Category Archives: criminal tax law

A federal district court has held in Wolin, No. 17-CV-2927 (RRM) (CLP) (E.D.N.Y. Sept. 28, 2020) that the IRS could collect a failure to file foreign bank account reports (FBAR) penalty from a decedent’s estate because the penalty survived the decedent’s death.

Generally, under federal common law, a claim survives a party’s death if it is "remedial" rather than "punitive.'" (Sharp v Ally Fin., Inc., (DC NY 2018) 328 FSupp 3d 81)

Generally, actions to recover tax penalties are remedial because the purpose of such penalties is to reimburse the government for the heavy cost of investigating violations of the tax law. (Estate of Kahr, (CA 2 1969) 24 AFTR 2d 69-5332)

In 1983, Leo Ziegel, a U.S. citizen, engaged the services of a Swiss company to set up a foundation in Lichtenstein. The foundation's trustee opened a bank account with the Union Bank of Switzerland (UBS). Ziegel signed a UBS signature card for the account

During 2008, Ziegel made cash withdrawals and wrote checks on the UBS account, deposited earned interest and dividend income, and received investment sales proceeds from that account.

Ziegel did not disclose this account to IRS on his 2008 return or at any other time. He also failed to file an FBAR for 2008. 

Ziegel died on April 4, 2014, and on May 15, 2015, the IRS assessed against his estate a failure to file an FBAR penalty ("FBAR penalty") in the amount of $1.4 million.

When the estate failed to pay the FBAR penalty, IRS initiated an action to recover the FBAR penalty from Ziegel’s estate, alleging that the FBAR penalty survived Ziegel’s death and that, therefore, his estate was liable for the penalty.

The District Court Determined That
The FBAR Penalty Survived Ziegel’s Death; 

Therefore, His Estate Was Liable For The Penalty.

The district court noted that, under Estate of Kahr, liability for a tax penalty survives an individual’s death and is borne by their estate if the purpose of the penalty is remedial. The district court determined that the failure to file an FBAR is a “remedial penalty with incidental penal effects” because it is imposed to protect tax revenue and reimburse the government for the public funds expended in investigating and uncovering the individual’s tax malfeasance.

Read more at: Tax Times blog

In Tax Court Press Release (10/29/2020) the Tax Court has announced that, effective Friday, October 30, 2020, it is suspending, until further notice, in-person acceptance of hand-delivered documents. 

On March 18, the Tax Court closed its building due to the COVID-19 pandemic.

On July 10, the Tax Court resumed accepting hand-delivered documents between the hours of 8:00 AM and 4:30 PM, Monday through Friday. 

While in-person acceptance of hand-delivered documents has been suspended until further notice, the Tax Court will continue to receive mail and other deliveries. 

Litigants and representatives may comply with deadlines for filing petitions or notices of appeal by timely mailing the petition or notice of appeal to the Court.

To be timely mailed, the petition or notice of appeal must be postmarked on or before the last day for filing and mailed using the U.S. Postal Service (USPS) or a designated private delivery service. (Code Sec. 7502) 

The Press Release notes that the Court’s eAccess and eFiling systems remain operational. Litigants can use the eFiling system to file documents that can be e-filed, and use eAccess to view documents filed in their case.

The Press Release recommends that litigants and others with questions contact the Court's Public Affairs Office at (202) 521-3355.

Have a Tax Court Problem?

Marini & Associates, P.A. 

Read more at: Tax Times blog

Procedurally taxing has a detailed post describing how recent IRS guidance to Revenue Officers, SBSE-05-1020-0084, advising them essentially to continue avoiding going into the field, unless absolutely necessary will impact collections, offers in compromise and the filing of Notice of Federal Tax Lien and other collection notices.

The hallmark of a revenue officer is showing up and providing a physical presence to let the taxpayer know that the IRS has not forgotten about them and the unpaid taxes.  Essentially, ROs were told to sit tight when the pandemic hit.  The new guidance extends this situation until January 31, 2021.  

Have IRS Tax Problem?

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

Read more at: Tax Times blog

The IRS unveiled a new online publication called “A Closer Look” to provide a more detailed look at some of the major issues facing IRS and tax administration. 

• This post focuses on compliance and audits. 
• The post includes data about audit rates that provides insight and 
• perspective into which income groups are more likely to be audited.
• Audit Rates Increase as Income Rises

Few Things Can Generate As Much Taxpayer Concern, Confusion and Controversy as an IRS Audit.

Tax audits are a critical compliance tool to help ensure fairness in the tax system, and the IRS works hard to ensure the agency's audit selection process is fair and impartial. Decisions to conduct audits are based on the financial information that's on – or not on – the tax return. There's an extensive set of checks and balances to ensure fairness with individual audits, and there are important protections and appeals for taxpayers during the administrative process as well.

But before an audit of a taxpayer takes place, the IRS career leadership team must make higher-level decisions on where to focus our limited audit resources across the agency. Given the breadth of our economy and the types of income people have, the IRS takes steps to ensure audits are spread across income categories – to ensure fairness and support voluntary compliance with the nation's tax laws.

Like many things involving taxes, there are complexities behind audit rates. On the surface, these can be easy to misinterpret. A Closer Look at audit rates provides insight into which income groups are more likely to be audited.

Higher-Income Taxpayers Face Greater Chance of Audit

Despite common misperceptions about IRS examination rates, the reality is that the likelihood of an audit significantly increases as income grows.

Taxpayers with incomes of $10 million and above had substantially higher audit rates than taxpayers in every other income category for each calendar year from 2010 through 2015. Those with incomes above $1 million also had higher exam rates than all other groups earning less.

Tax Year 2015 provides a good historical overview of where IRS compliance priorities are focused. The exam coverage rate of taxpayers with incomes of $10 million or more is 8.16%. The rate for those between $1 million and $10 million is 2.53%. And other income categories are far below that – generally less than 1%.

Tax Year 2015 is the last year for which we know the actual audit rates, because the IRS can still open audits for more recent years, so the data for more recent years is not yet complete.

The chart below shows that higher-income taxpayers were audited at much higher rates in 2013-2015. Data is not yet complete for the more recent years, particularly for high-income taxpayers for the 2016 through 2018 tax years, where many examinations are in the process or have yet to even begin.

IRS Audit Rates By Income Category: 2013-2015 Shows More Exams For Higher Income Over Time

Total positive income	Total returns filed in TY2013	Returns examined*	Percent covered
No total positive income**	619,694	78,573	12.68
$1 under $25,000	56,181,555	464,856	0.83
$25,000 under $50,000	34,753,396	121,841	0.35
$50,000 under $75,000	19,532,032	63,700	0.33
$75,000 under $100,000	12,787,903	52,852	0.41
$100,000 under $200,000	17,451,788	90,236	0.52
$200,000 under $500,000	4,844,782	40,290	0.83
$500,000 under $1,000,000	800,121	11,802	1.48
$1,000,000 under $5,000,000	342,605	10,782	3.15
$5,000,000 under $10,000,000	23,413	1,499	6.40
$10,000,000 and above	14,009	1,689	12.06

Total positive income	Total returns filed in TY2014	Returns examined*	Percent covered
No total positive income**	662,876	49,829	7.52
$1 under $25,000	54,956,300	390,799	0.71
$25,000 under $50,000	35,090,262	147,805	0.42
$50,000 under $75,000	19,676,659	82,822	0.42
$75,000 under $100,000	13,130,657	49,717	0.38
$100,000 under $200,000	18,405,264	73,729	0.40
$200,000 under $500,000	5,324,980	29,884	0.56
$500,000 under $1,000,000	910,977	10,362	1.14
$1,000,000 under $5,000,000	401,634	10,651	2.65
$5,000,000 under $10,000,000	28,847	1,512	5.24
$10,000,000 and above	18,122	1,572	8.67

Total positive income	Total returns filed in TY2015	Returns examined*	Percent covered
No total positive income**	701,594	31,329	4.47
$1 under $25,000	54,135,898	357,410	0.66
$25,000 under $50,000	35,589,401	141,727	0.40
$50,000 under $75,000	20,312,858	108,219	0.53
$75,000 under $100,000	13,063,770	64,324	0.49
$100,000 under $200,000	19,459,846	92,124	0.47
$200,000 under $500,000	5,788,644	31,804	0.55
$500,000 under $1,000,000	962,481	10,898	1.13
$1,000,000 under $5,000,000	428,082	10,244	2.39
$5,000,000 under $10,000,000	31,159	1,367	4.39
$10,000,000 and above	19,531	1,593	8.16

Source: Table 17a, Internal Revenue Data Book, 2019
*Returns examined is total of columns “Closed” and “in process”.
** Returns that show no total positive income report zero or negative income. The negative income could be negative business income and/or capital losses. Returns with no TPI are filed by taxpayers in any of the income categories, and there is no prevalence of one over the other. These returns account for less than 0.5% of the individual filing population.

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The Typical Audits For Higher-Income Taxpayers
Involve at Least Three Different Tax Years,
Often Include Related Entities, and
Routinely Take Years To Resolve.

The highest income taxpayers face the most significant chance of an examination, and they face the most highly trained and experienced IRS agents and teams utilizing our most sophisticated tools and techniques.

At the end of the day, the IRS strives to properly serve compliant taxpayers and uphold the nation’s tax laws, ranging from civil side audits and notices to criminal investigations in the most egregious cases. We face tough choices each year as far as where to deploy resources given the breadth of our responsibilities, but our choices are guided by fair and impartial audit plans throughout the process.

Have 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