How To Stay Out Of Jail: Lessons To Learn From The “Queen Of IRS Tax Fraud”

Crime doesn’t pay. Despite using money from crime to temporarily fund a lavish lifestyle, Rashia Wilson of Tampa, Florida, learned her lesson the hard way before a Federal District Court Judge in July 2013 when she was sentenced to 21 years of prison for Tax Fraud and Weapons Charges. She is also ordered to pay restitution of more than $3 million. At the time of sentencing she was just 27. When she is released, her children, currently all in elementary school, will all have graduated from high school. Her youngest child will be 23.

While Wilson was briefly able to cash in on her crimes before landing a record prison sentence, the details of her spree read like a “What Not To Do” map when stealing from the government. If you’re one of those folks pondering how best to stay out of jail, here are a few tips:

1. Don’t steal. That should be obvious but clearly, it’s not. Stealing from the government – in particular, identity theft – is on the rise and as a result, the IRS put identity theft resulting in tax fraud at the top of its list. In the scheme, thieves like Wilson access your personal information including your name, address and Social Security number to fraudulently file a tax return and claim a refund without your consent. Wilson gleaned much of the information she used to file fraudulent returns from medical records: in addition to printouts of medical records, investigators found thousands of ID numbers at her home.

In order to combat this level of fraud, the IRS now has 3,000 people working on identity theft related cases, more than twice the number from two years ago. So they’re watching you. If, on the other hand, you believe you are at risk of identity theft due to lost or stolen personal information, contact the IRS Identity Protection Specialized Unit at 800-908-4490.

2. If you did steal, don’t talk about it. Wilson had a big mouth. She liked to talk about herself and her money. She also liked to throw it around. She used the millions she stole from others to finance a showy lifestyle, including $30,000 on her 1-year-old’s birthday party, and $90,000 on a 2013 Audi (which she bought using a money order). She wanted to show off. And that’s exactly how she caught the eye of investigators. Her behavior prompted U.S. District Judge James. S. Moody Jr. to remark at her sentencing, “She knew what she was doing was wrong. She reveled in the fact that it was wrong.”

3. If you did steal, don’t expect your privacy settings on Facebook or use of a fake name to protect you. I don’t care what you think you know about privacy settings, when you put something out there on Twitter or on Facebook, it’s not protected. As a taxpayer, that means you should avoid posting personally identifying information like tax ID numbers and your address (the IRS Facebook page won’t allow you to post comments for that reason). And you should certainly avoid posting photos of yourself surrounded by stacks of cash with such gems as:

I’m Rashia, the queen of IRS tax fraud. … I’m a millionaire for the record. So if you think that indicting me will be easy, it won’t. I promise you. I won’t do no time, dumb b——.

In additional when you sign up for Facebook, the terms of use indicate that “Facebook users provide their real names and information” and you agree that “you will not provide any false personal information on Facebook.” Apparently, this is about the only rule that Wilson followed. She used her real name to create a personal page on Facebook where she regularly bragged that she couldn’t be arrested and teased the police, posting entries like:

I’M RASHIA, THE QUEEN OF IRS TAX FRAUD… I’m a millionaire for the record, so if U think indicting me will B easy it won’t, I promise you! U need more than black and white to hold me down N that’s to da rat who went N told, as if 1st lady don’t have da TPD under her spell. I run Tampa right now.

Granted, that feels like it’s written in code but if you can fumble your way through it, you get the gist. And yes, in case you’re wondering, Wilson isn’t college educated. Or high school educated. Or even middle school educated. She failed the 5th and 6th grades and that’s as far as she got. A lack of punctuation and, heck, let’s face it, actual consonants and vowels, didn’t hold her back from blasting authority figures on Facebook. Turns out, they were paying attention.

Investigators worked for two years to gather evidence against Wilson and a host of other fraudsters as part of Operation Rainmaker so dubbed because of the amount of money that was raining down. Included in that group was Wilson’s boyfriend, Maurice “Thirst” Larry, and a friend, Marterrence “Quat” Holloway.

4. Don’t assume that your luck won’t run out. Born into poverty to a coke addict and a father in prison, Wilson quickly glommed on to a life of crime. She dropped out of school in the 7th grade. Since then, she has been arrested 40 times and held felony convictions for grand theft and burglary, but never did any time in a state prison. She came to believe that her streak would continue, bragging to practically everyone that she would never do any time. That streak ended July 2013.

5. Hire tax counsel now. The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

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 defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

IRS Trolling Social Media Looking For Tax Evaders

Thanks to Big Data analysis and digital information-gathering tactics, the IRS employs a more watchful eye than ever especially with the fiscal challenges faced by the Federal government, the pressure for the IRS to recover lost revenue has never been higher. Conveniently enough, the IRS has made massive investments in its computing power and tools for crunching big data, allowing for more automation and rapid analysis. That means a greater capacity for robo-audits and less room for honest mistakes.

The IRS is reportedly using data from social media on people who file fishy-seeming taxes or don’t file at all. The IRS loses roughly $300 billion per year to tax evasion; and in times of budget cuts, with a smaller staff, the agency has allegedly turned to both data mining and data crunching.

In its quest to find and audit tax dodgers, the IRS is said to use online activity trackers to sift through the mass amounts of data available on the Internet. This data is then added to the information the agency already has on people, such as Social Security numbers, health records, banking statements and property rolls.

But the IRS efficiency in catching tax evaders is not just from an improvement in the tools it uses but also from the fact that the data itself is richer and more varied than ever, drawing increasingly from whatever details about our digital lives the IRS can get its hands on, including information that isn’t publicly accessible.

In an April 2013 U.S. Senate Hearing, Senator Chuck Grassley (Iowa, Republican) asked Steven Miller, the IRS’ then acting commissioner, whether the IRS obtained a search warrant before reading private Facebook or Twitter messages. The Senator didn’t get an answer.

We don’t know the full extent of the IRS’s data-mining capabilities, but recent reporting has revealed new details. 

1. Analyzing Your Social Media Updates 

The social Web has been a boon for IRS investigators, who can use updates from Facebook, Twitter and other services to bolster its cases against alleged tax cheats. Information about work history, one’s physical whereabouts and even purchases can be gleaned from social networks. Some of it, like tweets and certain details from Facebook, are public. But should the IRS want to take a closer look, it supposedly has the means to do so, with or without a warrant. 

According to recent reports, the IRS cross-references data from social networks with Social Security numbers and then works in a host of other private data to look for suspicious patterns. 

the IRS is using online activity trackers to mine through massive amounts of data on sites like Facebook, Instagram and Twitter to look at photos and other updates that might offer a glimpse into vacations, home and car purchases and other goodies.

Facebook, Instagram, and Twitter have all become places where people post intimate details about their lives: vacation photos, work successes, buying a new house, car, or other cool stuff.

However, this information is also up for grabs by the Internal Revenue Service. So a word of advice: THINK BEFORE YOU POST. After all, do you really want IRS to like your Facebook update or be your newest Twitter follower?

2. Monitoring Digital Payments and Credit Card Activity 

The rise of commerce and digital payments has also given the IRS new sets of data to mine and analyze. The agency has long looked at taxpayers’ activity on ecommerce sites like EBay, but are now going deeper and getting a look at credit card transactions and other online payments. 

The IRS looks for potential auditing targets by matching tax filings to social media or electronic payments. The exact mechanism of this monitoring isn’t publicly known (lest they tip off tax cheats) but it is widely believed that it includes examining credit card transactions for the first time ever. And if the IRS feels it has cause to take a peek at your online payment data, it won’t have a problem doing so. 

3. Peeking At Your Email Usage 

While as of April 2013 the IRS said it would abandon its controversial policy that claimed the right to read taxpayers’ e-mail without first obtaining a search warrant, the IRS did not make the same commitment for other private electronic communications including when and how the IRS looks at email usage.

The IRS’ big data analysis tools are used in part for “tracking individual Internet addresses and emailing patterns.” That’s pretty vague. In theory, the IRS could glean some details about email usage simply by looking at browsing activity, whether that insight comes from an ISP or email service provider. 

Does that mean that the IRS has blanket access to everybody’s Gmail account for the purpose of feeding its data-crunching behemoth? That seems pretty unlikely. Instead, what the IRS likely does is to get a search warrant to access individual accounts for people who are already suspected of wrongdoing. It usually is easy for the IRS to be granted a search warrant and the taxpayer is not required not receives any notice that a search warrant was issued.

Conclusion

Of course, these days everyone from Google to Nike is cobbling our data together to create profiles of us.

Still, it’s different when the IRS does it. If Nike is analyzing your information, the worst consequence is that they market stuff to you that you don’t want and it’s annoying. However, if the IRS does it, the worst consequence is there could be legal ramifications, whether it’s fines, penalties or imprisonment. Which is why the sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

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 defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

What Tax Crimes Can The IRS Charge You With?

Unlike a civil tax examination, a criminal tax investigation has little to do with the assessment of additional tax. The purposes of a criminal investigation are (1) to detect suspected criminal tax offenses and (2) to refer those offenses for criminal prosecution. The government’s goal is to obtain a conviction that results in imprisonment, fines, and/or restitution.

Tax Evasion


This is a particularly broad, catch-all statute that subjects the taxpayer to fines of up to $100,000.00 ($500,000.00 for corporations) and imprisonment of up to 5 years for the willful attempt in any manner to evade or defeat any tax under the Internal Revenue Code. While used sparingly by the U.S. Justice Department, it nevertheless remains a potential trap for even the most innocuous and benign transgressions of the IRC.

Fraud and False Statements


Any person who makes a false or fraudulent statement, or assists another person to make a false or fraudulent statement in connection with documents submitted to the IRS, such as Form 433A or B, or an offer in compromise or a closing agreement, may be prosecuted under this statute and, if convicted, subjected to a fine of up to $100,000.00 ($500,000.00 in the case of a corporation) and imprisoned up to three years. Concealment of property from the IRS, or withholding, falsifying or destroying records, also subjects the person to prosecution under this statute.

Failure to File Returns, Supply Information, or Pay Tax


This is another broad statute that can be used to criminally convict a taxpayer for failing to file a tax return, filing an incomplete one, or not paying the tax that is due. The taxpayer may be fined $25,000.00 ($100,000.00 in the case of a corporation), plus costs of prosecution, and incarcerated up to one year in a federal prison.

If CID recommends prosecution, it will give its evidence to the Justice Department to decide the special charges. Individuals are typically charged with one or more of three crimes: tax evasion, filing a false return, or not filing a tax return. All of which are tax fraud.

The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

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 defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

How The IRS May Start A Criminal Investigation Against You?

The IRS Criminal Investigation Division (“CID”) is made up of Special Agents who are duly sworn law enforcement officers who are trained to “follow the money”. CID may open up an investigation in higher profile cases as a result of coordination with the FBI, DEA, INS and other agencies. However, average citizens should not assume that they are immune from investigation by the CID. They may be targets of special programs, such as those involving tax protester groups, bankruptcy fraud, or bank deposits or currency exchange transactions involving cash of $10,000.00 or more. In addition, they may be referred to CID by Revenue Agents of the Examination Division or Revenue Officers of the Collection Division who have reason to believe that there may be fraud or tax evasion involved in the cases they are working. Finally, CID may open an investigation simply as a result of a telephone call to their “squeal” line if it feels that the call warrants further investigation.

A criminal case is the most serious kind of case that IRS can have against a taxpayer. Nothing even comes close to the impact of an investigation by the Criminal Investigation Division. If it results in a referral to the U.S. Justice Department and subsequent prosecution, the consequences may be devastating, including damage to the taxpayer’s personal and business reputation, financial ruin, break up of his or her family unit, and, worst of all, incarceration.

If you are contacted by Special Agents and asked to be interviewed, decline the interview and contact a criminal attorney immediately. Do not say anything to them. Anything you say may be held against you – even statements you may consider to be innocuous. For example, many criminal statutes require an element that is known as “willfulness.” Willfulness is a state of mind that cannot be demonstrated through direct evidence. The government must resort to circumstantial evidence to prove a state of mind, such as statements by the taxpayer. Therefore, even statements about the weather, depending on the context in which they are made, may be relevant to prove “willfulness.” An unwary taxpayer, encouraged by seemingly friendly and low-key Special Agents, may disclose information that is damaging to his or her case.

How do you know you have been contacted by Special Agents? They almost always travel in pairs, show their gold badges, and, as a matter of policy, usually read your “Miranda” rights on initial contact.

The need to retain counsel cannot be overemphasized. The criminal “game” is played by special rules and you need a representative who knows them.

If CID recommends prosecution, it will give its evidence to the Justice Department to decide the special charges. Individuals are typically charged with one or more of three crimes: tax evasion, filing a false return, or not filing a tax return. All of which are tax fraud.

The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

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 defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

Beware Of IRS Special Agents Who Travel In Pairs!

An IRS Special Agent works for the IRS’ Criminal Investigation Division (“CID”). Special Agents are duly sworn law enforcement officers who are trained to “follow the money”. They investigate potential criminal violations of the Internal Revenue Code, and related financial crimes. Unless they are working undercover they will identify themselves with credentials which include a gold badge. The same gold badge appears on their business cards. Generally IRS Special Agents travel in pairs if they are going to interview someone. One to conduct the interview, and the other to take notes, and act as a witness if necessary.

If you are contacted by an IRS Special Agent it is because he or she is conducting a CRIMINAL investigation. It is possible that the Special Agent is only interested in you as a witness against the target of the IRS investigation. However, it is a bad idea to speak to Special Agent without a criminal tax attorney present. IRS Special Agents are highly trained financial investigators. If you are the target or subject of an IRS criminal investigation you are not going to talk your way out of it, by “cooperating”; instead you may be giving the IRS more evidence to use against you.

Even if the IRS Special Agent tells you that you are only a witness you should still consult with an experienced criminal tax attorney BEFORE speaking with an IRS agent. If you make misstatements that you think put you in a better light you could change your role from a witness into a target. The best tactic is to simply tell the Special Agent that you are uncomfortable talking to him until you have had a chance to speak with your attorney. Then ask him for his business card. In this way your tax attorney can contact the Special Agent directly, and determine the best course of action.

There are a number of statutes in the Internal Revenue Code that authorize the federal government to prosecute individuals, including those dealing with tax evasion, fraud and false statements, failure to file returns, failure to pay tax, etc. Some, like the tax evasion statute, are worded in particularly broad terms and may ensnare the unwary or careless taxpayers.

If CID recommends prosecution, it will give its evidence to the Justice Department to decide the special charges. Individuals are typically charged with one or more of three crimes: tax evasion, filing a false return, or not filing a tax return. All of which are tax fraud.

The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

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 defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

G’day Mate! Australia Becomes The 27th Country To Sign FATCA Accord

Under the Foreign Account Tax Compliance Act (“FATCA”), foreign banks, insurers and investment funds must send the Internal Revenue Service information about Americans’ and U.S. permanent residents’ offshore accounts worth more than $50,000. Institutions that fail to comply could effectively be frozen out of U.S. markets. The U.S. has entered into intergovernmental Agreements (“IGA’s”) with 26 countries for the implementation of FATCA.

Australia’s Treasurer Joe Hockey announced on April 29, 2014 that Australia and the United States “…signed an intergovernmental agreement (IGA) to reduce the burden on Australian financial institutions in complying with FATCA.” This makes Australia he 27th country to join the ranks of those countries cooperating with the U.S. in disclosing U.S. accountholders to the IRS.

Mr. Hockley commented that the agreement would assist Australian financial institutions to comply with FATCA and minimize the costs of doing so. He also mentioned that “…it broadens arrangements between the Australian Taxation Office and the U.S. Internal Revenue Service” and that it “…will also improve existing tax information-sharing arrangements between Australia and the United States, for the purpose of presenting tax evasion.”

The 26 countries with IGA’s already in place are:

Bermuda

France

Italy

Netherlands

Canada

Germany

Japan

Norway

Cayman
Islands

Guernsey

Jersey

Spain

Chile

Hungary

Luxembourg

Switzerland

Costa Rica

Honduras

Malta

United Kingdom

Denmark

Ireland

Mauritius

 

Finland

Isle
of Man

Mexico

 

 

Countries which are close to having an IGA in place are:

 

Austria

Estonia

Liechtenstein

Qatar

Belgium

Gibraltar

Lithuania

Slovenia

Brazil

Jamaica

New Zealand

South Africa

British
Virgin Islands

Kosovo

Poland

South Korea

Croatia

Latvia

Portugal

Romania

Czech Republic

 

 

 

 

Click here for progress and developments IRS has made in gathering information from foreign banks and foreign governments.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

The IRS is giving taxpayers one last chance to come forward and voluntarily disclose foreign accounts and unreported foreign income before the IRS starts investigating non-compliant taxpayers.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI). 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 and elsewhere in California qualify you for OVDI.

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.

Seven Tips To Avoid Having To Check Into “Club Fed” For Tax Evasion

Many criminal investigations start as a result of a referral from the civil side of the IRS. That is why for most taxpayers, a criminal investigation isn’t a first step, but rather the last step in a lengthy process to get you to resolve your tax debt even if it means that an IRS Special Agent will show up on your doorstep one day with cuffs in hand.

Additionally, while tax evasion and related charges are an important piece of the IRS Criminal Investigation Division (CID) charges, the government tends to link to other criminal activities like fraud, drug offenses, and money laundering. When it comes to criminal activities, other federal agencies – like the Federal Bureau of Investigation (FBI) and the Financial Crimes Enforcement Network (FinCEN) – can pursue these violations.

Tip # 1: File and Pay Your Taxes on Time

This seems obvious. But failing to file and pay on time happens all of the time for all kinds of reasons. With all the balance due notices the IRS will issue, it should be clear that the IRS just wants to get paid. Yet, time and again, once an investigation has been initiated, taxpayers either refuse to pay or don’t pay the tax due. While there may be valid reasons for nonpayment, when it appears that resources are available, not filing and/or nonpayment just makes a bad situation worse. At sentencing hearings, judges take note of whether taxpayers have made arrangements to resolve ongoing liabilities.

Tip # 2: Open Your Mail and Respond On Time

Whatever you do, don’t think that by not claiming or opening mail from the IRS that your tax problems will go away by themselves. If you’ve been chosen for examination or if the IRS has asked you to provide additional information about your return, it means you’re on their radar. In most cases, it does not mean that you’ve been targeted for criminal investigation, just that additional information is required. But failing to respond – especially if you have good reasons for your behavior – doesn’t help and in most cases, it raises the level of inquiry.

Tip # 3: Cooperate During an Examination

Nobody likes IRS audits. They trigger all sorts of strong emotions. Indeed, they make people angry, defensive, and combative. But none of that helps. And it could make a bad situation worse. Procedurally, criminal investigations are generally initiated from information obtained when a Revenue Agent (auditor) or Revenue Officer (collection) detects possible fraud. While there are guidelines that lead to criminal inquiries, there may be some wiggle room – but not for taxpayers who thumb their nose at the IRS and are not cooperative.

Tip # 4: Be Consistent

Very simply, no privilege applies when speaking to or making disclosures to the IRS. If you report sales of $500,000 to the state for purposes of sales tax, the IRS will want to see these numbers accounted for on the Federal Income Tax Return. It is not unusual for the IRS to exchange information with other law enforcement agencies — local and federal — throughout the country. Don’t assume that because you have not yet heard from one tax agency information provided to another tax agency is not being shared. Be consistent in your reporting. This is the only sure way of not waiving any red flags in front of the bull.

Tip # 5: Don’t Destroy Records

Destroying records can be a crime. And if there’s anything you don’t need, that’s additional charges. Once an investigation is opened, an IRS Special Agent will attempt to gather facts and evidence. This may include interviews of third party witnesses, conducting surveillance, executing search warrants, subpoenaing bank records, and reviewing financial data including cash register receipts, bank statements, and deposit and withdrawal slips. Special Agents have even gone undercover to observe the lifestyle of many taxpayers, most especially those who own cash-based businesses to determine whether the business was hiding cash.

Tip # 6: Take Any Confrontation With IRS Special Agents As A Serious Matter

While there might be a temptation to roll the dice and see what happens, once criminal charges are filed, you have to take the matter seriously. Failing to file and failing to pay can result in criminal charges. Lying to federal investigators can result in additional criminal charges. It’s called perjury. Be smart. You have a right to remain silent – so use it!

Tip # 7: Hire a Criminal Tax Defense Attorney

Once a criminal investigation has begun, the wheels have been set in motion. After all the evidence has been collected, the IRS Special Agent will determine whether to recommend your case for prosecution or return it back to the field for completion of the audit. At this point, you’re not talking yourself out of charges. Your case will be referred to either the Department of Justice, Tax Division, or to the United States Attorney. At that point, it’s not a matter of simply mitigating penalties. You need to hire a criminal tax defense attorney who has experience in tax crimes and who has a solid reputation for being a zealous advocate.

Conclusion

If CID recommends prosecution, it will give its evidence to the Justice Department to decide the special charges. Individuals are typically charged with one or more of three crimes: tax evasion, filing a false return, or not filing a tax return. All of which are tax fraud.

The sooner you hire tax counsel experienced with criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

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 and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

 

What You Need To Know About IRS Bills, Penalties And Interest Charges

Many people want to know what they are up against for failing to file and or pay by the tax deadline of April 15th so here are some things for you to consider.

1.         Federal income tax returns are systematically checked for mathematical accuracy. If there is any money owed, you will be sent a bill. So don’t worry so much about math errors on the federal tax return as it will be caught. Generally speaking if you catch a math error after the tax return was submitted it can make sense in many instances to wait for the IRS to contact you with the changes before going through the brain damage of filing an amended federal income tax return. The tangible cost incurred for waiting will be the assessed penalties and interest for the difference between the original underpayment and the actual balance owed.

Keep in mind too that a math error on a federal tax return will also impact your state income tax return and various states react differently to errors. So you will want to reach out to your state department of revenue with any necessary adjustments as soon as they are discovered.

2.         Interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate, determined quarterly is the federal short-term rate plus 3% compounded daily. This in and of itself is not so onerous however when penalties are added in a $10,000 balance due can jump up to $15,000 in approximately 5 months.

3.         If you file a return but don’t pay all amounts shown as due on time, you will be subject to pay a late payment penalty. This penalty is on the amount of tax due at the rate of one-half of one percent for each month, or part of a month, up to a maximum of 25%, on the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. The one-half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. If you file by the return due date, the one-half of one percent rate decreases to one-quarter of one percent for any month in which an installment agreement is in effect.

4.         If you owe tax and don’t file on time, you will be subject to a total failure to file penalty. The total failure to file penalty is usually five percent of the tax owed for each month, or part of a month that your return is late, up to five months. If your return is over 60 days late, the minimum penalty for late filing is the lesser of $135 or 100% of the tax owed.

5.         You must file your return and pay your tax by the due date to avoid interest and penalty charges. Be mindful that the effective rate of accruals with the IRS can be as high as 8% per annum. Often times the funds necessary to pay your tax can be borrowed at a lower effective rate than the combined IRS interest and penalty rate.

6.         Properly identify each payment you are making. To ensure your payment on a bill for tax is credited properly, be sure to return the tear-off stub on your bill. Make your check or money order payable to the United States Treasury. Do not make your check payable to Internal Revenue Service as it will likely be returned by the government to you. Enter the primary social security number or employer identification number, the tax year and form number, and your telephone number on your check or money order. Do not send cash.

What Should You Do?

If you believe there is an error on your notice or bill, do not assume that the IRS will discover this on their own. The IRS will not and will continue their efforts to aggressively collect the money they say is due. Instead, enlist the services of a qualified tax attorney to resolve these errors. There are circumstances where penalties can be abated if you have reasonable cause and the failure was not due to willful neglect. Working with a tax attorney lawyer at the Law Offices Of Jeffrey B. Kahn, P.C. with offices in Los Angeles, San Diego, San Francisco and elsewhere in California is the best way to assure that your account is corrected, and penalties are abated and that you get a payment plan or settlement that works for your situation and prevents IRS collection action to be taken against you.

Description: Working with an IRS lawyer to resolve errors in your IRS notice or bill and set up a payment plan can help you avoid a tax levy and other IRS collection actions.

FATCA Enforcement Picking Up Momentum As July 1, 2014 Deadline Approaches

Under the Foreign Account Tax Compliance Act (“FATCA”), foreign banks, insurers and investment funds must send the Internal Revenue Service information about Americans’ and U.S. permanent residents’ offshore accounts worth more than $50,000. Institutions that fail to comply could effectively be frozen out of U.S. markets.

Since the release of the Model 1 and Model 2 intergovernmental Agreements (“IGA’s”) to implement FATCA, there has been robust and growing interest from jurisdictions worldwide to enter into IGA’s. To date, the United States has signed IGA’s with 26 jurisdictions and has reached agreements in substance or is in advanced discussions with many others.

Foreign Financial Institutions (“FFI’s”) continue to express strong support for a broad IGA network as a way to facilitate FATCA compliance while avoiding legal conflicts, and to more effectively and efficiently implement cross-border tax information reporting. They have also expressed practical concerns about the status of FFI’s in jurisdictions that are known to be in an advanced stage of concluding an IGA, but have not yet signed an agreement.

For this reason, the U.S. Department of the Treasury and the Internal Revenue Service announced that countries that have FATCA agreements “in substance” with the United States will be seen as complying with the law, even if the agreements are not finalized by December 31, 2014.

This impact of this announcement increased to 45 from 26 the number of countries that have IGA’s with the United States, which allow a country’s financial institutions to comply with FATCA via their domestic regulators while their officials are in the process of negotiating an IGA with the United States.

The 26 countries with IGA’s already in place are:

Bermuda

France

Italy

Netherlands

Canada

Germany

Japan

Norway

Cayman
Islands

Guernsey

Jersey

Spain

Chile

Hungary

Luxembourg

Switzerland

Costa Rica

Honduras

Malta

United Kingdom

Denmark

Ireland

Mauritius

 

Finland

Isle
of Man

Mexico

 

 

Countries treated as having an agreement, that are “in the process” who are added to the list:

 

Australia

Czech Republic

Liechtenstein

Slovenia

Austria

Estonia

Lithuania

South Africa

Belgium

Gibraltar

New Zealand

South Korea

Brazil

Jamaica

Poland

Romania

British
Virgin Islands

Kosovo

Portugal

 

Croatia

Latvia

Qatar

 

 

Click here for progress and developments IRS has made in gathering information from foreign banks and foreign governments.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

The IRS is giving taxpayers one last chance to come forward and voluntarily disclose foreign accounts and unreported foreign income before the IRS starts investigating non-compliant taxpayers.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI). 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 and elsewhere in California qualify you for OVDI.

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.

How To Get Included On The Foreign Earned Income Exclusion

Ordinarily, the United States taxes U.S. citizens and resident aliens on their worldwide income, even when they live and work abroad for an extended period of time. To provide some relief, a U.S. citizen or resident who meets certain requirements can elect to exclude from U.S. taxation a limited amount of foreign earned income plus a housing cost amount. A double tax benefit is not allowed, however, and a taxpayer cannot claim a credit for foreign income taxes related to excluded income.

1. Exclusion versus Credit

Because the foreign earned income exclusion is elective, an expatriate must decide whether to elect the exclusion or to rely on the foreign tax credit. A key factor in deciding which option is most advantageous is the relative amounts of U.S. and foreign taxes imposed on the foreign earned income before the exclusion or credit. The exclusion completely eliminates the U.S. income tax on the qualifying amount of foreign earned income.

This allows expatriates who work in a low-tax foreign jurisdiction or who qualify for special tax exemptions in the countries in which they work, to benefit from the lower foreign tax rates. In contrast, under the foreign tax credit option, the United States collects any residual U.S. tax on lightly taxed foreign income and the expatriate derives no benefit from the lower foreign rates.

The exclusion also eliminates the U.S. tax on the qualifying amount of foreign earned income derived by an expatriate working in a high-tax foreign jurisdiction. The credit option also achieves this result, since the higher foreign taxes are sufficient to fully offset the U.S. tax on foreign earned income.

In addition, under the credit option, the expatriate receives a potential added benefit in the form of a foreign tax credit carryover. Foreign taxes in excess of the foreign tax credit limitation can be carried back one year and forward up to ten years. Therefore, an expatriate can use these excess credits in a carryover year in which he or she has foreign-source income that attracts little or no foreign tax.

2. Qualified Individuals

The foreign earned income exclusion is available only to U.S. citizens or resident aliens who meet the following requirements:

(a) the individual is physically present in a foreign country for at least 330 full days during a 12-month period or, in the case of a U.S. citizen, is a bona fide resident of a foreign country for an uninterrupted period that includes an entire taxable year, AND

(b) the individual’s tax home is in a foreign country.

Whether a person is a bona fide foreign resident is determined by his intentions with regard to the length and nature of the stay. Factors which suggest that an expatriate is a bona fide resident include: (i) the presence of family, (ii) the acquisition of a foreign home or long-term lease, and (iii) involvement in the social life of the foreign country.

The second requirement is that the individual has a foreign tax home. An individual’s tax home is his principal or regular place of business.

3. Computing the Exclusion

The exclusion is available only for foreign-source income that was earned during the period in which the taxpayer satisfies:

(1) the foreign tax home requirement, and

(2) either (a) the bona fide foreign resident or (b) the 330-day physical presence test.

Therefore, when identifying compensation that qualifies for the exclusion, the determinative factor is whether a paycheck or taxable reimbursement is attributable to services performed during the qualifying period, not whether the expatriate actually received the compensation during that period. A deferred payment, such as a bonus, qualifies for the exclusion only if it is received before the close of the taxable year following the year in which it was earned. Pension income does not qualify for the exclusion.

Employment-related allowances, such as foreign housing and automobile allowances, also qualify for the exclusion. However, the allowance must represent compensation for services performed during the qualifying period. In this regard, any taxable reimbursement received for expenses incurred in moving from the United States to a foreign country are treated as compensation for services performed abroad. On the other hand, any taxable reimbursements received for expenses incurred in moving back to the United States are treated as U.S.-source income.

Any deductions allocable to excluded foreign earned income, such as reimbursed employee business expenses, are disallowed. Certain deductions are considered unrelated to any specific item of gross income and are always deducted in full. These include medical expenses, charitable contributions, alimony payments, IRS contributions, real estate taxes, mortgage interest on a personal residence, and personal exemptions.

4. Housing Cost Allowance

An expatriate that qualifies for the foreign earned income exclusion can also claim an exclusion for the housing cost amount. The housing cost amount equals the excess of eligible expenses incurred for the expatriate’s foreign housing over a stipulated base amount, which is prorated for the number of qualifying days in the year.

Eligible housing expenses normally include rent, utilities (other than telephone charges), real and personal property insurance, certain occupancy taxes, nonrefundable security deposits, rental of furniture and accessories, household repairs, and residential parking. Housing expenses do not include the costs of purchasing or making improvement to a house, mortgage interest and real estate taxes related to a house that the taxpayer owns, purchased furniture, pay television subscriptions, or domestic help.

5. Electing the Exclusion

The election to claim the foreign earned income exclusion and housing cost amount is made by filing Form 2555, Foreign Earned Income Exclusion, and remains in effect until revoked by the taxpayer. If uncertainties exist regarding whether to elect the exclusion, a taxpayer can file an original return without making the election, and then file an amended return at a later date electing the exclusion.

Given the complexity of this area, one would be best served by seeking tax counsel to make sure that you are getting the maximum tax benefits. Contact the Law Offices Of Jeffrey B. Kahn, P.C. with locations in Los Angeles, San Francisco and elsewhere in California.
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.