Yearly Archives: 2023

According to Law360, Federal prosecutors asked a Philadelphia judge to give the father-son duo who owned the iconic Tony Luke's cheesesteak restaurant more than two years in prison each and order them to pay $1.3 million in combined restitution after they pled guilty to defrauding the government through an $8 million tax evasion scheme.

On May 19, 2023, U.S. District Judge Gerald A. McHugh received the government's sentencing submission for Tony Luke's founder Anthony Lucidonio Sr., 84, and his son, Nicholas Lucidonio, 57, about a year after they pled guilty to the first count of the 24-count indictment that initially charged them in 2020.

"Defendants' willingness to baldly deny the full scope of their criminal conduct, and defendant Nicholas Lucidonio's brazen willingness to speciously contest his role in the criminal scheme to evade both income and payroll taxes is astounding," the memorandum reads.

Prosecutors accused the Lucidonios of various crimes related to the business' payroll and income taxes. I

"Despite committing tax evasion for the better part of two decades, and despite their own accounting records which show skimmed sales approximating $8 million, concealed net profits in the millions, and a tax loss of at least $1.3 million, defendants would have this court believe the harm they caused to the United States Treasury for which they are responsible is just $286,000 over the decade charged in the indictment," the memorandum reads.

In total, the government determined Tony Luke's failed to pay $486,142 of payroll taxes and $834,900 of income taxes while the Lucidonios argue it was just $286,000 in payroll taxes and $424,535 in income taxes that was lost.

The memo also says the sentencing guidelines suggest 30-37 months for Nicolas Lucidonio and 37-46 months for Anthony Lucidonio if they accept responsibility for their crimes.

Read more at: Tax Times blog

According to Law360, the U.S. Supreme Court affirmed on May18thh 2023 a Sixth Circuit decision approving IRS summonses for the banking records of two law firms and the wife of a man owing $2 million in taxes, rejecting their arguments that they should have been notified of the requests.

In a unanimous opinion by Chief Justice John Roberts, the court found that:

The Internal Revenue Service Wasn't Required To Notify
Firms Abraham & Rose PLC, Jerry R. Abraham PC And
Hanna Karcho Polselli, The Tax Debtor's Wife, of the
Him hhimSummonses Seeking Their Banking Records.

The Sixth Circuit correctly concluded that the IRS could issue the summonses without notification under Internal Revenue Code Section 7609(c)(2)(D)(i), because the IRS was trying to collect the already-assessed taxes of Remo Polselli, according to the opinion. The court rejected arguments from the firms and Hanna Polselli that an exception to the notice requirements applies only when the delinquent taxpayer has a legal interest in the requested records, saying none of the three parts of the statutory exception mention any sort of legal interest test.  

"None of the three components for excusing notice in [Section] 7609(c)(2)(D)(i) mentions a taxpayer's legal interest in records sought by the IRS, much less requires that a taxpayer maintain such an interest for the exception to apply," the opinion said.

The dispute stems from an IRS probe into the liabilities of Remo Polselli, whom the agency determined owed $2 million in unpaid taxes. An IRS agent had issued summonses to three banks: Wells Fargo Bank NA, JP Morgan Chase Bank NA and Bank of America NA, seeking records on accounts held by the two law firms as well as Hanna Polselli. 

But the IRS didn't tell the firms or the spouse of the summonses. Instead, the banks notified them, and Hanna Polselli and the firms subsequently filed petitions in Michigan federal court to quash the summonses, according to the opinion.

A lower court found that Hanna Polselli and the firms couldn't sue to do away with the summonses because the IRS was trying to collect the taxes assessed against Polselli, and the plain meaning of Section 7609(c)(2)(D)(i) permits the IRS to skip notifying them in such circumstances. That statute specifically exempts from the general notice requirement summonses "issued in aid of the collection of" an assessment made against a different taxpayer.

In a 2-1 opinion, the Sixth Circuit agreed, saying it's clear the IRS issued the summonses in order to aid the collection of tax and locate Polselli's assets.

Polselli and the firms have argued that both the language of the statute and the history behind its enactment indicate that the exception is applicable only in limited circumstances, when the delinquent taxpayer has a legal interest in the requested records. The Ninth Circuit embraced such a test in Ip v. United States , according to Polselli and the firms.

But in the Supreme Court's opinion, Justice Roberts said there's no support in the statute for such a legal interest test, based on "a straightforward reading of the statutory text."

Moreover, Polselli and the firms have too narrow a reading of the statute's phrase "in aid of," the opinion said. While they've argued that the phrase requires that there be some sort of direct connection between a summons the IRS issues and taxes it collects, the agency can issue summonses that in some way help it locate assets without necessarily enabling the agency to collect taxes, the opinion said.

"Even if a summons may not itself reveal taxpayer assets that can be collected, it may nonetheless help the IRS find such assets," the opinion said.

In a separate concurring opinion, Justice Ketanji Brown Jackson said the IRS isn't automatically exempt from the notification requirements for IRS summonses when a tax matter enters the collection phase. The exception to the notice requirements is specifically intended to help the IRS out so notice of a summons doesn't tip off a delinquent taxpayer who might want to hide their assets, Justice Jackson wrote.

But that exception isn't intended to "devour the rule" requiring notice, she wrote in the concurring opinion, joined by Justice Neil Gorsuch.

"I believe that both courts and the IRS itself must be ever vigilant when determining when notice is not required," Justice Jackson said. "Doing so properly involves a careful fact-based inquiry that might well vary from case to case, depending on the scope and nature of the information the IRS seeks."

Read more at: Tax Times blog

On May 9, 2023 we posted Available IRS Payment Plans - Part I, where we discussed that for the 2019 filing season, the IRS projects that more taxpayers than ever will file and owe and that many will be able to pay, but a lot of them will need to make other arrangements because they can’t pay their full tax bills to the IRS. We also discussed that the IRS has three simplified payment plans:

• Guaranteed Installment Agreements (GIA): 36-month payment terms for balances of $10,000 or less.
• Streamlined Installment Agreements (SLIA): 72-month payment terms for balances of $50,000 or less.
• Streamlined Processing for Balances Between $50,000-$100,000: 84-month payment terms for balances between $50,000 and $100,000.

Here we would like to discuss a few other tips related to these simple agreements:

1. Avoid a tax lien – pay down the balance to get into a SLIA. Here’s the best plan for taxpayers who owe more than $50,000: Get an extension to pay of up to 120 days, get funds to pay the balance down to under $50,000, and obtain a SLIA. Doing so will avoid the filing of a tax lien.

2. For SLIA, it’s the “assessed” balance – not the total amount owed. The $50,000 SLIA threshold is based on the taxpayer’s assessed balance – not the total amount they owe. The assessed balance includes tax, assessed penalties and interest, and all other assessments for each tax year. It doesn’t include accrued penalties and interest after the original assessment. For example, if a taxpayer’s original assessment is under $50,000 for an older tax year, he may accrue additional penalties and interest that puts the total balance over $50,000. In this situation, they would still qualify for a SLIA based on the original assessed balance. Taxpayers can also designate payments to reduce their “assessed balance only” to help them qualify for a SLIA.

3. Apply and pay automatically to reduce fees. The IRS increases installment agreement setup fees if taxpayers pay by check. Reduce the setup fee by agreeing to automatic direct debit payments. Automatic payments also avoid a monthly reminder letter from the IRS about the payment due.

4. Pay by direct debit or payroll deduction to avoid default. IRS installment agreements have a high default rate. To avoid a default, taxpayers must make their monthly payments. The best way to avoid missing a payment is to have the payment automatically deducted from the taxpayer’s financial accounts.

5. Don’t owe again. The second most common cause of defaulted installment agreements is filing future tax returns with unpaid balances. Taxpayers need to change their withholding and/or make estimated tax payments to avoid owing taxes that they can’t pay in the future.

6. Taxpayers can miss one payment a year. Most IRS payment plans allow taxpayers to miss one payment per year and not default. It’s best for the taxpayer to notify the IRS in advance if they can’t make a payment.

7. If the taxpayer’s financial situation worsens, get an ability-to-pay plan. Taxpayers can always renegotiate their payment plans if their financial circumstances change. For example, if a taxpayer loses their job, they may not be able to pay the IRS. In these cases, the taxpayer can contact the IRS and provide documentation on their ability to pay. This may mean a lower payment or even payment deferral (called currently not collectible status). Be careful here: If the taxpayer owes more than $10,000 and can’t pay within 72 months, the IRS is likely to file a tax lien.

8. Remember to ask for penalty abatement at the end of the plan. One important action to take at the end of a payment plan is to request abatement of the failure to pay penalty. Taxpayers should consider using first-time abatement or reasonable cause abatement if they qualify.

Each year, more than 3 million taxpayers get into a payment plan with the IRS. With tax reform, we can expect that more taxpayers will need a payment plan in 2019. Taxpayers who owe less than $100,000 should first look at 36-, 72-, or 84-month payment plans with the IRS. Many will also benefit from the help of a qualified tax professional to find the best option.

  

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com 

or Toll Free at 888-8TaxAid (888) 882-9243 

Sources:

accountingTODAY

IRS.gov
 

Read more at: Tax Times blog

 1 .Offshore Accounts & Digital Assets

International tax compliance remains a high priority for the IRS. The IRS continues to scrutinize taxpayers attempting to hide assets in offshore accounts and accounts holding digital assets, such as cryptocurrency. The IRS reminds U.S. persons that they are taxable on their worldwide income, unless they can establish there is a statutory or treaty exemption.

The IRS continues to identify individuals who attempt to conceal income in offshore banks, brokerage accounts, digital asset accounts and nominee entities. The IRS scrutinizes structured transactions, private annuities, employee leasing schemes, foreign trusts, the use of nominee ownership and other arrangements used to conceal taxable income, beneficial owners and assets. To complement its enforcement investigations, the IRS requires individuals holding foreign assets and third parties to report to the IRS on foreign assets, foreign accounts, foreign entities and digital assets. Reporting requirements carry penalties for failure to file.

Asset protection professionals and unscrupulous promoters continue to lure U.S. persons into placing their assets in offshore accounts and structures, saying they are out of reach of the IRS. Similarly, unscrupulous promoters recommend digital assets as being untraceable and undiscoverable by the IRS. These assertions are not true. The IRS can identify and track anonymous transactions of foreign financial accounts as well as digital assets.

Many of these schemes are promoted and advertised online, but all these schemes have one thing in common - they promise tax savings that are too good to be true and will likely cause legal harm to taxpayers.

2. Maltese Individual Retirement Arrangements Misusing Treaty

These arrangements involve U.S. citizens or residents who attempt to avoid U.S. tax by contributing to foreign individual retirement arrangements in Malta (or potentially other host countries). The participants in these transactions typically lack any local connection to the host country, and unlike U.S. law for individual retirement arrangements, the host country’s laws allow for contributions in a form other than cash and do not limit the amount of c
ontributions by reference to employment or self-employment activities. By improperly asserting the foreign arrangement as a “pension fund” for U.S. tax treaty purposes, the U.S. taxpayer misconstrues the relevant treaty provisions and improperly claims an exemption from U.S. income tax on gains and earnings in, and distributions from, the foreign individual retirement arrangement.

3. Puerto Rican and Other Foreign Captive Insurance

In these transactions, U.S. business owners of closely held entities participate in a purported insurance arrangement with a Puerto Rican or other foreign corporation in which the U.S. business owner has a financial interest. The U.S. business owner (or a related entity) claims a deduction for amounts paid as premiums for “insurance coverage” provided by a fronting carrier, which reinsures the “coverage” with the Puerto Rican or other foreign corporation. Despite being labeled as insurance, these arrangements lack many of the attributes of legitimate insurance. Like the micro-captives described above, the characteristics of the purported insurance arrangements typically will include one or more of the following: implausible risks covered (or duplicative coverage of risks already covered by commercial insurance), excessive premiums indicative of non-arm’s length pricing and a lack of business purpose for entering the arrangement.

Where appropriate, the IRS will challenge the purported tax benefits from these types of transactions and impose penalties. The IRS Criminal Investigation Division is always on the lookout for promoters and participants of these types of schemes. Taxpayers should think twice before including questionable arrangements like this on their tax returns. After all, taxpayers are legally responsible for what's on their return, not a promoter making promises and charging high fees. Taxpayers can help stop these arrangements by relying on reputable tax professionals they know and trust.

The IRS warns anyone thinking about using one of these schemes – or similar ones – that the agency continues to improve investigation and enforcement in these areas by utilizing new and evolving data analytic tools and enhanced document matching.

Whether anchored offshore or in the U.S., abusive transactions and schemes remain a high priority for the IRS. 

The IRS also created the Office of Fraud Enforcement (OFE) and Office of Promoter Investigations (OPI) to coordinate service-wide enforcement activities against taxpayers committing tax fraud and promoters marketing and selling abusive tax avoidance transactions and schemes to effectuate tax evasion.

Like Your Freedom?

 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