Category Archives: criminal tax law

The Department of the Treasury and IRS on June 29, 2020 announced in IR-2020-134 that the tax filing and payment deadline of July 15 will not be postponed. Individual taxpayers unable to meet the July 15 due date can request an automatic extension of time to file until Oct. 15.

Due to COVID-19, the original filing deadline and tax payment due date for 2019 was postponed from April 15 to July 15.

The IRS Reminds Taxpayers Filing Form 1040 That They Must File Form 4868 By July 15 To Obtain The Automatic Extension To Oct. 15 and The Extension Provides Additional Time To File The Tax Return – It Is Not An Extension To Pay Any Taxes Due.

The IRS urges people who owe taxes, even if they have a filing extension, to carefully review their situation and pay what they can by July 15 to avoid penalties and interest. 

Taxpayers can also get an extension by paying all or part of their tax due and indicate that the payment is for an extension using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. 

When Getting An Extension By Making A Payment, Taxpayers Do Not Have To File A Separate Extension Form And Will Receive A Confirmation Number For Their Records.

Payment options

Taxpayers who owe taxes can choose from the following payment options:

• IRS Direct Pay allows payment directly from a checking or savings account. This service is free.
• Electronic Federal Tax Payment System, or EFTPS. Pay by phone or online. This service is free.
• Debit or credit card payment. This service is free, but the processing company may charge a fee. Fees vary by company.
• Check or money order made payable to the United States Treasury (or U.S. Treasury) through the mail.

The IRS recommends that taxpayers who are unable to pay their taxes in full should act as quickly as possible. Tax bills can quickly accumulate more interest and penalties the longer they sit. The usual penalty rate of 0.5% per month is reduced to 0.25% For the calendar quarter beginning July 1, 2020, the interest rate for underpayment is 3%.

Most taxpayers who cannot pay in full have the following payment options:

• Installment Agreement — Taxpayers who do not qualify to use the online payment agreement option, or choose not to use it, can also apply for a payment plan. 
• Temporarily Non-Collectible — You can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves. Penalties and interest continue to accrue until the full amount is paid.
• Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. 

Taxpayers Should File, Even If They Can’t Pay The Full Amount Due. 

By properly filing this form, a taxpayer will avoid the late-filing penalty, normally five percent per month based on the unpaid balance, that applies to returns filed after the deadline. In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 15. The current interest rate is three percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.

Taxpayers who have finished their returns should file by the regular July 15 deadline, even if they can’t pay the full amount due. In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including the following:

• Most people can set up a payment agreement with the IRS. Those who owe $50,000 or less in combined tax, penalties and interest can use the Streamlined Procedure to set up a monthly payment agreement for up to 72 months. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. 
• Some struggling taxpayers may qualify for an Offer in Compromise  This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay. 

Can't Pay Your Taxes?

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

Read more at: Tax Times blog

On October 29, 2019 we posted The IRS is Now Criminally Prosecuting Employers For FailureTo Pay Withheld Payroll Taxes! where we discussed that the IRS is stepping up criminally prosecuting business owners for failing to turn over withheld payroll taxes, on June 4, 2020  we posted Another Employer Gets Criminally Prosecuting For Failure To Pay Withheld Payroll Taxes! and now according to the DoJ, a Greensboro, North Carolina, business owner was sentenced to 18 months in prison for failing to pay employment taxes.

On Feb. 5, 2020, Wood and her mother, Adams, pleaded guilty to failing to pay over employment taxes. Adams is scheduled to be sentenced on July 9, 2020. In addition to the term of imprisonment, U.S. Senior District Judge N. Carlton Tilley Jr., ordered Wood to serve three years of supervised release and to pay approximately $2,338,766 in restitution to the United States.

 

Thinking of Borrowing From Your Company's

Payroll Tax Withholdings?

You Better Thank Again, if You Like Your Freedom!

Have Payroll 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 

orToll Free at 888-8TaxAid

 

Read more at: Tax Times blog

TIGTA issued its report Reference Number:  2020-30-031 on June 22, 2020 to the Commissioner of Internal Revenue.

The IRS’s primary objective in selecting returns for examination is to promote the highest degree of voluntary compliance. The LB&I Division has a variety of examination programs and uses a multitude of methods to select returns.  However, it consistently spent most of its examination resources on large business returns.

The IRS compiles Tax Gap data to periodically update appraisals of the nature and extent of tax payment noncompliance for use in formulating tax administration strategies.  

The largest component, $352 billion, is attributable to underreporting of taxes. Large corporation (assets of $10 million or more) tax noncompliance contributes an estimated $26 billion to the average annual underreporting Tax Gap.

This audit was initiated to evaluate the selection process, use of resources, and examination productivity for corporate returns examined as part of the Large Business and International (LB&I) Division’s Discriminant Analysis System (DAS) workstream.  Approximately 44 percent of Form 1120, U.S. Corporation Income Tax Return, examinations during Fiscal Years 2015 through 2018 were closed from the DAS workstream. If

TIGTA Analyzed The 10,755 Returns Closed in the DAS Workstream During Fiscal Years 2015 Through 2018 

and Found That 47 Percent Were Closed
With No Change to the Tax Return.

TIGTA analyzed the potential cost for excessive time charged to no-change returns, i.e., time in excess of 200 hours, and estimated that potentially $22.7 million was spent examining no‑change returns in excess of 200 hours.

Of the 10,755 returns:

• 7,831 returns (73 percent) were systemically selected, i.e., were selected as the primary tax return to be examined.  
• The overall no-change rate for these returns was about 55 percent (4,327 of the 7,831), and 
• The no‑change rate was generally high across all activity codes for businesses with assets of $10 million or more (ranging from 44 percent to 61 percent).

The LB&I Division is updating the DAS model to improve the no‑change rates.  However, TIGTA found that the LB&I Division is not leveraging all available information to improve the model, such as the examination scope and which tax issues are the most productive to examine.  LB&I also plans to test the new formulas only on returns that are nearly a decade old.

TIGTA Reviewed The Examination Results For The 10,755 DAS Returns and Found That the LB&I Division
Is Not Adequately Monitoring DAS Examination Results
To Assess Whether The Model Is Effectively Ranking Returns
Based On The Likelihood of Potential Tax Adjustment.

When assessing the productivity of its models, the LB&I Division does not use the actual examination amount when an examination results in a refund.  Instead, it treats examinations that result in a refund as no change in tax.  By not using the actual examination amount for refunds, the LB&I Division’s productivity is skewed to the positive and does not accurately reflect the true compliance impact.

TIGTA recommended that the LB&I Division:

• Develop an action plan to reduce the examination no-change rates; 
• Avoid working pickup returns unless issues are established on primary tax returns that may affect prior or subsequent years; 
• Minimize hours expended on no‑change closures; 
• Test newly developed formulas on current examined returns;
• Consider breadth of scope and noncompliance issues found in past examinations; and 
• Analyze DAS return actual examination results on a regular basis. 

The LB&I Division agreed with two recommendations and will formulate a plan to reduce the no‑change rate and hours incurred.  The LB&I Division also plans to analyze examination results on a regular basis.  

The LB&I Division disagreed with three recommendations pertaining to the DAS model and noted that it released a new DAS model in April 2020.  The LB&I Division also disagreed with using actual examination dollar results for evaluating the effectiveness of the DAS model.

 

To view the report, including the scope, methodology, and full IRS response, go to: https://www.treasury.gov/tigta/auditreports/2020reports/202030031fr.pdf.

Have a 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

Read more at: Tax Times blog

In IR-2020-130 the Internal Revenue Service Office of Chief Counsel announced a time-limited settlement offer to certain taxpayers with pending docketed Tax Court cases involving syndicated conservation easement transactions. Taxpayers eligible for this offer will be notified by letter with the applicable terms.

The settlement offer would bring finality to these taxpayers with respect to the syndicated conservation easement issues in their docketed U.S. Tax Court cases. 

The Settlement Requires A Concession of The Income Tax Benefits Claimed By The Taxpayer and Imposes Penalties.

“The IRS will continue to actively identify, audit and litigate these syndicated conservation easement deals as part of its vigorous and relentless effort to combat abusive transactions,” said IRS Commissioner Chuck Rettig. “These abusive transactions undermine the public's trust in private land conservation and defraud the government of revenue. Ending these abusive schemes remains a top priority for the IRS."

The IRS recognizes the important role of conservation easement deductions in incentivizing land preservation for future generations. However, abusive syndicated conservation easement transactions have been of concern to the IRS for several years. 

In Notice 2017-10, the IRS identified certain syndicated conservation easement transactions as tax avoidance transactions and provided that such transactions (and substantially similar transactions) are listed transactions for purposes of Treasury Regulation § 1.6011-4(b)(2) and §§ 6111 and 6112 of the Internal Revenue Code.  Also, in 2019, the IRS added syndicated conservation easement transactions to its annual “Dirty Dozen” list of tax scams.
 
Taxpayers should note that the U.S. Tax Court has held in the government’s favor in several opinions and orders in syndicated conservation easement cases.  The IRS realizes that some promoters may tell their clients that their transaction is “better” than or “different” from the transactions previously rejected by the Tax Court and that it may be better for the client to litigate than accept this resolution.  When deciding whether to accept the offer, the IRS encourages taxpayers to consult with independent counsel, meaning a qualified advisor who was not involved in promoting the transaction or handpicked by a promoter to defend it.  

In listed syndicated conservation easement structures, promoters syndicate ownership interests in real property through partnerships, using promotional materials to suggest that prospective investors may be entitled to a share of a conservation easement contribution deduction that equals or exceeds two and one-half times the investment amount. The promoters obtain an appraisal that greatly inflates the value of the conservation easement based on a fictional and unrealistic highest and best use of the property before it was encumbered with the easement.  After the investors invest in the partnership, the partnership donates a conservation easement to a land trust.  Investors in the partnership then claim a deduction based on an inflated value. The investors typically claim charitable contribution deductions that grossly multiply their actual investment in the transaction and defy common sense.

The IRS has developed a comprehensive, coordinated enforcement strategy to address abusive syndicated conservation easement transactions and has also been working closely with the U.S. Department of Justice to shut down the promotion of them.  The IRS will continue to disallow the claimed tax benefits, asserting civil penalties to the fullest extent, considering criminal sanctions in appropriate cases, and continuing to pursue litigation of the cases that are not otherwise resolved administratively. This syndicated conservation easement resolution should not be deemed to have any impact on the potential criminal exposure, investigation and/or prosecution of any individual or entity that participated in or assisted or advised others in participating in a syndicated conservation easement transaction in any manner whatsoever.

In addition, part of the IRS’ strategy is the creation of two new offices that are actively investigating these transactions: the Promoter Investigation Coordinator and the Office of Fraud Enforcement. For certain taxpayers involved in syndicated conservation easements, the IRS Office of Chief Counsel has decided, however, to offer taxpayers an opportunity to resolve certain docketed cases on standardized terms. The settlement offer will be sent by mail to those eligible. Among the key terms of the settlement offer:

• The deduction for the contributed easement is disallowed in full.
• All partners must agree to settle, and the partnership must pay the full amount of tax, penalties and interest before settlement.
• “Investor” partners can deduct their cost of acquiring their partnership interests and pay a reduced penalty of 10 to 20% depending on the ratio of the deduction claimed to partnership investment.
• Partners who provided services in connection with ANY Syndicated Conservation Easement transaction must pay the maximum penalty asserted by IRS (typically 40%) with NO deduction for costs.

Taxpayers Should Not Expect To Settle Their 
Docketed Tax Court Cases on Better Terms.

Based on cases the Independent Office of Appeals has encountered to date, and the existing state of the law, taxpayers should not later expect a better result than what is provided in this settlement offer. 

“With this announcement, we encourage taxpayers and their advisors to take a hard, realistic look at their cases. They should carefully review this settlement offer. We believe this is clearly the best option for them to pursue given all of these factors,” said IRS Chief Counsel Michael J. Desmond. “Those who choose not to accept the offer should keep in mind the Office of Chief Counsel will continue to vigorously litigate their cases to the fullest extent possible.”

Have a 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

Read more at: Tax Times blog