Jeffrey B. Kahn, Esq. Discusses taxes, the IRS and undisclosed foreign accounts On ESPN Radio – January 30, 2015 Show
Topics Covered:
1. Does The National Football League Deserve Tax-Exempt Status?
2. Hiding Money Or Income Offshore Among The List Of Tax Scams For The 2015 Filing Season
3. Programs And Plans Available To Taxpayers To Resolve Outstanding IRS debts And Avoid Collection Action
4. Questions From Our Listeners:
a. Is there an advantage to hire a former IRS agent over a tax attorney?
b. My CPA who prepared my tax return which has now been selected for audit, wants to represent me – why should I decline his offer and hire a tax attorney?
Yes we are all working for the tax man!
Good afternoon! Welcome to the KahnTaxLaw Radio Show.
This is your host Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
You are listening to my weekly radio show where we talk everything about taxes from the ESPN 1700 AM Studio in San Diego, California.
When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!
It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into our website at www.kahntaxlaw.com.
I have a lot to cover today in the world of taxes and helping me out will be my associate attorney Amy Spivey who will be calling in later in today’s show.
Today’s Big Story: Does The National Football League Deserve Tax-Exempt Status?
You know that with this weekend being the Super Bowl game it seems everywhere I go somebody is talking about this big event.
Besides the match-up of the Seahawks and the Patriots, people are excited over the entertainment and half-time show, what celebrities will be attending the game and of course – the commercials.
Sponsors present their best commercials during the Super Bowl, and the big game wouldn’t be the same without them. For the advertising community, the Super Bowl is their Super Bowl, and often creates commercials specifically for the enormous viewership that the game provides. For many, watching the commercials is the most entertaining part of the Super Bowl. Advertisers try to get their money’s worth by unveiling their most creative and innovative spots.
And so with the Super Bowl 49 coming up, what does taxes have to do with football?
Well as I said one of the things we look forward to are the commercials. The cost to air a 30-second commercial during the 2015 Super Bowl is $4.5M. $4.5M dollars!
How about the cost of a ticket to attend the Super Bowl? Well the cheapest seat – and this is face value – is $800.00. The more expensive seats (and I am not even talking about suites) go up to $1,900.00. For that price I will pass and instead buy one of those 80 inch screen TV’s which I can enjoy every day! I just can’t justify paying that much to go to a game when I can sit in the comfort of my own home and not have to worry about beer sales closing at the end of the third quarter.
Now here is a fact that is not so widely known – the National Football Association which you figure makes a ton of money is recognized by the IRS as a tax-exempt entity. You heard me right – the National Football League does not pay income taxes as any for-profit-company would.
How can this be?
Section 501(c)(6) of the Internal Revenue Code provides for the exemption from tax entities which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.
Those entities are specifically:
- business leagues,
- chambers of commerce,
- real estate boards,
- boards of trade and
- professional football leagues.
It’s obviously notable that only professional football leagues are included here, as opposed to all sporting leagues.
It seems inconceivable that the NFL is not “engaging in a regular business of a kind ordinarily carried on for profit.”
How are their efforts to maximize profits any different than those of Major League Baseball, the National Basketball Association or the National Hockey League? Those organizations do not have tax-exempt status.
Well professional football leagues were not always included in this list. This change dates back to 1966, when the tax code was amended to give a professional football league tax-exempt status in order to facilitate the merger of the NFL and the old American Football League.
In order to have that status, the NFL must be run as a charitable foundation. In 2012, they gave away a meager $2.3 million. Almost all of it–$2.1 million– went to the NFL Hall of Fame. Oh by the way, last time I checked the price of Adult admission to the Hall of Fame was $24.00 ($17.00 for a child). The average admission price (including free admission museums) for all museums in the United States is $8.00.
In 2012, NFL commissioner Roger Goodell was paid $29.5 million to run the organization. More crazy: Goodell’s salary is 1/10th of what the NFL claimed in total assets for 2012– $255 million. Even crazier: Goodell made 15 times what the NFL donated to other charities. Extremely crazier: the amount of charitable donations made by the NFL equaled one-one hundredth of their annual income.
Here are the stats: The NFL’s most recent Form 990 filed with the IRS ended on March 31, 2012. They claimed revenue of $255 million, up from $240 million in 2011. So, if you were concerned, things are good. The NFL has assets of over $822 million.
Under “grants”– meaning donations to other non profit organizations, the NFL did increase the number from just over $900,000 to $2.3 million. Generous right? However: the NFL’s executive salaries increased by $27 million to a total of over $107 million.
Here’s the best part: after all that, thanks to creative thinking, the NFL claims it finished the year in the red with negative $316 million.
What else did they spend money on? Well, for one thing, new office construction cost $36 million. That’s thirty six million dollars.
Just to put all this in perspective: going by numbers in Forbes, Goodell would come in at around number 28 of the highest paid CEO’s in 2012. He made more than the heads of FedEx, AT&T, Heinz, Ford Motors, Goldman Sachs, as well as Rupert Murdoch.
And remember, all those other businesses are for profit, not tax free foundations.
And if you’re wondering about the other sporting leagues, neither Major League Baseball nor the National Basketball Association is registered as a charity, foundation or trade organization. They each gave up their tax- free status years ago.
But don’t think that if you go on NFL.com and order super bowl tickets you can claim a charitable deduction. Why?
You see that when you make a donation to a charity and receive a benefit back, the amount deductible is only the excess of your contribution over the benefit you receive. Also, your charitable deduction cannot include the value of any benefits you received from the charity. An example would be where you paid $200 to attend a charitable ball for which the charity states that the value of the ticket is $75. In such an instance your charitable deduction would be $125.
Going back to whether the NFL should get to keep its tax-exempt status, the important thing here is that WE THE PEOPLE through our politicians in Washington DC granted the NFL this tax exemption, even if it was decades ago. This is no different that us granting the NFL’s anti-trust exemption for negotiating television broadcast contracts. As a result, should that exemption be revoked if the NFL blacks out its fans, forces fans to pay for personal seat licenses, extorts public money from municipalities by threatening to move teams, etc.? The NFL may technically be a “nonprofit,” but is it really acting in the public interest?
Well it’s time for a break but stay tuned because we are going to tell you about a big tax scam the IRS is following for people who have foreign accounts.
You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.
BREAK
Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.
Calling into the studio from our San Francisco Office is my associate attorney, Amy Spivey.
Chit chat with Amy
Jeff opens with: Hiding Money Or Income Offshore Among The List Of Tax Scams For The 2015 Filing Season
IRS Commissioner John Koskinen was proud to announce that “the recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore and he encouraged taxpayers to come in voluntarily and getting their taxes and filing requirements in order.”
But most taxpayers do not know what they need to report or how to get in compliance which is why we make this offer – PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Jeff states, Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, the IRS reports there have been more than 50,000 disclosures and the IRS has collected more than $7 billion from this initiative alone. The IRS also has conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. Finally, the IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.
Jeff asks Amy, now you have information on a multi-national conference dealing with this area.
Amy states, The IRS remains committed to top priority efforts to stop offshore tax evasion wherever it occurs. Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil. In fact, the Internal Revenue Service Criminal Investigation Division (IRS-CI) and Her Majesty’s Revenue & Customs (HMRC) co-hosted a three-day International Criminal Tax Symposium in Washington, D.C. starting January 27, 2015. The symposium focused on combating offshore tax evasion and international financial crimes—including cyber-crime—and brought together delegates from criminal tax and enforcement programs from Australia, Canada, The Netherlands, Norway, New Zealand, the United Kingdom and the United States.
Jeff states:
Tax Scam: Hiding Income Offshore
Through the years, offshore accounts have been used to lure taxpayers into scams and schemes which usually peak during filing season as people prepare their returns or hire people to help with their taxes. Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them.
Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.
The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas.
Amy states:
Big Penalties For Non-compliance – Jail-time Is Possible.
While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.
Separate from United States income tax returns, many U.S. persons are required to file with the U.S. Treasury a return commonly known as an “FBAR” (or Report of Foreign Bank and Financial Accounts; known as FinCEN Form 114), listing all non-US bank and financial accounts. These forms are required if on any day of any calendar year an individual has ownership of or signature authority over non-US bank and financial accounts with an aggregate (total) balance greater than the equivalent of $10,000.
Jeff states:
The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes.
Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge you with violations.
Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment. Many violent felonies are punished less harshly.
Amy states:
Voluntary Disclosure.
Since 2009, the IRS has provided several programs for taxpayers to disclose their offshore accounts, potentially reduce their financial liability, and avoid criminal prosecution. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.
The IRS further warned that it is obtaining a significant amount of information regarding offshore tax evasion from its enforcement efforts as well as the Foreign Account Tax Compliance Act (FATCA), which will require foreign financial institutions to start disclosing the identities of U.S. accountholders as early as March 2015.
Jeff states, now there are different voluntary disclosure programs available so let’s break them down for our listeners.
Amy please tell us about the regular program.
Amy says, The Offshore Voluntary Disclosure Program (OVDP) provides protection from criminal prosecution and offers fixed terms for resolving civil tax and penalty liabilities. Instead of the multitude of potential penalties, the OVDP generally allows taxpayers to pay a 27.5% miscellaneous penalty on the highest aggregate balance of undisclosed accounts, pay tax on any undisclosed income for the last 8 years, and pay interest on such income. The OVDP offers significant benefits, but a successful conclusion requires multiple complex steps.
Amy please tell us about the streamlined program.
Amy says, Effective July 1, 2014, the Streamlined Disclosure Programs provide potential alternative methods for taxpayers to address their offshore reporting delinquencies. Under the Streamlined Disclosure Programs, taxpayers file three years of amended or delinquent returns and six years of FBAR’s, but are subject to a reduced penalty structure. U.S. residents pay a penalty of 5% of the highest balance of their offshore accounts, while non-U.S. resident taxpayers are subject to no penalty on their account balances. However, to participate in the Streamlined Disclosure Programs, the IRS requires taxpayers to certify that their failure to disclose their accounts was non-willful.
Jeff states,
What Should You Do?
If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or in 2012 OVDI, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law.
Protect yourself from excessive fines and possible jail time. PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Stay tuned because after the break we are going to tell you how one person who owed the IRS about $60,000.00 ended up getting $862,000.00 from them.
You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.
BREAK
Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.
And on the phone from our San Francisco office I have my associate attorney, Amy Spivey.
Programs And Plans Available To Taxpayers To Resolve Outstanding IRS debts And Avoid Collection Action
Now listen to how one person who owed the IRS about $60,000.00 ended up getting $862,000.00 from them. This is a true story taken from the New York Post.
Jeff to talk about the story.
A taxpayer who met with a Revenue Officer at an Internal Revenue Service office on Long Island successfully sued the IRS for $862,000 after he was injured by tripping over a phone cord.
William Berroyer claimed in his lawsuit that he could no longer play golf or have intimate relations with his wife more than once a month after he fell during a 2008 conference with a Revenue Officer at an IRS office in Hauppauge, N.Y., according to the New York Post. He had visited the offices to work out a payment agreement for a $60,000 tax bill when he tripped on the phone cord and fell against a cabinet.
After leaving the office, he telephoned the IRS Revenue Officer from the parking lot to inform him that he had lost the sense of feeling in his leg and was suffering from shoulder pain. He then spent 17 days in hospitals and rehabilitation centers recovering from his injury.
In his lawsuit he claimed $10 million in damages. Attorneys for the IRS claimed he was exaggerating his injury, but the judge ultimately awarded him $862,000 for pain and suffering. And the big prize is because this was for pain and suffering, he won’t have to pay taxes on the damages!
So now that the IRS has tucked away all their telephone cords, how can taxpayers who owe the IRS avoid collection action? You need to have a plan.
PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Amy what are some of the plans that persons may incorporate to resolve outstanding IRS debts and avoid collection action?
Jeff to introduce each one, followed by Amy’s explanation and then Jeff to further comment.
1. Extension of Time to Pay — This is different than the extension you file on April 15th which that extension gives you an extra 6 months (to October 15th) to file your income tax return but any monies from that tax return still remain due April 15th. Instead this Extension of Time to Pay is offered by Collections after the tax returns have been filed. You may be eligible for a short extension of time to pay of up to 120 days. This might be a desirable option for you if are able to pay the taxes in full within the extended timeframe – due to an expected sale or liquidation of assets, securing financing, an expected gift or inheritance, or an expected bonus.
2. Offer In Compromise. This is a formal application to the IRS requesting that it accept less than full payment for what you owe in taxes, interest, and penalties.
An offer in compromise may allow you to settle back taxes or IRS liability at a substantial discount on the basis of doubt as to collectability, liability, or effective tax administration.
In addition, while your offer is under consideration, the Internal Revenue Service is prohibited from instituting any levies of your assets and wages.
Most people do not have the necessary skills or knowledge of the IRS collection process to make an offer in compromise that is in their best interest and can be processed by the IRS.
Government figures show that 75% of offers are returned at the beginning due to forms being filled out incorrectly, and of the 25% that are processed, approximately 50% are rejected.
3. Installment Agreement. Allows you to pay IRS debt in full in smaller, more manageable amounts, usually in equal monthly payments.
The amount of your installment payment will be based on the amount you owe and your ability to pay that amount within the time available to the IRS to collect tax debt from you. However, be aware that because you are financing your liability with IRS, interest and penalties will continue to accrue.
Most installment agreements are set up with level monthly payments but there are also different types and terms of installment agreements which if you qualify may be more suitable for you. The variations are not publicly offered by IRS – only a seasoned tax professional would know to ask for them.
4. Uncollectible Status. Occurs when the IRS has determined that they are presently unable to collect the taxes from the taxpayer by full payment, through an Installment Agreement or by way of an Offer in Compromise.
Once the account is placed on an Uncollectible Status, the IRS does not pursue collection activity against the taxpayer and the statute of limitations on the tax liabilities will continue to run.
Generally, unless the taxpayer’s financial situation changes, the account will remain on an Uncollectible Status until the tax liabilities expire. However, if the taxpayer’s financial situation improves the account will be taken off of Uncollectible Status so that the IRS can collect the taxes through full payment or an Installment Agreement.
Uncollectible Status although temporary could provide interim relief to taxpayers who all of a sudden run into financial hardship.
PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Stay tuned as we will be taking some of your questions. You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.
BREAK
Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team along with my associate attorney, Amy Spivey.
If you would like to post a question for us to answer, you can go to our website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.
OK Amy, what questions have you pulled from the kahntaxlaw inbox for me to answer?
1. John of Newport Beach, CA asks: Is there an advantage to hire a former IRS agent over a tax attorney?
Jeff to respond
What I find is that IRS agents are trained to deal with matters that are black and white. However many times matters are gray and that’s where a tax attorney can plead a case to your benefit and get the best resolution possible.
Agents are also typically regulated to a single function in IRS – such as an auditor whose job is solely to conduct tax audits. How can that agent then be able to help you get an Offer In Compromise? A tax attorney is experienced in all these areas so no matter what your tax problem is, you will have effective representation and should get the best possible outcome.
2. Kevin of Escondido, CA asks: My CPA who prepared my tax return which has now been selected for audit, wants to represent me – why should I decline his offer and hire a tax attorney?
Jeff to respond
CPA’s prepare tax returns and there are a lot of CPA’s and other tax professionals who a great in preparing tax returns.
A taxpayer will provide them with information and tax documents and a return will be generated for filing with the IRS. This process I refer to as “compliance”.
But a tax attorney will focus on “representation” – meaning that the cases taken on by the attorney are when the IRS is questioning a return or making other civil or even criminal inquiries of a taxpayer.
A tax attorney being familiar with the “representation” aspect, knows who to speak to at IRS and how to best present your case. The tax attorney can also devote full attention to your attention at any time since the tax attorney’s workload is not jammed like the CPA’s workload during tax season who is busy with tax return preparation and more focused over meeting filing deadlines and therefore cannot provide the needed attention to your case.
Speaking of civil and criminal inquiries, a taxpayer who engages a tax attorney also gets the benefit of attorney-client privilege. This benefit allows that taxpayer to freely discuss with his attorney any matters or issues without the threat of these communications being disclosed to the government or anyone else. You do not get this level of privilege when dealing with non-attorneys.
Lastly with the tax attorney there is no conflict of interest. The best way to explain this is by example – if a great defense is to rely on what the tax preparer did, do you think your tax preparer will put himself under the bus to save you from the IRS – chances are not. A tax attorney who had no involvement in the preparation of your returns can make these arguments thus truly serving your best interests.
PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Thanks Amy for calling into the show. Amy says Thanks for having me.
Well we are reaching the end of our show.
You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.
Have a great day everyone!
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