Author Archive for Jeffrey B. Kahn, Esq. - Principal Attorney

Jeffrey B. Kahn, Esq. Discusses Taxes, Undisclosed Foreign Accounts and the IRS On ESPN Radio – February 20, 2015 Show

Topics Covered:

1. Even Grandmothers and Widows Are Not Safe From IRS Bank Account Seizures

2. FATCA and FBAR

3. The 5 Biggest, Best Homeowner Tax Breaks – Get Them While They Are Still Here!

4. Questions from our listeners:

a. I hear you say that you are Board Certified in Tax – what does that mean?

b. I am getting ready to file my 2014 which will have a balance due that I cannot pay in full. What can I do?

c. Why does the IRS file tax liens?

Yes we are all working for the tax man!

Good afternoon! Welcome to the KahnTaxLaw Radio Show

This is your host Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.You are listening to my weekly radio show where we talk everything about taxes from the ESPN 1700 AM Studio in San Diego, California. When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into our website at www.kahntaxlaw.com.

I have a lot to cover today in the world of taxes and helping me out will be my associate attorney Amy Spivey who will be calling in later.

Even Grandmothers and Widows Are Not Safe From IRS Bank Account Seizures

Ronald Malone and his wife Janet Malone of Dubuque, Iowa lived a simple life and enjoying their retirement. Shortly before Ronald’s death in October 2011, Ronald told his wife about a briefcase containing $180,000 cash that he accumulated from his job as a publishing executive and from gambling winnings and investment income.

After Ronald died, Janet who at the time was 68 years old, deposited this cash into her bank account in increments of anywhere from $5,800 to $9,000.

Unknown to Janet, these cash deposits were being reported by the bank to the IRS. The IRS having picked this up obtained a warrant to seize the funds in Janet’s bank account based on suspicion that the transactions were meant to avoid tax reporting requirements under the Bank Secrecy Act of 1970.

Well just a couple of weeks ago prosecutors charged Janet Malone with a criminal misdemeanor and she was arrested. It turns out that four years earlier her husband who must have been making cash deposits to the bank was warned by the IRS about continuing this practice. Ronald acknowledged to the IRS Special Agent at a meeting in his house that the small deposits amounting to $35,500 could be considered “structuring” (which is against the law) and signed a form confirming that he’d been warned about the practice. Janet was at the home for part of that meeting between the IRS Special Agent and Ronald, but she had not signed anything. Janet claims that she did not remember the details of the IRS agent’s 2011 visit with her husband because she was in a state of despair over her husband’s health who at that time was dying of cancer.

As part of the federal government’s dragnet surveillance of the civilian population, everyone’s banking activities are monitored for “red flag” activities. Under the Bank Secrecy Act of 1970, banks are required to report to the IRS transactions on every individual who deposits or withdraws more than $10,000 in cash to or from a personal bank account on a given day. These reports indicate the financial activities that took place and include the individual’s bank account number, name, address, and social security number.

People who know of this law and are seeking to avoid this level of reporting by the bank will often go to great lengths to make multiple deposits so that no single deposit will be greater than $10,000. This tactic is called “structuring”. The IRS thinking that Ms. Malone was making small deposits to evade this reporting requirement used its civil forfeiture power to seize Ms. Malone’s bank account.

That’s right – federal law enforcement agencies are invested with the power of civil forfeiture whereby the agency can take cash, cars and other property without charging the property owner with a crime. The property owner need not receive any advance warning or notice before the assets are seized by the federal government. The government need not prove that a person is guilty of a crime – only that he or she is suspected of committing a crime. This law was designed to catch terrorists, money launderers, drug lords and serious criminals – but it can also be used by the government against law-abiding businesses and law-abiding taxpayers.

The reason that the federal government does not have to read you your rights, or advise you that you can have a lawyer, or do any of the things that the constitution is supposed to provide, is that they don’t charge the person with the crime – they charge your money with the crime. And that crime that your money committed can carry a charge to you of up to one year in jail and a $250,000 fine.

Janet Malone is not the only person whose money got her into criminal trouble. A few weeks ago, I told you about Carole Hinders, another resident of Iowa and a 67 year old grandmother who operated Mrs. Lady’s Mexican Food in Arnolds Park, Iowa for 38 years. But despite her clean tax record, on May 22, 2013 while settling into a crossword puzzle with her grandchildren she was visited at her home by a pair of IRS agents who stated that they had closed her business bank account and seized all her money, which at the time was almost $33,000.

Even professionals could get into criminal trouble from how their money is deposited. The IRS seized $344,405 from Mason City, Iowa doctor Alireza Yarahmadi’s bank account last year after suspecting he made repeated cash withdrawals in increments below $10,000 to evade federal reporting requirements. Dr. Yarahmadi denied wrongdoing, saying he routinely transferred cash from his bank account to safe deposit boxes for safekeeping. His attorney said that Dr. Yarahmadi is an Iran native who is suspicious of banks because his family lost its savings after the 1979 revolution.

Eventually, the government dropped their charges against Ms. Hinders and Dr. Yarahmadi and returned their funds. Ms. Malone’s case is still pending and the IRS does not appear to have discontinued this practice.

Are There Any Safeguards In Place For The IRS To Follow So Things Like This Do Not Happen?

Critics say the IRS rarely investigates such cases to see if the business owner has legitimate reasons for making small deposits, such as an insurance policy that covers only a limited amount of cash.

Seizing assets without criminal charges is legal under a controversial body of law that allows law enforcement agents to seize cars, cash and other valuables they believe are tied to criminal activity. There is nothing illegal about depositing less than $10,000 cash unless it is done specifically to evade the reporting requirement. But often a mere bank statement is enough for investigators to obtain a seizure warrant. In one case, the IRS agent noted almost a year’s worth of daily deposits by a business, ranging from $5,550 to $9,910. The officer wrote in his warrant affidavit that based on his training and experience, the pattern “is consistent with structuring”.

The IRS made 639 of these seizures in 2012, compared to 114 in 2005. And only one in five was prosecuted as a criminal case. So you are probably thinking was the money from the other 80% of cases returned to its rightful owners?

Well it’s time for a break but stay tuned because we are going to tell you what the IRS is doing to uncover taxpayers with undisclosed foreign bank accounts.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

Calling into the studio from our San Francisco Office is my associate attorney, Amy Spivey.

Chit chat with Amy

FATCA and FBAR

Jeff states: On a recent airplane trip from the Bay Area to Southern California, I sat beside a distinguished-looking elderly man. I initiated a conversation with him and found out he was a former judge now living in Mexico. We talked about everything, including taxation.

Jeff continues, The former judge admitted that he was an American citizen and he and some of his friends have problems sleeping because of Foreign Account Tax Compliance Act (FATCA). So, I asked him what about Foreign Bank Account Reporting (FBAR), as that was more serious than FATCA. But he had never heard about it. I wondered how many people are like the former judge and his friends who can’t sleep at night because of FATCA and who never heard of FBAR.

FATCA

Jeff asks Amy, please tell us what is FATCA all about?

Amy replies, FATCA was enacted in 2010 and the IRS has touted that FATCA has been successful so far. The IRS states they have collected US$6.5 billion and they reasonably believe that as much as $100 billion per year could be collected. The IRS is working with other countries that would like to use the U.S. model to improve their tax collection. The IRS will be working closely with the Organization for Economic Cooperation and Development (OECD) to implement Global FATCA (what many people are now calling GATCA); and also that the forms to request information from financial institutions would be standardized so that all countries would use the same forms, making it easy on the financial institutions. The IRS reasonably believes that FATCA can work, and given that the law has the effect of forcing compliance by every country, ultimately, everyone will benefit.

FBAR

Jeff asks Amy, how is the FBAR different from FATCA?

Amy replies, Keep in mind that an FBAR is different from FATCA and the requirements are also different. While impact of FATCA is to report you foreign income on your U.S. income tax returns, FBAR is an informational submission that must be filed with the Treasury Department if you have more than $10,000 in financial assets overseas. So, for FATCA, the financial institutions and the foreign governments will report to the IRS directly, but for FBAR, the taxpayers must self-report to the United States Treasury Department by June 30th each year.

Amy continues, Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge you with violations.

Jeff states, Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Foreign Corporations

Jeff asks Amy, what about those taxpayers who instead of having their foreign bank accounts titled in their individual names instead have the accounts titled in a foreign corporation?

Amy replies, The IRS has a special interest in foreign corporations (i.e., corporations organized outside the United States). They are interested in shareholders with at least 10% ownership and directors of these foreign corporations. Foreign corporations are very important because that is where the big bucks are. They want U.S. citizens and green card holders who are 10% shareholders and directors (in said corporations) to provide information from the following sources annually: articles of incorporation, listing of directors, annual returns for the company filed with the registrar of companies and financial statements. While this information is filed for informational purposes only, the foreign corporations should file a tax return with the IRS. You should note that the requirement applies to partnerships and trusts also.

Those Who Gave Up U.S. Citizenship

Jeff asks Amy, are U.S. taxpayers giving up their U.S. citizenship to avoid FATCA?

Amy replies, The IRS has noted that a record number of Americans have given up citizenship recently and some may have done so with the intent to get around FATCA. But the news is bad, because the IRS is threatening that every one of those citizens will be thoroughly investigated with a view to seeing if they are trying to evade taxes.

Amy continues, The IRS warns that people with a certain amount of assets will be treated as if all the assets were sold and will be taxed as at the day when citizenship was given up. This will also apply to long-term green card holders. Also, if one has given up citizenship and spends more than 30 days in the United States in a calendar year, he may be taxed as if he were a citizen.

Bad Banks

Jeff asks Amy, does it matter which foreign bank a U.S. taxpayer has an account in?

Amy replies, The IRS has named about a dozen banks worldwide that are considered bad [meaning that they are or were under investigation by IRS and/or DOJ] – and if you have an account in one of those banks and failed to comply with your filing and tax-reporting obligations, you are very likely to have a problem with the IRS. Click here for a list of those banks that are under scrutiny by IRS.

Is The IRS Watching You?

Jeff asks Amy, is the IRS watching U.S. taxpayers who travel in and out of the country?

Amy replies, The IRS claims it can tell when people enter and exit the country, and lying on immigration forms and tax returns is a federal offence. There is even a website that the IRS uses that can be used to tell whenever people enter and exit the United States.

Amy continues, Be aware that the number of days spent in the U.S. is very important in determining your tax status. For citizens, if you spend more than 330 days outside the U.S. per year, you will not be required to participate in Obamacare, or the number of days spent abroad will affect the amount of foreign earnings you may be able to exclude from income, hence paying low or no tax to Uncle Sam. For green card holders, you have immigration issues, as well as tax issues if you spend more than a specified period outside the United States.

It’s A Small World After All.

Jeff states, The IRS says people may be able to run, but they can’t hide. The IRS says it is going to have agents all over the world, as they are going to work closely with foreign governments through the information exchange programs and the financial institutions.

Amy states, Also, the IRS is using Internet searches and social media like Facebook and LinkedIn to find tax dodgers, along with whistle-blowers. There will be GATCA, where other countries will be following the IRS path and these countries along with the U.S. are proposing one standard form that will be used to get information from financial institutions worldwide. So, if China wants information from Swiss banks, it will use the same forms to make the request as Jamaica or France.

Jeff states, The idea is to make it easier for the banks to retrieve information. So, we may be looking to one tax reporting system if the global tax agencies have their way and tax evasion worldwide may very well be a thing of the past in a few years’ time. Under that perspective full compliance with the IRS requirements is the best way forward.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

If you are a homeowner you will want to stay tuned because after the break we are going to tell you the 5 biggest best homeowner tax breaks you should be taking advantage of.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And on the phone from our San Francisco office I have my associate attorney, Amy Spivey.

The 5 Biggest, Best Homeowner Tax Breaks – Get Them While They Are Still Here!

Jeff states, Leaving off deductions you’re eligible for, such as mortgage interest and property taxes, is leaving money on the table and with tax reform revving up again on Capitol Hill, with the heads of key committees pledging to work toward a simpler and fairer tax code, Congress may be looking to tradeoff these tax breaks with lower tax rates. Sounds intriguing?

Jeff states: Homeownership can pay off big time if you itemize your deductions. Use these five tax breaks to cut what you owe Uncle Sam:

Jeff to read off each break and Amy to respond and discuss.

1. Home Office

Do you work at home? Collect a tax break either by using the simplified method explained below or doing some complicated calculations to claim your exact home office expenses. When you opt for the simplified method, you get $5 per square foot and can claim up to 300 square feet of office. That’s a $1,500 deduction!

The Fine Print:

  • You can’t deduct a home office just because you head in there after dinner to read and answer emails from co-workers.
  • You have to use your home office “substantially and regularly to conduct business.”
  • Your home office doesn’t have to be in your home. A studio, garage, or barn can count as a home office.

Where You Claim it: Form 8829

2. Energy-Efficient Upgrades

Energy-efficiency home upgrades you made in 2014 can potentially cut your tax bill by up to $500, thanks to the residential energy tax credit. This tax credit lets you offset federal taxes dollar-for-dollar. You may be able to claim up to 10% of what you spent in 2014 on such items as insulation, a new roof, windows, doors or high-efficiency furnaces or air conditioners.

The Fine Print:

  • There’s a $500 lifetime cap (meaning you have to subtract any energy tax credit you used in prior years).

Where You Claim it: Form 5695

3. Mortgage Interest Deduction

This is the mother lode of tax deductions. You typically can deduct the interest you pay on your home loan of up to $1 million (married filing jointly). You have to use your mortgage to buy, build or improve your home. Using a home equity line or mortgage for something else, like paying college tuition? It’s generally OK to deduct the interest on loans up to $100,000 (married filing jointly) as long as your home secures the loan.

The Fine Print:

  • An RV, boat or trailer counts as a home if you can sleep and cook in it and it has toilet facilities.
  • Second home loans count toward the $1 million loan limit.

Where You Claim it: Schedule A

4. Property Tax Deduction

The property taxes you paid to the state, the county, the city, the school district and every other government entity that reached into your pockets last year are usually deductible on your federal tax return. If your mortgage lender paid your property taxes, look on your annual escrow statement to see the exact amount paid.

The Fine Print:

  • You can’t deduct assessments (one-time charges for things like streets, sidewalks and sewer lines).
  • Keep a record of the assessments you paid. When you sell your home, you can generally use the cost of those assessments to reduce any tax you owe on your sale profit.

Where You Claim it: Schedule A

5. Private Mortgage Insurance

Did you put down less than 20% when you bought your home? If you did, your lender probably forced you to buy private mortgage insurance. Those monthly premiums are tax deductible, if you can clear a few hurdles.

If you have a Veterans Affairs, Federal Housing Administration or Rural Housing Service loan, you likely paid upfront mortgage insurance premiums at the closing table (they might have called it a guarantee fee). The deduction for those is pretty complicated.

You get to deduct a part of that upfront premium each year. To figure out how much to deduct, you first check to see which is shorter:

  • The length of your mortgage
  • 84 months (seven years)

If your mortgage lasts more than seven years, you divide the cost of that upfront mortgage premium by 84 months and then multiply by the number of months you paid it (so 12 months for a full year) to get your deductible amount.

If you mortgage lasts seven years or less, you divide by the number of months it lasts and multiply by the number of months you paid it.

The Fine Print:

  • You have to have gotten your mortgage in 2007 or later.
  • When adjusted gross income is more than $100,000 (married filing jointly) you start losing the private mortgage insurance deduction and it disappears completely when your adjusted gross income is more than $109,000.

Where You Claim it: Schedule A

What About Everything Else?

Jeff asks Amy, What about all the other home-related expenses you paid, but can’t deduct, like your new deck or the pipes you replaced?

Amy replies, Hang on to those invoices and receipts by scanning them (receipts fade over time) and storing them in a file or online. When you sell your home and you’re figuring out if you owe federal tax on the profits, you may be able to subtract the cost of the improvements you made from your home’s selling price.

Jeff states: You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states, Many people benefit from tax breaks such as mortgage interest and property tax deductions, plus tax-free write-offs of up to $250,000 or $500,000 of home sale capital gains, depending on whether they file returns as singles or married couples. Renters get none of these.

Stay tuned as we will be taking some of your questions. You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team along with my associate attorney, Amy Spivey.

If you would like to post a question for us to answer, you can go to our website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Amy, what questions have you pulled from the kahntaxlaw inbox for me to answer?

1. Carlos from Chula Vista asks: Hi Jeff I listen to your show all the time and hear you say that you are Board Certified in Tax – what does that mean?

An attorney who is Board Certified by the California Board of Legal Specialization in Tax Law must have demonstrated a broad based knowledge of statutes (primarily federal) dealing with the imposition and collection of taxes. The attorney must also have advised clients concerning their rights and responsibilities regarding taxes, the proper taxation transactions, and the procedure for contesting proposed and assessed taxes

To become Board Certified in Tax Law, an attorney must have:

  1. Been licensed to practice law for at least five (5) years;
  2. Devoted a required percentage of practice to tax law for at least five (5) years;
  3. Handled a wide variety of tax law matters to demonstrate experience and involvement;
  4. Attended tax law continuing education seminars regularly to keep legal training up to date;
  5. Been evaluated by fellow lawyers and judges;

Passed a day-long written examination.

Initial certification is valid for a period of five (5) years. To remain certified, an attorney must apply for recertification every five years and meet practice, peer review and continuing legal education requirements for the specialty field.

The consumer can identify a Tax Law Board Certified attorney in one of many ways. A Tax Law Certified attorney is entitled to indicate certification on business cards and letterhead by stating “Board Certified-Tax Law”. The attorney may also display the certification in legal directories and telephone listings under “Attorneys-Board Certified.”

The California Board of Legal Specialization was created by, and operates under the authority of, the State Bar of California.

2. Barbara from Los Angeles asks: I am getting ready to file my 2014 which will have a balance due that I cannot pay in full. What can I do?

Here are four alternative options you may want to consider:

a. Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full – usually 60 to 120 days. Taxpayers are granted this relief will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.

b. Installment Agreement You can apply for an IRS installment agreement before your current tax liabilities are actually assessed. Remember that the sooner you start making payments, the less in penalties and interest you will be paying to the IRS.

c. Pay by Credit or Debit Card You can pay your Federal taxes by credit or debit card. IRS accepts all major cards (American Express, Discover, MasterCard, or Visa). Keep in mind that there is no IRS fee for credit or debit card payments, but the third-party processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95. If following this option, do not add the convenience fee or flat fee to your tax payment.

d. Offer In Compromise An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship. The IRS will consider your unique set of facts and circumstances:

Beware that not everyone will qualify for an Offer in Compromise program so you will want to check first with a tax professional.

3. John from San Francisco asks: Why does the IRS file tax liens?

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:

  • Puts your balance due on the books (assesses your liability);
  • Sends you a bill that explains how much you owe (Notice and Demand for Payment); and

You:

  • Neglect or refuse to fully pay the debt in time.

The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.

The lien will impact you in the following ways:

  • Assets — A lien attaches to all of your assets (such as property, securities, vehicles) and to future assets acquired during the duration of the lien.
  • Credit — Once the IRS files a Notice of Federal Tax Lien, it may limit your ability to get credit.
  • Business — The lien attaches to all business property and to all rights to business property, including accounts receivable.
  • Bankruptcy — If you file for bankruptcy, your tax debt, lien, and Notice of Federal Tax Lien may continue after the bankruptcy.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Well we are reaching the end of our show.

You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.

Have a great day everyone!

IRS Agents To Hunt Tax Dodgers Overseas

On a recent airplane trip from the Bay Area to Southern California, I sat beside a distinguished-looking elderly man. I initiated a conversation with him and found out he was a former judge now living in Mexico. We talked about everything, including taxation.

The former judge admitted that he was an American citizen and he and some of his friends have problems sleeping because of Foreign Account Tax Compliance Act (FATCA). So, I asked him what about Foreign Bank Account Reporting (FBAR), as that was more serious than FATCA. But he had never heard about it. I wondered how many people are like the former judge and his friends who can’t sleep at night because of FATCA and who never heard of FBAR.

FATCA

FATCA was enacted in 2010 and the IRS has touted that FATCA has been successful so far. The IRS states they have collected US$6.5 billion and they reasonably believe that as much as $100 billion per year could be collected. The IRS is working with other countries that would like to use the U.S. model to improve their tax collection. The IRS will be working closely with the Organization for Economic Cooperation and Development (OECD) to implement Global FATCA (what many people are now calling GATCA); and also that the forms to request information from financial institutions would be standardized so that all countries would use the same forms, making it easy on the financial institutions. The IRS reasonably believes that FATCA can work, and given that the law has the effect of forcing compliance by every country, ultimately, everyone will benefit.

FBAR

Keep in mind that an FBAR is different from FATCA and the requirements are also different. While impact of FATCA is to report you foreign income on your U.S. income tax returns, FBAR is an informational submission that must be filed with the Treasury Department if you have more than $10,000 in financial assets overseas. So, for FATCA, the financial institutions and the foreign governments will report to the IRS directly, but for FBAR, the taxpayers must self-report to the United States Treasury Department by June 30th each year.

Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge you with violations.

Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment.

Foreign Corporations

The IRS has a special interest in foreign corporations (i.e., corporations organized outside the United States). They are interested in shareholders with at least 10% ownership and directors of these foreign corporations. Foreign corporations are very important because that is where the big bucks are. They want U.S. citizens and green card holders who are 10% shareholders and directors (in said corporations) to provide information from the following sources annually: articles of incorporation, listing of directors, annual returns for the company filed with the registrar of companies and financial statements. While this information is filed for informational purposes only, the foreign corporations should file a tax return with the IRS. You should note that the requirement applies to partnerships and trusts also.

Those Who Gave Up U.S. Citizenship

The IRS has noted that a record number of Americans have given up citizenship recently and some may have done so with the intent to get around FATCA. But the news is bad, because the IRS is threatening that every one of those citizens will be thoroughly investigated with a view to seeing if they are trying to evade taxes.

The IRS warns that people with a certain amount of assets will be treated as if all the assets were sold and will be taxed as at the day when citizenship was given up. This will also apply to long-term green card holders. Also, if one has given up citizenship and spends more than 30 days in the United States in a calendar year, he may be taxed as if he were a citizen.

Bad Banks

The IRS has named about a dozen banks worldwide that are considered bad – and if you have an account in one of those banks and failed to comply with your filing and tax-reporting obligations, you are very likely to have a problem with the IRS.

Is The IRS Watching You?

The IRS claims it can tell when people enter and exit the country, and lying on immigration forms and tax returns is a federal offence. There is even a website that the IRS uses that can be used to tell whenever people enter and exit the United States.

Be aware that the number of days spent in the U.S. is very important in determining your tax status. For citizens, if you spend more than 330 days outside the U.S. per year, you will not be required to participate in Obamacare, or the number of days spent abroad will affect the amount of foreign earnings you may be able to exclude from income, hence paying low or no tax to Uncle Sam. For green card holders, you have immigration issues, as well as tax issues if you spend more than a specified period outside the United States.

It’s A Small World After All.

The IRS said people may be able to run, but they can’t hide. The IRS said it is going to have agents all over the world, as they are going to work closely with foreign governments through the information exchange programs and the financial institutions.

Also, the IRS is using Internet searches and social media like Facebook and LinkedIn to find tax dodgers, along with whistle-blowers. There will be GATCA, where other countries will be following the IRS path and these countries along with the U.S. are proposing one standard form that will be used to get information from financial institutions worldwide. So, if China wants information from Swiss banks, it will use the same forms to make the request as Jamaica or France.

The idea is to make it easier for the banks to retrieve information. So, we may be looking to one tax system if the OECD has its way and tax evasion worldwide may very well be a thing of the past in a few years’ time, and the full compliance with the IRS requirements is the best way forward.

What Should You Do?

We encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts. By then, it will be too late to avoid the new higher penalties under the OVDP of 50% percent – nearly double the regular maximum rate of 27.5%.

Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or you are in the 2012 Offshore Voluntary Disclosure Initiative (“OVDI”), you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

The 5 Biggest, Best Homeowner Tax Breaks – Get Them While They Are Still Here!

Leaving off deductions you’re eligible for, such as mortgage interest and property taxes, is leaving money on the table and with tax reform revving up again on Capitol Hill, with the heads of key committees pledging to work toward a simpler and fairer tax code, Congress may ne looking to tradeoff these tax breaks with lower tax rates. Sounds intriguing?

Homeownership can pay off big time if you itemize your deductions. Use these five tax breaks to cut what you owe Uncle Sam:

1. Home Office

Do you work at home? Collect a tax break either by using the simplified method explained below or doing some complicated calculations to claim your exact home office expenses. When you opt for the simplified method, you get $5 per square foot and can claim up to 300 square feet of office. That’s a $1,500 deduction!

The Fine Print:

  • You can’t deduct a home office just because you head in there after dinner to read and answer emails from co-workers.
  • You have to use your home office “substantially and regularly to conduct business.”
  • Your home office doesn’t have to be in your home. A studio, garage, or barn can count as a home office.

Where You Claim it: Form 8829

2. Energy-Efficient Upgrades

Energy-efficiency home upgrades you made in 2014 can potentially cut your tax bill by up to $500, thanks to the residential energy tax credit. This tax credit lets you offset federal taxes dollar-for-dollar. You may be able to claim up to 10% of what you spent in 2014 on such items as insulation, a new roof, windows, doors or high-efficiency furnaces or air conditioners.

The Fine Print:

  • There’s a $500 lifetime cap (meaning you have to subtract any energy tax credit you used in prior years).

Where You Claim it: Form 1040, Form 5695

3. Mortgage Interest Deduction

This is the mother lode of tax deductions. You typically can deduct the interest you pay on your home loan of up to $1 million (married filing jointly). You have to use your mortgage to buy, build or improve your home. Using a home equity line or mortgage for something else, like paying college tuition? It’s generally OK to deduct the interest on loans up to $100,000 (married filing jointly) as long as your home secures the loan.

The Fine Print:

  • An RV, boat or trailer counts as a home if you can sleep and cook in it and it has toilet facilities.
  • Second home loans count toward the $1 million loan limit.

Where You Claim it: Schedule A

4. Property Tax Deduction

The property taxes you paid to the state, the county, the city, the school district and every other government entity that reached into your pockets last year are usually deductible on your federal tax return. If your mortgage lender paid your property taxes, look on your annual escrow statement to see the exact amount paid.

The Fine Print:

  • You can’t deduct assessments (one-time charges for things like streets, sidewalks and sewer lines).
  • Keep a record of the assessments you paid. When you sell your home, you can generally use the cost of those assessments to reduce any tax you owe on your sale profit.

Where You Claim it: Schedule A

5. Private Mortgage Insurance

Did you put down less than 20% when you bought your home? If you did, your lender probably forced you to buy private mortgage insurance. Those monthly premiums are tax deductible, if you can clear a few hurdles. (See The Fine Print below.)

If you have a Veterans Affairs, Federal Housing Administration or Rural Housing Service loan, you likely paid upfront mortgage insurance premiums at the closing table (they might have called it a guarantee fee). The deduction for those is pretty complicated.

You get to deduct a part of that upfront premium each year. To figure out how much to deduct, you first check to see which is shorter:

  • The length of your mortgage
  • 84 months (seven years)

If your mortgage lasts more than seven years, you divide the cost of that upfront mortgage premium by 84 months and then multiply by the number of months you paid it (so 12 months for a full year) to get your deductible amount.

If you mortgage lasts seven years or less, you divide by the number of months it lasts and multiply by the number of months you paid it.

The Fine Print:

  • You have to have gotten your mortgage in 2007 or later.
  • When adjusted gross income is more than $100,000 (married filing jointly) you start losing the private mortgage insurance deduction and it disappears completely when your adjusted gross income is more than $109,000.

Where You Claim it: Schedule A

What About Everything Else?

What about all the other home-related expenses you paid, but can’t deduct, like your new deck or the pipes you replaced? Hang on to those invoices and receipts by scanning them (receipts fade over time) and storing them in a file or online. When you sell your home and you’re figuring out if you owe federal tax on the profits, you may be able to subtract the cost of the improvements you made from your home’s selling price.

Impact Of Tax Reform On Homeowner Tax Breaks.

Many benefit from tax breaks such as mortgage interest and property tax deductions, plus tax-free write-offs of up to $250,000 or $500,000 of home sale capital gains, depending on whether they file returns as singles or married couples. Renters get none of these.

Homeowner write-offs become targets for cutbacks or elimination whenever tax code reforms get serious attention because of their costs in uncollected federal revenue. The mortgage interest deduction alone will cost the Treasury $113.4 billion in fiscal 2015, and property tax write-offs will cost $27.8 billion, according to estimates by the congressional Joint Committee on Taxation.

President Obama kicked off the tax legislative season with a budget proposal that would limit mortgage interest and other deductions for upper-income taxpayers. No surprise there. He called for essentially the same change last year, and this year’s version was widely viewed as dead on arrival in a Congress controlled by Republicans.

But what might Republican tax reformers themselves have up their sleeves? Last February the top Republican tax writer, Rep. Dave Camp of Michigan, then chairman of the Ways and Means Committee, came out with a massive tax code overhaul blueprint that would offer lower tax rates and a big increase in the standard deduction in exchange for drastic cutbacks in special-interest deductions and credits, including the benefits traditionally enjoyed by homeowners.

Camp retired from Congress at the end of the last session. His reform plans — considered too controversial to pass in an election year — never moved out of committee. But the impetus for some sort of wholesale reform of the sprawling Internal Revenue Code remains alive and well. Of course anything is likely or even possible this year but for now homeowner tax breaks appear safe for the time being, probably until 2017 at the earliest.

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

Even Grandmothers and Widows Are Not Safe From IRS Bank Account Seizures

Beware IRS is stepping up enforcement action of the Bank Secrecy Act in closing out bank accounts of U.S. taxpayers making cash deposits.

Ronald Malone and his wife Janet Malone of Dubuque, Iowa lived a simple life and enjoying their retirement. Shortly before Ronald’s death in October 2011, Ronald told his wife about a briefcase containing $180,000 cash that he accumulated from his job as a publishing executive and from gambling winnings and investment income. After Ronald died, Janet who at the time was 68 years old, deposited this cash into her bank account in increments of anywhere from $5,800 to $9,000.

Unknown to Janet, these cash deposits were being reported by the bank to the IRS. The IRS having picked this up obtained a warrant to seize the funds in Janet’s bank account based on suspicion that the transactions were meant to avoid tax reporting requirements under the Bank Secrecy Act of 1970.

Well just a couple of weeks ago prosecutors charged Janet Malone with a criminal misdemeanor and she was arrested. It turns out that four years earlier her husband who must have been making cash deposits to the bank was warned by the IRS about continuing this practice. Ronald acknowledged to the IRS Special Agent at a meeting in his house that the small deposits amounting to $35,500 could be considered “structuring” (which is against the law) and signed a form confirming that he’d been warned about the practice. Janet was at the home for part of that meeting between the IRS Special Agent and Ronald, but she had not signed anything. Janet claims that she did not remember the details of the IRS agent’s 2011 visit with her husband because she was in a state of despair over her husband’s health who at that time was dying of cancer.

Bank Secrecy Act of 1970

As part of the federal government’s dragnet surveillance of the civilian population, everyone’s banking activities are monitored for “red flag” activities. Under the Bank Secrecy Act of 1970, banks are required to report to the IRS transactions on every individual who deposits or withdraws more than $10,000 in cash to or from a personal bank account on a given day. These reports indicate the financial activities that took place and include the individual’s bank account number, name, address, and social security number.

People who know of this law and are seeking to avoid this level of reporting by the bank will often go to great lengths to make multiple deposits so that no single deposit will be greater than $10,000. This tactic is called “structuring”. The IRS thinking that Ms. Malone was making small deposits to evade this reporting requirement used its civil forfeiture power to seize Ms. Malone’s bank account.

That’s right – federal law enforcement agencies are invested with the power of civil forfeiture whereby the agency can take cash, cars and other property without charging the property owner with a crime. The property owner need not receive any advance warning or notice before the assets are seized by the federal government. The government need not prove that a person is guilty of a crime – only that he or she is suspected of committing a crime. This law was designed to catch terrorists, money launderers, drug lords and serious criminals – but it can also be used by the government against law-abiding businesses and law-abiding taxpayers.

The reason that the federal government does not have to read you your rights, or advise you that you can have a lawyer, or do any of the things that the constitution is supposed to provide, is that they don’t charge the person with the crime – they charge your money with the crime. And that crime that your money committed can carry a charge to you of up to one year in jail and a $250,000 fine.

Others Have Been Targets Under This Act

Janet Malone is not the only person whose money got her into criminal trouble. A few weeks ago, I told you about Carole Hinders, another resident of Iowa and a 67 year old grandmother who operated Mrs. Lady’s Mexican Food in Arnolds Park, Iowa for 38 years. But despite her clean tax record, on May 22, 2013 while settling into a crossword puzzle with her grandchildren she was visited at her home by a pair of IRS agents who stated that they had closed her business bank account and seized all her money, which at the time was almost $33,000.

Even professionals could get into criminal trouble from how their money is deposited. The IRS seized $344,405 from Mason City, Iowa doctor Alireza Yarahmadi’s bank account last year after suspecting he made repeated cash withdrawals in increments below $10,000 to evade federal reporting requirements. Dr. Yarahmadi denied wrongdoing, saying he routinely transferred cash from his bank account to safe deposit boxes for safekeeping. His attorney said that Dr. Yarahmadi is an Iran native who is suspicious of banks because his family lost its savings after the 1979 revolution.

Eventually, the government dropped their charges against Ms. Hinders and Dr. Yarahmadi and returned their funds. But Ms. Malone’s case is still pending and the IRS does not appear to have discontinued this practice.

Are There Any Safeguards In Place For The IRS To Follow So Things Like This Do Not Happen?

Critics say the IRS rarely investigates such cases to see if the business owner has legitimate reasons for making small deposits, such as an insurance policy that covers only a limited amount of cash.

Seizing assets without criminal charges is legal under a controversial body of law that allows law enforcement agents to seize cars, cash and other valuables they believe are tied to criminal activity. The burden of proof falls on owners seeking the return of their property. In fact what happened to Ms. Hinders has prompted the two high-ranking members on the House Ways and Means committee to file bipartisan legislation to curb abuses of the practice, known as civil asset forfeiture. Civil asset forfeiture even become an issue in the confirmation of President Obama’s nominee for attorney general, Loretta Lynch, who as United States attorney for the Eastern District of New York presided over a case involving more than $440,000 seized from a family-run cash-intensive candy and cigarette distributor that has been operating in Long Island, New York for 27 years.

There is nothing illegal about depositing less than $10,000 cash unless it is done specifically to evade the reporting requirement. But often a mere bank statement is enough for investigators to obtain a seizure warrant. In the Long Island case, the police submitted almost a year’s worth of daily deposits by a business, ranging from $5,550 to $9,910. The officer wrote in his warrant affidavit that based on his training and experience, the pattern “is consistent with structuring”.

The IRS made 639 of these seizures in 2012, compared to 114 in 2005. And only one in five was prosecuted as a criminal case. So you are probably thinking was the money from the other 80% of cases returned to its rightful owners?

Don’t Take The Chance And Lose Everything You Have Worked For.

Protect yourself. If you are in danger of wage garnishments or bank levies or having a tax lien placed against your property, stand up to the IRS and your State Tax Agency by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

Jeffrey B. Kahn, Esq. Discusses Love, Taxes and the IRS On ESPN Radio – February 13, 2015 Show

Topics Covered:
1. Wife Convicted Of Murdering Husband To Avoid Him Learning Of Their Outstanding IRS Debt
2. The Tax Benefits Of Claiming Your Sweetheart on Your Tax Return Or Writing Off The Costs Of Marrying Your Sweetheart
3. IRS Extends A Sweetheart Deal To U.S. Taxpayers With Undisclosed Foreign Bank Accounts
4. Questions from our listeners:

a. When are individuals of the same sex lawfully married for federal tax purposes?

b. Can same-sex spouses file federal tax returns using a married filing jointly or married filing separately status?

c. I recently got married. Am I responsible for my spouse’s past taxes?

Yes we are all working for the tax man!

Good afternoon! Welcome to the KahnTaxLaw Radio Show
This is your host Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
You are listening to my weekly radio show where we talk everything about taxes from the ESPN 1700 AM Studio in San Diego, California.
When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!
It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into our website at www.kahntaxlaw.com.
I have a lot to cover today in the world of taxes and helping me out today will be my associate attorney Amy Spivey who will be calling in later in today’s show.

So today is Friday the 13th and with tomorrow being Valentine’s Day, I am devoting today’s show to Love, Taxes and the IRS.

Wife Convicted Of Murdering Husband To Avoid Him Learning Of Their Outstanding IRS Debt

Joe Yates now has a successful chimney sweeping and inspection business in Kentucky but he will never forget what happened on May 17, 2005 when he and 14 other co-workers lost their boss and their jobs.

That boss was Robert Bosley, owner of Bosley Roofing and Chimney Sweep in Alexandria, Kentucky who was shot to death as he slept in his small cabin in Campbell County. Robert who lived to age 42 was murdered by his wife Amy Bosley.

The reason? Amy did not want Robert to know the huge business debts and IRS debts she had racked up.

Robert and his wife, Amy, were making a name for themselves in their small Kentucky community.

Together they were like local royalty with their million-dollar roofing business and being active volunteers in their community. They had sports cars, horses, their own plane and a 50-ft motor-yacht. They also planned to build a castle-like mansion on their 35-acre estate. It was on this land, mainly remote woods, that the Bosley’s had built their weekend retreat, a luxury cabin.

Nightmare In The Woods.

But that dream became a nightmare at dawn on a May morning in 2005 when 38-year-old Amy rang police in floods of tears to report that an intruder had broken into their remote luxury cabin deep in woodland in Campbell County.

Moments later a patrolman arrived at the Bosley’s cabin. Amy Bosley told him, “An intruder shot my husband, he shot my husband! She then said that the intruder fled out the back door. The patrolman pushed past her and there, lying on the bed was Robert Bosley riddled with bullets. His lips were blue. He was dead. The room and the rest of the cabin, had been ransacked – possessions and clothes strewn around the doors and windows broken.

The Bosleys’ two sons, Trevor, nine, and Morgan, six, asleep in a first-floor loft bedroom had not been harmed.

Police searched the house and grounds, but no intruder was found. Amy Bosley in a state of shock was taken to the house of friends. She described the intruder as a white guy in his thirties, very tall and with a pointed very mean face.

Police launched a manhunt for the intruder using sniffer dogs and helicopters but no one was found. The lead investigator immediately suspected something was wrong with Amy’s story. You see Robert had been shot seven times while sleeping, and his gun was missing. Also missing were the shell casings, which should have littered the crime scene.

Soon afterwards police investigations began to reveal that the Bosley marriage had not been as idyllic as Amy claimed it to be. Robert spent most weekends on his boat on nearby Lake Cumberland holding parties at which most of the guests were women.

Friends said that Robert would be on the lake for days at a time and refuse to tell Amy who he was with and when he would be back. But not all the Bosley’s secrets concerned Robert’s extramarital affairs. A close study of the finances of the roofing company, of which Amy was financial director, showed that the apparently booming enterprise was going bust.

Police also discovered a motive: the Bosley’s were deep in debt, and, unknown to Robert, the IRS was literally knocking at their door over a $1.5 million tax bill. Amy it seemed was destroying the business by embezzling nearly $2 million which should have been paid to the IRS. In fact during the investigation into the murder, police discovered something suspicious in Amy’s car: hundreds of unmailed checks to the IRS totaling about $1.7 million in back taxes.

Weeks before the shooting, Amy met with an IRS Revenue Officer who informed her they were investigating Robert for nonpayment of taxes. According to police, Amy went to great lengths to keep the tax problems from her husband even going as far as to impersonate him over the phone. She also got a P.O. Box for the business which Robert did not know about and had all IRS notices go to that box so Robert would not be aware of this problem. But this tax problem was coming to a head and Robert was to hear about it firsthand from the Revenue Officer himself.

Crime Scene Staged?

Throughout the investigation, police, prosecutors, townspeople and even the Bosley family had their suspicions the Amy committed the crime.

The police came up with their own theory that the day of the murder, the IRS was coming to audit the business’s books, potentially exposing Amy’s secret. Police said Amy might have felt that the only way to make the tax problem go away was to kill her husband.

But a week later another piece of incriminating evidence turned up in Amy’s purse — a Glock handgun. It was the same type of gun used to kill her husband. Even though police had no doubt they’d found the murder weapon, authorities couldn’t definitively match it to the lead slugs that struck Robert Bosley because the slugs were too mutilated. Nevertheless, this was enough for police to arrest Amy for murder.

The Surprising Outcome

Amy first pleaded not guilty, but her case didn’t hold up well during a dramatic four-hour pretrial hearing.

While there was a mountain of circumstantial evidence against Amy, prosecutors admitted they didn’t have a slam dunk. But statements Amy’s children, Morgan, 9, and Trevor, 6, gave to police following the murder would become the strongest piece of evidence.

Their testimony was crucial, but no one wanted to force young children who had already lost their father to testify against their mother. As a result, prosecutors reluctantly offered Amy Bosley a deal — the minimum sentence of 20 years if she pleaded guilty — and to everyone’s surprise she took the deal.

In November 2005, Amy Bosley was sentenced to 20 years for murder and five years for a tampering of evidence charge. The sentences to be served concurrently. Unfortunately, the IRS would still be looking to collect the over $1.7 million in payroll taxes from Robert’s estate.
Well it’s time for a break but stay tuned because we are going to tell you The Tax Benefits Of Claiming Your Sweetheart on Your Tax Return Or Writing Off The Costs Of Marrying Your Sweetheart.
You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

Calling into the studio from our San Francisco Office is my associate attorney, Amy Spivey.

Chit chat with Amy

The Tax Benefits Of Claiming Your Sweetheart on Your Tax Return Or Writing Off The Costs Of Marrying Your Sweetheart

Jeff states:

Valentine’s Day is all about that special someone in your life, but have you ever wondered if your date across the dinner table might actually be able to save you money on your tax return or if the two of you now decide to get married, whether you can deduct any portion of the wedding and thereafter pay less in taxes?
What you need to know about who qualifies as a dependent.
Dependents, which can range from a girlfriend to a child or even a friend, are often an area where tax deductions are either missed or misstated on tax returns. To help taxpayers navigate this gray area, here are the tests necessary to claim someone as your dependent—and some of the tax benefits available for claiming the one you love:

Amy says:

First and foremost, whether they are your child or your Valentine:

You cannot claim them if you can be claimed as a dependent by another person.

They cannot file a joint tax return (in most cases).

They must be a U.S. citizen, resident alien, national, or a resident of Canada or Mexico.

Jeff asks Amy: What else is required?

Amy replies: In order to claim a child as a dependent, these five additional tests must be met:

Relationship: Must be your child, adopted child, foster-child, brother or sister, or a descendant of one of these (grandchild or nephew).

Residence: Must have the same residence for more than half the year.

Age: Must be under age 19 or under 24 and a full-time student for at least 5 months. Can be any age if they are totally and permanently disabled.

Support: Must not have provided more than half of their own support during the year.

Joint support: The child cannot file a joint return for the year.

Jeff asks Amy – so for a relative or sweetheart what additional tests apply for that person to qualify as a dependent?

Amy replies:

They are not the “qualifying child” of another taxpayer or your “qualifying child.”

Dependent earns less than $4,000 taxable income in Tax Year 2015 and $3,950 in Tax Year 2014.

You provide more than half of the total support for the year.

The person must live with you all year as a member of your household or be one of the relatives who doesn’t have to live with you.

Amy continues: You can even claim a boyfriend, girlfriend, domestic partner, or friend as a qualifying relative if:

They are a member of your household the entire year.

The relationship between you and the dependent does not violate the law, meaning you can’t still be married to someone else. Also check your individual state law, since some states do not allow you to claim a boyfriend or girlfriend as a dependent even if your relationship doesn’t violate the law.

You meet the other criteria for “qualifying relatives” (gross income and support).

Jeff states:

Once you’ve determined who in your life can be claimed as a dependent, be sure to take advantage of the following tax deductions and credits:

Dependent exemption: Have you been supporting your boyfriend or girlfriend? If he or she meets the above tests, this may entitle you to a deduction of $3,950.

Dependent care credit: Allows you to claim up to $6,000 of your eligible dependent care costs for two or more dependents.

Child tax credit: Depending on your income, you can claim up to $1,000 per qualifying child—helping to reduce your federal taxes.

You know that we are always thinking of ways that our clients can save on taxes.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Can you get a Tax Write-Off for your wedding?

Tax write-offs are usually the last thing a bride and groom think about when planning a wedding. To the surprise of many, however, wedding purchases and/or rentals can actually save money when it’s time to pay taxes at the end of the year. While there are rules and stipulations to each of these tax write-offs, many newlyweds take advantage of them every year.

Amy what ideas do you have on this?

Amy replies: The Attire. Brides often wear their wedding dress only once. And while some opt to keep them for whatever reason, others have no idea how to discard them. For a tax write-off, consider donating the wedding gown to a nonprofit organization like Goodwill, MakingMemories.org or CinderellaProject.net. These organizations will take your dress and issue you a donation receipt for your good efforts. While you’re at it, consider donating the bridesmaids dresses, flower girl dress, ring bearer’s outfit and any nonperishable decorations.
Jeff asks Amy – what about the venue?
Amy replies: The Venue. Believe it or not, some wedding venues are tax deductible. Choose a ceremony or reception venue located at a museum, public-owned park or even a historic house or building of some sort. These places are usually owned by nonprofit organizations who use the money they receive for upkeep purposes only. Speak with the head of the venue sight to make sure that it is a nonprofit organization and what portion of the cost you pay is in excess of the deemed value of the rental of the space (only the excess amount could be deductible as a charitable contribution).

Jeff asks Amy – what about the reception costs?

Amy replies: Wedding Favors and Gifts. Charity donations can make thoughtful wedding gifts and favors. They also save you money during tax season. So instead of purchasing a trinket that your guests or attendants may discard later, opt for a donation to your favorite charity on behalf of all those who are a part of your wedding.

Amy continues: Flowers and Foods. You can also get a tax write-off for items that have a short life, such as leftover food and all those floral centerpieces. After the wedding is over, ask a friend or family member to bring the items to a local nursing home, homeless shelter or somewhere similar. You will get a tax deduction for the cost of the remaining food and flowers and you’ll put a few smiles on faces.

Jeff states: It’s Risky Business To Claim Your Sweetheart on Your Tax Return or Deduct Gifts To Your Sweetheart or Take A Tax Write-Off For Your Wedding.

Writing off wedding costs reduces your tax liability for the year in question and may increase your tax refund but consider whether you are willing to endure an audit for your attempted deductions. Quirky write-offs are red flags for the IRS. So if you are writing off your honeymoon as a business trip, keep a log of activities like appointments and what business was transacted. A paper trail of receipts will back up your case and may provide you with some relief and well-deserved tax savings this Valentine’s Day.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned because after the break we are going to tell you the Sweetheart Deal the IRS extended To U.S. Taxpayers With Undisclosed Foreign Bank Accounts.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And on the phone from our San Francisco office I have my associate attorney, Amy Spivey.

Jeff states: IRS Extends A Sweetheart Deal To U.S. Taxpayers With Undisclosed Foreign Bank Accounts

On June 18, 2014, the IRS announced major changes in the 2012 offshore account compliance programs, providing new options to help taxpayers residing in the United States and overseas. The changes are anticipated to provide thousands of people a new avenue to come back into compliance with their tax obligations and would largely waive these penalties if taxpayers come forward and show that they didn’t hide the money on purpose.

Amy states:

Separate from United States income tax returns, many U.S. persons are required to file with the U.S. Treasury a return commonly known as an “FBAR” (or Report of Foreign Bank and Financial Accounts; known as FinCEN Form 114), listing all non-US bank and financial accounts. These forms are required if on any day of any calendar year an individual has ownership of or signature authority over non-US bank and financial accounts with an aggregate (total) balance greater than the equivalent of $10,000.

The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes.

Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge you with violations.

Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment.

Jeff states: PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states:

The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.  The streamlined procedures are designed to provide to taxpayers in such situations (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving their tax and penalty obligations.

Taxpayers will be required to certify that the failure to report all income, pay all tax, and submit all required information returns, including FBAR’s (FinCEN Form 114, previously Form TD F 90-22.1), was due to non-willful conduct.

Jeff asks Amy: What Constitutes Non-Willful Conduct?

Amy replies: The key to qualification in this new procedure is to prove that your past actions or inactions can be considered to be non-willful conduct.  Non-willful conduct is conduct that is due to negligence, inadvertence or mistake, or conduct that’s the result of a good-faith misunderstanding of the requirements of the law.  The application of this standard will vary based on each person’s facts and circumstances so it is something that has to be evaluated on a case-by-case basis.

If the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures.   Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.

Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures” made outside of the Offshore Voluntary Disclosure Program (“OVDP”) or its predecessor programs) may still use the streamlined procedures.

Jeff states: The Streamlined Procedures are classified between U.S. Taxpayers Residing Outside the United States and U.S. Taxpayers Residing in the United States.

Both versions require that taxpayers:

a. Certify that the failure to report the income from a foreign financial asset and pay tax as required by U.S. law, and failure to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, resulted from non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

b. File 3 years of back tax returns reflecting unreported foreign source income;

c. File 6 years of back FBAR’s reporting the foreign financial accounts; and

d. Calculate interest each year on unpaid tax.

In return for entering the streamlined offshore voluntary disclosure program, the IRS has agreed:

a. Possible waiver of charges of criminal tax evasion which would have resulted in jail time or a felony on your record;

b. Possible waiver of other fraud and filing penalties including IRC Sec. 6663 fraud penalties (75% of the unpaid tax) and failure to file a TD F 90-22.1, Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50% of the foreign account balance); and

c. Possible waiver of the 20% accuracy-related penalty under Code Sec. 6662 or a 25% delinquency penalty under Code Sec. 6651.

Amy states:

For U.S. Taxpayers Residing Outside the United States who apply to the streamlined program, the IRS is waiving the OVDP penalty.

For U.S. Taxpayers Residing in the United States who apply to the streamlined program, the IRS is imposing a 5% OVDP penalty (applied against the value of the undisclosed foreign income producing accounts/assets).

Jeff states: Case Example:

Raj is an engineer working and living in California. He was born in India and came to California after completing his education in India. While he was a child his parents set up a bank account in India which he did not even know about until just recently. That account has been earning interest all of these years and now has a balance of $100,000.00.

Jeff asks Amy: What liabilities does Raj face under the Internal Revenue Code?

Amy replies:

1. Back taxes, interest and 20% accuracy related penalty for the unreported interest income going back at least three years.

2. FBAR penalties of $10,000 per account per year (going back 6 years results in a $60,000 penalty).

Jeff states: When I total that all up, what started out as an account with $100,000.00 would leave Raj with about $30,000 – that’s a 70% reduction in value!

Jeff asks: How would Raj fare by hiring tax counsel experienced in OVDP and going forward with one of the programs established by IRS?

Amy replies:

1. Back taxes and interest for the unreported interest income for the last three years.
2. No 20% accuracy related penalty.
3. No FBAR Penalties
4. A one-time 5% OVDP penalty (applied against the value of the account)

So when I total that all up, what started out as an account with $100,000.00 now would leave Raj with about $93,000.00 – a 7% reduction in value. That’s a lot better than a 70% reduction in value! And there are things that we can do as tax counsel to make that reduction even smaller and perhaps get full abatement of penalties.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned as we will be taking some of your questions. You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team along with my associate attorney, Amy Spivey.

If you would like to post a question for us to answer, you can go to our website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Amy, what questions have you pulled from the kahntaxlaw inbox for me to answer?

1. Hugh from San Francisco asks: When are individuals of the same sex lawfully married for federal tax purposes?

For federal tax purposes, the IRS looks to state or foreign law to determine whether individuals are married. The IRS has a general rule recognizing a marriage of same-sex spouses that was validly entered into in a domestic or foreign jurisdiction whose laws authorize the marriage of two individuals of the same sex even if the married couple resides in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages.

Generally, your marital status on the last day of the year determines your status for the entire year.

You are considered married for the whole year if on the last day of your tax year you and your spouse meet any one of the following tests.

1. You are married and living together as husband and wife.
2. You are living together in a common law marriage that is recognized in the state where you now live or in the state where the common law marriage began.
3. You are married and living apart, but not legally separated under a decree of divorce or separate maintenance.
4. You are separated under an interlocutory (not final) decree of divorce. For purposes of filing a joint return, you are not considered divorced.

2. Terry from Los Angeles asks: Can same-sex spouses file federal tax returns using a married filing jointly or married filing separately status?

Yes. For tax year 2013 and going forward, same-sex spouses generally must file using a married filing separately or jointly filing status. For tax year 2012 and all prior years, same-sex spouses who file an original tax return on or after Sept. 16, 2013 (the effective date of Rev. Rul. 2013-17), generally must file using a married filing separately or jointly filing status. For tax year 2012, same-sex spouses who filed their tax return before Sept. 16, 2013, may choose (but are not required) to amend their federal tax returns to file using married filing separately or jointly filing status. For tax years 2011 and earlier, same-sex spouses who filed their tax returns timely may choose (but are not required) to amend their federal tax returns to file using married filing separately or jointly filing status provided the period of limitations for amending the return has not expired. A taxpayer generally may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. 

3. Joanne from San Diego asks: I recently got married. Am I responsible for my spouse’s past taxes?

Maybe. Your wages and property might be at risk of IRS seizure for your spouse’s tax bill, depending on the state where you live. In most states, property owned by one spouse before marriage remains that spouse’s separate property during marriage. Assets acquired during marriage, however, are generally considered joint property. When couples own property together, IRS problems can arise. The IRS can legally go after jointly owned assets to cover the tax debt of just one spouse. The IRS cannot, however, take the share of the non-debtor spouse. See a local attorney for help.

Be particularly aware of these specific problem areas:

  • Gifts. If a spouse without an IRS tax debt gives a spouse who has a tax debt an interest in property, the IRS can grab it. For example, Joanne deeds her separate property boat to her husband, Kevin, and herself as joint tenants. The IRS can seize the boat for Kevin’s debt, although the IRS would have to pay Joanne for her half interest in the boat once it was sold.
  • Commingled property. If spouses deposit funds into a joint account and use that account to pay joint expenses, the funds are commingled. The IRS can take the entire account to satisfy the tax debt of one spouse.

If the couple uses commingled funds to purchase property, and the IRS seizes it for only one spouse’s tax debt, the IRS must give the non-debtor spouse one-half of the sales proceeds.

  • Wages. The IRS, quite unfairly, can take the wages of one spouse to pay for the sole tax debt of the other spouse. Some couples have divorced just to stop the IRS from taking the wife’s wages for taxes owed by the husband prior to marriage. They may continue to live together after the divorce, but the wife’s earnings are no longer within the IRS’s grasp.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Well we are reaching the end of our show.

You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.

Have a great day everyone and Happy Valentine’s Day!

The Tax Benefits Of Claiming Your Sweetheart on Your Tax Return, Giving Gifts To Your Sweetheart Or Marrying Your Sweetheart – Part 2 Of 2.

Valentine’s Day is all about that special someone in your life, but have you ever wondered if your date across the dinner table might actually be able to save you money on your tax return or if the two of you now decide to get married, whether you can deduct any portion of the wedding and thereafter pay less in taxes?

In part 1 of this blog, I discussed what you need to know about who qualifies as a dependent and what you need to know on deducting gifts to your staff.

Can you get a Tax Write-Off for your wedding?

Tax write-offs are usually the last thing a bride and groom think about when planning a wedding. To the surprise of many, however, wedding purchases and/or rentals can actually save money when it’s time to pay taxes at the end of the year. While there are rules and stipulations to each of these tax write-offs, many newlyweds take advantage of them every year.

The Attire. Brides often wear their wedding dress only once. And while some opt to keep them for whatever reason, others have no idea how to discard them. For a tax write-off, consider donating the wedding gown to a nonprofit organization like Goodwill, MakingMemories.org or CinderellaProject.net. These organizations will take your dress and issue you a donation receipt for your good efforts. While you’re at it, consider donating the bridesmaids dresses, flower girl dress, ring bearer’s outfit and any nonperishable decorations.

The Venue. Believe it or not, some wedding venues are tax deductible. Choose a ceremony or reception venue located at a museum, public-owned park or even a historic house or building of some sort. These places are usually owned by nonprofit organizations who use the money they receive for upkeep purposes only. Speak with the head of the venue sight to make sure that it is a nonprofit organization and what portion of the cost you pay is in excess of the deemed value of the rental of the space (only the excess amount could be deductible as a charitable contribution).

Wedding Favors and Gifts. Charity donations can make thoughtful wedding gifts and favors. They also save you money during tax season. So instead of purchasing a trinket that your guests or attendants may discard later, opt for a donation to your favorite charity on behalf of all those who are a part of your wedding.
Flowers and Foods. You can also get a tax write-off for items that have a short life, such as leftover food and all those floral centerpieces. After the wedding is over, ask a friend or family member to bring the items to a local nursing home, homeless shelter or somewhere similar. You will get a tax deduction for the cost of the remaining food and flowers and you’ll put a few smiles on faces.

Documenting. Whether you have your taxes done by a professional accountant or take care of them yourself, it’s important to document each of these wedding tax write-offs. Keep all your receipts for any purchases you make and request a donation sheet (signed by the organization) that states how much you donated, what you donated and when. Save all your contracts for any wedding venues and, if possible, request that the venue organizer provide you with receipts for each of your payments.

Reporting Charitable Contributions. To claim charitable deductions, you must itemize them on Schedule A of Form 1040. The IRS will need any and all receipts and statements that support the fees, expenses and donations that you claim. If your total noncash contributions exceed $500, you must also fill out Form 8283, Noncash Charitable Contributions, and attach it to your tax return. If you donate a single item worth more than $5,000, you must add Form 8283, Section B, and obtain an appraisal.

Is an Engagement Ring Tax Deductible?

An engagement ring signifies a commitment between two partners and marks their intention to marry at a later date. Because engagement rings are typically made from precious metals and stones, the price can range from several hundred dollars to several thousand dollars. Whether you may claim an engagement ring as a tax deduction depends on individual circumstances.

Purchasing a Ring. If you plan to propose and purchase an engagement ring to seal the deal, you may not deduct the cost of the ring from your taxes. An engagement ring is considered a capital gains item rather than a household item, making it ineligible for deduction purposes.
Donating a Ring. You may donate an engagement ring to a charitable entity if, for instance, your engagement ended without marriage or if you divorced and no longer want to keep the ring. In most cases, the donation represents a charitable contribution that you can deduct from your tax liabilities for the year in which you donate the ring. However, to claim the ring as a tax deduction, the charitable organization must be able to use or sell the ring. Contributions that a charitable entity cannot use are not tax deductible.

Appraisal. The amount you can deduct from your tax liability depends partially on the value of the ring. Obtaining a certified appraisal of the ring might help you maximize your tax deduction if the ring has increased in value since purchase. The cost of the appraisal is not included in the charitable contribution deduction; however, you may deduct the cost of the appraisal as a miscellaneous deduction.

Considerations. The Internal Revenue Service only allows you to claim the appraised value of a donated engagement ring if you have had possession of the ring for more than one year. Otherwise, you may only deduct the purchase price of the ring after donating it to a charitable entity. Also, if the value of the ring exceeds 50% of your adjusted gross income for the year, you may only deduct the portion of the value that is equal to 50% of your adjusted gross income, minus the value of any other charitable contributions claimed for the same tax year.

Is There A Marriage Tax Penalty?

Federal income taxes can be particularly difficult to fully grasp. The marriage penalty is the term used to describe the difference in the amount of taxes paid by a married couple versus what they would have paid if they had remained single. For some couples, this difference results in higher taxes; for others, the resultant tax liability is lower. While the marriage penalty used to stem from many inequities in the U.S. tax code, a great many of those were eliminated by legislation. The two lowest tax brackets for “married filing jointly” are exactly double that of the same tax brackets for those filing “individually,” which results in no penalty at all for those brackets. Additionally, the standard tax deduction for married filing joint is exactly double the standard deduction for single filers.

Because the marriage penalty no longer stems from simple imbalances in the standard deduction and all tax brackets, the only realistic way to calculate it is to use a standard tax calculator and compare the results by running it three times. After running the tax calculator once as married filing jointly and once for each person as a single filer, add the results from the two single calculations and compare them to the results from the joint calculation. The amount paid via annual taxes is not the whole story. Differences in the taxable nature of capital gains, home sales and other large tax events can significantly change the total amount of taxes a couple pays over multiple years.

It’s Risky Business To Claim Your Sweetheart on Your Tax Return or Deduct Gifts To Your Sweetheart or Take A Tax Write-Off For Your Wedding.

Writing off wedding costs reduces your tax liability for the year in question and may increase your tax refund but consider whether you are willing to endure an audit for your attempted deductions. Quirky write-offs are red flags for the IRS. So if you are writing off your honeymoon as a business trip, keep a log of activities like appointments and what business was transacted. A paper trail of receipts will back up your case. It costs a lot to support our children and sometimes even our friends who have been living on the couch for the past year but taking advantage of these tax tips may provide you with some relief and well-deserved tax savings this Valentine’s Day.

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

The Tax Benefits Of Claiming Your Sweetheart on Your Tax Return, Giving Gifts To Your Sweetheart Or Marrying Your Sweetheart – Part 1 Of 2.

Valentine’s Day is all about that special someone in your life, but have you ever wondered if your date across the dinner table might actually be able to save you money on your tax return or if the two of you now decide to get married, whether you can deduct any portion of the wedding and thereafter pay less in taxes?

What you need to know about who qualifies as a dependent.

Dependents, which can range from a girlfriend to a child or even a friend, are often an area where tax deductions are either missed or misstated on tax returns. To help taxpayers navigate this gray area, here are the tests necessary to claim someone as your dependent—and some of the tax benefits available for claiming the one you love:

First and foremost, whether they are your child or your Valentine:

You cannot claim them if you can be claimed as a dependent by another person.

They cannot file a joint tax return (in most cases).

They must be a U.S. citizen, resident alien, national, or a resident of Canada or Mexico.

In order to claim a child as a dependent, these five additional tests must be met:

Relationship: Must be your child, adopted child, foster-child, brother or sister, or a descendant of one of these (grandchild or nephew).

Residence: Must have the same residence for more than half the year.

Age: Must be under age 19 or under 24 and a full-time student for at least 5 months. Can be any age if they are totally and permanently disabled.

Support: Must not have provided more than half of their own support during the year.

Joint support: The child cannot file a joint return for the year.

These four tests determine where a relative or sweetheart qualifies as a dependent:

They are not the “qualifying child” of another taxpayer or your “qualifying child.”

Dependent earns less than $4,000 taxable income in Tax Year 2015 and $3,950 in Tax Year 2014.

You provide more than half of the total support for the year.

The person must live with you all year as a member of your household or be one of the relatives who doesn’t have to live with you.

You can even claim a boyfriend, girlfriend, domestic partner, or friend as a qualifying relative if:

They are a member of your household the entire year.

The relationship between you and the dependent does not violate the law, meaning you can’t still be married to someone else. Also check your individual state law, since some states do not allow you to claim a boyfriend or girlfriend as a dependent even if your relationship doesn’t violate the law.

You meet the other criteria for “qualifying relatives” (gross income and support).

Once you’ve determined who in your life can be claimed as a dependent, be sure to take advantage of the following tax deductions and credits:

Dependent exemption: Have you been supporting your boyfriend or girlfriend? If he or she meets the above tests, this may entitle you to a deduction of $3,950.

Dependent care credit: Allows you to claim up to $6,000 of your eligible dependent care costs for two or more dependents.

Child tax credit: Depending on your income, you can claim up to $1,000 per qualifying child—helping to reduce your federal taxes.

What you need to know on deducting gifts to your staff.

If you own or run a business, you know how important it is to keep your staff feeling appreciated. Sometimes you will want to reward your staff members after a particularly big project or demanding event. Other times that you may want to give gifts to staff include holiday gatherings, birthdays, wedding and birth announcements and after a staff member loses a loved one. The IRS understands that businesses routinely give small gifts to employees and has established rules governing the deductibility of those gifts.

General Rules Regarding Gifts. The IRS allows businesses to make gifts to other businesses or individuals for the purposes of developing goodwill and a favorable business environment. There are two broad categories of gifts — tangible gift items and entertainment. The IRS allows businesses to deduct gifts of up to $25 in value per recipient. If you make a gift to a client’s or employee’s wife, the IRS considers that to be a gift to the client or employee. If the gift is an entertainment expense, the IRS allows you to deduct half of the expense, as long as the expense is not exceedingly lavish or unreasonable.

De Minimis Fringe Benefits. The IRS also recognizes that employers frequently provide gifts or insignificant fringe benefits to their employees that cannot be reasonably tracked and expensed. Generally, if a business provides complimentary bagels to employees on an infrequent basis, or sends flowers to a staff member mourning the loss of a loved one or celebrating a new birth, this expense is deductible to the company but not taxable to the employee. Generally, if the gift is less than $100 in value, and is given infrequently by the company, or only on special occasions, there is no requirement to report this item as income.
Awards and Prizes. The IRS considers cash awards and prizes of any amount to be compensation and are, therefore, deductible to the employer. Awards and prizes are taxable to the employee, however; and as a business owner, you must track the award and report it on the employee’s W-2 form. However, if the award is for longevity, safety or similar awards, you may only deduct $400 for awards not part of a qualified plan that does not discriminate against highly compensated employees, or $1,600 for all awards.

Reporting Gifts. For gifts of nominal value that you give to employees to promote goodwill, you can generally deduct the expense on your business tax return or on your Schedule C as a nonwage business expense. Deductible expenses include most meals you provide to employees and up to $2,000 in life insurance.

In part 2 of this blog I discuss how you may get a Tax Write-Off for your wedding, is an engagement ring tax deductible and is there a Marriage Tax Penalty?

It’s Risky Business To Claim Your Sweetheart on Your Tax Return or Deduct Gifts To Your Sweetheart or Take A Tax Write-Off For Your Wedding.

Writing off wedding costs reduces your tax liability for the year in question and may increase your tax refund but consider whether you are willing to endure an audit for your attempted deductions. Quirky write-offs are red flags for the IRS. So if you are writing off your honeymoon as a business trip, keep a log of activities like appointments and what business was transacted. A paper trail of receipts will back up your case. It costs a lot to support our children and sometimes even our friends who have been living on the couch for the past year but taking advantage of these tax tips may provide you with some relief and well-deserved tax savings this Valentine’s Day.

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

IRS Extends A Sweetheart Deal This Valentine’s Day To U.S. Taxpayers With Undisclosed Foreign Bank Accounts

On June 18, 2014, the IRS announced major changes in the 2012 offshore account compliance programs, providing new options to help taxpayers residing in the United States and overseas. The changes are anticipated to provide thousands of people a new avenue to come back into compliance with their tax obligations and would largely waive these penalties if taxpayers come forward and show that they didn’t hide the money on purpose.

Separate from United States income tax returns, many U.S. persons are required to file with the U.S. Treasury a return commonly known as an “FBAR” (or Report of Foreign Bank and Financial Accounts; known as FinCEN Form 114), listing all non-US bank and financial accounts. These forms are required if on any day of any calendar year an individual has ownership of or signature authority over non-US bank and financial accounts with an aggregate (total) balance greater than the equivalent of $10,000.

The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes.

Failing to file an FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation—and each year you didn’t file is a separate violation. By the way the IRS can go back as far as 6 years to charge you with violations.

Criminal penalties for FBAR violations are even more frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law (such as tax law, which it often will) the penalties are increased to $500,000 in fines and/or 10 years of imprisonment.

The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.  The streamlined procedures are designed to provide to taxpayers in such situations (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving their tax and penalty obligations.

Taxpayers will be required to certify that the failure to report all income, pay all tax, and submit all required information returns, including FBAR’s (FinCEN Form 114, previously Form TD F 90-22.1), was due to non-willful conduct.

What Constitutes Non-Willful Conduct?

The key to qualification in this new procedure is to prove that your past actions or inactions can be considered to be non-willful conduct.  Non-willful conduct is conduct that is due to negligence, inadvertence or mistake, or conduct that’s the result of a good-faith misunderstanding of the requirements of the law.  The application of this standard will vary based on each person’s facts and circumstances so it is something that has to be evaluated on a case-by-case basis.

If the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures.   Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.

Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures” made outside of the Offshore Voluntary Disclosure Program (“OVDP”) or its predecessor programs) may still use the streamlined procedures.

The Streamlined Procedures are classified between U.S. Taxpayers Residing Outside the United States and U.S. Taxpayers Residing in the United States.

Both versions require that taxpayers:

a. Certify that the failure to report the income from a foreign financial asset and pay tax as required by U.S. law, and failure to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, resulted from non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

b. File 3 years of back tax returns reflecting unreported foreign source income;

c. File 6 years of back FBAR’s reporting the foreign financial accounts; and

d. Calculate interest each year on unpaid tax.

In return for entering the streamlined offshore voluntary disclosure program, the IRS has agreed:

a. Possible waiver of charges of criminal tax evasion which would have resulted in jail time or a felony on your record;

b. Possible waiver of other fraud and filing penalties including IRC Sec. 6663 fraud penalties (75% of the unpaid tax) and failure to file a TD F 90-22.1, Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50% of the foreign account balance); and

c. Possible waiver of the 20% accuracy-related penalty under Code Sec. 6662 or a 25% delinquency penalty under Code Sec. 6651.

For U.S. Taxpayers Residing Outside the United States who apply to the streamlined program, the IRS is waiving the OVDP penalty.

For U.S. Taxpayers Residing in the United States who apply to the streamlined program, the IRS is imposing a 5% OVDP penalty (applied against the value of the undisclosed foreign income producing accounts/assets).

Case Example:

Raj is an engineer working and living in California. He was born in India and came to California after completing his education in India. While he was a child his parents set up a bank account in India which he did not even know about until just recently. That account has been earning interest all of these years and now has a balance of $100,000.00.

What liabilities does Raj face under the Internal Revenue Code?

1. Back taxes, interest and 20% accuracy related penalty for the unreported interest income going back at least three years.

2. FBAR penalties of $10,000 per account per year (going back 6 years results in a $60,000 penalty).

When I total that all up, what started out as an account with $100,000.00 would leave Raj with about $30,000 – that’s a 70% reduction in value!

How would Raj fare by hiring tax counsel experienced in OVDP and going forward with one of the programs established by IRS?

1. Back taxes and interest for the unreported interest income for the last three years.
2. No 20% accuracy related penalty.
3. No FBAR Penalties
4. A one-time 5% OVDP penalty (applied against the value of the account)

So when I total that all up, what started out as an account with $100,000.00 now would leave Raj with about $93,000.00 – a 7% reduction in value. That’s a lot better than a 70% reduction in value! And there are things that we can do as tax counsel to make that reduction even smaller and perhaps get full abatement of penalties.

What Should You Do?

We encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts. By then, it will be too late to avoid the new higher penalties under the OVDP of 50% percent – nearly double the regular maximum rate of 27.5%.

Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or you are in the 2012 Offshore Voluntary Disclosure Initiative (“OVDI”), you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

Wife Convicted Of Murdering Husband To Avoid Him Learning Of Their Outstanding IRS Debt

While death and taxes are always certain, take lesson from Amy Bosley that you should never mix them together.

These are busy days for Joe Yates.  The brisk fall air has ushered in a long ledger of names. Home owners in need of having their chimneys swept and inspected. And those with chimney emergencies who summon Yates 24 hours a day.  These are also somber days for the 6-foot-5 inch, 280 pound Pendleton County man, known to many Northern Kentuckians as simply “Big Joe.”

“Big Joe,” who is 30, has a tall top hat and tails to fill. It’s a hat he wishes would never have been left vacant.  “Big Joe,” is one of 14, who lost their boss and their jobs in the early hours of May 17, 2005.

That boss was Robert Bosley, owner of Bosley Roofing and Chimney Sweep in Alexandria, who was shot to death as he slept in his small cabin in Campbell County. Robert was the owner of Bosley Roofing and Chimney Sweep of Alexandria, and a member of St. Peter & Paul Church, National Chimney Sweep Guild, Alexandria Businessman’s Association and he was a private pilot. Robert who lived to age 42 was murdered by his wife Amy Bosley. The reason? Amy did not want Robert to know the huge business debts and IRS debts she had racked up. Yes this is another story of how outstanding IRS debt contributed to the death of a taxpayer. 

Robert was born Aug. 6, 1962 in Campbell County Kentucky. With his wife, Amy, they were making a name for themselves in their small Kentucky community. Together they ran a successful roofing and chimney sweep business eventually turning it into somewhat of a local empire with Amy right beside him handing the bookkeeping.

Amy Bosley was the archetypal American dream wife…attractive, kind and funny, a devoted mother, a valued business partner to her husband, an untiring charity worker and community stalwart in the small town of Campbell, Kentucky.

Together they were like local royalty with their million-dollar roofing business and being active volunteers in their community. They had sports cars, horses, their own plane and a 50-ft motor-yacht. They also planned to build a castle-like mansion on their 35-acre estate. It was on this land, mainly remote woods, that the Bosley’s had built their weekend retreat, a luxury cabin.

Nightmare In The Woods.

But that dream became a nightmare at dawn on a May morning in 2005 when 38-year-old Amy rang police in floods of tears to report that an intruder had broken into their remote luxury cabin deep in woodland in Campbell County.

“Someone is breaking into my house,” Amy frantically told a 911 dispatcher.

The conversation then abruptly ends.

So the 911 dispatcher called back and getting through to Amy asks if the intruder was still in the house?

Amy replied: He just left but he shot my husband. Oh my God, he shot my husband!!

Moments later a patrolman arrived at the Bosley’s cabin. Amy Bosley tells him, He shot my husband, he shot my husband! She tells him the intruder fled out the back door. The patrolman pushes past her and there, lying on the bed is Robert Bosley riddled with bullets. His lips were blue. He was dead. He was face down on the bed, shot 7 times. The room and the rest of the cabin, had been ransacked – possessions and clothes strewn around the doors and windows broken.

The Bosleys’ two sons, Trevor, nine, and Morgan, six, asleep in a first-floor loft bedroom had not been harmed although they had been woken by the commotion and told to stay in their room by their mother.

Police searched the house and grounds, but no intruder was found. Amy Bosley in a state of shock was taken to the house of friends. She described the intruder as a white guy in his thirties, very tall and with a pointed very mean face.

Police launched a manhunt for the intruder using sniffer dogs and helicopters but no one was found. The lead investigator immediately suspected something was wrong with Amy’s story. Robert had been shot seven times while sleeping, and his gun was missing. Also missing were the shell casings, which should have littered the crime scene. Indeed, surveying the wreckage, one hardened detective muttered to a colleague: “This is overkill…No intruder would kill the guy like this and then destroy the place.” Detective Dave Fickensecher said later “You could see bullet-holes everywhere. The once immaculate cabin was a shambles. Whatever had gone on was extremely violent.”

Amy Bosley made a tearful statement in a press conference held the next day in which she said: “We have every faith in the police department and the investigation to find this killer. We are helping the authorities in every way we can. Unfortunately as of now all I can remember is that I woke up and was on the floor. I heard shots and I saw a man leave the house.”

Soon afterwards police investigations began to reveal that the Bosley marriage had not been as idyllic as Amy claimed it to be. Robert spent most weekends on his boat on nearby Lake Cumberland holding parties at which most of the guests were women.

Friends said that Robert would be on the lake for days at a time and refuse to tell Amy who he was with and when he would be back. But not all the Bosley’s secrets concerned Robert’s extramarital affairs. A close study of the finances of the roofing company, of which Amy was financial director, showed that the apparently booming enterprise was going bust.

Police also discovered a motive: the Bosley’s were deep in debt, and, unknown to Robert, the IRS was literally knocking at their door over a $1.5 million tax bill. Amy it seemed was destroying the business by embezzling nearly $2 million which should have been paid to the IRS. In fact during the investigation into the murder, police discovered something suspicious in Amy’s car: hundreds of unmailed checks to the IRS totaling about $1.7 million in back taxes.

Weeks before the shooting, Amy met with an IRS Revenue Officer who informed her they were investigating Robert for nonpayment of taxes. According to police, Amy went to great lengths to keep the tax problems from her husband even going as far as to impersonate him over the phone. She also got a P.O. Box for the business which Robert did not know about and had all IRS notices go to that box so Robert would not be aware of this problem. But this tax problem was coming to a head and Robert was to hear about it firsthand from the Revenue Officer himself.

Crime Scene Staged?

Throughout the investigation, police, prosecutors, townspeople and even the Bosley family had their suspicions about who committed the crime — Amy Bosley, something she vehemently denied. “I had no reason to shoot him,” she told police. But the Bosley’s unusual marriage, the looming IRS investigation, Amy’s story of an intruder and her behavior following the murder just didn’t seem to add up.

“Her actions weren’t appropriate. He’s dead just two hours and she’s bashing him in a police interview,” said Fickenscher. Prosecutors felt her crying was forced and not at all genuine. “Her husband had just been killed and even though she would do the same crying out, no one saw a tear fall from her eye,” said an investigator.

Authorities said even the crime scene looked staged. Around the body police found just two bullet shell casings; the others were found in the most unusual of places, like the bottom of the washing machine. According to Amy’s lawyer, Jim Morgan, those casings were old, probably left in Robert’s jeans from target practice. “Just like coins typically fall out of your pocket in the washing machine, the shell casings [did too],” he said.

Police don’t buy that explanation and had their own theory. The day of the murder, the IRS was coming to audit the business’s books, potentially exposing Amy’s secret. Police say Amy might have felt that the only way to make the tax problem go away was to kill her husband. “The IRS was investigating Robert Bosley and if Robert Bosley couldn’t tell them otherwise, then he could be at fault,” said Fickenscher.

Ten days after Robert Bosley was shot and killed, Amy was arrested for the murder. She insisted she was innocent, but a week later another piece of incriminating evidence turned up in Amy’s purse — a Glock handgun. It was the same type of gun used to kill her husband. Even though police had no doubt they’d found the murder weapon, authorities couldn’t definitively match it to the lead slugs that struck Robert Bosley because the slugs were too mutilated.

The Surprising Outcome

Amy first pleaded not guilty, but her case didn’t hold up well during a dramatic four-hour pretrial hearing.

While there was a mountain of circumstantial evidence against Amy, prosecutors admitted they didn’t have a slam dunk. But statements Amy’s children, Morgan, 9, and Trevor, 6, gave to police following the murder would become the strongest piece of evidence. “The first thing that woke the children up was gunshots,” said the investigator. “The children heard the glass breaking after the gunshots,” the investigator added, which would contradict Amy’s story of an intruder break-in.

Their testimony was crucial, but no one wanted to force young children who had already lost their father to testify against their mother. As a result, prosecutors reluctantly offered Amy Bosley a deal — the minimum sentence of 20 years if she pleaded guilty — and to everyone’s surprise she took the deal. “Amy entered a plea for one reason, and that was to save her children from testifying,” said her attorney, who maintains his client is not guilty. Robert’s parents who are now raising the couple’s two children were happy to hear that the kids would be spared from having to testify against their mother.

In November 2005, Amy Bosley was sentenced to 20 years for murder and five years for the tampering charge. The sentences to be served concurrently. Unfortunately, the IRS would still be looking to collect the over $1.7 million in payroll taxes from Robert’s estate.

Don’t Take The Chance And Lose Everything You Have Worked For.

Protect yourself. If you are being audited or investigated by IRS or in danger of wage garnishments or bank levies or having a tax lien placed against your property, stand up to the IRS and your State Tax Agency by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including tax audits, criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.