New January 31st Filing Deadline For Businesses To File All W-2’s And 1099’s

To expedite IRS’ ability to match up W-2’s and 1099’s reported by businesses to the income reported on taxpayers’ tax returns, all these forms must be submitted to IRS and given to taxpayers no later than January 31st. This filing deadline was made uniform under The Protecting Americans from Tax Hikes (PATH) Act. Prior law required that only W-2’s had to be provided to employees no later than January 31st with all other reporting forms (including the copies to IRS) due by the end of February. Failure to file these forms correctly and timely may result in penalties to the employer or payor.

Tips For Businesses To Be Ready And Avoid Penalties.                          

Employers should verify employees’ information. This includes names, addresses, Social Security or individual taxpayer identification numbers. They should also ensure their company’s account information is current and active with the Social Security Administration before January. If paper Forms W-2 are needed, they should be ordered early. There is no automatic extension of time to file Forms W-2.

More Efficiency In Matching Means More IRS Audit Notices Issued Sooner.

According to IRS estimates, in a calendar year employers, businesses, financial institutions, credit card companies and other third party payers will file 2.3 billion information statements. These information statements report income and financial transactions, and can help individuals and businesses prepare accurate tax returns. Using information-matching programs, the IRS compares third-party information statements with taxpayer data, and sends a notice to taxpayers when IRS systems detect inconsistencies.

Individual Automated Underreporter (AUR) Program

This matching program is better known by its primary notice: CP2000, Notice of Proposed Adjustment for Underpayment/Overpayment. IRS systems automatically send this notice when items reported on Form 1040, U.S. Individual Income Tax Return, don’t match information reported to the IRS by employers and other payers. The first round of these notices arrives just after Thanksgiving, and the second round arrives toward the end of the next year’s filing season.

The CP2000 notice has been a mainstay of IRS information reporting for decades. In 2012, the IRS issued more than 4.5 million CP2000 notices, with an average of $1,572 in additional taxes owed.

Form 1099-K merchant card transaction matching program

In 2012, the IRS started receiving from credit card companies, Forms 1099-K, Payment Card and Third Party Network Transactions. With merchant card transactions now being reported to IRS, the IRS quickly began using this information to match against business returns. However, because businesses do not specifically report merchant card transactions as separate line items on business tax returns, the IRS can only infer potential underreporting. For example, if a business has a disproportionate amount of cash to credit/debit card sales, based on its line of business, the IRS may look closer. These kinds of mismatches have led the IRS to develop compliance initiatives, including “soft” notices requesting explanation and mail audits requesting documentation.

The IRS has established a Form 1099-K matching initiative that makes the IRS more efficient in identifying problem tax returns especially where merchant card payments appear to make up the majority or even exceed the total business receipts reported on the return. In these cases, the IRS perceives that the business is underreporting cash sales due to the disproportionate share of merchant card payments. Accrual-basis taxpayers and e-commerce businesses whose receipts do not neatly match merchant card transactions are likely early targets in this program and we have had our share of these cases where that is what happened.

Automated Substitute For Return Program

When a taxpayer does not file and the IRS has information statements indicating a filing requirement, the IRS uses the data to file a return on behalf of the taxpayer if there is a projected balance owed. In 2012, the IRS used information statements to file 803,000 returns for taxpayers, totaling $6.7 billion in additional taxes owed. And the sad thing about this is in just about every case, the amount actually owed when a tax return is filed by the taxpayer is much lower than what the IRS says a non-filer taxpayer owes. We even had cases where the IRS ended up owing our clients money.

The Stakes Are High!

A recent U.S. Government Accountability Office study showed that the IRS spends $267 million on underreporter matching programs, compared with the $4.2 billion it spends on audits. But automated information-matching programs return almost six times more revenue than audits. You can see why with fewer IRS agents and reduced budgets, the IRS will increasingly rely on technology-driven matching programs to bring in more tax dollars.

What Should You Do?

So if you receive one of these audit notices it is important that you don’t ignore it. 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 Orange County, San Diego County and elsewhere in California defend you from the IRS.

California-Taxpayers-Impacted-By-Wildfires-Receive-More-Time-to-File-And-Pay

California Taxpayers Impacted By Wildfires Receive More Time to File And Pay

With so many people whose lives were disrupted by the California wildfires, it is welcome relief that the Federal and State Tax Agencies are providing extra time to taxpayers to meet their tax obligations.

Internal Revenue Service (“IRS”)

The IRS announced that victims of wildfires ravaging parts of California now have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for taxpayers with valid extensions that run out Monday, October 16, 2017.

Currently, the IRS is providing relief to seven California counties: Butte, Lake, Mendocino, Napa, Nevada, Sonoma and Yuba. Individuals and businesses in these localities, as well as firefighters and relief workers who live elsewhere, qualify for the extension. The agency will continue to closely monitor this disaster and may provide other relief to these and other affected localities.

The tax relief postpones various tax filing and payment deadlines that occurred starting on October 8, 2017. As a result, affected individuals and businesses will have until January 31, 2018, to file returns and pay any taxes originally due during this period.

This includes the January 16, 2018 deadline for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until October 16, 2017. However, any payment that was due with the extension filed on April 18, 2017 but not paid until later will still be subject to a late-payment penalty.

A variety of business tax deadlines are also affected, including the October 31, 2017 deadline for quarterly payroll and excise tax returns. Calendar-year tax-exempt organizations whose 2016 extensions run out on November 15, 2017 also qualify for the extra time.

In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due after October 8, 2017 and before October 23, 2017, if the deposits are made by October 23, 2017.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, it would be necessary to contact the IRS to have the penalty abated.

The IRS will also work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. An example would be where the taxpayer’s representative is located in an affected area and is unable to help the taxpayer-client meet a tax deadline.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year) or the return for the prior year (2016). See Publication 547 for details.

For a complete list of all disasters besides the recent California wildfires, see the IRS disaster relief webpage.

Franchise Tax Board (“FTB”)

The FTB announced that affected taxpayers are granted an extension to file 2016 California tax returns and make payments until January 31, 2018.

Taxpayers may deduct a disaster loss for any loss sustained in California that is proclaimed by the Governor to be in a state of emergency. For a complete list of all disasters, see the “Qualified Disasters” chart on FTB’s Disaster Loss webpage. This disaster page also has information on extended deadlines, filing instructions, and obtaining free copies of state returns.

In addition, the FTB automatically follows federal postponement periods for any presidentially declared disasters, the most recent being Hurricanes Harvey, Irma and Maria. So a taxpayer who earns income in California can show that Hurricane Harvey impacted him or her, that taxpayer has extra time to file a California tax return. 

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business activities.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS audits. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

IRS collection

How to Stop IRS Collection Efforts

The IRS is the world’s largest and most powerful collection agency (and the staggering fact that Congress has allowed them to start outsourcing debt collection to private third parties doesn’t change this).

Therefore, if you owe the IRS money, there is nowhere to run and no place to hide. It is only a matter of time before matters are brought to a head — either with or without your participation. As such, it’s absolutely in your best interest to make dealing with this your top priority. Procrastinating, or waiting and seeing to ensure that the IRS really, really wants you to pay up are both very bad ideas. In fact, don’t even consider them. Read more

IRS offer in compromise

Warning: Don’t Get Trapped by These 4 Myths About the IRS Offer in Compromise Program

The adage “a little knowledge is a dangerous thing” is vividly — and sometimes catastrophically — illustrated when it comes to anything and everything to do with the IRS.

Indeed, the amount of so-called good advice available on the web and across social media that is partially or wholly incorrect is staggering, and many taxpayers (individuals and businesses) that believe they are sailing towards safe shores are, in fact, heading straight into a costly audit that could turn into criminal prosecution. Read more

What’s the Difference Between Tax Fraud and Tax Negligence?

For many reasons — some of which are justified and necessary, and others that frankly do not make sense and obfuscate rather than clarify — the Internal Revenue Code (IRC) is an excessively complex set of volumes, which contain laws enforced by the IRS (published as Title 26 of the United States Code/USC).

Partly due to this inherent complexity — and also because the web is riddled with incomplete, misleading or outright wrong “advice” on tax controversies— there continues to be significant confusion around two fundamentally separate concepts: tax fraud and tax negligence.   Read more

An Unusual But Effective IRS Collection Tool: The Writ Of Ne Exeat Republica

Congress has given the IRS potent tools to collect taxes. The IRS can impose liens on a taxpayer’s property and can seize it through levy, all without prior judicial authorization. But for taxpayers who attempt to move or keep their assets offshore to circumvent IRS collections – beware of the writ of ne exeat republica.

The writ of ne exeat republica effectively prevents a person from leaving the Court’s jurisdiction and the IRS has demonstrated that where its efforts to seize a taxpayer’s property to collect his past due taxes, the IRS essentially seized the taxpayer instead.

Predictably, it takes some fairly serious misbehavior to lead a court to bar someone from traveling – and that is what happened to Charles and Kathleen Barrett of Colorado. United States v. Barrett [Case No. 10-CV-02130], 2014 U.S. Dist. LEXIS 10888 (D. Colo. Jan. 29, 2014).

Unknown to the Barretts, the government secured a writ of ne exeat republica just before the Barretts had departed for Ecuador. The government then received a default judgment and an order directing the Barretts to repatriate funds that the IRS believed that the Barretts had wired to Ecuador. Thereafter, the Barretts not knowing that this writ and order were outstanding returned to Colorado to attend their daughter’s wedding.

Take-down At The Airport.

After attending their daughter’s wedding, on the morning of August 8, 2013, Charles and Kathleen Barrett were preparing to leave Colorado for the return trip to Cuenca, Ecuador. Charles was leaving from the Denver airport while Kathleen was flying out of Grand Junction, Colorado, where she had been visiting her mother. Both were heading to Miami where they would meet their sons for the flight back to Ecuador.

After Charles checked in at the airlines counter at the Denver Airport, he went to the gate an hour before his flight was scheduled to board. Just as he settled into his seat in the waiting area he was surrounded by three men, one of whom showed his U.S. marshals badge. “You’re not flying anywhere today,” one of the marshals told him. “The judge wants to see you.”

Charles turned over his passport and airplane ticket and was led out of the airport in handcuffs. Four times, Charles recalls, he asked to call to an attorney to represent him before the judge. Four times he was put off. He informed the marshal that his sons, Nathaniel and Jonathan, were waiting for him at the Miami airport and was told that the marshals would contact them. Despite the drama and rough treatment, Barrett understood why he was being taken away but felt confident the issue could be resolved quickly once he talked to the judge.

You see the Barretts owed the IRS money from 2007 when they received a large refund of $217,615 that they were not entitled to as a result of a tax return filed without their signatures by their tax preparer. When contacted by the IRS about this, they filed a corrected return in 2009, but the Barretts kept the money.

On September 1, 2010, the IRS sued the Barretts in Colorado federal court, and eventually obtained a default judgment against them for $351,197 (which amount included penalties and interest). Subsequently, three separate times thereafter the Barretts tried to vacate the default judgment, and three times they failed.

So far, so what — if the Barretts had simply paid their taxes, this would have been an obscure case for a relatively small amount and probably nobody except the parties concerned would have cared much. But the Barretts decided that they weren’t going to pay, and that’s where it starts getting interesting. Apparently the Barretts decided to move to Ecuador and that they deposited their erroneous refund check first into their domestic bank account, and then moved it to another account, and then wire-transferred funds to an account with a bank in Uruguay. The government believed that the Barretts had spirited the $217,615 out of the country.

IRS Action To Get The Offshore Money Back.

By this time you are probably thinking, “Yeah, and good luck with the IRS collecting any of that money, against a couple living outside the U.S. with bank accounts outside the U.S.”

But, in the off-chance that the Barretts might show up again, on December 2, 2010 the IRS went to a U.S. District Judge, and asked that an order by the cool name of writ of ne exeat republica be issued against the Barretts to keep them from leaving the U.S. (although they were already long gone), requiring them to post a bond for the $351,197, requiring they be detained by the U.S. Marshal Service pending a hearing, requiring that they produce all their books and records of financial assets and accounts, and restricting them from further transferring or alienating their property.

The writ of ne exeat republica is a little known and seldom used judicial tool dating to the 18th century English royal court. Originally intended to restrict travel for political reasons, its occasional use in the U.S. court system, primarily in family and tax law cases, has often come under question. When it has been invoked, it has been strictly as a civil law action.

Of course, this writ was without little immediate effect since the Barretts had vamoosed. The writ was issued without the Barrett’s knowledge, by the court on an ex parte basis, which meant that only the IRS showed up to talk with the Judge, and the Barretts were unrepresented — a disadvantage inherent to fleeing the country.

The Federal Court Weighs In.

So when Charles was taken into the courtroom on August 8, 2013, he stood before U.S. District Magistrate Judge Boyd Boland who issued the writ of ne exeat republica, ordering the Barretts to turn over their passports and preventing them from leaving the country. Judge Boland read Charles his rights and told him he was not allowed to speak.

An attorney for the IRS asked Judge Boland to put Barrett in jail or post bond of $253,000. The judge responded that the writ did not authorize jailing, only the confiscation of passports and other travel documents. The IRS attorney persisted, claiming the Barretts were flight risks, and the judge finally relented. Charles was fingerprinted and booked into federal jail. However, no charges were filed.

Meanwhile, 200 miles west of Denver in Grand Junction, Kathleen was experiencing the same treatment that Charles was in Denver. She too, was booked into a local jail. It was two days before Charles and other family members knew where she was.

In Miami, not knowing what had happened to their parents, Nathaniel and Jonathan boarded an American Airlines flight to Quito. The U.S. Marshals had not bothered to inform them that their parents had been detained. Assuming that there was a scheduling problem and that the family would be reunited in Ecuador, they remained on the flight.

Kathleen and Charles saw each other for the first time in five days on Tuesday August 13th, at a hearing in the federal courthouse in Denver. Their attorney immediately demanded that the handcuffs and leg irons be removed. This is a civil not a criminal case, he argued and Judge Boland agreed. The marshals, however, refused to obey the judge’s order based on instructions from their superiors. Charles and Kathleen sat through the hearing literally in chains.

On October 11, 2013, the Barretts appeared for a hearing before a U.S. Magistrate Judge. At this time, the IRS identified the assets they believed the Barretts had control of that were available to pay their debt — about $20,000 in cash in various accounts, some real estate in Ecuador, a bunch of minority stock interests in a nutritional food company apparently doing business in Central America, various small assets such as coins and jewelry, a truck and a horse.

Mrs. Barrett claimed that most of the assets were either worthless or not accessible, and at any rate their total value was not much more than $48,000. Of course, these are just the assets that the IRS was able to identify.

As with nearly all the debtors in similar cases involving offshore assets, the Barretts’ biggest failure was their own credibility. Specifically:

  1. The Barretts had obtained a large tax refund through fraud. While they tried to claim that a “maverick accountant” signed their names to the return, when shown their signatures on their returns they claimed that the government forged their signatures. Nonetheless, the Barretts kept the fraudulently-obtained refund.
  2. The Barretts had not voluntarily paid anything to their creditor, and had “loaned” $20,000 to their son just to keep it out of their creditor’s hands.
  3. While basically claiming poverty, the Mr. Barrett had his credit cards paid from an undisclosed account in the U.S., and had wired to another of his sons from $1,500 to $3,000 per month over a 2 to 3 year period.
  4. There was evidence that the Barretts had wire-transferred money between various accounts, and eventually withdrew $48,720 by a cashier’s check, when a wire-transfer failed.
  5. The Barretts had refused to provide bank account or wire-transfer information for their various accounts.
  6. Mrs. Barrett sold shares in a company that was not disclosed to the U.S. Magistrate Judge for $40,000 while at the same time claiming that her sole income was the $430 she received from Social Security. Some of this money was used to pay the Barrett’s legal fees.

After reviewing the available evidence and applying a multifactor test that considered the merits of the governments underlying tax claim, the relative harm to each party and the public interest to be served by the writ, the district court concluded that the writ should stay in place. Ultimately, the court concluded that the Barretts had to stay put until they paid the balance of their tax debt (which after applying prior payments and credits now only amounted to $16,000) and provided satisfactory evidence that their Ecuadorian property truly was unmarketable.

So don’t think that if you flee the country to dodge your debts or avoid reporting your undisclosed foreign bank accounts you will not have any problems when you come back. A U.S. Marshal or your local friendly sheriff will be waiting for you.

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.

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.

Beware Of New E-Mail Scam Using The IRS Name Targeting Foreign Taxpayers With U.S. Bank Accounts

An e-mail claiming to come from the IRS claims:

Our records indicate that you are a Non-resident, and that you are exempted from the United States of America Tax reporting and withholding on interest paid to you on your account and other financial benefits. To protect your exemption from tax on your account and other financial benefits, you need to re-certify your exempt status to enable us confirm your records with us. Therefore, you are required to authenticate the following by completing form W-8BEN attached and return same to us as soon as possible with a valid copy of government issued Identification (e.g., International Passport) through the email at the bottom of the form.”

This appears to be an identity theft scheme to obtain recipients’ personal and financial information so the scammers can clean out their victims’ financial accounts. In reality, a request for a Form W-8BEN, W-8 or W-9 would be made directly by your bank not the IRS.

Why Banks Need Your Social Security Number.

A social security number (SSN) is a nine-digit number issued by the Social Security Administration to all U.S. citizens, permanent residents and temporary working residents. The purpose of a social security number is to track individuals for taxation purposes. Federal law requires private businesses to collect an SSN when the Internal Revenue Service requires notification of the transaction. Banks and other financial institutions require individuals to provide an SSN when engaging in financial transactions.

Banks are required by federal law to participate in a Customer Identification Program for the opening of new accounts. Individuals opening up a checking account, savings account or renting a safe deposit box are required to provide the bank with a valid name, date of birth, current mailing address, and a social security number. Banks are required to verify the accuracy of the information by also requesting proof of identification in the form of a driver license, passport or by contacting a credit reporting agency that would have information on file based on the SSN. Banks are also required to obtain a SSN on existing accounts and where there is no SSN, the banks are required to withhold tax at the source (that means your bank account) and remit your money to the IRS. Banks check the SSN against government terror lists, to limit terrorist financing and fight against money laundering.

How The Scam Works.

Using a technique calculated to get almost anyone’s attention, the e-mail notifies the recipient that he or she to protect their exemption from tax on interest paid to you on your account and other financial benefits you must complete a tax form with their identifying information (such as Form W-8BEN) and email it back along with a copy of a government-issued ID.

Unusual for a scam e-mail, it may contain a salutation in the body addressed to the specific recipient by name. These scam e-mails are sent using the same technique used by spammers, in which hundreds of thousands of messages are sent to potential victims based on Internet address. Because of the volume, the typical scam e-mail is not personalized.

Beware this e-mail is a phony. The IRS does not send unsolicited, tax-account related e-mails to taxpayers. Also, any domain name in sender’s email or reply email address contained in the email are not legitimate as the domain name for IRS is “irs.gov”.

So What Should You Do?

If you get an email from someone claiming to be from the IRS and asking for your identification, here’s what you should do:

Report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

And if you do owe taxes and you have not already resolved this with the IRS or you have not disclosed your foreign accounts as required by the IRS, then that is where we come in. 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.

How The IRS Turned Carole Hinders’ Life Upside Down.

Iowa restaurant owner’s fight against the IRS gains national attention.

A restaurant owner in northwest Iowa has landed in the national news spotlight over her fight with the federal government. Carole Hinders who at the time was 67 years old and a grandmother has operated Mrs. Lady’s Mexican Food in Arnolds Park, Iowa for 38 years.

Nowadays it is most notable for a small business to be in operation for 38 years – especially if it is a restaurant which we all know “come and go”. Even more notable for Ms. Hinders was that she was always in full compliance with her tax obligations. 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.

As the IRS agents were leaving her house she pleaded “How am I supposed to pay my bills? How am I supposed to pay my people?” The agents replied – we don’t know.

You may ask how could this have happened? She did not have any outstanding liability to the IRS. The problem though is that Ms. Hinders’ restaurant only accepts cash so Ms. Hinders makes frequent trips to the bank to avoid having large sums of money on the business’ premises.

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. Hinders was making small deposits to evade this reporting requirement used its civil forfeiture power to seize Ms. Hinders’ bank account and close down her business.

That’s right – federal law enforcement agencies are invested with the power of civil forfeiture whereby the federal 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.

Ms. Hinders said she received no warning from either her bank or the government before her money was taken. 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 – instead they charge your money with the crime.

Since then, she’s had to borrow money and use credit cards to pay bills and keep her restaurant in business. But Ms. Hinder was not stopping there – she knew she didn’t do anything wrong and did not owe anything to the IRS. But yet the IRS took her money so Ms. Hinders’ decided she was going to fight the IRS.

The Battle Against IRS Begins

Remember Ms. Hinders was never accused of any crime. The Mexican restaurant she owned, Mrs. Lady’s, did not accept credit cards and she regularly deposited earnings in a bank branch a block away. She followed this procedure for almost four decades. And all this activity occurred in rural Northwestern Iowa – far from any foreign border and in a region not known for drug dealing and money laundering.

Ms. Hinders and similar business owners were making deposits under $10,000 because that is the kind of money their business is bringing in – not because of a desire to avoid government reporting. Ms. Hinders stated “How can I be committing a crime by depositing money that I worked for, and deposited in my own bank account? In 30 years of banking with the same bank, no one ever mentioned that I was making my deposits wrong”.

Ms. Hinders wasn’t using the money for illegal purposes. Her business doesn’t accept credit cards and the law fails to provide provisions for small businesses with limited cash flow. Ms. Hinders frequently deposited money in order to keep it safe in the bank. 

But yet the government was treating Ms. Hinders like a criminal, just for running an honest cash business.

She hired an attorney to sue the IRS and regain her property. In civil forfeiture cases, the government must file lawsuits “against” property or cash in order to keep it. This one was called United States of America v. $32,820.56 in United States Currency (Case No. 2013-CV-4102). This lawsuit was filed in Federal District Court for the Northern District of Iowa. Weeks later Ms. Hinders was deposed. After her deposition, it became overwhelmingly clear that Ms. Hinders was an innocent and hardworking restaurateur. The Assistant United States Attorney on the case had then informed the IRS that they should not go forward with the case. The IRS agreed and the case was dismissed but without prejudice – meaning that the government can file another action in the future to get Hinders’ money if the court grants its motion.

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”.

Given the dismissal of the case brought on by Ms. Hinders, the IRS has since stated that it would consider more carefully seizures in cases where there is no suspicion that the money involved came from an illegal source. But of course officials did not go so far to drop cases that were already underway or to even stop using this form of power. 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 in Ms. Hinders’ case she still faces the possibility of the IRS reopening her case. The IRS claimed that their case was “justified” and requested the right to be able to refile the case at another point in time. You would think that the IRS would have instead simply return the money with interest and apologize to Ms. Hinders for the nightmare they put her through. Instead the IRS is shamefully attempting to mask their retreat by insisting on the right to refile the case in the future.

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.

Famous Alaska Bar Landmark Shut Down By IRS Is Reopened By New Owners

Alaska’s economy is dominated by the oil, natural gas, and fishing industries, resources which it has in abundance. Tourism is also a significant part of the economy and that is where you can find some classic Alaska bars but for some time now these bars have been under pressure to stay in business and to do so have created tax problems and gained the attention of the IRS.

So what makes a classic Alaska bar?

A classic Alaska bar is a magical mixture — a touch of danger and a place where characters gather, featuring a strong relationship between bartender and patrons. More than fun, a classic Alaska bar is educational in a perverse sort of way. Past customers bring them up in conversation. People outside Alaska know of them.

What makes some bars unique is what used to be there before the bar existed – perhaps an old outpost or bootlegging operation or brothel.

Some of these classic Alaskan bars are set up as a dark and dank watering hole with sawdust on the floors and dollar bills and a bra or two nailed to wooden walls. While others may be more conventional. But the one thing that the classic Alaskan bars have in common is the atmosphere of the bar reflects the personality of its owner.

But as those owners get older and retire or pass away, a new crop of entrepreneurs are taking their shot at preserving legendary watering holes. One of those places is Louie’s Bar in the Southeast Juneau community of Douglas.

Louie’s Bar rose out of the ashes of the Great Douglas Fire of 1937, which incinerated downtown Douglas. Although the bar was not called Louie’s until 1974 when it was then inherited by a man named Louie Pusich.

But in 2013 Louie’s doors were closed – not because the owner died or retired. Instead it was closed by the Internal Revenue Service for nonpayment of taxes amounting to $1 million.

The Shutdown.

That’s right, P P’s Douglas Inn, formerly known as Louie’s Bar, was closed down and seized by the Internal Revenue Service for not paying federal taxes over the last fourteen years. The doors were locked, stools upturned on tables and lights dimmed just before the 2013 Independence Day holiday. Owner Patrick M. Peterson admitted that he did not pay federal taxes and knew that a shut down had to be coming.

Mr. Peterson was asked, how could he have racked up over $1 million in Federal taxes? He replied that “Paperwork is not my big suit. I just couldn’t keep up with it. Up until 1999, I had a good bookkeeper that was taking care of it for me. So, I had everything caught up with”. He then added that “staring with 1999, he did have others working on his bookkeeping and taxes but nobody came through with what I needed”.

Federal tax records showed that Peterson and his company Peterson Pacific Holdings owed nearly $1 million in back taxes. Three-quarters of that amount was in the form of unpaid quarterly employer taxes from early 1999 to the end of 2012. The rest is what the IRS calls a Trust Fund Recovery Penalty, or an attempt to recoup employees’ withholding, Medicare and Social Security taxes that the employer did not pass on to the federal government.

This is all evidenced by eleven federal tax liens totaling $997,188.16 that were filed against Peterson and his company between July 2011 and June 2013. They were for unpaid federal employer taxes during most of the reporting periods from First Quarter of 1999 to the Fourth Quarter of 2012.

Now, most business owners in this situation would look to reach a resolution with the IRS and avoid collection action or even worse – a business shutdown. But not Peterson. Instead he signed a quit claim deed for the Bar’s property to a Carol Collier of Riverview, Florida in exchange for $1.00 on May 20, 2013. This was at the same time when the City and Borough of Juneau (“CBJ”) property assessments showed the land valued at $67,900 and the structure valued at $174,100 for a combined total of $242,000. But don’t think that this transfer thwarted IRS collection action. You see when the IRS files a Federal Tax Lien, such lien follows any subsequent transfer of the property until the lien is paid in full or otherwise satisfied.

What is most unusual about Peterson’s case is that his business’ tax problems go back to 1999 – that’s about 15 years! How could the IRS have let this drag on for that long? Perhaps being in a remote location in the rugged State of Alaska made the growing Federal tax liabilities of Peterson’s business a low priority of IRS.

But the continued non-payment of such taxes is common, especially among struggling businesses. Owners of struggling businesses in financial trouble and having cash flow issues are saying “OK, if I don’t pay my suppliers, they’re not going to give me any inventory. If I don’t have any inventory, (then) I’m out of business. Just one quarter or one month and I’ll do better, and the IRS isn’t going to shut me down”. Unfortunately, when this practice continues over successive quarters, many businesses are unable to turn this around. The IRS calls this “pyramiding”.

The IRS is usually in contact with the taxpayer with almost-immediate notices and the assignment of a Revenue Officer to prevent such a huge pyramiding problem. But the eventual measures that were taken in Peterson’s case were an extraordinary step that the IRS had no choice to pursue. You see, Peterson did not owe just the IRS but also the City and Borough of Juneau (CBJ) for sales tax, CBJ for property taxes and the State of Alaska for unemployment insurance contributions.

So the IRS had no choice – it had to stop the bleeding and shut down Peterson’s business. A public auction would be later held and the proceeds applied to the back tax liability of Peterson’s business.

The Reopening.

Abigail Trucano and her parents, James and Arbe Williams were unhappy that the landmark bar was forcibly closed by the IRS because of unpaid back taxes amounting to $1 million. Family members were regulars, as were many in the Southeast community of Douglas. “We thought this bar was so important to Douglas,” says Trucano. “I used to come in here all the time.”

So when the IRS auctioned the bar, the Williams’ snatched it up for $145,000 and invested heavily in its renovation. Their daughter, a co-owner, took charge of operations. Trucano had worked six years as a bartender at Juneau’s downtown tourist destination, Red Dog Saloon, dealing with swarms of cruise ship tourists.

The family contacted Louie Pusich, the former founder, obtaining his permission for the use of his name. The 76-year-old attended the grand opening in July 2014 which was reopened as Louie’s Douglas Inn.

Excited for its return, a handful of Douglas residents waited on the steps of the newly renovated Louie’s Douglas Inn a few minutes before the doors would open at 3:00 p.m. on a Tuesday. A celebratory drink was in order, certainly, but the real reason was to reunite with friends, including the new owners of the bar.

The eponymous Louie Pusich walked down the hill from his home with his wife, Doreen, to the bar he once owned. He ordered a Bud Light, which he jokingly referred to as a “Butt Light.” Looking out for his health, the 76-year-old doesn’t drink much these days.

The look of the bar has changed considerably since the renovation, with a more open layout, exposed brick, new fixtures and more. While the bar has received a makeover, there’s a lot that will remain unchanged about Louie’s Douglas Inn — it’s still the “living room of Douglas.” And not it has another great story behind it – that it was raised from the 2013 wrath of the IRS.

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.