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Category Archives: criminal tax law

IRS Training of Additional 20,000 – 30,000 New Employees Could Take up to “Three Years”

The IRS is set to receive billions in new funding to catch wealthy tax evaders, but the effects may not be visible for years and enforcement could initially drop as agency workers are pulled away to train new agents.

The Internal Revenue Service will receive $45.6 billion in enforcement funding as part of a nearly $80 billion funding increase included in the Inflation Reduction Act, Democrats' tax, climate and health care bill signed into law Aug. 16 by President Joe Biden.


However, former senior agency officials told Law360 it will take years for the IRS to ramp up enforcement efforts following the funding boost. Hiring a large number of workers will take time, as will training them. Further, existing employees will be involved in training new personnel, and senior agency management will need to put plans in place to avoid significant disruptions to their work, they said.

"As you get new funding to hire more auditors, instead of revenue going up it often goes down" initially, according to former IRS Commissioner Lawrence Gibbs, who is now with Miller & Chevalier Chtd. "You're taking experienced agents out of the line working to train new agents and that's an extremely important task."

Measures of enforcement performance often decline somewhat the first year or two after the agency receives new funding, said Mark Matthews, a former deputy commissioner of services and enforcement at the IRS and a former chief of the agency's Criminal Investigation division. That's because the most effective agents are typically taken offline to train new workers, said Matthews, who is now at Caplin & Drysdale.

"The programs with the longest training cycles like criminal investigation generally will take longer to show progress statistically," he said.


The New Funding Will Be Directed At Enforcing Compliance Among The "Wealthiest Taxpayers" With Complex
Tax Situations, Meaning The Agents Pursuing
Them Will Need Extensive Training.


IRS Commissioner Chuck Rettig told agency employees this month that the law provides needed resources to address noncompliance among large corporate and wealthy taxpayers, along with pass-throughs and multinational companies with international tax issues. Doing so will require sophisticated and specialized teams that can analyze complex structures to ensure fairness in the system, he said.

Eric Hylton, a former commissioner of the agency's Small-Business/Self-Employed division and former deputy chief of the Criminal Investigation division, told Law360 that fully training compliance personnel generally takes about three years.

Training includes a year of classroom and on-the job instruction for revenue agents, who perform audits, and revenue officers, who collect taxes, he said. Revenue agents receive additional training.

Special agents in the IRS' Criminal Investigation division receive training for six months at the Federal Law Enforcement Center, then do one to two years of on-the-job training with an experienced special agent, said Hylton, who is now national director of compliance at Alliantgroup.

To reduce the training burden on existing workers, CI is using contractors and recent retirees for some academy and on-the-job training roles, Cole said. The division is also increasing its use of technology in training, he said.

Improved technology will play a part in boosting collections, Koskinen said. Audit rates for wealthy people and corporations have dropped much more than others, and increasing them to be on par with historical rates "will generate significant funds," Koskinen said.

Treasury Secretary Janet Yellen has directed the IRS to submit a report within six months detailing how it plans to spend the nearly $80 billion provided by the Inflation Reduction Act. Meanwhile, Rep. Bill Pascrell Jr., D-N.J., who chairs the House Ways and Means Oversight Subcommittee, has called on Rettig to provide him a spending plan by Aug. 30.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at
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Read more at: Tax Times blog

IRS 2019 Tables on Foreign-Controlled US Corporations Shows a Combined $15.9 Trillion of Assets And $6.4 Trillion of Receipts



The IRS, under its Statistics of Income (SOI) program, has published tables for the Tax Year 2019 Foreign-Controlled Domestic Corporation study. (IRS Tax Stats Dispatch 2022-06)

The tables are based on data from the Form 1120 series for domestic corporations with 50%-or-more stock ownership by a single foreign "person." The data are classified by industry group, country, and age of the corporation.

According to SOI, there were 134,000 federal income tax returns filed by foreign-controlled domestic corporations (FCDCs) for tax year 2019. These returns accounted for 2.1% of all corporate returns filed for that year.

"However, the FCDCs were often large companies, with a combined $15.9 trillion of assets and $6.4 trillion of receipts," SOI stated. 

"They reported 13.9% of the assets and 17.9% of the receipts of all corporations." Manufacturing companies accounted for $2.9 trillion of the FCDC receipts.

Domestic companies with owners based in Japan produced $1 trillion of receipts, followed by owners from the United Kingdom and the Netherlands, with $900 billion each.

Have an 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 
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Domestic Streamline Denied – Too Many Accounts & Too Much in The Foreign Accounts To Be Non-Willful

According to Law360, the estate of a dual U.S.-Canadian citizen owes penalties of more than $157,000 for her failure to disclose accounts in Canada and New Zealand, the U.S. Court of Federal Claims ruled in Flint et al. v. U.S., case number 21-1202, in the U.S. Court for Federal Claims.

The court found on August 23, 2022 that Margaret J. Jones failed to file the required disclosures of foreign bank and financial accounts for more than $3 million kept in Canada and New Zealand, where her husband was born. 


Judge Marian Blank Horn threw out claims by Jones' estate for breach of contract and illegal extraction, rejecting arguments that the U.S. government violated an agreement with her over the acknowledgement of the funds.

After Jones' husband died in 2011, she admitted in her tax filings that the foreign accounts existed, according to court filings. In an effort to pay the money she owed, Jones enrolled in an Internal Revenue Service program known as the Streamlined Domestic Offshore Procedures. Designed to encourage disclosure of previously undisclosed offshore accounts, the program allows participants to work with the IRS to come into full tax compliance.

Jones' Estate Said The IRS Then Used This Self-Disclosure To Impose An FBAR Penalty Of $157,000 For Failing To Disclose The Existence Of The Foreign Bank Accounts.


"The government lured Mrs. Jones in based upon the IRS promise and the explicit provisions of the contract," the estate said in its complaint. "They then later switched their position and alleged her good faith misunderstanding of the law was irrelevant and she should be strictly liable for other 'willfully blind' penalties."

The accounts date back nearly six decades to when Jones' husband began placing funds in them, around the end of World War II. By the time the IRS caught up, they held millions across 11 accounts, according to Tuesday's ruling.

Jones knew about the accounts but never told her tax preparer, the government said, indicating that she was willfully attempting to hide the assets. It therefore assessed a penalty even after she admitted to the existence of the accounts.

To qualify for the for streamlined programs, the IRS defines non-willful as “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirement of the law.”

The court was unpersuaded by the claims that Jones was tricked by the government. Judge Horn said the government had not in fact changed its position, and noted that the contract specified that the taxpayer may have to pay penalties if found to have deliberately hidden assets.


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Read more at: Tax Times blog

Penalty Relief for Late 2019 and 2020 Filings Including 5471, 5472, 3520 & 3520-A


To help struggling taxpayers affected by the COVID-19 pandemic, the Internal Revenue Service today issued Notice 2022-36,which provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late. 


To Qualify For This Relief,
Any Eligible Income Tax Return Must Be Filed
On Or Before Sept. 30, 2022.

Returns covered include: 

  • Form 1040, U.S. Individual Income Tax Return;
  • Form 1040-C, U.S. Departing Alien Income Tax Return;
  • Form 1040-NR, U.S. Nonresident Alien Income Tax
    Return;
  • Form 1041, U.S. Income Tax Return for Estates and Trusts;
  • Form 1065, U.S. Return of Partnership Income
  • Form 1120-S, U.S. Income Tax Return for an S corporation
  • Form 1120, U.S. Corporation Income Tax Return;
  • Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
  • Form 1120-F, U.S. Income Tax Return of a Foreign Corporation;
  • Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation;
  • Form 990-T, Exempt Organization Business Income Tax Return

The waiver also covers late penalties for foreign tax disclosures for those years, including

  • Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, and or Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is attached to a late-filed Form 1120 or Form 1065;
  • Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner.

However, As Currently Drafted, Only Corporations And Partnerships Are Entitled To This Relief For Late Filing
Penalties For Form 5471 & Form 5472!

The relief also covers a broad range of information returns, including many 1099s and information returns related to health insurance coverage. There are exceptions, including returns subject to fraud penalties. 

Have an 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

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