Category Archives: criminal tax law

The Chief of the IRS Independent Office of Appeals (Appeals) has set out information about Appeals including the fact that the entire Appeals process for non-docketed cases has recently been taking approximately 7-8 months.

Appeals' function is to resolve tax controversies without litigation on a basis that: 

1. is fair and impartial to both IRS and the taxpayer; 
2. promotes a consistent application and interpretation of, and voluntary compliance with, federal tax laws; and 
3. enhances public confidence in the integrity and efficiency of IRS. (Code Sec. 7803(e)(3))

The Appeals Chief set out a number of facts, etc. about Appeals, including:

• Appeals has an overall staff of approximately 1,240 employees, mostly Appeals Officers and Settlement Officers. An Appeals Officer typically handles matters involving audit-related issues like penalties or additions to tax. For some complex matters, Appeals Officers may work as a team with other Appeals Officers. A Settlement Officer typically handles matters involving collection matters like whether IRS followed proper procedures when imposing a lien or proposing a levy for unpaid taxes.

• Appeals is unique within tax administration, because it has the authority to compromise the amount of tax owed to resolve a dispute. This means Appeals can offer taxpayers a settlement based on the probable outcome if their case were to go to court. Appeals calls this "evaluating the 'hazards of litigation.'" The Chief noted that not every dispute merits a compromise and some issues do not raise hazards of litigation. 

• When IRS makes a determination regarding tax liability, it will provide the taxpayer with a notice. If you receive an IRS notice and your case is eligible for an appeal, the notice will explain your appeal rights. At that point, if you disagree with IRS determination, you can request an appeal. The next step is to write down, either in a formal protest or simple statement, the issues with which you disagree and why. It’s important to remember that you should make your appeal request with the IRS compliance person who worked your case. That employee then will be able to send your appeal request, along with your case file, to Appeals.

• Taxpayers can also come to Appeals after filing a petition in the United States Tax Court to dispute the IRS compliance action.

• Once your case arrives in Appeals, Appeals will assign it to an Appeals Officer or Settlement Officer depending on the type of case. Appeals' goal is to have the assigned Appeals employee contact you by mail or telephone within approximately 30 days of receiving your case; however, it is taking longer these days due to pandemic-related delays and other resource constraints.

• You may request to view the non-privileged part of the Compliance file prior to meeting with Appeals.

• If you are unable to locate an important document that might help explain your position, please try to explain the document, why it isn’t available and what steps you took to try to obtain copies, etc.

• Appeals Officers and Settlement Officers try to resolve cases after holding a taxpayer conference or by correspondence. But, some complex cases may take more than one conference to resolve.

• The time it takes for Appeals to work your case depends on several factors, including the type of case, the facts of the case, the complexity of the issues, the availability of legal precedents, other legal theories involved and Appeals’ determination of the hazards of litigation. If you have petitioned the Tax Court prior to coming to Appeals, you have a “docketed” case and the time involved will also be affected by dates and timeframes established by the court and beyond Appeals’ ability to control.

• Cases received directly from a compliance function that have not been petitioned to the Tax Court are referred to as “non-docketed” cases. Recently, for non-docketed examination or collection appeals, the entire process, from the time your case is received in Appeals to the time it is resolved or closed in Appeals, takes on average 7 or 8 months.

• Appeals has set out the following goals: 

1. Increasing staffing; 
2. Adopting secure digital messaging to communicate with taxpayers electronically; 
3. Expanding taxpayer access to videoconferences so they can meet with Appeals “face-to-face” even during the pandemic; 
4. Expanding internal paperless processes to allow Appeals to process cases more quickly.

Have IRS Tax Problems?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

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www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

• Has the passage of ObamaCare with its associated additional 3.8% Obama Care Tax make you feel like leaving the country?
• Or perhaps you're so sick of liberal Democrats trying to socialize the United States by taxing wealthy people?
• Or maybe you're a naturalized U.S. citizen or permanent resident who has prospered here, but would now like to move back the old country for retirement or to start a new venture?

Whatever your motives, just because you leave the United States and renounce your citizenship, don't assume you can leave U.S. taxes (or U.S. tax forms and complexity) behind, particularly if you are financially well-off.

For those who expatriate after June 16, 2008, the rules are different, since Internal Revenue Code Section 877A applies instead of Section 877. You are subject to an immediate exit tax, which deems you (for tax purposes) to have sold all of your worldwide property for its fair market value the day before your departure from the U.S.

In 1994 a Forbes cover story described how such wealthy Americans as Campbell Soup heir John (Ippy) Dorrance III, the late Carnival founder Ted Arison and Dart Container heir Kenneth Dart had given up their U.S. citizenship and avoided U.S. income or estate tax. Perhaps the most clever was Dart, who managed to come back "home" as the Belize ambassador to the U.S., manning a newly opened Belize embassy in Sarasota, Fla., right where he had previously lived! Since that time, Congress has repeatedly tightened the screws on tax-motivated expatriation.

10 things you need to know about Expatriation:

(set forth below and in two subsequent blog posts)

1. Uncle Sam taxes income worldwide.
The U.S. is unusual in that it asserts the right to tax the worldwide income (and at death assets) of its citizens and those who have become permanent residents. It doesn't matter where you live, where the income is earned, or where else you might pay tax. Yes, you may receive foreign tax credits on your U.S. Form 1040 for taxes you pay elsewhere and those credits will offset some (but typically not all) of the financial burden of paying tax in multiple jurisdictions. But the key point is that if you are a U.S. citizen or a permanent U.S. resident, no matter where you move, Uncle Sam will assert a claim on your wealth. So being a U.S. citizen can be expensive.

2. Expatriating means really leaving.
To even think about putting himself beyond the reach of the Internal Revenue Service, a citizen must give up U.S. citizenship and (in the case of citizens subject to Internal Revenue Code Section 877) severely limit the time spendy in the U.S. to not more than 30 days a year. Under that section, a person who attempts to renounce U.S. citizenship but then spends more than 30 days a year in the U.S. will be treated as a U.S. citizen or resident for that year. You may think no one has ever done this, but many have. Permanent U.S. residents (holding green cards) also pay U.S. tax on their worldwide income. They may find it easier to take the expatriation plunge, particularly if family or business opportunities beckon in their country of origin.

3. The old 10-year window is closed.
Back in 1966 Congress enacted the Foreign Investors Tax Act of 1966, signed into law by Lyndon B. Johnson. Essentially expatriates were subject to U.S. tax on their U.S.-source income at normal U.S. tax rates for a full 10 years following their expatriation. Significantly, though, a person could avoid this tax entirely if he did not have as one of his principal purposes the avoidance of U.S. federal income, estate or gift taxes. Of course few people would admit they had a principal purpose of tax evasion, and the government had a hard time proving it. Suffice it to say that there were lots of people (with good lawyers) marrying foreigners, returning to the country of their birth, etc. The system didn't work very well, and little tax was collected.

"Should I Stay or Should I Go?"

Need Advise on Expatriation? 
 

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Marini & Associates, P.A. 

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Read more at: Tax Times blog

We previously posted IRS CONTINUES to Criminally Prosecutes Employers For Failure To Pay Withheld Payroll Taxes - As Promised! where we discussed that the IRS is stepping up criminally prosecuting business owners for failing to turn over withheld payroll taxes.

Now according to the DoJ, a federal grand jury in Atlanta, Georgia, returned an indictment on April 13, 2021 charging a Georgia man with failing to pay employment taxes and with obstructing the collection efforts of the IRS. 

According to the indictment, from 2009 through 2018, Douglas Mittleider, of Adairsville, was in charge of several long-term care facilities located throughout the United States, and was responsible for withholding and paying employment taxes on behalf of his employees. 

Notwithstanding his obligations, Mittleider allegedly did not fully pay over these withholdings, resulting in an outstanding balance of more than $10,000,000 being owed to the IRS. From approximately November 2011 to the present, Mittleider allegedly attempted to obstruct IRS efforts to collect employment taxes that were due by filing false employment tax returns and directing payment of corporate funds to his family members instead of to the IRS. 

The defendant’s initial court appearance will be scheduled at a later date in the U.S. District Court for the Northern District of Georgia. If convicted, he faces a maximum penalty of three years (3) in prison on the obstruction charge and five (5) years in prison on each of the other charges. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. 

You Better Thank Again, if You Like Your Freedom!

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com 

or Toll Free at 888-8TaxAid

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The Court of Federal Claims has held that penalties assessed for failure to file a Report of Foreign Bank and Financial Accounts (FBAR or FinCEN Form 114) are not internal revenue taxes subject to the full-payment requirement.

The Bank Secrecy Act (BSA) requires "United States persons" who have relationships with foreign financial agencies to disclose these relationships to the U.S. Department of Treasury (Treasury Department) on an FBAR. (31 U.S.C. §5314(a); 31 CFR §1010.350) Civil money penalties may be imposed under the BSA on any person who fails to file a required FBAR. The Treasury Department may sue for collection of the penalty. (31 U.S.C. § 5321)

Although the BSA is in title 31 of the U.S. Code, the authority to enforce 31 U.S.C. §5314 and collect FBAR penalties under 31 U.S.C. § 5321 has been delegated to IRS. (31 CFR § 1010.810(g))

The Court of Federal Claims has jurisdiction in any civil action against the United States for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, any penalty claimed to have been collected without authority, or any sum alleged to have been excessive or in any manner wrongfully collected under the internal revenue laws (28 U.S.C. § 1346(a)(1))

Courts lack jurisdiction of suits for refund of income tax unless the taxpayer has paid the entire amount of the assessment against it. (Flora v. United States (S Ct 1960) 5 AFTR 2d 1046; (S Ct 1958) 1 AFTR 2d 1925)

The Court of Appeals for the Third Circuit has stated in a footnote that it was "inclined to believe" that FBAR penalties are internal revenue taxes within the scope of 28 U.S.C. § 1346(a)(1), and are therefore subject to the Flora full payment rule. (Bedrosian v. U.S. (CA 3) 122 AFTR 2d 2018-7052)

In this case the IRS assessed a $752,920 penalty against Raghuveer Mendu for failing to file an FBAR with respect to foreign bank accounts that he had signatory authority over.

Mendu made a $1,000 partial payment against this penalty and filed suit in the Court of Federal Claims, alleging that the FBAR penalty assessed against him was erroneous and resulted in an illegal exaction of his $1,000 partial payment.

The government filed a counterclaim seeking payment of the entire FBAR penalty plus interest.

Mendu then filed a motion to dismiss his own claim, contending that the Court of Federal Claims lacked jurisdiction over it because the full-payment rule applied.

The Court of Federal Claims stated that the structure of the BSA indicated that the FBAR was not an internal revenue tax, as it was part of Title 31 of the United States Code ("Money and Finance"), not the Internal Revenue Code in Title 26. Congress's placement of FBAR penalties outside Title 26 means that they are not subject to various cross-references that equate penalties contained in Title 26 with taxes. The court noted that both Mendu and the government acknowledged they were unable to find any example of a penalty outside the Code that was subject to the Flora full-payment rule.

The Court of Federal Claims said that the Third Circuit's footnote in Bedrosian was unpersuasive. Jurisdiction was not at issue in Bedrosian, the Third Circuit dealt with the full-payment issue in a cursory fashion, and it said it left a definitive holding on the issue for another day.

Have IRS Tax Problems?

     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