Category Archives: criminal tax law

The Internal Revenue Service on November 2, 2020 announced in IR-2020-248 a number of changes designed to help struggling taxpayers impacted by COVID-19 more easily settle their tax debts with the IRS.

Taxpayers who owe always had options to seek help through payment plans and other tools from the IRS, but the new IRS Taxpayer Relief Initiative is expanding on those existing tools even more.

The revised COVID-related collection procedures will be helpful to taxpayers, especially those who have a record of filing their returns and paying their taxes on time. Among the highlights of the Taxpayer Relief Initiative:

• Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of 120 days.
• The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
• The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and out of business taxpayers. This taxpayer-friendly approach will occur instead of defaulting the agreement, which can complicate matters for those trying to pay their taxes.
• To reduce burden, certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient. 
• Some individual taxpayers who only owe for the 2019 tax year and who owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
• Additionally, qualified taxpayers with existing Direct Debit Installment Agreements may now be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.

Installment Agreement options are available for taxpayers who cannot full pay their balance but can pay their balance over time. 

The IRS Expanded Installment Agreement Options To Remove The Requirement For Financial Statements And Substantiation

 In More Circumstances For Balances Owed Up To $250,000 If The Monthly Payment Proposal Is Sufficient.

The IRS also modified Installment Agreement procedures to further limit requirements for Federal Tax Lien determinations for some taxpayers who only owe for tax year 2019.

In addition to payment plans and Installment Agreements, the IRS offers additional tools to assist taxpayers who owe taxes:

• Temporarily Delaying Collection — Taxpayers 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.
• Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an Offer in Compromise. 
• Relief from Penalties — The IRS is highlighting reasonable cause assistance available for taxpayers with failure to file, pay and deposit penalties. First-time penalty abatement relief is also available for the first time a taxpayer is subject to one or more of these tax penalties.

"If you're having a tax issue, don't go silent. Please don't ignore the notice arriving in your mailbox," Guillot said. "These problems don't get better with time. We understand tax issues and know that dealing with the IRS can be intimidating," so hiring experience Tax Attorneys prevent you from having deal with the IRS while addressing and resolving your tax problems!

Have IRS Tax Problems?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog

According to Law360, high-net-worth individuals may find themselves the focus of unwanted attention from the Internal Revenue Service. Last summer Douglas O'Donnell, the commissioner of the IRS Large Business and International, or LB&I, Division, announced the IRS would begin a new campaign initiating several hundred audits of high-net-worth individuals.

The new examinations will be conducted by a specialized group of examiners in the global high wealth industry group at LB&I nicknamed "the Wealth Squad." The Wealth Squad specializes in taking a holistic approach and examining the types of complex financial transactions and holdings that are more common among high-net-worth individuals.

As the Wealth Squad sends out notices to targeted high-net-worth individuals, professional advisers need to be prepared to develop an effective strategy for representing these clients through the audit process and beyond. That strategy includes making a high-level review of their clients' business and financial holdings, identifying potential issues, developing the roles that respective professional advisers will play during the audit, and how to best respond to requests for documents or interviews with their clients.

One of the most important items during the examination is to ensure that the taxpayer is protecting any privileged communications and preserving objections to the government's requests in the event of any future litigation. 

LB&I has an established examination process that outlines the phases of an LB&I examination and the steps that occur during each stage. Professional advisers should review the LB&I examination process to help them formulate their plan for representing their clients through the examination.

Among those campaigns are issues related to offshore holdings and foreign transactions; syndicated conservation easement transactions; Internal Revenue Code Section 831(b) captive insurance companies; private foundation abuses; and S corporation issues related to excess losses, built-in gains and shareholder distributions.

By identifying these issues early, professional advisers are able to identify other parties that may have information relevant to that issue and work to gather any relevant documents, ensuring they have adequate time to review the information and develop a strategy addressing the potential issue.

Upon identification of issues that may become a focus of the audit, a decision needs to be made as to who among the taxpayer's professional advisers is in the best position to handle the examination and interact directly with the IRS. Section 7521(c) grants the representative the right to handle any interview without the taxpayer present, absent a summons, and the professional adviser should limit direct interaction between their client and the examiner.

In large cases that are likely to end up in litigation, an attorney should be engaged early to help develop a strategy for the audit with an eye towards litigation. If there is any hint that anything in the audit could be construed as some form of fraud or misrepresentation by the taxpayer, everything must stop immediately, and the attorney who handles criminal tax defense needs will advise on how to proceed.

One of the most important aspects of an examination is to maintain privileges and preserve objections in the event of any future litigation. Section 7525(a)(1) extends limited protection to certain tax-practitioner communications for noncriminal tax matters if such communication would have been privileged if it were a communication between a taxpayer and an attorney. 

When An Attorney Has Been Engaged, The Parties Should Execute A Kovel Agreement To Extend The Attorney-Client Privilege To The Taxpayer's Nonattorney Professional Advisers.

Given the likely complexity of a high-net-worth taxpayer's business and financial holdings, there are likely to be a number of potential professional advisers to assist in the audit, each of whom should enter into a Kovel agreement to protect their audit-related communications.

Following the initial audit notification from the Wealth Squad, the examining agent is likely to begin making requests for documents related to the taxpayer and their business and financial holdings. Unlike a summons, an information document request has no statutory authorization outside of the general power of the IRS to examine returns.

However, timely responses to information document requests help establish cooperation and reduce the likelihood that the government will feel the need to issue a summons. It is important during this stage to maintain objections to any requests and preserve privileges.

Among the potential objections are that the requests are overly broad, unduly burdensome or vague, that the request has provided inadequate time to comply, or that the documents are not within the taxpayer's possession, custody or control.

If the requests come in the form of a summons, the government must be able to establish that it was issued for a proper purpose, that the information sought is relevant to an existing examination, that all administrative and statutory procedures have been satisfied, and that the information is not already in the possession of the IRS.

The IRS cannot compel taxpayers to waive privileges, however, any conduct by the taxpayer or their representative that is inconsistent with the maintenance of privilege can operate as a waiver.

The overarching goal while representing a high-net-worth individual in an audit is to cooperate with the examiner and the government's requests for documents while protecting your client by preserving objections and privileges. Cooperation does not mean waiving privileges, statutory limitations periods or other rights that protect taxpayers.

High-net-worth individuals receiving audit notifications from the Wealth Squad should be prepared for a thorough examination of their business and financial holdings that includes their personal information along with information from any entities in which they hold an interest, including any domestic or foreign corporations, partnerships, trusts or charitable foundations.

Using the resources published by LB&I, professional advisers can identify any potential issues that fall under one of LB&I's active campaigns and work to develop a strategy for addressing that issue throughout the LB&I examination process.

That strategy includes determining who is in the best position to serve as the face of the client in the audit. All communication should flow through that adviser and direct interaction with the client should be limited to the extent possible.

All of this should be done with an eye toward potential future litigation. While future litigation is all about offense, the audit is all about defense, protecting the client by preserving the client's privileges, objections, limitations periods and other statutory protections.

Are You Being Audited by the IRS Wealth Squad?

Contact the Tax Lawyers at 

Marini & Associates, P.A.

 

for a FREE Tax Consultation

at www.TaxAid.us or www.TaxLaw.ms

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

 

Read more at: Tax Times blog

In a December 2016 post, Foreign Owned Domestic Disregarded Entities Must Report Under New Regs. we discussed that the IRS has now issued final regulations and they treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner, but only for the reporting, record maintenance and associated compliance requirements that apply to 25% foreign-owned domestic corporations under Code Sec. 6038A. 

These changes were intended to provide IRS with improved access to information that it needs to satisfy its obligations under U.S. tax treaties, tax information exchange agreements and similar international agreements, as well as to strengthen the enforcement of U.S. tax laws. TD 9796, 12/12/2016; Reg. § 1.6038A-1, Reg. § 1.6038A-2, Reg. § 301.7701-2. These regulations are effective December 13, 2016.

For Tax Years Beginning After December 31, 2017,
The TCJA Act Increased The Penalty To $25,000 From $10,000
For Each Return That Must Be Filed.

For US tax purposes, a limited liability company (LLC), that has a single owner (Single Member LLC, or SMLLC) and is not classified as a corporation is generally disregarded as separate from its owner (a Disregarded Entity). The economic activities of the SMLLC are attribute to the owner of the LLC for tax purposes, as if the LLC did not exist. 

This concept allowed a foreigner to use a SMLLC to conduct certain economic activities in an “anonymous” manner prior to TCJA 2017.

Foreigners have traditionally used SMLLCs to do the following activities, without having to declare anything in the United States:

• Maintain bank accounts in the United States in the name of a company, yet with the same tax benefits as an individual investor.
• Conduct international trading business using the United States as a hub.
• Hold property with limited personal liability and without publishing the name of the final beneficiary in public records.
• Legally compartmentalize a series of financial and/or real estate investments in different entities without creating a new taxpayer for each separate investment.
• Being a subsidiary of a foreign company doing any of the activities previously mentioned, etc.

In preparation for exchanging more information with other countries, at the end of 2016 Congress revised the law so that SMLLCs were no longer considered transparent for purposes of reporting on their international transactions and foreign ownership. Beginning with the 2017 tax year, SMLLCs with foreign owners and reportable transactions needed to:

1. Apply for a taxpayer number, for which it may be necessary that the ultimate beneficial owner list their taxpayer number (ITIN) or apply for one.
2. Identify and report the LLC’s direct and indirect foreign owners, including the ultimate beneficial owner(s).
3. Break down “reportable” transactions between the LLC and its owner(s) and/or other “related parties.”
4. Report the total value of the LLC’s assets.
5. Maintain books and records subject to audit.

Foreign-owned Corporations were already subject to filing form 5472, and the requirements for SMLLCs are basically the same with one important exception. The definition of “reportable transactions” was expanded for SMLLCs to include not only things such as payments and loans, but also capital contributions and distributions. Therefore, it can easily be that Form 5472 and the corresponding information will have to be presented by each SMLLC every year.

The civil penalty for failing to file a Form 5472, even if the non-filing was unintentionally, was increased from $10,000 for the 2017 fiscal year to $25,000 in 2018. 

The penalty is also applied whenever an incomplete, or late form is filed. Because a separate form 5472 is required for each “related party” in each year that there is a reportable transaction, the penalty can easily multiply for each transaction which the SMLLC has with each “related party.” In addition, failure to maintain updated books to verify transactions constitutes an additional $25,000 penalty. 

Both penalties increase by $25,000 each month that non-compliance continues in case the breach is not resolved within 90 days after the tax authority sends the notice of a penalty. If the LLC does not pay the penalty, the tax lien could be extended to the assets of the LLC even if they are transferred to another owner and in some cases, be enforceable against the owners of the LLC.

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 for a FREE Tax Consultation 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 DoJ, a Alabama, salesman was sentenced to 24 months in prison on October 27, 2020 for tax evasion. 

According to court documents and statements made in court, Ivan Scott “Scott” Butler was an automobile industry consultant and sold automobile warranties as an independent salesman. 

• In 1993, Butler stopped filing tax returns and attended tax defier meetings and purchased tax defier materials. 
• Starting in 1998, Butler used several Nevada nominee corporations to receive his income and conceal it from the IRS. 
• In or around 1999, Butler moved hundreds of thousands of dollars to bank accounts in Switzerland and hid his assets in offshore insurance policies held in the name of non-U.S. insurance providers, thus disguising his ownership of the funds. 
• Such accounts, which generally are used as investment vehicles, are commonly known as “insurance wrappers.”  
• In 2014, Butler converted some of his insurance wrappers into precious metals, which were shipped to Butler and another individual in the United States. 
• Some of those precious metals were given to friends and family for safekeeping. 

In total, Butler caused a tax loss to the IRS of $1,093,400. On March 6, 2020, Butler pleaded guilty to tax evasion. 

In addition to the term of imprisonment, U.S. District Judge Annemarie Carney Axon ordered Butler to serve three years of supervised release and to pay approximately $1,093,400 in restitution to the United States.

Need Help Coming Clean with the IRS?

Contact the Tax Lawyers at 

Marini & Associates, P.A.

 

for a FREE Tax Consultation

at www.TaxAid.us or www.TaxLaw.ms

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

 

Read more at: Tax Times blog