Monthly Archives: April 2021

According to Law360, the gap between taxes owed each year and those actually paid could be more than $1 trillion, much larger than the most recent estimate of $441 billion, IRS Commissioner Chuck Rettig told the Senate Finance Committee on Tuesday.

IRS Commissioner Chuck Rettig told the Senate Finance Committee on April 13, 2021 that his agency is making the most of its resources, but "we do get outgunned." 

The Ballooning Of The Tax Gap, Rettig Said, Can Be Partly Attributed To The Growth In Popularity Of Cryptocurrency, Which Was Still A Relative Novelty The Last Time The Internal Revenue Service Released An Official Estimate Of The Tax Gap, Which Covered Tax Years 2011 Through 2013.

There are now more than 8,600 virtual currencies with a global market capitalization of about $2 trillion, he said. Rettig added that the estimates for 2011 through 2013 didn't have information about foreign-sourced and illegally sourced income.

"I Think It Would Not Be Outlandish To Believe That
The Actual Tax Gap Could Approach And Possibly Exceed
$1 Trillion Per Year," Rettig Said.

The $441 billion tax gap estimate, according to the IRS, is an average gross yearly estimated tax gap based on data from tax years 2011 through 2013. After late payments and enforcement work are factored in, the estimated net tax gap is $381 billion, according to the agency's website.

Rettig also noted that a recently released report found that the top 1% of all earners fail to report about 20% of their income and that some outside estimates have said the tax gap could exceed $7.5 trillion over the next decade.

The IRS will issue a new estimate next year, Rettig said. Meaningfully reducing the tax gap will take a multifaceted effort, he said.

Rettig said the agency has lost about 17,000 employees in the enforcement area over the last decade. It has about 6,500 frontline revenue agents who now handle the most complex individual and corporate tax matters and substantially all of them are dedicated to the most egregious cases, wealthy individuals or the largest corporations, he said. The IRS is using its resources to the best of its ability, he said, but it needs more.

"We do get outgunned. I mean there's no other way to say it," he said. "We are today able to identify evidence of tax fraud and signatures of tax fraud, if you will, and tax evasion that even two years ago we could not identify. But it's an example of we're heading in the right direction. We need to get there ahead of time."

President Joe Biden's Fiscal 2022 Budget Request Calls For A 10.4% Funding Increase For The IRS.

The request would include an increase of $417 million in funding to improve tax compliance and revenue collection under a multiyear project.

 Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

According to the DoJ, as tax filing season continues, the Department of Justice's Tax Division reminds taxpayers to pay careful attention to their reporting and filing obligations and to timely pay all taxes due. Willfully filing false tax returns or deliberately evading paying taxes are serious criminal offenses. 

“Our criminal prosecutors are prepared for tax filing season too,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Tax Division. “Honest, law abiding taxpayers should know that the Tax Division is aggressively using its resources and expertise to identify, investigate, and prosecute those attempting to defraud and obstruct the IRS.” 

Throughout the past year, the Tax Division, in collaboration with U.S. Attorney’s Offices, other Justice Department litigating offices and the IRS, has investigated and prosecuted a broad array of tax offenses from businesses and white-collar professionals underreporting income to employment tax fraud to identity theft. Enforcement efforts are continually ongoing. Here are a few recent examples: 

Prosecution of Business Owners 

• 

  On Dec. 1, 2020, a New York City restaurateur was sentenced to 24 months in prison for tax
  evasion. Adel Kellel, the owner of Raffles Bistro, diverted business income for personal expenses, including rent for a high-end Manhattan apartment, college tuition payments for his children, and purchases from luxury retailers. As part of his sentence, Kellel was ordered to pay $613,478 to the IRS. 

• On Oct. 20, 2020, two biofuel company owners were sentenced to prison for conspiracy to defraud the IRS and preparing a false tax claim, among other offenses. Ben Wootton, 55 of Savannah, Georgia, was sentenced to 70 months and Race Miner, 51, of Marco Island, Florida, was sentenced to 66 months, after a jury convicted both defendants and their company, Keystone Biofuels Inc., in April 2019. 

Prosecution of White-Collar Professionals & Individuals 

• On Dec. 21, 2020, two Atlanta-area tax professionals pleaded guilty to promoting a syndicated conservation easement tax scheme involving more than $1.2 billion in fraudulent charitable deductions. Stein Agee of Canton, Georgia, and Corey Agee of Atlanta, Georgia, are currently awaiting sentencing for their role in the scheme. 
• On Nov. 2, 2020, a New Jersey man was sentenced to 78 months in prison for conspiring to defraud the United States, filing false claims, and obstructing the internal revenue laws, following his conviction at trial. According to evidence presented at trial, between 2015 and 2016, Kenneth Crawford Jr. and his co-conspirators promoted and sold a “mortgage recovery” tax fraud scheme in which they obtained fraudulent refunds from the IRS for their clients. As a result of Crawford’s scheme, more than $2.5 million in fraudulent refunds were sought from the IRS. 
• On Aug. 21, 2020, a North Carolina risk consultant pleaded guilty to filing a false tax return and illegally possessing a firearm. From 2011 through 2017, Charles Atkins underreported income from several risk consulting businesses, causing a tax loss of more than $800,000 to the IRS. Atkins is currently awaiting sentencing. 4/8/2021 Justice Department Tax Enforcement Already in Gear | OPA | Department of Justice https://www.justice.gov/opa/pr/justice-department-tax-enforcement-already-gear 2/2 Employment Tax Prosecutions 
• On April 7, 2021, the manager of the San Diego Home Cooking restaurant chain was sentenced to 30 months in prison for employment tax fraud. According to court records, from the last quarter of 2014 through 2017, Aleksandar Sreckovic did not file employment tax returns nor pay employment taxes for San Diego Home Cooking, causing a tax loss of over $1.5 million. Instead of paying employment taxes, Sreckovic paid other creditors and his own personal expenses. 
• On March 24, 2021, A Montana businessman pleaded guilty today to employment tax fraud. According to court documents, Thomas O’Connell owned and operated three plumbing businesses, Quality Plumbing and Heating, Orbit Plumbing and Heating, and Orbit PHC, each based in Great Falls. From at least 2005 through 2016, O’Connell did not pay employment taxes for several quarters, despite being obligated to ensure such taxes were paid to the IRS. Instead, he directed payments to other creditors and to his own personal expenses. The total tax loss to the IRS from O’Connell’s conduct is more than $550,000. 

Identity Theft Prosecutions 

• On Oct. 7, 2020, a Las Vegas, Nevada, man was sentenced to 70 months in prison for mail and wire fraud conspiracy, following his jury trial convictions. The trial evidence proved that from January 2009 through April 2011, Terry Williamson and his co-conspirators filed false tax returns with the IRS to fraudulently obtain tax refunds. To facilitate the fraud, they used the names and social security numbers of deceased taxpayers. More than 480 fraudulent tax refund checks totaling almost $2 million were deposited into Williamson’s account. More information about the Tax Division’s enforcement efforts in these and other areas can be found on the division’s website.

Have as IRS Tax Problem?

 Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

The IRS Independent Office of Appeals (“Appeals”) has issued a procedural memo,  AP-08-0321-0009: Memorandum for Required Use of Virtual Conferences, that requires Appeals employees to offer a virtual conference to taxpayers who request an in-person conference that can't be accommodated. Offering a virtual Appeals conference previously wasn't required in this situation. 

Most taxpayers with an active tax controversy can request a conference with Appeals to try to settle their tax controversy. (Code Sec. 7803(e)(4))

This new procedural memo requires Appeals employees to offer taxpayers a “virtual conference” in certain circumstances. 

For example, an Appeals employee is required to offer and conduct a virtual conference if the taxpayer (or their representative) has requested one. In addition, the Appeals employee should offer a virtual conference if the taxpayer (or their representative) has requested an in-person conference, but that request can’t be accommodated by Appeals.

Prior to COVID, Appeals would generally hold an in-person conference if a taxpayer requests one. However, Appeals stopped conducting in-person conferences at the beginning of the COVID-19 pandemic and has not yet resumed holding them. 

Appeals employees are not required to offer a virtual conference when a taxpayer (or their representative) has requested a phone or correspondence conference. In this case, the Appeals employee should use their judgment and experience to determine whether to voluntarily offer a virtual conference to that taxpayer. 

If the taxpayer declines the offer of a virtual conference, then the Appeals employee should continue with normal case processing procedures.

The Memo notes that this procedural deviation doesn't replace in-person conferences when Appeals begins holding them again. Appeals will still hold in-person conferences when Appeals can accommodate them and such conferences are appropriate. 

This guidance is effective as of March 22, 2021and will be incorporated into IRM 8.6.1 within two years of this date.

                                                                Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

Internal Revenue Service officials on April 9, 2021 urged participants in abusive micro-captive insurance arrangements to exit these transactions as soon as possible (IR-2021-82). 

On March 10, 2021, the U.S. Tax Court held in Caylor Land & Dev. v. Commissioner, T.C. Memo. 2021-30 (2021), that yet another micro-captive arrangement failed to qualify as insurance for federal tax purposes. This decision follows several earlier Tax Court decisions that also confirmed the IRS’s determinations that certain micro-captive arrangements were not eligible for the claimed federal tax benefits. In Caylor, the Tax Court also sustained the IRS’s determination of accuracy-related penalties and rejected the taxpayer’s claim of reliance on tax advice.

Taxpayers who engaged in abusive micro-captive transactions are once again encouraged to consult an independent tax advisor prior to filing their 2020 tax returns. Taxpayers should consider exiting the transaction and not reporting deductions associated with abusive micro-captive insurance transactions.

“In multiple cases before the courts, judges have held that these ‘fanciful’ and ‘unreasonable’ arrangements don’t add up to insurance in the commonly accepted sense,” said IRS Commissioner Chuck Rettig. “I strongly urge participants in these arrangements to get independent legal advice separate from those who helped steer them into these abusive arrangements.”. 

In Notice 2016-66, the IRS advised that micro-captive insurance transactions have the potential for tax avoidance or evasion. The notice designated transactions that are the same as or substantially similar to transactions that are described in the notice as “Transactions of Interest.” The notice established reporting requirements for those entering into such transactions on or after Nov. 2, 2006 and created disclosure and list maintenance obligations for material advisors.

In March and July 2020, IRS issued letters to taxpayers who participated in a Notice 2016-66 transaction alerting them that IRS enforcement activity in this area will be expanding significantly and providing them with the opportunity to tell the IRS if they've discontinued their participation in this transaction before the IRS initiates examinations. Early responses indicate that a significant number of taxpayers who participated in these transactions have exited the transaction.

Have an IRS Tax Problem?

                                                                Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog