo, the Swedish foursome adopted their outlandish dressing style in order to ensure they could deduct the cost of their costumes under Swedish tax code. Like U.S. tax law, Swedish laws allowed work wear to be tax deductible so long as it was demonstrably apparel that couldn’t be worn on the street – which, with its garish coloring and liberal use of sparkle, ABBA’s certainly was.
PLUG: Now while you will find no one on the kahntaxlaw team wearing outrageous costumes, we will provide you with a rock solid 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?
Question from Doug: I live in San Diego County and work in Irvine. I need to see you but cannot get to your downtown San Diego office during my work day. How can I see you?
Jeff replies: Well Doug you should know that I have multiple offices so that people can see me at the location that is most convenient to them whether it be close to their residence or place of work. My office in Orange County is in Newport Beach near the airport so you can see me sometime during your workday or perhaps at the beginning or end of your work day. Just give us a call and we will make it happen.
Question from Cheryl: You always tell us that you are a “Board Certified Tax Attorney”. What does that entail?
Jeff replies: Just like doctors, attorneys can get a special designation for their area of practice. The State Bar governs this process. This requires having at least 5 years of experience, satisfying a peer review, taking extra continuing education in the tax field and passing a comprehensive tax exam. While the tax exam is taken once, all the other requirements must continue to be maintained in order for an attorney to hold out this special designation. It really is the highest designation that an attorney can attain in tax law.
Question from Todd: I always hear on the radio or see on T.V. those commercials for tax relief companies. How are you different from them?
Jeff replies: I have been practicing tax law for over 26 years and I personally meet with every client. I let them know that I am accountable to them to resolve their tax problems. I take this commitment so seriously that my name is in the name of my firm, the Law Offices Of Jeffrey B. Kahn, P.C., and our clients know where and how to reach me and my staff with any questions or the status on their case.
Question from Barbara: Is engaging the Law Offices Of Jeffrey B. Kahn, P.C. expensive and beyond my means?
Jeff replies: Our purpose at the Law Offices Of Jeffrey B. Kahn, P.C. is to help people resolve their tax problems. We are very efficient and effective in doing this because this is what we know and do everyday. With our expertise in solving tax problems we personally meet your needs and do it for the same price if not less than those tax relief companies you always seem to hear about on radio or see on TV.
PLUG: Remember only 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 hashtag 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!
Now when I think of Halloween, I look forward to seeing all of the different costumes that people wear. Some are very extravagant and I am sure pricey. And for some they would like to know how that can be deductible. Since costumes fall under the category of clothing or uniforms, you need to be aware of what the tax law requires.
The tax law requires the following three elements for clothing useful only in the business environment to be deductible:
If these three requirements are satisfied, not only is the cost of the closing deductible but also its upkeep.
Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.). Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.
Work Clothes Of Painters And Welders.
But let’s say that you are a painter and you are required by your union to wear on the job a white cap, white shirt or white jacket, white bib overalls, and standard work shoes and there is nothing on any of the clothes that indicate the company this you work for. You would think this to be deductible but the IRS would say no because the clothes are not distinctive. Similarly, blue work clothes worn by a welder are not deductible even if the foreman requires them. However, required protective clothing like safety boots, safety glasses, hard hats, and work gloves are deductible. Likewise, just by adding the company’s logo on the clothing will make it deductible even if it can be worn outside the scope of employment because you are advertising your company. In that case you are a walking billboard.
Military Uniforms.
We have a large military presence here in San Diego County so we are asked many times what rules apply for military uniforms? You generally cannot deduct uniforms if you are on full-time active duty in the armed forces. However, reservists can deduct the unreimbursed cost of uniforms if military regulations restrict wearing it except on duty. Still, you must reduce your deduction by any nontaxable allowance you receive. If local military rules don’t allow wearing fatigues off duty, you can deduct the amount by which your uniform cost exceeds your uniform allowance.
“Business Attire”.
Given today’s dot.com and casual era environment, people are not coming to work as dressed up as they used to. So could lawyers and others argue their suits are just like uniforms and therefore ought to be tax deductible? No. Where business clothes are suitable for general wear, there’s no deduction even if these particular clothes would not have been purchased but for the employment.
Is Being On TV Any Different?
While these tax rules are pretty circumscribed, they are also intensively factual. Someone is always pushing the tax envelope. Such was the case with an Ohio TV news anchor, Anietra Y. Hamper. She was claiming approximately $20,000 a year in 2005, 2006, 2007 and 2008 in clothing expense that included not only what she wore for each broadcast but also lounge wear, a robe, sportswear, lingerie, thong underwear, an Ohio State jersey, jewelry, running shoes, dry cleaning, business gifts, cable TV, contact lenses, cosmetics, gym memberships, haircuts, Internet access, self-defense classes, and her subscriptions to Cosmo, Glamour, Newsweek, and Nickelodeon. Her argument was that as a TV anchor she was required to maintain a specified appearance described in the Women’s Wardrobe Guidelines. These guidelines say the “ideal in selecting an outfit for on-air use should be the selection of ‘standard business wear’, typical of that which one might wear on any business day in a normal office setting anywhere in the USA”. The IRS and U.S. Tax Court did not agree stating that where business clothes are suitable for general wear, there’s no deduction even if these particular clothes would not have been purchased but for the employment. For this TV anchor, that was no help. She claimed the requirement to dress conservatively made the clothing unsuitable for everyday, and that’s how she treated it. She wore the business clothing only at work and even kept it separate from her personal clothing. Not only did the IRS and Tax Court denied her wardrobe deductions, they added penalties.
And Finally A Winner!
There is one group that in the history of tax law prevailed in getting their costumes deducted – that was the Swedish disco group ABBA! According to ABBA: The Official Photo Book, released to commemorate the 40th anniversary of the group career-making Eurovision victory for Waterloo, the Swedish foursome adopted their outlandish dressing style in order to ensure they could deduct the cost of their costumes under Swedish tax code. Like U.S. tax law, Swedish laws allowed work wear to be tax deductible so long as it was demonstrably apparel that couldn’t be worn on the street – which, with its garish coloring and liberal use of sparkle, ABBA’s certainly was.
What Should You Do?
Now while you will find no one at the Law Offices Of Jeffrey B. Kahn, P.C. wearing outlandish costumes, we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS 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 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.
You can in fact deduct Halloween candy if you figure out a way to make it business related. The IRS doesn’t say a lot about this topic because they don’t want to give you “permission” to deduct these items, but they also have not specifically stated that you cannot deduct Halloween candy.
Here are five ways to deduct those over-priced bags of snack size chocolates:
1. Make a promotion out of it. Attach your business card or a promotional flyer to packets of M&M’s and voila! Deductible.
2. There are many companies who will print candy wrappers with your logo on it. An even better and more advanced way to promote your business and still have something for trick-or-treaters.
3. Send a box of candy to potential or existing clients during October. This promotes your business and would likely not be questioned as a business deduction.
4. Donate any leftover candy to the US troops. Charitable organizations with 501(3)(c) status like Operation Gratitude (EIN 20-0103575) and Soldiers’ Angels (EIN 20-0583415) collect leftover Halloween candy to include in care packages for soldiers. They are two of many 501(c)(3) organizations on the IRS-approved list to donate tax deductible charitable goods. Always be sure to check the IRS list before claiming your donations are tax deductible, as status can change.
5. Make it a party. You can deduct a portion of a Halloween party if the party is to conduct or promote business. Typically this looks like an open house of some sort where you mingle with current and potential clients, play a few Halloween games, give out candy and treats, and discuss business. The IRS does not specify how much time you must spend discussing the business to claim a deduction but you must invite people that you do business with or are looking to do business with.
What Should You Do?
You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS 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 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.
With Halloween coming up, it is just not the neighbor kids looking forward to trick or treat but also people pretending that they are the Internal Revenue Service looking to steal your identity and scam you for your money.
The scam artists exploiting innocent law-abiding taxpayers has been a big problem for the IRS and despite issuing multiple consumer alerts, the bogus emails, the bogus IRS letters and the bogus telephone calls continue and unfortunately taxpayers are still falling for this. The government estimates that taxpayers have lost roughly $5 million to scammers.
Every week our office receives about a half-dozen inquiries from taxpayers asking whether the communication they just received is really from the IRS. I do not want you to become the next victim of any such scam so read on to what we have to say.
The communication methods used by the scammers are email, letters and telephone calls. The scammers are still going strong doing this to people who are unsuspecting and don’t know how systems work and could very easily frighten them to turn over money. So I am going to break down each type of fraudulent communication for you and give you the warning signs and tips that you should be aware of.
Emails.
When identity theft takes place over the Internet, it is called phishing. Phishing (as in “fishing for information” and “hooking” victims) is a scam where Internet fraudsters send e-mail messages to trick unsuspecting victims into revealing personal and financial information that can be used to steal the victims’ identity. Current scams include phony e-mails which claim to come from the IRS and which lure the victims into the scam by telling them that they are due a tax refund.
Remember, too, the IRS does not use unsolicited email, text messages or any social media to discuss your personal tax issue so if this is the form of communication used – avoid it like you would avoid the plague.
Letters.
If you receive a notice regarding your taxes which does not bear the official seal of the Internal Revenue Service and an official verifiable address of an IRS office or Service Center, that is a sign that it really isn’t the IRS sending you a notice.
The most recent scam that the public has told our office involves a sophisticated fraudulent tax collection notice scam targeting taxpayers for which the IRS has filed a Federal Tax Lien.
Here is how it works: The scammers will search public records for the filing of a Federal Tax Lien by IRS and with the information gathered from that filing will generate a form letter and mail it to the targeted taxpayer. The letter is designed to mimic an IRS notice but it is really coming from a third party having nothing to do with the IRS. If the recipient of the notice contacts the number listed, the person answering your call will purport to be working for the IRS. The intended victim is told he or she owes money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, he or she is then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the person who answered your call becomes hostile and insulting.
Telephone.
These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves. They may know a lot about you and may be able to recite the last four digits of a victim’s Social Security Number and your place of business. They usually alter the caller ID to make it look like the IRS is calling – many times they will use a Washington, D.C. area code. The area codes for the Washington D.C. area are 202, 301 and 703. They will also background noise of other calls being conducted to mimic a call site. If you don’t answer, they often leave an “urgent” callback request and if they have your email address, will send bogus IRS emails to some victims to support their bogus calls. After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
How Do You Recognize That This Call Is Fake?
Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:
So What Should You Do?
If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484. So far for this year, the government has received more than 90,000 calls.
And if you do owe taxes and you have not already resolved this with the IRS, then that is where we come in. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.
Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.
With Halloween coming up, it is just not the neighbor kids looking forward to trick or treat but also people pretending that they are the Internal Revenue Service looking to steal your identity and scam you for your money.
Listen to the story of Arati who works in New York City and immigrated to the U.S. from India. Arati received a call from a Brian Cruz who called her house early in the morning before Arati left for work. He left his telephone number, name and noted he was calling from the IRS. Arati put the number in her cell phone without searching for it online first. After all it had a 202 area code which is Washington D.C. so she figured it had to be official. Once she got into her car she called, and the man who picked up the call answered that this was the investigations bureau for the IRS. Arati asked for Cruz, but he wasn’t available. The man who picked up the call told Arati to give him the telephone number where Cruz left the message. She did, and then it began.
After the man confirmed Arati’s home telephone number, he stated that she attempted to defraud the IRS, and that the government was now taking legal action against her including issuing a warrant for her arrest within the next hour. When Arati asked what this was all about, he asked if she aware of an investigation against her. Arati replied “I have no clue about an investigation. This is the first time I’m hearing about any of this”. Arati started to panic. The man asked if Arati had a lawyer, and then told her about the investigation ordering her not to interrupt him while he speaks. He then recited the last four digits of Arati’s social security number and recited where she worked. He seemed to know all of Arati’s personal information. He told Arati that she failed to declare all of her income and engaged in tax fraud. He then told Arati that the government was seizing all property and all assets in her name that it had already froze her bank and credit card accounts, suspended her driver’s license as well as her passport. Furthermore, there would be a massive penalty, plus possible jail-time and that her social security number was now blacklisted.
Arati listened with fear to this man who went on to tell me someone would be waiting at her office to arrest her. When she interrupted him to ask why this was the first time she was hearing about this, he ignored her question, paused and began repeating the details of the investigation. Arati then asked again why this was the first time she was hearing about it. His reply: “This isn’t our first attempt to make you aware. We came to your house but you were not home.” Arati then asked what she owed the government. He replied approximately $4,900. Arati then asked why she couldn’t just pay him the amount owed. He told her that the investigation was beyond the point of payment–it was too late.
The man then asked Arati questions like: Have you been part of any previous tax fraud cases? Are there currently any judgments against you? Are there any lawsuits pending against you? The man then stated that since the warrant for Arati’s arrest had yet to be issued, she could pay the amount owed and avoid the legal mess he’d been threatening her with by wiring the amount owed or delivering a check to him.
Now at this point Arati was starting to think that something was wrong. Being an IRS agent, wouldn’t he already have records showing that she has a clean record? Wouldn’t she have been audited if the IRS believed she owed taxes? Why would the IRS look to take such drastic action for only a $4,900 liability? Arati started to doubt the man and when she pressed him to independently confirm that he works for the IRS, he replied: “How would you even find me using the IRS 1-800 number? This is my direct line. Do you want to find out if I’m a real IRS agent? You’ll see in an hour when the arrest warrant is issued.” Then, he hung up. Arati then showed up at work and no agents were waiting for her.
I tell you this true story so you can get an idea on how far these scam artists are willing to go.
So What Should You Do?
If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484. So far for this year, the government has received more than 90,000 calls.
And if you do owe taxes and you have not already resolved this with the IRS, then that is where we come in. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.
Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.
Topics Covered:
1. Tax Time – Why we pay.
2. Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 1: Travel Expenses, Cell Phones, Home Office Deduction and Home Computers.
3. Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 2: Personal Expenses, Guard Dogs, Uniforms and Wages Paid To Family.
4. Answering Your Questions:
a. When Should You Lawyer Up When Dealing With the IRS?
b. Is It True That Taxpayers With Legal Counsel are Treated Better?
c. Why Should I Only Use A Tax Attorney For Representation In A Criminal Tax Investigation?
Listen to the podcast:
Read the show’s transcript:
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.
So It’s Tax Time – Why do we pay?
Well I must tell you how it began with an earthquake. What hit San Francisco in 1906 was one of the worst natural disasters in American history. Once the water mains broke, there was no way to fight the dozens of fires caused by ruptured gas mains, except by dynamiting buildings in the fire’s path, which made things worse. The fires lasted for days. More than 3,000 people died, including the city’s fire chief, who fell two stories after the dome of the California Hotel crashed into the fire station. Most of the city was destroyed. Economic aftershocks were felt as far away as London. Twelve insurance companies went bankrupt, and, after a gold shortage and a doomed scheme to corner the copper market, the Knickerbocker, the second-largest trust in New York, failed, setting off the Panic of 1907. The New York Stock Exchange nearly collapsed. So did the United States Treasury.
The Panic of 1907 contributed to the passage of the Sixteenth Amendment, in 1913, which granted Congress the right to levy an income tax, and to the establishment of a central banking system, the Federal Reserve. Both the Sixteenth Amendment and the Federal Reserve turned a hundred years old in 2013.
Taxes dominate domestic politics. They didn’t always. Since the 1970’s, almost all of that talk has been about cuts, which ought to be surprising, because more than 90% of Americans receive social or economic security benefits from the federal government. Americans, though, find it easier to see what they pay, than what they get — not because they aren’t paying attention but because the case for taxation is so seldom made.
Damning taxes is a piece of cake. It’s defending them that’s hard. “Taxes are what we pay for civilized society,” Oliver Wendell Holmes, Jr., said, nearly a century ago. (His words are engraved on the front of the I.R.S. Building in Washington.) No one’s said it better since. And that, right there, is the problem.
Taxes, which date to the beginning of recorded history, are payments made to a ruler in exchange for military protection, public services, and civil order. In the ancient world, taxes were paid in kind: landowners paid in crops or livestock; the landless paid with their labor. Taxing trade made medieval monarchs rich and funded the early-modern state. Then a series of political revolutions began that led to monarchs ceding the power to tax to legislatures. One of those revolutions lies behind American independence.
But let’s go back to the earthquake. In 1906, the day the earthquake hit and the fires began, people raced to the San Francisco Bay and boarded ferries to escape the flames. A handful of men rushed to the banks, but before long all that was left of the city’s deposit and lending institutions, aside from rubble and ashes, were their fireproof steel vaults: red hot, smoking, and locked.
During the recession that followed the panic that followed the earthquake, the number of people applying for poor relief in New York tripled; in Philadelphia, it increased nearly fivefold. A purpose of a federal reserve was to allow the government to halt a panic by shoring up faltering banks. A purpose of a federal income tax was to undergird the Treasury with a stable source of revenue. But it had another purpose, too. The richest one per cent of households, which had held about a quarter of the nation’s wealth in 1890, now held more than a third. The tax was intended to answer populist rage at the growing divide between the rich and the poor. In the election of 1908, both parties favored an income tax—Democrats hoping to close that gap, Republicans hoping to quiet that rage.
Republicans won. The new President, William Howard Taft, who had been a federal judge (and who went on to serve as Chief Justice), wanted to avoid signing a law that would end up going back to the Supreme Court. He decided to support a constitutional amendment. It went to the states for ratification in 1909.
Constitutional amendments are notoriously difficult to ratify. The Sixteenth Amendment was not. Once it got out of Congress, it passed, handily, in 42 of 48 states, six more than required, and took effect on February 25, 1913. The House voted on an income-tax bill in May; Woodrow Wilson signed it in October. Its highest rate was 7%. The next year, the Bureau of Internal Revenue printed its first 1040. The form was three pages, the instructions just one.
Taxes have got a lot hairier since. The Revenue Act of 1916, anticipating the United States’ entry into the war in Europe, raised taxes on incomes, doubled a tax on corporate earnings, eliminated an exemption for dividend income, and introduced an estate tax and a tax on excess profits. Rates on the wealthiest Americans began to skyrocket, from 7% to 77%, but most people paid no tax at all. By 1918 only about 15% of American families had to pay personal income taxes, and the tax payments of the wealthiest 1% of American families accounted for about 80% of the revenues.
Taxes are what we pay for civilized society, for modernity, and for prosperity. The wealthy pay more because they have benefitted more. Taxes, well laid and well spent, insure domestic tranquility, provide for the common defense, and promote the general welfare. Taxes protect property and the environment; taxes make business possible. Taxes pay for roads and schools and bridges and police and teachers. Taxes pay for doctors and nursing homes and medicine. During an emergency, like an earthquake or a hurricane, taxes pay for rescue workers, shelters, and services. For people whose lives are devastated by other kinds of disaster, like the disaster of poverty, taxes pay, even, for food.
What’s surprising, given how much money and passion have been spent to defeat a broad-based, progressive income tax over the past century, and how poorly it has been defended, is that it has endured. In addition, the IRS which is government agency charged with administering the tax laws and enforcing compliance has become one of the largest and most powerful government agencies. 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! And it all started with an earthquake in San Francisco.
By the way exactly 25 years to the day – that’s October 17, 1989 – a 6.9 magnitude earthquake, the Loma Prieta earthquake, rocked the San Francisco Bay Area. Remember history does have a way of repeating itself.
Well it’s time for a break but stay tuned because we are going to tell you the top tax write-offs that could get you in trouble with the IRS.
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 states: Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 1 of 2
From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?
Amy opens up with Tax Write-Off: Travel Expenses
Here’s a write-off that sometimes is difficult deciding just where to draw the line. Can you deduct the cost of going to see a Cirque du Soleil show in Las Vegas if you’re treating your client? The answer is yes, as long as you can justify it as a business expense. And what if your spouse goes along on the trip? As long as they’re a partner or employee of your business and attended conventions or meetings on the trip you took together, then his or her travel and 50% of his or her meals are also deductible.
Jeff states:
• Key Issue: You can deduct travel expenses, and 50% of related meals and entertainment, if the travel is reasonably related to your business.
• How to Do It Right: The more accurate your records are, the more likely they’ll be accepted and validated by the IRS if you become involved in an audit situation. On your next business trip grab an envelope from the stationary drawer of your hotel room and put all your receipts from that trip in it. Label the envelope with a name and date to help you remember that trip and document it should it be questioned later.
Amy opens up with Tax Write-Off: Cell Phone Bill
If you use a cell phone as part of your business, this could be a big deduction for you. So don’t make the mistake of mixing business with pleasure by sneaking too many personal calls onto your cell phone bill.
Jeff states:
• Key Issue: Because of the way a cell phone can be used and many phones and features are bundled into single plans, this expense has come under much scrutiny, so people need to keep good records and keep their actual cell phone bill so they can demonstrate what portion relates to cell phone use and that a majority of the calls were business calls.
• How to Do It Right: Take a look at your cell phone bill to make sure you receive an itemized report. Because cell phones are considered listed property, you need to keep detailed records of their use. In the case of a land line, it’s a good idea to have a separate phone number for your business since the IRS won’t let you allocate the cost of a single phone in your home to your home office.
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 opens up with Tax Write-Off: Home Office
Home office deductions used to be a big red flag for an audit back in the 1990’s. These days, you just need to use the deduction with caution. A good rule of thumb to follow is that anything that’s unusual and disproportionate to your level of income is something the IRS will check out.
Jeff states:
• Key Issue: Home office space is the exact square footage area in your home dedicated exclusively to the running of your business.
• How to Do It Right: Get an accurate floor plan of your residence and the exact square footage of the space exclusively used for business. Once you figure out the percentage of your home office compared to your overall home, then you can go back to your heating bills, electric bills and all other bills that go to supporting your home, and figure out the amount you can deduct for running your business.
Jeff states – the rules and recordkeeping for the home office deduction apply the same whether you are a home-owner or you are a home-renter.
Amy opens up with Tax Write-Off: Home Office Computer
It’s not a good idea to mix your business world with your personal life so you should not use your home office computer for personal tasks if you can help it.
Jeff states:
• Key Issue: If there is the only computer in your house, you will have to calculate the percentage of total time you use it for business purposes.
• How to Do It Right: Ideally, your best option is to purchase a laptop or tablet and dedicate it to being your personal computer. You then use your desktop computer solely for business. This way you can avoid any messy situations come audit 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 more of the top tax write-offs that could get you in trouble with the IRS.
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 states: From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?
Amy opens up with Tax Write-Off: Personal Expenses
This is a category business owners can easily get into trouble with if they’re not careful.
Jeff states:
• Key Issue: You simply can’t deduct services of a purely personal nature that aren’t related to your business.
• How to Do It Right: Getting an opinion from a tax professional as to whether an expense is deductible for your business makes most sense. The cost of high-speed internet service should be deductible but you can’t deduct such homecare services as gardening, landscaping and tree removal simply because you work out of a home office.
Amy opens up with Tax Write-Off: Guard Dog
Believe it or not, this is a legit write-off if taken correctly. In order for a dog to qualify as your company’s guard dog, it helps if you’re a little afraid of the animal yourself (picture a Rottweiler, Pit Bull or German Shepherd).
Jeff states:
• Key Issue: You will only be able to deduct that portion of the dog’s total time devoted to “guard-dog” duty.
• How to Do It Right: Though it may seem rather obvious, your dog most also be guarding your inventory. Knowing the percentage of time devoted to guard-dog duty, applying this business use percentage you can deduct expenses relating to the dog but you can’t deduct the dog itself. You can however depreciate the dog over its expected lifespan as determined by a local breeder.
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 opens up with Tax Write-Off: Work-Related Uniforms or Costumes
The dos and don’ts of this tax write-off are fairly simple.
Jeff states:
• Key Issue: If the costume or uniform is something you could wear outside your job, you shouldn’t write it off. If, however, it’s obvious you can only wear it for the duties of your specific job, then it qualifies as a write-off.
• How to Do It Right: A new suit wouldn’t qualify since you can wear it other places outside of your work environment. A perfect example of some rather unusual clothing you can write-off would be a clown suit. Even a Las Vegas showgirl with tight, sequined costumes she purchased for her performances should qualify. In this case a picture is worth a thousand words.
Amy opens up with Tax Write-Off: Paying Wages To Family.
When employing a spouse, child or close relative, be careful not to give them any extra-special treatment.
Jeff states:
• Key Issue: Make sure the responsibilities of their job description are commensurate with their age and experience. Pay them the same salary you’d pay anyone else doing the same job.
• How to Do It Right: Just like any other employee, maintain a personnel file and include them on your worker’s compensation coverage. Report them on the business’ employment tax returns and issue W-2’s at the end of each year.
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?
Question: When Should You Lawyer Up When Dealing With the IRS?
Answer: If you receive a notice from the IRS regarding small mistakes and omissions with your income tax return, you can probably deal with the IRS directly or by giving your tax preparer a quick call. However, if there is any chance your case could go sour, you need to call a qualified and experienced tax attorney, and pronto. A good rule of thumb is that if you’re asking yourself whether it’s serious enough to merit calling a tax attorney, it probably is.
Question: Is It True That Taxpayers With Legal Counsel are Treated Better?
Answer: It’s unfair, even illegal, but it’s also human nature. IRS agents are flesh and blood and if they can get away with bullying someone into their interpretation of the law, they probably will. A tax attorney can ensure the IRS is playing by the rules and treating you fairly. IRS investigators are much more careful about asking inappropriate questions or wasting your time with unnecessary requirements, if they know they are dealing with a tax attorney.
Question: Why Should I Only Use A Tax Attorney For Representation In A Criminal Tax Investigation?
Answer: When it comes to tax planning, business budgeting and asset management, a CPA is – all things being equal – more useful than a tax attorney is. But when you have a dispute with the IRS, especially if you’re accused of tax fraud or tax evasion, a tax attorney is the only intelligent choice. Tax attorneys are the only ones who can represent you in a court of law and provide you the legal advice and analysis you need. Anything discussed with your tax attorney is protected under the attorney-client privilege. Unlike CPA’s and accountants, attorneys cannot be subpoenaed to testify against a client in a criminal procedure.
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 hash tag 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!
It began with an earthquake. What hit San Francisco in 1906 was one of the worst natural disasters in American history. Once the water mains broke, there was no way to fight the dozens of fires caused by ruptured gas mains, except by dynamiting buildings in the fire’s path, which made things worse. People raced to the San Francisco Bay and boarded ferries to escape the flames. The fires lasted for days. A handful of men rushed to the banks, but before long all that was left of the city’s deposit and lending institutions, aside from rubble and ashes, were their fireproof steel vaults: red hot, smoking, and locked. More than 3,000 people died, including the city’s fire chief, who fell two stories after the dome of the California Hotel crashed into the fire station. Most of the city was destroyed.
Economic aftershocks were felt as far away as London. Twelve insurance companies went bankrupt, and, after a gold shortage and a doomed scheme to corner the copper market, the Knickerbocker, the second-largest trust in New York, failed, setting off the Panic of 1907. The New York Stock Exchange nearly collapsed. So did the United States Treasury.
The Panic of 1907 contributed to the passage of the Sixteenth Amendment, in 1913, which granted Congress the right to levy an income tax, and to the establishment of a central banking system, the Federal Reserve. Both the Sixteenth Amendment and the Federal Reserve turned a hundred years old in 2013.
Constitutional amendments are notoriously difficult to ratify. The Sixteenth Amendment was not. Once it got out of Congress, it passed, handily, in 42 of 48 states, six more than required, and took effect on February 25, 1913. The House voted on an income-tax bill in May; Woodrow Wilson signed it in October. Its highest rate was 7%. The next year, the Bureau of Internal Revenue printed its first 1040. The form was three pages, the instructions just one.
Taxes have got a lot hairier since. The Revenue Act of 1916, anticipating the United States’ entry into the war in Europe, raised taxes on incomes, doubled a tax on corporate earnings, eliminated an exemption for dividend income, and introduced an estate tax and a tax on excess profits. Rates on the wealthiest Americans began to skyrocket, from 7% to 77%, but most people paid no tax at all. By 1918 only about 15% of American families had to pay personal income taxes, and the tax payments of the wealthiest 1% of American families accounted for about 80% of the revenues.
Taxes are what we pay for civilized society, for modernity, and for prosperity. The wealthy pay more because they have benefitted more. Taxes, well laid and well spent, insure domestic tranquility, provide for the common defense, and promote the general welfare. Taxes protect property and the environment; taxes make business possible. Taxes pay for roads and schools and bridges and police and teachers. Taxes pay for doctors and nursing homes and medicine. During an emergency, like an earthquake or a hurricane, taxes pay for rescue workers, shelters, and services. For people whose lives are devastated by other kinds of disaster, like the disaster of poverty, taxes pay, even, for food.
What’s surprising, given how much money and passion have been spent to defeat a broad-based, progressive income tax over the past century, and how poorly it has been defended, is that it has endured. In addition, the IRS which is government agency charged with administering the tax laws and enforcing compliance has become one of the largest and most powerful government agencies.
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! And it all started with an earthquake in San Francisco.
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.
A new revenue procedure makes it easier for taxpayers who hold interests in certain Canadian retirement plans to get favorable U.S. tax treatment.
On October 7, 2014, the IRS made it easier for taxpayers who hold interests in certain popular Canadian retirement plans to get favorable U.S. tax treatment. Rev. Proc. 2014-55. As a result of the change, many Americans and Canadians with either registered retirement savings plans (RRSP’s) and registered retirement income funds (RRIF’s) now automatically qualify for tax deferral similar to that available to participants in U.S. individual retirement accounts (IRA’s) and 401(k) plans. In addition, the IRS is eliminating a special annual reporting requirement that has long applied to taxpayers with these retirement plans.
In general, U.S. citizens and resident aliens will qualify for this special treatment as long as they have filed and continue to file U.S. income tax returns for any year they held an interest in an RRSP or RRIF and include any distributions as income on their U.S. returns.
Under a longstanding provision in the U.S.-Canada Tax Treaty, U.S. citizens and resident aliens can defer tax on income accruing in their RRSP or RRIF until it is distributed. Otherwise, U.S. tax is due each year on this income, even if it is not distributed. In the past, however, taxpayers generally were required to elect-in to get tax deferral by attaching Form 8891 to their return and choosing this tax treaty benefit, something many eligible taxpayers failed to do. Before this change, a primary way to correct this omission and retroactively obtain the treaty benefit was to request a private letter ruling from the IRS, a costly and often time-consuming process.
Many taxpayers with an interest in a RRSP or RRIF also failed to comply with a reporting requirement of the yearly filing of Form 8891, U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans, reporting details about each RRSP and RRIF, including contributions made, income earned and distributions made. This requirement applied regardless of whether the taxpayer chose the special tax treatment. In Rev. Proc. 2014-55, the IRS said it is eliminating Form 8891, and taxpayers are no longer required to file this form for any year, past or present.
Taxpayers Still Subject To FBAR and Form 8938 Reporting
Rev. Proc. 2014-55 does not modify any other U.S. reporting requirements that may apply under Code Sec. 6038D or under any other provision of U.S. law, including the requirement to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), imposed by 31 U.S.C. § 5314 and the regulations thereunder. Failure to comply with these reporting requirements can result in steep penalties to the unwitting taxpayer. Failure to file a Foreign Bank Account Report (“FBAR”) may result in civil penalties for negligence, pattern of negligence, non-willful, and willful violations. These penalties range from a high penalty for willful violations, equal to the greater of $100,000 or 50% of the balance in the account at the time of violation, to a low penalty of $500 for negligent violations. For failing to file a correct Schedule B or Form 8938, the taxpayer could face a failure-to-file penalty of $10,000, criminal penalties, and if the failure to file results in underpayment of tax, an accuracy-related penalty equal to 40% of the underpayment of tax and a fraud penalty equal to 75% of the underpayment of tax.
Federal Relief Does Not Extend To State Income Taxation
Such is the case in California. The State Board of Equalization has previously held that tax treaties between the United States and other countries which expressly limit their application to federal income taxes do not prevent California from taxing persons otherwise covered by such treaties.” Appeal of M. T. de Mey van Streefkerk, 85-SBE-135, Nov. 6, 1985. The United States Supreme Court noted that “the tax treaties into which the United States has entered do not generally cover the taxing activities of subnational governmental units such as States … and if the treaty does apply to the States it will be specified in the treaty itself. Container Corp. v. Franchise Tax Board (1983) 463 U.S. 159, 196. Accordingly, the federal election to defer taxation on earnings of the RRSP is inapplicable for California income tax purposes.
Basically, the Franchise Tax Board considers a RRSP to be similar to a savings account. The Franchise Tax Board will treat a taxpayer’s original contributions to the RRSP, made while a Canadian resident, as a capital investment in the RRSP. A California resident must include any earnings from their RRSP in their taxable income and pay taxes on this income in the year earned. After a taxpayer pays tax on these earnings, the earnings will also be treated as capital invested in the RRSP. Therefore, when a taxpayer receives a distribution from their RRSP, the amount consisting of the contributions and the previously taxed earnings is considered a nontaxable return of capital.
What Should You Do?
California taxpayers who have an interest in a Canadian RRSP would benefit from the experienced tax attorneys of the Law Office Of Jeffrey B. Kahn, P.C. representing you to avoid the pitfalls associated with failure to comply with the reporting requirements associated with having an interest in an RRSP.
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.
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