A Double Life, Missing Millions and Murder

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Amy and Bob Bosley were like local royalty — they owned a million-dollar roofing business and were active volunteers in their community. But a phone call one spring morning would devastate their Campbell County, Ky., domain.

“Someone is breaking into my house,” Amy frantically told a 911 dispatcher. “Oh my God, he shot my husband!” she exclaimed.

Police rushed to the scene and discovered the Bosley’s cabin in shambles. The back door was broken in, shattered glass was everywhere and in the bedroom they found Bob Bosley dead — shot seven times.

The Money Trail

For years Bob had built up his chimney sweep and roofing business, eventually turning it into somewhat of a local empire with Amy right beside him handing the bookkeeping. But during the investigation into the murder, police discovered something suspicious in Amy’s car: hundreds of unmailed checks to the IRS totaling about $1.7 million in back employment taxes.

Weeks before the shooting, Amy met with an IRS agent who informed her they were investigating Bob for nonpayment of taxes. Amy went to great lengths to keep the tax problems from her husband even going as far as to impersonate him over the phone, according to police. But she could not keep this problem away from Bob for too much longer as the IRS agent was going to meet Bob for what turned out to be the day after he was be murdered.

The Surprising Outcome

While there was a mountain of circumstantial evidence against Amy including a crime scene that looked staged and Amy having the same type of gun used to kill her husband in her purse, prosecutors admitted they didn’t have a slam dunk. But statements Amy’s children, Morgan, 9, and Trevor, 6, gave to police following the murder would become the strongest piece of evidence to show that their mother’s story that an intruder came into the house was false. Their testimony was crucial, but no one wanted to force young children who had already lost their father to testify against their mother. As a result, prosecutors reluctantly offered Amy Bosley a deal — the minimum sentence of 20 years if she pleaded guilty — and to everyone’s surprise she took the deal.

Bob’s family is certain Amy did it and speculated that the motive involved that missing money from his company and IRS debt that Bob did not even know about.

So when you have IRS problems and we know that murder will not resolve them, how can taxpayers who owe the IRS avoid collection action?  You need to have a plan.

The Law Offices Of Jeffrey B. Kahn, P.C. can help you negotiate a resolution through the IRS and avoid a forced shut-down of your business.

Description: If your business has delinquent taxes or is being threatened with collection action for unpaid taxes, it’s urgent that you speak with an employment tax attorney. The experienced tax attorneys in the Law Offices Of Jeffrey B. Kahn, P.C. know how to keep the closure of your business from happening.

What are some of the actions Revenue Officers take to collect taxes?

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a.         Garnish wages and levy bank accounts

Tax levies are the way that the Internal Revenue Service gets your immediate attention. What they are saying is, We have tried to communicate with you but you have ignored us.

Levies are used to seize your wages (commonly referred as garnishment) and whatever other assets you have: Checking accounts, savings accounts, autos, stocks, bonds or anything else that you own. If you have more in the bank than you owe, the IRS will only take that amount to satisfy your liability, leaving the rest for you.

b.         File a Federal Tax Lien

A levy is different from an IRS lien. A lien is a claim used as security for the tax debt, while an IRS levy actually takes the property to satisfy the tax debt. Once a tax lien is filed, it will stay on your credit history for seven years which is why if one has been filed, we look to have it released or withdrawn.

The Law Offices Of Jeffrey B. Kahn, P.C. can help you negotiate a resolution through the IRS Fresh Start Program which offers a one-time way to avoid collection actions and get tax liens removed from your credit.

Description: If you are in danger of wage garnishments or bank levies or having a tax lien placed against your property, it’s urgent that you speak with an income tax attorney. The experienced tax attorneys in the Law Offices Of Jeffrey B. Kahn, P.C. know how to keep this from happening.

Jackpot! Now How Do I Get My Withholding Back?

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For foreign persons gambling in casinos in the United States and Indian Reservations, when it comes to taxes – “What happens in Vegas, doesn’t have to stay in Vegas”.

Unlike other foreign countries, the United States considers winnings from gambling and lotteries to be taxable. Under the tax law jackpots of $600 or more will incur a non-resident withholding tax of 30%. So if you are non-U.S. resident and you win $10,000 you only go back home with $7,000.

But as a foreign person, can you get that money back? The short answer is “maybe” depending on the country you are from. For example, the US-Canada Tax Treaty allows Canadians to deduct their U.S. gambling losses (with a few exceptions) in a given year from winnings.

How do you substantiate the losses? Well you don’t have to submit your receipts to the IRS with your tax return.  But if you are ever audited you will be asked for proof of losses so its wise to claim only those losses that you can substantiate. The requirement of substantiation extends to any tax filer (resident or non-resident) looking to claim gambling losses.  To start, if you belong to a casino’s Players Club, check with the casino or casinos that you visited to see if they can provide you with a record of your gambling. Some keep those records. If not, then you should keep a diary of your activity with the following:

•           The date and type of wagering activity

•           The name and location of the casino

•           The amounts you won or lost

You can aggregate all your U.S. gambling  losses for the whole year, not just the trip you won on. Remember travel expenses, entertainment, food and accommodations are not deductible.

So if you are a foreign person looking to claim the gambling losses, what forms need to be filed? If you have never obtained an Individual Taxpayer Identification Number (ITIN) you will need to file for one using Form W-7 along with a certified copy of your passport (sending the original passport is not advisable). Contact passport services of your State Department for one. This only needs to be done the first time you file a return. Next you will fill out tax form 1040NR using the information from the Form 1042S issued to you by the casino. Next send in the completed Form 1040NR, 1042S and your W-7 if you don’t have an ITIN to the IRS who will process your refund.

By using an experienced Cross-Border Tax Expert who is familiar with U.S. tax filings there should be no problem in quickly getting your refund. Contact the Law Offices Of Jeffrey B. Kahn, P.C. with locations in Los Angeles and elsewhere in California.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and make sure you are fully utilizing all benefits under the tax laws so that you are paying the least amount of tax.

 

IRS Collection Of Employment Taxes

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Employment taxes make up two components:

1.         The taxes withheld from each employee’s paycheck – FICA, Medicare, FWT and SWT – we call this component Trust Fund Liability.

2.         The second category is the employer’s matching share of the FICA Medicare withheld by from each employee’s paycheck.

Now any business will be liable for both components.  But that is not enough for the IRS – the IRS will also seek liability for individuals who the IRS determines are “responsible persons”.

Responsible persons will have joint and several liability for the Trust Fund Liability.

Who are responsible persons?

1.         Officers, directors – basically any one in the business organization with the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes.

2.         Any one whose name is on the business bank account.  So the bookkeeper who can sign checks even though having no other authority is a responsible person.

Now at first the IRS will only be looking to collect from the business and if it is incorporated, only the corporation will at first be subject to collection enforcement by the IRS.

However, if the IRS feels they are not collecting enough, the IRS will determine who the responsible persons are and then after that determination has been made and the person fails to appeal that determination, the IRS will now start collection against that person individually.

That’s why it is really important that when a business is falling behind in making its employment tax payments, that you contact the Law Offices Of Jeffrey B. Kahn, P.C as early as possible to mange the situation and come up with a plan.

Description: If your business is behind in employment taxes or the IRS is coming after you for the collection of employment taxes, it’s urgent that you speak with an employment tax attorney. The experienced tax attorneys in the Law Offices Of Jeffrey B. Kahn, P.C. know how to manage this problem and protect you or your business from collection action.

Marriage And Taxes

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It’s hard to think of a less romantic topic than tax planning but if you and your honey are considering to “tie the knot” here are some tax consequences that you should be aware.

Marriage Penalty or Marriage Bonus?

In particular, the test is geared toward telling you whether you’ll pay a marriage penalty or get a marriage bonus. Because married filers have different tax brackets than single filers, you can’t assume that your tax liability after you marry will be the sum of the taxes from your individual returns. Some of the important factors involved include the following:

  • Couples where both spouses work are more likely to owe more in taxes than they would if they weren’t married, because once you get above the 15% bracket, thresholds for higher tax rates on joint filers are less than double the rate thresholds for single filers.
  • Single-earner families, on the other hand, are more likely to get a marriage bonus, because the working spouse gets to take advantage of deductions and exemptions for the non-working spouse, and the family gets to enjoy lower tax rates on more overall income.
  • For high-income taxpayers, marriage can be especially costly because special provisions like exemption and deduction phaseouts and the Medicare surcharge tax start applying at levels that aren’t much higher for couples than they are for singles. For instance, the Medicare surcharge applies to singles with incomes of more than $200,000 and couples earning $250,000.

Also, don’t think you can beat the penalty by choosing the married-filing-separately option. Spouses who file separately get less favorable treatment than singles as many of the exclusions and deductions are evenly split.

Given the complexity of this area, one would be best served by seeking tax counsel to make sure that you are getting the maximum tax benefits.  Contact the Law Offices Of Jeffrey B. Kahn, P.C. with locations in Los Angeles and elsewhere in California.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and make sure you are fully utilizing all benefits under the tax laws so that you are paying the least amount of tax.

Jeffrey B. Kahn on Mr. Credit ESPN Feb 13 2014

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Topics Covered:

1.         Tax Planning if you are looking to get married – Marriage Penalty or Marriage Bonus?

2.         What are some of the actions Revenue Officers take to collect taxes?

3.         A Double Life, Missing Millions and Murder – can IRS debt lead to death?

4.         The ABC’s of employment taxes and IRS collection efforts.

Listen to the podcast:

U.S. Reporting Requirements for Certain Canadian Savings Plans

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U.S. taxpayers who own a Canadian Registered Retirement Savings Plan (RRSP), Canadian Registered Retirement Income Fund (RRIF) or own or are the beneficiary of a Canadian Registered Education Savings Plan (RESP) may have special tax reporting requirements.

Reporting Requirements for all RRSPs, RRIFs, and RESPs

Some IRS reporting requirements are the same for RRSPs, RRIFs, and RESPs. For all three types of accounts, U.S. taxpayers who have an interest in, or signatory or other authority over these foreign accounts must file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), if the aggregate value of the foreign trust accounts exceeds $10,000 at any time during the calendar year. As of October 1, 2013 the FBAR form must be filed through the Financial Crimes Enforcement Network’s (FinCEN’s) Bank Secrecy Act E-Filing System on or before June 30th of the year following the calendar year being reported. For example, to report foreign accounts held open in 2013, the taxpayer must file the FBAR by June 30, 2014.

In addition to filing an FBAR form, the U.S. taxpayer with an interest in these Canadian accountsmust follow certain reporting requirements on his or her annual tax return. First, the U.S. taxpayer must include a completed Schedule B, Interest and Ordinary Dividends, with his or her annual tax return. On Schedule B, the taxpayer will complete Part III, Foreign Accounts and Trusts. Questions 7a asks whether, at any time in the year, the taxpayer had a financial interest in or signatory authority over a foreign financial account. Question 7b also asks whether the taxpayer is required to file an FBAR, and if so, in which foreign country the financial account was located. Finally, Question 8 asks whether the U.S. taxpayer received a distribution from, or was the grantor of, or transferor to, a foreign trust, which includes RESPs.

The U.S. taxpayer may also be required to file Form 8938, Statement of Specific Foreign Financial Assets with his or her annual tax return. Whether a taxpayer is required to file this form depends on where the taxpayer lives, the taxpayer’s filing status, and the value in the accounts. For example, unmarried taxpayers living in the United States must file Form 8938 if the total value of your interest in the foreign accountsis more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

RRSPs and RRIFs Unique Reporting Requirement

RRSPs and RRIFs have one unique filing requirements. These two accounts are two types of Canadian retirement account for holding assets, similar to a U.S. IRA or 401(k) retirement plan. Also similar to U.S. IRA and 401(k) plans, RRSPs and RRIFs enjoy tax-deferral benefits in Canada. By default, U.S. taxpayers who have an interest in an RRSP or RRIF do not have tax-deferral benefits on their U.S. income tax returns. However, a U.S. taxpayer may elect to receive similar tax-deferral status of their RRSP or RRIF by filing a Form 8891.

Even if a U.S. taxpayer does not elect tax-deferral status of their RRSP or RRIF, he or she must still file a Form 8891 a) to report contributions to RRSPs and RRIFs; b) to report undistributed earnings in RRSPs and RRIFs; and c) to report distributions received from RRSPs and RRIFs.

RESPs Unique Reporting Requirements

By contrast, a Canadian RESP is generally treated as a foreign trust and must follow similar reporting requirements to a foreign trust.

When the RESPexperiences a “reportable event,” the U.S. taxpayer must file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Reportable events generally occur when the taxpayer makes a contribution to or receives distributions from an RESP.

The U.S. taxpayer must also file a Form 3520-A, Annual Information Return of Foreign Trust
With a U.S. Owner. This form is an annual information return that provides information about the RESP, its U.S. beneficiaries, and any U.S. person who is treated as an owner of any portion of the RESP.

A U.S. taxpayer who transfers money or property to a foreign trust may also be required to file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Generally, a U.S. taxpayer who transfers money or property totaling more than $14,000 for the year must file a Form 709. Form 709 is a separate tax return, which is not submitted with the taxpayer’s annual tax return.

Finally, RESPs do not enjoy the tax-deferral benefits afforded to RRSPs and RRIFs by making the Form 8891 election. Accordingly, the owner of an RESP must include any earnings in the RESP on his or her annual U.S. income tax return.

Penalties

Failure to comply with the above reporting requirements can result in steep penalties to the unwitting taxpayer. Failure to file an 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.

Failure to file a correct and complete Form 3520results in an initial penalty of the greater of $10,000, 35% of the gross value of any property transferred to or distribution from a foreign trust, or 5% of the gross value of the portion of the trust’s assets treated as owned by the U.S. taxpayer. An additional 5% penalty of any unreported foreign gifts may also apply for each month for which the failure to report continues.

Finally, failure to file a Form 709 may come with penalties for willful failure to file a return on time, willful attempt to evade or defeat payment of tax, and valuation understatements that cause an underpayment of the tax. A 20% penalty of the tax underpayment may be imposed on both a substantial valuation understatement (the reported value of property listed on Form 709 is 65% or less of the actual value of the property) and a gross valuation understatement (the reported value listed on the Form 709 is 40% or less of the actual value of the property).

U.S. taxpayers who have an interest in a Canadian RRSP, RRIF, or an RESP 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 a foreign trust.

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.

Deceased Mother’s Undisclosed Foreign Bank Accounts- What to Do?

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Question: My mother just passed away and I inherited $5 million that she kept in offshore bank accounts. The problem is that while she was alive, she did not report the existence of these accounts on the FBAR nor did she report the interest income made on these accounts on her tax returns. What are my reporting obligations, if any? I do not want to get in trouble with the IRS. What should I do?

Answer: It is highly recommended that you come forward and disclose these overseas assets and income to the IRS. The IRS has set up a program called the Offshore Voluntary Disclosure Initiative (OVDI) to allow taxpayers with previously unreported offshore assets and income to come forward and disclose these assets. By voluntarily disclosing these assets, the taxpayer can avoid higher civil penalties that would be imposed if the taxpayer didn’t participate in the program. The taxpayer can also avoid possible criminal prosecution.

The same reporting requirements apply to taxpayers who have inherited previously undisclosed foreign assets. The IRS specifically states that entities such as trusts are eligible to participate in OVDI. (FAQ 13, OVDI 2012).

Not disclosing these inherited assets can lead a taxpayer to suffer the same fate as Henry Seggerman and other members of the Seggerman family. In August 2013, Henry Seggerman pled guilty to charges of tax fraud and evasion for not disclosing over $12 million he and his siblings had inherited from their father who died in 2001. The money was secretly held in Swiss bank accounts. Henry was required to pay $600,000 in restitution and faced up to 11 years in prison. His three siblings had also pled quilty to similar charges and awaited similar fates.

The bright side is that taxpayers who inherit previously undisclosed assets may qualify for a special reduced offshore penalty of 5% if they meet certain conditions. (The standard penalty rate is 27.5%). To qualify for the 5% penalty, the taxpayer must meet all of the following 4 conditions:

(a) he did not open or cause the account to be opened (unless the bank required that a new account be opened, rather than allowing a change in ownership of an existing account, upon the death of the owner of the account); (b) he must have exercised minimal, infrequent contact with the account, for example, to request the account balance, or update accountholder information such as a change in address, contact person, or email address; (c) he must have, except for a withdrawal closing the account and transferring the funds to an account in the United States, not withdrawn more than $1,000 from the account in any year for which the taxpayer was non-compliant; and (d) can establish that all applicable U.S. taxes have been paid on funds deposited to the account (only account earnings have escaped U.S. taxation). (FAQ 52, OVDI 2012).

If you have never reported your foreign investments on your U.S. Tax Returns or you have inherited previously unreported foreign assets, 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.

IRS Insists – No More FATCA Implementation Delays

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U.S. tax authorities and foreign governments are on track to conclude dozens of agreements in coming months on the sharing of financial data about citizens giventhe July 1, 2014 deadline nearing for implementation of a sweeping U.S. anti-tax evasion law – the Foreign Account Tax Compliance Act (FATCA).  If a foreign bank or financial institution falls to comply with FATCA, it could be frozen out of U.S. capital markets. Thus, foreign firms have a big incentive to comply with the law in reporting U.S. account holders.

Lately there have been many rumors about another delay for FATCA. . In fact, some foreign financial institutions as well as some governments say they need more time.  The IRS has already delayed implementation twice and is currently set on a July 1st implementation date.  We believe that the IRS will not allow a third extension and here’s why:

  1. Michael Danilack, IRS Deputy Commissioner, recently announced that FATCA’s July 1, 2014implementation date was not going to be postponed again.  Mr. Danilack is the number two person at IRS and he reaffirmed to his listeners that the IRS will be ready for FATCA implementation on July 1st.
  2. Thereafter the top IRS boss, Commissioner John Koskinen, made it crystal clear saying “We’re not going to have any delays.  We expect to issue the final package of rules shortly. We are working diligently to finalize all related guidance to ensure that financial institutions have time to effectively prepare and comply, and there is no consideration for a delay of FATCA implementation.”

With such strong words from the number one and two people in the IRS, it is clear the IRS is fully committed to the July 1st start date.

FATCA is hugely unpopular among foreign banks but Congress passed the law for a reason – many foreign banks were helping Americans evade taxes. While the law may be flawed, we doubt it will be repealed.

With or without FATCA, Americans, dual nationals, expats and green card holders remain obligated to report their offshore accounts. The penalties for failure to report required FBARs (Report of Foreign Bank and Financial Accounts) are tied to the Bank Secrecy Act which has been on the books since 1970. FATCA has no bearing on those penalties or the duty to file FBAR forms.Under current banking law – not FATCA – the penalties are up to the greater of $100,000 or 50% of the highest historical account balance. These are not hypothetical maximums; these are penalties routinely imposed by the IRS which they can charge without court action.

So what does this mean for taxpayers with undisclosed foreign accounts?

It means time is running out and we recommend quick action. With the fiscal challenges face by the U.S. government, the IRS and Justice Department are committedto uncover unreported foreign accounts and missing FBARswhich will be a lot easier once the foreign banks will start handing over data about American account holders.Although the IRS has an amnesty and expat reporting options available, those deals are off the table if the IRS finds your account first.

If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 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.

The Foreign Tax Credit- Avoiding Double Taxation

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If you paid or accrued foreign taxes to a foreign government on foreign source income that is still subject to U.S. tax, you may be able to take either a credit or itemized deduction for those taxes.  The IRS allows the foreign tax credit so that you are not doubly taxed on the same income.

Taken as a deduction, the foreign income taxes reduce your U.S. taxable income.  Taken as a credit, foreign income taxes reduce your tax liability.  Most of the time, it is more advantageous to take foreign income taxes as a tax credit.

To claim the foreign tax credit, you need to fill out IRS Form 1116 unless the amount of credit you are claiming is $300 or less ($600 if married filing a joint return).

The laws regarding the foreign tax credit are complex and the application of the foreign tax credit can vary depending on various factors.  For example, if you have foreign sourced qualified dividends or capital gains or capital losses that will affect the amount of foreign tax credit you can take.

Also, the U.S. has different tax treaties with other countries that may limit your foreign tax.  The tax treaty with each country specifically addresses the type of income for which the tax credit is available and the rate limitation.  For example, the tax treaty with the United Kingdom does not allow a tax credit for foreign taxes paid with respect to interest income.  Also, the tax treaty with India caps the foreign taxes paid to 15%.

But in all cases, if the foreign income is not recognized on your U.S. tax return, you cannot claim as a foreign tax credit the taxes paid to the foreign county on said income.

Given the complexity of this area, one would be best served by seeking tax counsel to make sure that you are getting the maximum tax benefits.  Contact the Law Offices Of Jeffrey B. Kahn, P.C. with locations in Los Angeles and elsewhere in California.

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.