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.

IRS Computers Not Affected By IRS Budget Cuts

Despite IRS Commissioner John Koskinen’s warning of IRS Office Shutdowns, IRS computers are still operating 24/7 to check tax returns for errors and incomplete data, process refunds and identify returns that need to be scrutinized.

It’s impossible to imagine the Internal Revenue Service or most other number-crunching agencies or companies working without computers.  But when the IRS went to computers in 1961 by unveiling the Automatic Data Processing system in Martinsburg, West Virginia there was an uproar. The public then envisioned a scenario in which erroneous notices forced people to overpay, or $100 million dollars in unwarranted refund checks were issued.

Now that 54 years have passed we all know the benefits of a computerized system: Computers speed up processing times, discover errors taxpayers make against themselves, and verify that all citizens pay a fair amount. It is through this resource that the IRS can more efficiently meet its functions in light of the 2015 IRS budget that was just cut $341 million by Congress.

Will the IRS budget cut paralyze the agency and allow taxpayers to slip through the system?

Now if you are still thinking that this latest move by Congress will paralyze the IRS, let’s put the amount of budget cut in perspective.

Since fiscal year 2010, Congress has cut IRS funding by almost $1.2 billion, or 10%, forcing the agency to severely reduce its full-time, permanent workforce by 13,000 employees. This occurred even as the country added approximately 7 million new taxpayers. 

But let’s go back to 1995 – that’s almost 20 years ago. In 1995, the IRS had 114,064 workers to administer tax laws and process 205 million tax returns. By the end of 2013, staffing had fallen to 83,613 to administer a more complicated tax code and process 242 million tax returns and other forms. When I run these numbers I get 26% fewer IRS employees processing 20% more tax returns. Contrary to what Congress may think these statistics show the IRS doing an extraordinary job using its computers to keep up with the functions it is charged with.

Additionally, the IRS may be one of the smarter investments for Congress. Treasury Secretary Jack Lew said last year that the IRS yields $6 in collections for every $1 it receives for tax enforcement. The agency is already working with a smaller budget than it had five years ago — $11.3 billion in 2014 compared to $11.5 billion in 2009.

So what’s another $341 million cut in funding?

The IRS still has $10.95 billion to work with in 2015. This will bring the agency’s budget below the sequester level and below the level that was in place in fiscal year 2008. This funding level was still sufficient even then for the IRS to perform its core duties, including taxpayer services and the proper collection of funds. So even if Commissioner Koskinen has his way and shuts down IRS offices for a few days in 2015, the IRS computers will still be at work checking tax returns for errors and incomplete data, processing refunds and identifying taxpayers to be audited, investigated, prosecuted, and levied.

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.

Don’t Let The Recent Funding Cuts To IRS Give You A False Sense Of Complacency.

With just weeks remaining before the new tax season opens, Congress walloped the IRS with $341 million in budget cuts. That’s in addition to earlier slashes to the IRS budget of more than $1 billion since 2010, resulting in nearly 13,000 employee layoffs.

Is that a wise choice or an act of spite toward an unpopular agency?

Congress touted that the cuts are much needed but to others it looks like something else – revenge. You see many in Congress are still fuming about this year’s earlier tax-exempt organization scandal and those missing Lerner emails. There are other members of Congress that are angry about reports of wasteful spending. And still there are other members of Congress that see this as a great opportunity to keep IRS from properly implementing pieces of the Affordable Care Act – yes, the same Act that Congress pushed through a few years ago, tasking the IRS with related administrative responsibilities.

Rep. Peter Roskam (R-IL), the newly elected Chair of the Oversight Subcommittee of the House Ways and Means Committee, minced no words about the agency’s budget, referring to the IRS as a “rogue operation” earlier this year. He said about the IRS and cuts to the budget, at the time “This is an effort to get this agency under control. They have not faithfully executed the law. They have not faithfully used the resources that they have been entrusted with, and we in the House are determined to get this right and to rein them in.”

So if Representative Roskam is right, the IRS by getting less funding will have no choice to run its operations more efficiently

Will the IRS cuts paralyze the agency and allow taxpayers to slip through the system?

Now if you are still thinking that this latest move by Congress will paralyze the IRS, let’s put the amount of cuts in perspective.

Since fiscal year 2010, Congress has cut IRS funding by almost $1.2 billion, or 10%, forcing the agency to severely reduce its full-time, permanent workforce by 13,000 employees. This occurred even as the country added approximately 7 million new taxpayers. 

But let’s go back to 1995 – that’s almost 20 years ago. In 1995, the IRS had 114,064 workers to administer tax laws and process 205 million tax returns. By the end of 2013, staffing had fallen to 83,613 to administer a more complicated tax code and process 242 million tax returns and other forms. When I run these numbers I get 26% fewer IRS employees processing 20% more tax returns. Contrary to what Representative Roskam thinks, these statistics show the IRS doing an extraordinary job keep up with the functions it is charged with.

Additionally, the IRS may be one of the smarter investments for Congress. Treasury Secretary Jack Lew said last year that the IRS yields $6 in collections for every $1 it receives for tax enforcement. The agency is already working with a smaller budget than it had five years ago — $11.3 billion in 2014 compared to $11.5 billion in 2009.

So what’s another $341 million cut in funding?

The IRS still has $10.95 billion to work with in 2015. This will bring the agency’s budget below the sequester level and below the level that was in place in fiscal year 2008. This funding level was still sufficient even then for the IRS to perform its core duties, including taxpayer services and the proper collection of funds. Taxpayers back in 2008 were still being audited, investigated, prosecuted, and levied. Back in 2008 the IRS was also starting its major initiative to pursue taxpayers with undisclosed foreign bank accounts.  2015 should be no different.  But don’t get me wrong, the IRS will still need to streamline and make better use of its budget as it now has less.

So how can the IRS do more for less?

Remember, the IRS is already yielding $6 in collections for every $1 it receives for tax enforcement. I know a lot of business people who would not mind having that rate of return. Therefore, cuts in tax enforcement should be minimal.

1. More tax returns being electronically filed and electronically processed. About 150 million returns were filed in 2014 of which more than 96% were electronically filed. The IRS issued more than 61.6 million refunds for approximately $179.8 billion. The average dollar refund is about $3,000, and the IRS has directly deposited more than 52.7 million refunds to taxpayers thus far, a 0.7% increase over the same period last year.

2. Increase access to tax information through the internet. Each tax filing season the IRS provides services to taxpayers to help them fulfill their tax obligations and by meeting taxpayers’ increasing demand for self-service and electronic service options, the IRS can deliver tax information without tying up human resources. Much of this has been accomplished through the IRS’ website. As a result of these and other improvements to the IRS website and because there were no significant tax law changes enacted in 2013, the volume of phone calls to the IRS’ toll-free lines has decreased.

3. Going Paperless. The IRS generated $60 million in annual printing and postage savings by eliminating the printing and mailing of selected tax packages and publications, and by transitioning to paperless employee pay statements.

4. Reducing Office Space. In an effort to promote more efficient use of the Federal government’s real estate assets and generate savings, in 2012, the IRS announced a sweeping office space and rent reduction initiative that over two years is projected to close 43 smaller IRS offices and consolidate space in many larger facilities. These measures will reduce annual rent costs by more than $40 million and reduce total IRS office space by more than 1.3 million square feet by the end of 2014.

When you add the savings for going paperless and reducing office space, this results in the IRS spending $300 million a year less. Remember the latest cut is $341 million. Maybe Congress has this right?

 
5. IRS Working With Other Federal Agencies. For example, the IRS criminal and civil enforcement organizations work with the U.S. Department of Justice Tax Division to shut down abusive tax schemes as quickly as possible in an effort to protect taxpayers from potential additional financial harm. Parallel civil and criminal investigations are an effective and aggressive IRS approach that halts these schemes quickly and permanently.  A civil injunction against the promoter stops the scheme and prevents additional ‘clients’ from investing.  In addition, the Criminal Investigation Division shares abusive tax scheme investor lists with the civil operating divisions to ensure investor tax returns are considered for examination (audit). Also, the Department of Justice, Department of Treasury and Homeland Security entered into a joint effort to enforce the “National Money Laundering Strategy” to continue the nation’s efforts to dismantle corrupt money laundering schemes.

6. IRS Working With Foreign Financial/Tax Agencies. International tax compliance is a top priority of the IRS. The IRS is vigorously pursuing tax cheats around the world, no matter how remote or secret the location. The IRS Criminal Investigation Division (“CID”) is working to develop new ways to share information and foster cooperation among other U.S. government agencies and foreign government counterparts. To enhance its international efforts CID has expanded its overseas presence by assigning attachés to key foreign embassies and consulates. Attachés establish strong ties with foreign government and law enforcement partners working with them to gather and share information about possible financial crimes. CID also actively participates in a number of international financial task force groups to investigate significant areas of noncompliance and criminal activity. These groups include INTERPOL, the Terrorist Finance Working Group (TFWG), the Financial Action Task Force (FATF), and the Organization for Economic Co-operation and Development (OECD).

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.

The IRS And Big Data.

With another tax filing and estimated tax payment deadline coming up, you may have spent the last few days thinking hard about your taxes, but the IRS has been doing so for years – positioning itself as a leader in using Big Data.

Each year, April 15th is a memorable date for those of us in the United States – this is the deadline to file our taxes or to file an extension to delay filing a tax return to October 15th.

It is clear that the IRS is the dominant government agency in the United States. After all if there are no taxes, there can be no government. Politicians know this and over the decades have ensured that the IRS has all the powers it needs to raise federal taxes from the citizens, residents, and even tourists who stay long enough in the United States.

U.S. citizens cannot even escape U.S taxation by leaving the country because the tax law requires U.S. citizens who currently earn more than $9,750 to file even if they don’t live in the country. Even if you renounce your citizenship, as 3,805 did in 2011, you still have to pay an exit tax of 15% on all your assets including investments, homes, and even your personal possessions.

Extensive data collection

To keep track of this, the IRS has one of the most extensive data collections in the world. Traditionally its power to enforce has come through the matching of data. For example, you received a W-2 Form from your employer showing how much you earned. That same form is submitted by your employer to the IRS. Now the IRS can match your return to that form to make sure you are reporting the income. The same thing goes for 1099 forms showing your earnings from miscellaneous income, gambling winnings, interest and dividend income, sales of assets, deductions, and so on.

But the IRS is not stopping here. The IRS has signed a $650 million ten-year contract with Unisys to further develop Big Transaction Processing Data whereby the IRS is using Unisys ClearPath Dorado Servers running at an estimated 1,200 MIPS to process tax returns.

For those of you who are not techies, “MIPS” is a measure of a computer’s central processing unit performance and its stands for “Million Instructions Per Second”. These servers will reside selected IRS Data Centers alongside several IBM z/196 mainframes, capable of running at an estimated 8,000 MIPS. Along with all this processing power are extensive data storage capabilities which will be managed in the IRS’ private cloud. It is estimated that IRS has 7.5 Petabytes of data. By the way just one Petabyte is equivalent to 1 quadrillion bytes.

Data from social media

But the IRS is not just stopping with Big Data Transactions, the IRS is now pursuing Big Data Social Media Analytics just like Google.

But unlike the normal corporate big data analytics, the IRS has one big advantage: It knows everyone’s social security numbers, as well as all the tax information from the firms we as taxpayers interact with, and as such the IRS can join the dots between Google, EBay, LinkedIn, Facebook, Yelp, Twitter, and perhaps your PayPal and credit card accounts along with your emails to overseas bankers.

The IRS has access to every social media posting going back to 2008 so deleting your posts does not make them go away.  The IRS has bragged that their computer can make DNA blueprint of each of our behaviors. Amazingly, the IRS’ supercomputer can read all 200 million e-Filed returns in just ten hours!

All this will allow the IRS to refine its algorithms to more effectively identity those taxpayers to be selected for audit or investigation.

So while none of us enjoys doing or paying our taxes we as taxpayers can be comforted by knowing that the government is at the forefront of the big data revolution. And despite the use of these new technology skills to make the government itself more efficient, there are still two certain things in life – death and taxes!

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 Diego, 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.

How The IRS Selects Returns For Examination.

I must say that the overwhelming majority of taxpayers file returns and make tax payments timely and accurately. As such taxpayers have a right to expect fair and efficient tax administration from the IRS, including verification that taxes are correctly reported and paid with enforcement actions against those who fail to comply voluntarily.

Four Ways That Returns Are Selected for Examination

1. Potential participants in abusive tax avoidance transactions — Some returns are selected based on information obtained by the IRS through efforts to identify promoters and participants of abusive tax avoidance transactions. Examples include information received from “John Doe” summonses issued to foreign and domestic banks, credit card companies, businesses and participant lists from promoters ordered by the courts to be turned over to the IRS.

2. Computer Scoring — Some returns are selected for examination on the basis of computer scoring.  Computer programs give each return numeric “scores”. The Discriminant Function System (DIF) score rates the potential for change, based on past IRS experience with similar returns. The Unreported Income DIF (UIDIF) score rates the return for the potential of unreported income. IRS personnel screen the highest-scoring returns, selecting some for audit and identifying the items on these returns that are most likely to need review.

3. Information Matching — Some returns are examined because payer reports, such as Forms W-2 from employers or Form 1099 interest statements from banks, do not match the income reported on the tax return.

4. Related Examinations — Returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for examination.

How Does One Find Out If The IRS Does Select Your Tax Return For Examination?

This is where one must be careful because there are scammers out there who are calling people saying they are the IRS and threatening them with arrest and deportation unless they pay right away. If you are selected for an audit by the IRS, the initial contact will always be in the form of a letter sent by the assigned agent under official IRS letterhead.

Look for the following in the IRS Notice:

First, it will give you the contact information of the agent and what IRS office the agent reports to.

Second, it will tell you how the examination is to be conducted – this can be by mail, or through an in-person interview and review of the taxpayer’s records at the agent’s office or outside the agent’s office such as the taxpayer’s business.

Third, it will tell you which years are being audited and what records will be needed. Taxpayers may act on their own behalf or have a tax professional represent or accompany them. 

And that is where we come in. We highly recommend that you do not go into the IRS on your own. 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 Diego, 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.

How The IRS Is Matching Big Data To Your Tax Return And Selecting You For Audit.

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.

Here are some of the programs IRS has in place to help select tax returns for audit:

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 is developing a Form 1099-K matching initiative that will make the IRS more efficient in identifying problem tax returns. But for now many initial notices indicate that the IRS is focusing on underreporting cases in which 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 this 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.

Where in the future is the IRS going with their use of Big Data?

The IRS has been getting a lot of help from Congress where Congress has expanded the IRS’ reach to access more information to enforce compliance and implement new legislation.

1. Foreign Account Tax Compliance Act (“FATCA”)

This legislation became law in 2010. Starting in 2014, the IRS will have the ability to match taxpayers’ returns against the information it receives on U.S. taxpayers with accounts at foreign financial institutions. The IRS will likely scrutinize taxpayers who have not filed the required Form 8938, Statement of Specified Foreign Financial Assets, or FinCEN Form 114, Report Of Foreign Bank Account (commonly known as “FBAR”). Our office has a lot of cases representing taxpayers with undisclosed foreign bank accounts – it is a hot issue with IRS.

2. Patient Protection and Affordable Care Act (“Obama Care”)

As this Act is implemented in the next several years, the IRS will start using information statements for individual and employer compliance with the Act’s mandates. Starting in 2012, employers reported the value of employer-provided health insurance on Forms W-2, Wage and Tax Statement, to inform taxpayers of the value of their health insurance coverage. In 2015, the IRS will also receive information from health insurance companies on employee coverage, including the name and identifying information of the employer. The IRS can use the information to identify and penalize individuals and employers for noncompliance with Obama Care mandates.

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.

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 Los Angeles, San Diego, 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.

Beware Of The Dark Side – Protecting Yourself From The IRS

A Gallup Poll released in April 2014 found that two-thirds of Americans believe that the Internal Revenue Service abuses its power. Yet few people realize exactly how much arbitrary power the IRS has through the Courts and the Laws of the United States.

Remember that the IRS like any government agency has a purpose to enforce the laws and like other government agencies the IRS will use all means available to achieve this purpose. For one thing the IRS will conduct undercover operations sometimes even masquerade as professionals to entice other citizens to violate tax laws.

The most common and for many people most cartographic use of power by the IRS is levying bank accounts, paychecks and other sources of income. Unlike a typical creditor, the IRS is able to do this without having to hire an attorney and for the most part does not even require a person to initiate this action. Instead it is the IRS computers that scour taxpayers’ accounts and when seeing that there is an outstanding balance sending out those dreaded Notices of Levy. What is even more tragic is that many times the amount that the IRS is seeking to collect is more than what the taxpayer should actually owe.

Take, for example, the case of Melvin Powers. In 1983 the IRS decided to investigate Mr. Powers’ 1978 and 1979 tax returns. Mr. Powers was a Houston builder and owner of five office buildings; he had only an eighth-grade education. The IRS had made no effort to examine Mr. Powers’ tax returns during the three years of the statute of limitations. Six weeks before the statute was to expire, an IRS agent asked Mr. Powers to sign a waiver of his statute of limitations, allowing the IRS to investigate him for another three years. Mr. Powers willingly agreed. In 1986, the IRS disallowed almost all of Mr. Powers’ business deductions for 1978 and 1979 and demanded $7,145,266.71 in back taxes, interest and penalties.

Shortly after the IRS’s assessment, a bankruptcy court trustee seized all of Mr. Powers’ operations, caused Mr. Powers to vacate his office premises, and took possession of his books and records for all years. Then, in early 1991, the IRS reversed itself and conceded that Mr. Powers actually had legitimate losses for the years under scrutiny and thus owed no taxes for those years. After IRS officials canceled the $7 million tax bill, Mr. Powers successfully sued the IRS to cover his legal costs for the case but it was already way too late as the IRS had devastated his life.

Another amazing position that the IRS maintains is that the IRS is entitled to impose penalties or seize property for overdue taxes even after the agency admits sending tax deficiency notices to the wrong address.

Take for example the case of Clayton and Darlene Powell. In late 1987 the Powell’s moved from Adelphi, MD, to Mitchellville, MD, and filed a tax return with their new address in early 1988. A few weeks after the IRS received the Powell’s’ new address, the agency sent a notice of deficiency for their 1984 tax return to their old address. The local post office — though it had the forwarding address — returned the notice to the IRS. Though the three-year statute of limitations had expired on the Powell’s 1984 return, on Dec. 28, 1988, the IRS sent a tax bill to their new address giving the couple 10 days to pay $6,864 in back taxes, interest and penalties or have their property seized. The Powell’s paid and then sued the IRS to get a refund.

The Federal Appeals Court ruled that “the Powell’s are entirely innocent” and ordered the IRS to issue a refund. The IRS then appealed the decision to the Supreme Court, contending that as long as the IRS mailed a tax deficiency notice to a taxpayer’s “last known address”, the taxpayer must be presumed to have received the notice — even when it is indisputable that he did not receive it.

The Justice Department, in its brief on this case, noted that the IRS “issues more than 2 million notices of deficiency each year and approximately 240,000 of those notices were returned undelivered during the past year.” The Justice Department whined that requiring the IRS to actually notify citizens of tax assessments before final seizure notices would impose “unmanageable detective burdens” on the IRS. The government went on to say that “This case threatens to create a ‘window of time’ during which the Internal Revenue Service may be helpless to protect its rights in pursuing delinquent taxpayers”.

The Supreme Court denied the government’s request to re-examine the Powell case. Yet even though the IRS lost in Federal Appeals Court on this issue and paid back the Powell’s, the agency has formally chosen to disregard that court’s verdict — to follow a policy of “nonacquiescence,” in legal terms. The IRS believes the court made a mistake and thus that the agency has no obligation to respect its decision.

So what is one to do when it is the IRS’ perspective that the citizen has an unlimited obligation to comply with its demands — even when the IRS fails to inform the citizen of its demands? You need to hire an experienced and local tax attorney who is accountable to you and will act in your best interest to defend you from the IRS and get an acceptable resolution. Having experienced tax counsel will level the playing field and take the IRS out of the driver’s seat.

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.

What Is The Difference Between Tax Fraud And A Simple Mistake?

In most tax audits the IRS is only interested in collecting the taxes owed, plus interest along with a few penalties. Perhaps the IRS might impose a negligence penalty or a late filing penalty. However, if during the tax audit the IRS suspects that you have committed tax fraud they can impose a civil tax fraud penalty. The civil tax fraud penalty is equal to 75% of the tax owed, plus interest on the penalty. Worse yet the IRS tax auditor might ask the tax fraud referral specialist to look at your case to see if it should be sent to the IRS Criminal Investigation Division (CID) for criminal tax prosecution.

 

Tax crimes include filing a false tax return, tax evasion, filing false documents, failure to collect employment taxes, failure to pay taxes, and failing to file a tax return. The penalties for criminal tax fraud are very serious. They range up to 5 years in jail, plus fines of up to $500,000, plus the costs of prosecution for each separate tax crime. Once the criminal tax case is completed CID will refer the case back to the IRS Examination Division where the taxes will be assessed, and the IRS can be expected to add on the civil tax fraud penalty, on top of any criminal tax fraud fines.

 

Generally tax fraud or tax evasion involves an intentional wrongdoing. Mere carelessness is not tax fraud. “Badges Of Fraud” commonly used by taxpayers to deceive or defraud the IRS include the following:

Badges of Fraud – Income

  • Omissions of specific items where similar items are included.
  • Omissions of entire sources of income.
  • Unexplained failure to report substantial amounts of income determined to
    have been received.
  • Substantial unexplained increases in net worth, especially over a period
    of years.
  • Substantial excess of personal expenditures over available resources.
  • Bank deposits from unexplained sources substantially exceeding reported
    income.
  • Concealment of bank accounts, brokerage accounts, and other property.
  • Inadequate explanation for dealing in large sums of currency or the
    unexplained expenditure of currency.
  • Consistent concealment of unexplained currency, especially in a business
    not calling for large amounts of cash.
  • Failure to deposit receipts to business account, contrary to normal
    practices.
  • Failure to file a return, especially for a period of several years
    although substantial amounts of taxable income were received.
  • Covering up sources of receipts by false description of source of
    disclosed income and/or nontaxable receipts.
  • Substantial overstatement of deductions.
  • Substantial amounts of personal expenditure deducted as business expenses.
  • Claiming fictitious deductions.
  • Dependency exemption claimed for non-existent, deceased, or
    self-supporting persons.
  • Loans of trust funds disguised as purchases or deductions.
  • Keeping two sets of books or no books.
  • False entries or alterations made on the books and records; backdated or
    postdated documents; false invoices, applications, or statements, other false
    documents, or applications.
  • Failure to keep adequate records, concealment of records, or refusal to
    make certain records available.
  • Variances between treatments of questionable items on the return as
    compared with books.
  • Intentional under or over footing of columns in journal or ledger.
  • Amounts on return not in agreement with amounts in books.
  • Amounts posted to ledger accounts not in agreement with source books or
    records.
  • Journalizing of questionable items out of correct amount.
  • False receipts to donors by exempt organizations.
  • Distribution of profits to fictitious partners.
  • Inclusion of income or deductions in the return of a related taxpayer,
    when difference in tax rates is a factor.
  • False statement, especially if made under oath, about a material fact
    involved in the examination.
  • Attempts to hinder the examination. For example, failure to answer
    pertinent questions, repeated cancellations of appointments, or refusal to
    provide records.
  • The taxpayer’s knowledge of taxes and business practice where numerous
    questionable items appear on the returns.
  • Testimony of employees concerning irregular business practices by the
    taxpayer.
  • Destruction of books and records, especially if just after examination was
    started.
  • Transfer of assets for purposes of concealment or diversion of funds
    and/or assets by officials or trustees.
  • Patterns of consistent failure over several years to report income fully.
  • Proof the return was incorrect to such an extent and in respect to items
    of such character and magnitude as to compel the conclusion the falsity was
    known and deliberate.
  • Payment of improper expenses by or for officials or trustees.
  • Willful and intentional failure to execute plan amendments.
  • Backdating of applications and related documents.
  • Making false statements on EP/EO determination letter applications.
  • Use of false social security numbers.
  • Submission of false Form W-4.
  • Submitting a false affidavit.
  • Attempts to bribe the examiner.
  • Inadequacy of consideration.
  • Insolvency of transferor.
  • Assets placed in other names.
  • Transfer of all or nearly all of debtors’ property.
  • Close relationship between parties to the transfer.
  • Transfer made in anticipation of a tax assessment or while the
    investigation of a deficiency is pending.
  • Reservation of any interest in the property transferred.
  • Transaction not in the usual course of business.
  • Retention of possession.
  • Transactions surrounded by secrecy.
  • False entries in books of transferor or transferee.
  • Unusual disposition of the consideration received for the property.
  • Use of secret bank accounts for income.
  • Deposits into bank accounts under nominee names.
  • Conduct of business transactions in false names.

 Badges of Fraud – Expenses or Deductions

 Badges of Fraud – Books and Records

  • Keeping two sets of books or no books.
  • False entries or alterations made on the books and records; backdated or
    postdated documents; false invoices, applications, or statements, other false
    documents, or applications.
  • Failure to keep adequate records, concealment of records, or refusal to
    make certain records available.
  • Variances between treatments of questionable items on the return as
    compared with books.
  • Intentional under or over footing of columns in journal or ledger.
  • Amounts on return not in agreement with amounts in books.
  • Amounts posted to ledger accounts not in agreement with source books or
    records.
  • Journalizing of questionable items out of correct amount.
  • False receipts to donors by exempt organizations.

Badges of Fraud – Allocations of Income

  • Distribution of profits to fictitious partners.
  • Inclusion of income or deductions in the return of a related taxpayer,
    when difference in tax rates is a factor.

Badges of Fraud – Conduct of Taxpayer

  • False statement, especially if made under oath, about a material fact
    involved in the examination.
  • Attempts to hinder the examination. For example, failure to answer
    pertinent questions, repeated cancellations of appointments, or refusal to
    provide records.
  • The taxpayer’s knowledge of taxes and business practice where numerous
    questionable items appear on the returns.
  • Testimony of employees concerning irregular business practices by the
    taxpayer.
  • Destruction of books and records, especially if just after examination was
    started.
  • Transfer of assets for purposes of concealment or diversion of funds
    and/or assets by officials or trustees.
  • Patterns of consistent failure over several years to report income fully.
  • Proof the return was incorrect to such an extent and in respect to items
    of such character and magnitude as to compel the conclusion the falsity was
    known and deliberate.
  • Payment of improper expenses by or for officials or trustees.
  • Willful and intentional failure to execute plan amendments.
  • Backdating of applications and related documents.
  • Making false statements on EP/EO determination letter applications.
  • Use of false social security numbers.
  • Submission of false Form W-4.
  • Submitting a false affidavit.
  • Attempts to bribe the examiner.

Badges of Fraud – Methods of Concealment

  • Inadequacy of consideration.
  • Insolvency of transferor.
  • Assets placed in other names.
  • Transfer of all or nearly all of debtors’ property.
  • Close relationship between parties to the transfer.
  • Transfer made in anticipation of a tax assessment or while the
    investigation of a deficiency is pending.
  • Reservation of any interest in the property transferred.
  • Transaction not in the usual course of business.
  • Retention of possession.
  • Transactions surrounded by secrecy.
  • False entries in books of transferor or transferee.
  • Unusual disposition of the consideration received for the property.
  • Use of secret bank accounts for income.
  • Deposits into bank accounts under nominee names.
  • Conduct of business transactions in false names.

Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, the experienced tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and San Diego and elsewhere in California can determine how to respond to these inquiries and formulate an effective strategy.

Description: Working with a tax attorney lawyer is the best way to assure that your freedom is protected and to minimize any additional amount you may owe to the IRS.