IRS Warning: Beware Email Phishing Scheme Falsely Claiming to be from the Taxpayer Advocate Service

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From time to time the IRS issues consumer warnings on the fraudulent use of the IRS name or logo by scammers trying to gain access to consumers’ financial information in order to steal their identity and assets. When identity theft takes place over the Internet,it is called phishing.

Suspicious e-Mail/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 Taxpayer Advocate’s Office which lure the victims into the scam by telling them that their case has been forwarded to the Taxpayer Advocate’s Office.

How The Scam Works

Victims will receive an email that appears to be from the IRS Taxpayer Advocate Service and includes a bogus case number.The fake emails may include the following message: “Your reported 2013 income is flagged for review due to a document processing error. Your case has been forwarded to the Taxpayer Advocate Service for resolution assistance. To avoid delays processing your 2013 filing contact the Taxpayer Advocate Service for resolution assistance.”

Recipients are directed to click on links that supposedly provide information about the “advocate” assigned to their case or that let them “review reported income.” The links lead to web pages that solicit personal information.

The Taxpayer Advocate Service (“TAS”) is a legitimate IRS organization that helps taxpayers resolve federal tax issues that have not been resolved through the normal IRS channels. The TAS never initiates contact with taxpayers by email, texting or any social media. A taxpayer must contact the TAS directly in order to secure assistance and receive communications from the TAS.

To Report Fraud

Taxpayers who get these messages should not respond to the email or click on the links. Instead, they should forward the scam emails to the IRS at phishing@irs.gov. You may also report the fraudulent misuse of the IRS name, logo, forms or other IRS property by calling the IRS toll-free fraud hotline at 1-800-366-4484.

What You Should Do If You Really Do Have Tax Issues?

The tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles and California know exactly what to say and handle the IRS. Our experience and expertise not only levels the playing field but also puts you in the driver’s seat as we take full control of resolving your tax problems.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people avoid collection action by the IRS and State tax agencies. Working with one of our tax attorneys in Los Angeles or elsewhere in California is the best bet for reducing or eliminating the amount you owe.

KahnTaxLaw on the ESPN Mr. Credit show – March 27, 2014

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Topics Covered:

1. Protect yourself: Scammers targeting taxpayers, including recent immigrants, throughout the country.
2. Types of audits that the IRS conducts and deadline to finish an audit.
3. Top 10 “red flags” that could increase the chance you’ll be targeted for an audit.
4. Will the IRS punish me if I hire a tax attorney? Should I use a national tax practitioner?

Listen to the podcast:

Top Ten Red Flags That Could Trigger An IRS Audit

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The IRS randomly selects tax returns for audit each year.

What sets off alarms at the IRS? Well for one thing it pays to keep in mind these 10 “red flags” that could increase the chance you’ll be targeted for an audit.

1. High income. The audit rate for 2011 tax returns, which was about 1.11% overall, shot to 3.93% for taxpayers with income of $200,000 or more. That’s almost one out of every 25 returns. The IRS tends to chase the “big money,” and while that’s no reason to earn less, you should realize that higher income exposes you to a greater audit risk.

2. Unreported income. The IRS computers match up the income listed on W-2 and 1099 forms with the income reported on individual returns. You’re likely to draw IRS scrutiny if you don’t report all of your taxable income or if you underreport the total, even if an omission is inadvertent. Check your tax forms to ensure the information is correct.

3. Large charitable gifts. Besides providing personal satisfaction, deductions for charitable gifts can offset highly taxed income on your return. But the IRS may become suspicious if the amount you deduct is disproportionate to your income. In particular, make sure that deductions for gifts of property are legitimate and include an independent appraisal when required.

4. Home office deductions. If you qualify, you can write off your direct costs of using part of your home as an office, plus a percentage of everyday living expenses such as property taxes, mortgage interest, utilities, phone bills, insurance, etc. But the basic rule is that you must use the office “regularly and exclusively” as your principal place of business. Simply doing work at home when your main office is elsewhere won’t cut it.

5. Rental real estate losses. Generally, “passive activity” rules prevent investors from deducting losses on rental real estate. But a special exception allows a loss deduction of up to $25,000 for “active participants,” subject to a phase-out between $100,000 and $150,000 of adjusted gross income (AGI). Another exception applies to qualified real estate professionals. The IRS may zero in on taxpayers claiming losses under either exception.

6. Travel and entertainment expenses. This is often a key audit target. IRS agents particularly look for self-employed individuals and other business owners who claim unusually large write-offs for travel and entertainment expenses and meals. Note that the tax law includes strict substantiation rules that must be followed in order to deduct any of these expenses.

7. Business use of cars. Another area ripe for abuse by taxpayers is the use of a vehicle for business purposes. The annual amount you can claim via depreciation deductions for the vehicle, based on percentage of business use, is limited by so-called “luxury car” rules. IRS agents have been trained to ferret out taxpayer records that don’t measure up. Another red flag is a claim for 100% business use of a vehicle, especially if another vehicle isn’t available for personal use.

8. Hobby losses. As a general rule, you can deduct expenses for a hobby only up to the amount of the income it produces. You normally can’t claim a loss for the activity, unless your involvement rises to a level of a bona fide business. Usually, an activity is presumed not to be a hobby if you show a profit in any three out of the past five years, but the IRS can refute this presumption.

9. Foreign bank accounts. The IRS has started clamping down on taxpayers with offshore accounts in “tax havens” in which banks do not disclose account information. Failure to report foreign income can trigger steep penalties and interest. If you have foreign bank accounts, make sure you properly report the income when you file your return.

10. Cash businesses. If you operate a small business in which you’re largely paid in cash—for example, if you own a car wash, restaurant or bar, or a hair or nail salon—the IRS is more likely to examine your return. Past history indicates that cash-heavy taxpayers may underreport their income or, in some cases, not report any income at all. Accordingly, the IRS remains on high alert.

These red flags don’t mean you should shy away from claiming the tax breaks you rightly deserve. But when the IRS knocks on your door you need to be prepared.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS audits. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

Top Questions On IRS Audits

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Many people have approached me with questions on IRS audits and so I have taken the most popular questions and laid them out in this blog with my response.

1. I received an IRS Notice informing you that your return has been selected for examination. What should I do?
The fact that your return has been selected for examination, it does not mean or imply that that you have made an error or done something dishonest. Tax returns are selected for audit in a variety of ways including random sampling. The most important thing is not to panic and instead to reach out to a tax attorney for representation. Provide us with your audit letter and the subject tax returns so we may review your situation.

2. Why should I be concerned if an audit is poorly conducted?
A poorly conducted audit can result in large additional tax adjustments and penalties and interest up to as much as 100% of the adjustment. Most local tax preparers are not equipped to represent you in an audit before the IRS. Because we focus on tax representation, we can make sure that your audit is efficiently and effectively handled and attempt to pursue an audit result with little or no additional tax assessments. We can handle everything from simply submitting missing tax documents to representing you in front of an IRS examiner. Let us do the work for you.

3. How is using a tax attorney beneficial during an audit?
Using a tax attorney to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

4. What does your firm do for an audit representation?
Upon filing a Power Of Attorney Form with the IRS or State Tax Agency, we become the primary contact for the tax agency. You will still receive copies of all correspondence sent out by the tax agencies but you will not be receiving any calls or visits from the agent(s). In connection with the audit we will research any issues that are likely to come up, respond to the agent’s arguments by coming up with answers on your behalf, meet with the agent in person if required on your behalf, negotiate and settle taxes owed if you end up owing more money during the audit and cannot pay, and handle any unforeseen issues that may arise during the audit.

5. Why would I not want my original tax preparer to represent me in my appeal (or in my audit)?
One of the most effective defenses to the imposition of penalties and the associated interest on the penalties available to Tax Counsel, is to argue that the taxpayer relied on a tax professional in the preparation of the return at issue. This creates a potential conflict of interest between you and your original tax preparer where your interest is to protect yourself financially and your original tax preparer’s motivation may be to protect his reputation with the IRS. It therefore becomes highly unlikely that even where appropriate to do so, your original tax preparer will throw himself under the bus by admitting his errors in preparing the returns at issue for your financial benefit to his possible detriment with the IRS including the possibility of preparer penalties and detriment to his professional reputation with the IRS. No such conflict exists where you engage Tax Counsel that did not prepare the returns at issue to prosecute your Appeal.

6. How many years worth of returns are at risk during an audit?
Ordinarily, the IRS has three years from a tax return’s due date or filing date, whichever is later. However, this limitation does not apply when there is an allegation of fraud, when no return was filed, or when the taxpayer is charged with a substantial omission or concealment of items of gross income. Because an audit conducted for one tax year can trigger other tax years and can result in scrutiny of other tax deductions not originally stated in the audit letter, you should take this matter seriously and engage an experienced tax attorney to represent you.

7. What will happen if I do not respond to the taxing authorities audit notice?
Because the taxpayer has the burden of proof to prove claimed deductions, failure to respond to an audit notice usually results in the denial of these deductions leading to the charge of additional taxes along with interest and penalties. If left unchecked, an ignored audit notice and failure to pursue any appeal will result in a final assessment. Once an assessment becomes final, the IRS will start the collection process action that can eventually lead to wage garnishments, liens, levies and seizure of property.

8. What is the worst that can happen if I choose to represent myself in an audit?
Tax agents are aggressive by nature and left unchecked could potentially reach a determination that is unreasonable and inconsistent with the applicable facts and circumstances of your case or their determination may be based on erroneous applications of law. An experienced tax attorney will be able counter a tax agent’s aggressive nature, deal with the complex technical issues that arise during an audit and be an advocate on your behalf as to any factual or legal issues that arise during the examination.

Using a tax attorney to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS audits. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

Received A Notice Of Deficiency To Appeal IRS Proposed Adjustments To The U.S. Tax Court? Let us help you

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Before adjustments from an audit can be finally assessed, a taxpayer must be given the right to appeal to the United States Tax Court if the taxpayer should disagree with the findings of the IRS audit. The Appeals Office (or in certain cases the IRS agent) will issue a “90-day Letter” to a taxpayer, which essentially provides the taxpayer with up to 90 days to file a petition with the Tax Court and have his or her case heard by a judge.

At this stage, any professional who is to represent you in Tax Court must be admitted to practice before Tax Court. Requirements for practicing in Tax Court include passing a very difficult income tax exam. Most non-lawyers are not qualified to practice before Tax Court and would, therefore, be unable to provide this kind of tax audit help or represent you. However, a qualified IRS audit attorney can help you.

The United States Tax Court is a Federal court of record established by Congress under Article I of the Constitution of the United States. Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies determined by the IRS prior to payment of the disputed amounts. The jurisdiction of the Tax Court includes the authority to hear tax disputes concerning notices of deficiency, notices of transferee liability, certain types of declaratory judgment, readjustment and adjustment of partnership items, review of the failure to abate interest, administrative costs, worker classification, relief from joint and several liability on a joint return, and review of certain collection actions.
Unlike appeals to other Federal courts, there is no requirement to pay any of the disputed tax liability in order to have your case heard in Tax Court.

The Tax Court is composed of 34 presidentially appointed judge-members. Trial sessions are conducted and other work of the Court is performed by these judges, by senior judges serving on recall, and by special trial judges. All of the judges have expertise in tax law and apply that expertise in a manner to ensure that taxpayers are assessed only what they owe, and no more. Although the Court is physically located in Washington, D.C., the judges travel nationwide to conduct trials in various designated cities.
A case in the Tax Court is commenced by the filing of a petition. The petition must be filed within the allowable time limit. The Court cannot extend the time for filing which is set by statute. A $60 filing fee must be paid when the petition is filed. Once the petition is filed, payment of the underlying tax is ordinarily postponed until the case has been decided.

In certain tax disputes involving $50,000 or less, taxpayers may elect to have their case conducted under the Court’s simplified small tax case procedure. Trials in small tax cases are generally less formal and result in a speedier disposition. However, decisions entered pursuant to small tax case procedures are not appealable.

Cases are calendared for trial as soon as practicable (on a first in/ first out basis) after the case becomes at issue. When a case is calendared, the parties are notified by the Court of the date, time, and place of trial. Trials are conducted before one judge, without a jury. Only those practitioners that are admitted to the Bar of the Tax Court may practice before this court.

Usually a case is settled by mutual agreement without the necessity of a trial. However, if a trial is conducted, in due course a report is ordinarily issued by the presiding judge, setting forth findings of fact and an opinion. The case is then closed in accordance with the judge’s opinion by entry of a decision.

By engaging our tax representation services, you can be assured that your petition and each stage of the litigation process will be persuasive because we know how to present your case with legal argument and tax authority.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS by pursuing litigation and negotiations with the U.S. Tax Court. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

Looking To Appeal An Audit Report To The IRS Office Of Appeals? Let us help you

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When taxpayers disagree with the findings of their IRS audits, they may usually appeal to the IRS Office Of Appeals. The IRS agent will issue a “30-day Letter” to a taxpayer, which essentially provides the taxpayer with up to 30 days to file a Tax Protest requesting his or her case be heard by an Appeals Officer.

The Office Of Appeals is independent of any other IRS office and provides a venue where disagreements concerning the application of tax law can be resolved on a fair and impartial basis for both the taxpayer and the government. The Appeals Officer will take a fresh look at the case and consider the strengths and weaknesses of the issues in your case. The advantage of appealing your IRS audit to this level provides us with the opportunity to reach a mutually acceptable settlement without expensive and time-consuming court trials.

Using a tax attorney to help with an appeal can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that appeals can go both ways, you may actually end up being owed money after the appeal. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

We will communicate directly with the Appeals Officer and build a persuasive case on your behalf because we know how to present your case with legal argument and tax authority. Of course, if we cannot reach agreement with the Appeals Officer, then we have the opportunity to appeal the case to the U.S. Tax Court.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS appeals. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS

Have you been selected for a tax audit? Let us help you

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We all dread the thought of an IRS audit or examination. Tax audits can be stressful and complicated as you must be prepared to explain the nature of your income and substantiate the expenses and deductions claimed on your tax return. If the IRS assesses additional taxes and interest, the adjustments are generally matched by the State making an already difficult situation much worse.

Using a tax attorney to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

Upon hiring our firm we will file a Power Of Attorney Form signed by you which authorizes our representation. This will allow the following:

• Audit communications are directed to our firm and we are in direct contact with the IRS or State tax agent assigned to your audit.
• Research any issues that are likely to come up during the audit.
• Respond to the agent’s inquiries and requests for information.
• Meet with the IRS or State tax agent in person as required.
• Negotiate and settle taxes owed if you end up owing more money during the audit and cannot pay.
• Handle any unforeseen issues that may arise during the audit.
• Get your audit underway without the stress of handling it on your own.

We will communicate directly with the agent and build a persuasive case on your behalf because we know how to present your case with legal argument and tax authority. Of course, if we cannot reach agreement with the agent, then we have the opportunity to appeal the case.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS audits. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

Know What The IRS Is Looking To Attack By The Type Of Audit Being Conducted

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The IRS randomly selects tax returns for audit each year. Depending on what deductions you’ve taken and other characteristics of your tax return, your tax return can have a higher probability of being selected for an audit.

Here’s what you need to know about IRS tax audits. There are three types of audits:

Correspondence Audit: This is the least severe type of audit. It involves the IRS sending a letter in the mail requesting more information about part of a tax return. For instance, the IRS may have questions regarding charitable deductions and request you send in receipts to substantiate your deduction. If you have the receipts or information it’s generally not an issue. If your tax return is legitimate and you have the data to back up any claims on your return, you may be able to handle the situation on your own. But if you don’t have the receipts or information, then you should hire a tax representation professional dealing with the IRS because you could face fines, penalties and interest if you end up owing money.

Office Audit: If the IRS has more questions about your return, then you’ll get a letter in the mail inviting you into an IRS office for the audit. The office audit is more serious, so you should always have a tax representation professional come with you or turn over the audit representation to him. A tax representation professional can gather information in advance of the meeting and make sure it is complete so that the office audit can be wrapped up with the IRS as quickly as possible. If the IRS still needs additional records, your representative can secure additional time to supply the missing information.

Field Audit: This is the most serious type of audit and involves the IRS agent visiting you at your home or your business. The reason the field audit is more serious is the IRS agentwill ask to see other things. The agent does not want to limit the audit to particular items.While there are much fewer field audits than office or correspondence audits, I wouldn’t let any client go into a field audit without representation. It’s the most serious level of audit. If they are coming out to you, they are looking for something.

If any part of your return worries you and the IRS is breathing down your neck, you should bring in a tax representation professional to help curb any worries or fines. Taxpayers have a tendency because they have no experience dealing with the IRS to say way too much, give away too much and admit too much. You don’t want to give the agent information the agent has not asked for.

Using a tax law firm to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax law firm can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS audits. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

FBAR: Goodbye Form TDF 90.22-1 and Hello FinCEN Form 114

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The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes. On September 30, 2013, FinCEN posted on their internet site, a notice stating that the FinCEN Form 114, Report of Foreign Bank and Financial Accounts (the current FBAR form) would replace Form TD F 90-22.1 (the old FBAR form used in previous years). If you have a financial interest in, or you are signatory authority over foreign account(s) that total more than $10,000 at any time during the calendar year, you are required to file Form 114 no later than June 30th for the following year. The 2013 Form 144 is due June 30, 2014.

Some of the new features of Form 114 include:

1) The requirement that From 114 must be filed electronically. The old FBAR allowed paper filing but that is no longer the case with Form 114. It must be filed electronically.

2) An option where you can “explain a late filing”. You can also indicate whether the filing is made in conjunction with an IRS compliance program.

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

The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes. The penalties for noncompliance which the government may impose include a fine of not more than $500,000 and imprisonment of not more than five years, for failure to file a report, supply information, and for filing a false or fraudulent report.

With the option for taxpayers to include why this Form for any prior year is being filed late, taxpayers may be tempted to use this process in an attempt to come into compliance for failing to report foreign income on prior year’s income tax returns and/or failing to disclose foreign bank accounts. Beware that such disclosure does not protect you from the heavy fines and possible criminal charges. Instead, you should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Initiative (OVDI) which allows taxpayers to come forward to avoid criminal prosecution and not have to bear the full amount of penalties normally imposed by IRS. 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.

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.

Opting-Out Of OVDI – Top Questions Answered

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IRS has established programs for taxpayers to voluntarily come forward and disclose unreported foreign income and foreign accounts under what the IRS calls the Offshore Voluntary Disclosure Initiative (OVDI).

On January 9, 2012 the IRS announced the terms of the 2012 OVDI which requires that taxpayers: (1) File 8 years of back tax returns reflecting unreported foreign source income; (2) Calculate interest each year on unpaid tax; (3) Apply a 20% accuracy-related penalty under Code Sec. 6662 or a 25% delinquency penalty under Code Sec. 6651; and (4) Apply up to a 27.5% penalty based upon the highest balance of the account in the past eight years.

In return for entering the offshore voluntary disclosure program, the IRS has agreed not to pursue charges of criminal tax evasion which would have resulted in jail time or a felony on your record; and other fraud and filing penalties including IRC Sec. 6663 fraud penalties (75% of the unpaid tax) and failure to file a TD F 90-22.1, Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50% of the foreign account balance).

With taxpayers still facing a rather large penalty, taxpayers are torn on whether or not they should participate in OVDI or “Opt-Out”. The “opt-out” process was first introduced in the 2011 version of OVDI and still continues to this day.  As our office has received many inquiries on opting-out. Here are top OVDI opt-out questions that we are routinely asked.

1.         Will the IRS prosecute me criminally if I opt-out of the OVDI? The IRS should keep your case in Civil because you are still within the structure of voluntary disclosure (a program which the IRS encourages taxpayers to come forward in exchange for avoiding criminal prosecution) but you are no longer subject to the standard penalty rates of OVDI.  Under the standard 2012 OVDI penalty cap, you pay one penalty either (a) 12.5% of account value, Offshore “FBAR equivalent” penalty for accounts under $75,000, or (b) 27.5% for accounts over $75,000.So that standard 12.5% / 27.5% penalty cap is all that you are “opting-out” of.

2.         Will the IRS charge me more than the standard 12.5% or 27.5% offshore penalty if I opt out? That’s possible and therefore one of the risks to consider in opting-out.

3.         What is the status and outcome of those cases that have opted out?The opt-out program is fairly new as it was first introduced in 2011.  So far only a few have closed out and the IRS has not announced any guidelines as to how these cases are being dispensed.  The reason: The IRS is trying to centralize all opt-out decisions for consistency especially given the hazards of litigation that the IRS would face if one of these cases went to Court and the Court ruled in favor of the taxpayer.  Another reason for the delay is that the IRS overestimated how many intentional tax evaders would use the program, while simultaneously underestimating how many innocent or at worst negligent filers like ex pats, dual citizens, Visa holders and resident aliens, would be entering OVDI.

4.         What if I disagree. Can I appeal or dispute the agent’s determination?Yes. There are means to dispute an agent’s determination that will be different whether within OVDI or having opted out.  When disputing a determination that is within OVDI, we still remain on more certain ground as to the downside if we cannot effect any change.  However, outside OVDI the law lets the IRS “raise the bar” by assuming willfulness and thus charge multiple 50% penalties that can wipe out your entire net worth.

5.         For small cases, OVDI seems like overkill. Why don’t I just do a “soft” or “quiet” disclosure?The decision to enter into the program is entirely yours. And honestly, the biggest threat of not entering into the program is the risk of an FBAR audit – not criminal charges (although it is possible). But if caught in an FBAR audit, the results could be disastrous.A “soft” or “quiet” disclosure to us makes no sense. The IRS is using its vast data collecting tools and is receiving information directly from foreign financial institutions under the Foreign Account Tax Compliance Act (“FATCA”).  Already IRS has discovered about 10,000 individuals and businesses that have made soft disclosures. The IRS claims they will track down all of those who have made soft or quiet disclosure.We have heard many people tell us they find the law unfair. Yet despite this unfairness, it is the law and our advice is to hire experienced tax counsel to take your case into OVDI and secure the best possible outcome within the OVDI guidelines.  We have found some “wiggle-room” in the guidelines that for some of our clients we used certain techniques that the IRS accepted resulting in lower penalties than what our clients thought they would be facing.

6.         If I made a soft disclosure can I still use the OVDI?Yes and you should. Again, the IRS has detected 10,000 people it suspects of making a soft disclosure. And these are only the accounts over $1 million. There are a lot more under $1 million.

7.         I started, or my CPA started my OVDI. But I am getting uncomfortable. I want to get a lawyer who specializes in this. Can you take over my case?We think that getting an OVDI / FBAR tax attorney is critical for your opt-out and from our experience each person’s case must be looked at separately to determine if opting-out is the best option.  If you have no evidence of willfulness, the sheer numbers may make opting out attractive especially where the proposed OVDI penalty is in the hundreds of thousands of dollars.  But for those taxpayers whose proposed OVDI penalty is let’s say $80,000 or less, opting out probably can’t save you too much, especially if by opting out you end up with non-willful penalties which over a six-year period can equate to about the same amount as this $80,000 guideline amount referred herein.

From a broad perspective OVDI is predictable but opting out is much less so. As the above considerations reflect, think about your facts. Ask whether the potential risks and additional legal fees of opting out offset the potential rewards. Individual advice about the particular facts is important.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. are highly skilled in handling OVDI cases and can effectively represent you no matter what is the make-up or circumstances of your unreported foreign assets and unreported foreign income.  We will keep you informed step-by-step of the progress in your case and present your case in the best possible way to avoid any pitfalls and gain the maximum benefits conferred by this program.

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 foreign account filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.