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

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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

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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

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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

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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.

Are You Under Investigation For An Alleged Tax Crime? Protest Yourself!

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What is a Tax Crime?

Tax crimes include all crimes that are under the jurisdiction of the Criminal Investigation Division (CID) of the IRS. While there are dozens of criminal offenses defined in the Federal tax code, they generally all fall under one of two categories: crimes related to the filing of the return and crimes related to the failure to file a return. The most common crime related to the filing of a return is criminal tax evasion, which, at the Federal level, carries a maximum penalty of 5 years in prison and a $250,000 fine for individuals, plus the cost of prosecution. For taxpayers charged with criminal tax fraud for failing to file a return, the penalties can be just as severe: up to five years in prison plus a fine of up to $25,000. In addition to the tax crime provisions of the Internal Revenue Code, CID is also charged with enforcing certain other financial crimes, including: money laundering, structuring transactions to avoid reporting requirements, or aiding and abetting another in the commission of tax evasion. Tax preparers who file fraudulent returns for their clients can be charged with aiding and abetting tax fraud. Given the fact that return preparer fraud is one of the CID’s top operational priorities for this year, more preparers than ever are being charged tax crimes than ever before.

What to do if contacted by a criminal investigator

If you are contacted by a criminal investigator with the IRS, the best thing to do is indicate that you do not want to speak to the investigator, and immediately contact a California tax evasion lawyer. You will know that this person is from CID by checking his credentials and seeing that he or she is a “Special Agent”. A carefully crafted response from a qualified criminal tax fraud attorney can make the difference between being prosecuted for a tax crime and walking away from the investigation unscathed. While you are constitutionally protected against being forced to incriminate yourself, it is important to note that this right must be asserted. Simply ignoring the investigators will usually result in a summons being issued and you will be required to respond to the investigators or face criminal prosecution for failing to comply with the summons. If you have been contacted by the IRS and think you may be the subject of a criminal tax fraud investigation, you should contact a qualified criminal tax attorney before speaking to anyone else about the matter. It is important to note that conversations with an accountant, CPA, or “tax professional” are not always privileged and the other party may be forced to disclose what you have said to them. However, conversations with a criminal tax fraud attorney, even one that you have not retained, pertaining to your case are generally covered under the attorney-client privilege. Your tax fraud lawyer can never be forced to disclose your confidential conversations to anyone.

The differences between white collar crime attorneys and tax fraud attorneys

There are many white-collar crime attorneys who are willing to take tax evasion cases. However, only a full-time criminal tax lawyer is qualified to handle most tax cases. Because the existence and severity of most tax fraud crimes depends on the amount of the tax evaded, a thorough understanding of the tax code is indispensable to comprehensive representation. Unlike white-collar criminal lawyers, tax fraud attorneys are trained in and have extensive knowledge of the various provisions of the federal tax laws. Sometimes, the charge of tax evasion can be defeated by simply finding deductions and tax credits that the taxpayer failed to take advantage of, countering the effect of any omitted income or inflated deductions elsewhere on the return. A taxpayer who intentionally omitted income, or fabricated deductions on a tax return is not guilty unless they understated their tax due. A qualified tax evasion lawyer who knows the ins and outs of the Internal Revenue Code may be able to find enough other deductions and credits to offset the understatement of income, and beat a charge of tax evasion.

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.

Careful What You Say And Who You Speak To When Under Criminal Tax Investigation

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Tax evasion stories aren’t covered in the news very often but the IRS still aggressively pursues tax cheats, particularly those who are accused of serious crimes such as filing a false return. It’s wise for all taxpayers to learn about the procedure and the possible penalties that come along with being prosecuted for tax fraud. Finding out how seriously the agency views these matters serves as a real deterrent against skimping on income tax forms.

Be Careful Who You Speak To

If you’re ever investigated by the IRS for possible tax crimes, it’s essential that you never speak to any of the agency’s representatives. If you owe a tax debt, communication with the IRS is usually helpful, since you can negotiate a possible settlement. In case of a criminal tax investigation, though, the IRS is not interested in assisting you to pay off your balance. The agency’s main goal is to gather evidence of your crimes and use it against you during the trial.

If you speak to an IRS agent on your own, the agent can use anything you said in the conversation as evidence to prove the agency’s claim. Simply agreeing that you owe a debt or that you neglected to file a return can sink your case. It’s also important to know that, if you have been working with a certified public accountant, you do not have any type of privilege to cover your communication. This means that your accountant can also be called as a witness against you during the trial.

Tax Perjury vs. Tax Evasion

You can be convicted of tax perjury simply by filing incomplete or incorrect information, even if it was unintentional. Tax evasion, though, is a far more serious charge. In this case, the IRS believes that you deliberately filed an incorrect tax return in order to avoid paying your rightful amount of income tax. Taxpayers who are found guilty of tax evasion often face stiff penalties, including fines and federal prison time.

The best way to handle your criminal tax defense during a tax investigation is to hire an experienced, qualified tax defense attorney who is familiar with both IRS tax law and your specific situation. He or she can give you both legal and financial advice that will help you navigate through the trial.

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.

Ten Things To Consider If You Are Worried About Criminal Tax Fraud Charges

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When it comes to committing tax fraud and other tax crimes, the IRS can leave you with nothing and even throw you in jail. Here’s some advice on how to protect yourself from the IRS, what to expect, and how to handle it.

1.         Get a lawyer. If the IRS criminally investigates you, this is crucial. Because of attorney-client privilege, communications between a client and his attorney are protected, keeping everything confidential. The accountant-client privilege does not extend to criminal tax matters.

2.         Tax crimes are most likely spotted during an audit. If you are caught by an auditor in a tax lie or fraud, you may be penalized or your case may be referred to the IRS’ Criminal Investigation Division (“CID”).

3.         Auditors will look for tax fraud. Also known as tax evasion, this is a willful act, with intent to defraud the IRS. For example, using a false social security number, keeping another set of financial books, or claiming a blind spouse as a dependent when you are single. Other examples which may not be as obvious are: not reporting all income on your tax return, overstating your deductions, or claiming phony deductions and exemptions. Any of these items could constitute a reason to be punished with a tax fraud civil penalty.

4.         Negligence and fraud are not always clear. A mistake on your tax return will cost you a 20% penalty on the increase in tax, while tax fraud will cost you a 75% penalty on the increase in tax. Tax fraud examples include multiple sets of books of record for a business, false receipts, and altered checks. Usually, the auditor will not tell you if a criminal tax fraud referral has been made.

5.         Alleged tax fraud cannot be combated easily. Defenses raised against tax fraud allegations are: cash hoard, nontaxable income, and honest mistake. The IRS does not typically accept any of these defenses at face value. In this case, a skilled attorney will be your most useful weapon.

6.         Lying will only make it worse. If an IRS auditor believes you’ve cheated on your taxes, they can either impose a penalty for fraud, or begin a criminal investigation. In this case, they can get information from law enforcement agencies, and even other IRS divisions. Also, to ask someone else to lie to the IRS on your behalf is a separate crime.

7.         Unless formally charged, you may not know of an investigation. But, you may hear from your friend, employee, accountant or lawyer. The CID will usually investigate cases involving $20,000 or more.

8.         You will be the last source. If the CID is building a case against you, chances are they have already contacted potential witnesses, and looked at thousands of records. If they still want to talk to you, you are probably recommended for prosecution. They will be looking for a confession from you.

9.         Know your rights. A special agent must contact you immediately if you are the target of a tax fraud investigation. He will read you a version of the Miranda rights—the right to remain silent, the right to have an attorney, and the warning that anything you say can be used against you. Know that it will be.

10.        If you are convicted, consequences are high. If you put the government through a trial, there is an 80% chance that you will be send to federal prison for tax fraud. However, if you reach a plea bargain without a trial, chances are that you could be fined and/or placed on probation, given home confinement, or sent to a halfway house.

Reasons You Can be Charged

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 Must Know About IRS FBAR Penalty Negotiations

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Recently, the IRS has made the Report of Foreign Bank and Financial Accounts (FBAR) penalty enforcement a top priority and this is alarming the taxpayers worldwide. Even in the course of every routine domestic IRS audit, IRS agents are looking for undisclosed foreign bank accounts. In this blog I will discuss some things that you need to keep in mind when negotiating FBAR penalties with the IRS.

1. The penalties for noncompliance in FBAR enforcement are staggering.

FBAR penalties can be unfair as the penalties are based on the account size and not on how much tax you avoided. This is a stark contrast to other IRS penalties which are based on how much additional tax is owed. Given this difference you will always have a bigger risk and more to loose when dealing with FBAR penalties.

2. The two types of FBAR penalties.

The “get off gently FBAR penalty” – If the IRS feels that you made an innocent mistake and “not willfully” ignored to file your FBAR, your “get off gently penalty” will be $10,000 per overseas account per year not reported. To illustrate, if you have five foreign accounts that you failed to report on your FBAR in each of five years, the IRS can penalize you $250,000 regardless of whether you even have that amount sitting in your foreign accounts.

The “disastrous FBAR penalty” – If the IRS can show that you “intentionally” avoided filing your FBAR’s, your minimum “disastrous FBAR penalty” will be 50% of your account value. Additionally, the IRS may also press for criminal charges and if convicted of a willful violation, this can also lead to jail time. The “disastrous FBAR penalty” can also be assessed multiple times thus wiping out your entire savings.

3. The taxpayer’s burden of proving “reasonable cause”

You are obligated to pay the penalty the IRS deems necessary. The IRS can assume the “disastrous FBAR penalty” and they are not required to prove willfulness. It will be the taxpayer that bears the heavy burden of proving that the taxpayer’s failure to comply was due to reasonable cause and not from “willful neglect”.

4. Your appeal option.

Having exhausted all administrative remedies within the IRS first, you can then appeal the proposed FBAR penalties to a Federal District Court but for that court to have jurisdiction you must pay the assessments in full and then sue the IRS in a district court for refund. Since coming up with the money may be impossible for most taxpayers, you should hire an experienced tax attorney to make the most of the IRS appeals process and perhaps avoid the need for litigation. Keep in mind that in the appeals process, you do not have to pay any FBAR penalty until the end. Second, you can be successful if IRS remedies itself thus making court filings unnecessary. And third, even if the administrative remedies do not yield you success, your tax attorney can attempt to negotiate with the IRS to lower your FBAR penalties without going for a trial.

5. The Offshore Voluntary Disclosure Initiative (OVDI) route.

When compared to past Voluntary Disclosure Programs used by people to avoid criminal charges, the OVDI amnesty program is intended to save people with undisclosed foreign accounts from the threat of huge or disastrous FBAR penalties. So to minimize your FBAR penalty, we recommend using the OVDI program as a starting point.

When you make use of OVDI, there is more chance of getting favorable review during the discussion of your potential claim of “reasonable cause”. But outside OVDI, the IRS does not treat people as favorably as those who make themselves visible under the OVDI. It does not matter whether you made an innocent mistake or made an unadvised “quiet” or “soft” disclosure, the ground for your case will be much less sturdy when it is outside OVDI.

The IRS audit division has a way of reaching into the every corner of a taxpayer’s life. By not facing the Federal District Court, you may avoid the prison time but losing your entire wealth through these audits can be nearly as devastating as sitting in a prison. Some people will look at the OVDI route and feel that its terms are unfair and thus not bother entering into the program. What they fail to realize is that the consequences when they get caught are a lot worse in that outside of OVDI the minimum penalty is 50% of your highest balance and the IRS can pursue criminal charges. They also do not realize that the OVDI route is not necessarily set in stone but can serve as a springboard for something better than the maximum penalty of 27.5% of your highest balance. OVDI also provides the benefit that you avoid criminal prosecution.

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.

Description: 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.

KahnTaxLaw teams up with Mr. Credit on ESPN – April 11, 2014 Show

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Topics Covered:

1. The Story Of Bradley Charles Birkenfeld And How Because Of His Actions No Longer Can Foreign Accounts Be A Secret.

2. What is an undisclosed foreign bank account and what are the penalties for not reporting foreign income?

3. Nine Things That Will Elevate Your Chances Of Being Targeted By IRS For Past Nondisclosure Of Foreign Accounts and/or Failure To Report Worldwide Income

4. My CPA who I have been going to for years has never told me that I had to report my foreign income. Now that I know I have to report my foreign income and disclose my foreign bank accounts, do I accept my CPA’s offer to represent me in OVDI or do I hire you?

Tax Tips For U.S. Expat Taxpayers

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If you have fallen behind on your U.S. expat taxes and the IRS has contacted you about delinquent tax returns, what should you do? Here are a few tips on what to do next.

Tip #1 – Do Not Ignore The Notice.

The worst thing you can do is ignore the notice. If you don’t think that you will be able to gather the proper documentation and file the return(s) by the deadline they provide, call them right away. Explain that you are aware of the delinquency and you are doing your best to resolve it. Often they will give you a few extra weeks if you are honestly trying to resolve the situation. If you do nothing at all, the IRS can file a return on your behalf and assess a liability of what they think you owe. Expats in particular want to avoid this, as the IRS won’t include any deductions or credits you may be eligible for—this could be very costly! Hiring a tax attorney would be most helpful to you to secure the additional time and get the information you need.

Tip #2 – Form A Plan.

The IRS may have only requested a particular year or two, but it’s important to determine exactly how many years you are behind and get caught up on all delinquent returns (up to six years is recommended). Most expats who are behind on their returns were unaware of their need to file and will be delinquent for more than one year. While they may only currently be aware of a certain year you failed to file, it is very likely they will eventually uncover the others and then you’ll need to do the entire process all over again. Hiring a tax attorney would be most helpful if you aren’t sure how many years you are behind. A tax attorney can also qualify you for amnesty in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI).

Tip #3 – Gather Your Documents.

The first step, and arguably the most time-consuming, is digging up the documents necessary to file back taxes. Most importantly, you will need to gather any 1099s, W2s or other US income reporting statements. Hiring a tax attorney would be most helpful if you have misplaced these documents, as copies can be requested from the IRS. A tax attorney can also help you identify exactly what you need to collect.

Tip #4 – Prepare And File.

With the complexity surrounding tax reporting by expats, a tax attorney would be most helpful in making sure that all reporting obligations are satisfied and that you are utilizing all tax breaks including carryovers from the Foreign Tax Credit or any capital losses.

Tip #5 – Evaluate Your Options.

Sometimes there are taxes owed on back tax returns and if you can’t pay everything you owe, there are options to avoid collection action by the IRS. Most taxpayers will apply for an Installment Agreement but keep in mind that with this option, interest and penalties continue to accrue so long as you have a balance, so paying as much as possible will help reduce the total debt over time. A tax attorney would be most helpful in determining your options and whether penalties can be abated.

The process of becoming compliant with your U.S. expat taxes can be stressful, but hiring a tax attorney with experience in this area and getting caught up as soon as possible is clearly your best option. The longer you wait, the more expensive it can be. This is particularly important if you need to file past FBARs, as the IRS is cracking down on tax evaders and stiff penalties can be assessed for every year you are delinquent.

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.

Description: 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.