Posted on November 17, 2017 in Taxation Law

Benjamin Franklin once said that nothing in this world is certain except death and taxes. This common saying is as true today as it was 200 years ago—paying taxes is a civic duty that is required of everyone in the United States. However, people often attempt to cheat on their taxes and avoid paying what they owe, and this can result in serious consequences. If you are facing a tax audit, you should understand the potential consequences of tax fraud or tax evasion.

IRS Tax Fraud Penalties

Tax fraud can take a number of different forms, including:

• Attempt to evade or defeat tax - This can include underreporting income, claiming improper deductions, or underreporting the value of an estate.

Continue Reading ››

 Posted on November 09, 2017 in Tax Audits

The prospect of being audited by the IRS is rather frightening, and many taxpayers do not know what to expect in a potential tax audit. However, only around 1 percent of people who file taxes are audited, and there is a great deal of confusion about what makes an audit likely. When filing a tax return, it is important to understand what the IRS looks for when deciding who to audit.

The DIF System

The IRS uses automated scoring known as the Discriminant Information Function (DIF) System to analyze tax returns. This system compares people’s incomes in a geographic area and looks at factors such as family size, how income is earned, and real estate property values to find any discrepancies that may require an audit. The IRS also uses an Unreported Income DIF (UIDIF) score to analyze whether a person is likely to have any income that was not reported correctly.

Continue Reading ››

 Posted on October 27, 2017 in Tax Appeals

If, when filing your tax return, you owe taxes to the Internal Revenue Service (IRS) and you do not pay them at that time, the IRS will bill you for the taxes that are due. They will send at least two notices. Additionally, if taxes are not paid after you receive a final notice, the IRS will begin to take collection actions. These actions can include applying the amount of your future tax refunds to the amount due, or seizing your property and financial assets.

If you are unable to pay your taxes, you are likely already having financial difficulties. Moreover, if you receive a notice that the IRS plans to initiate a collection action, you may worry about the possible consequences. In these cases, an experienced tax attorney can help you appeal the IRS’s decision through one of the following procedures.

Continue Reading ››

 Posted on October 19, 2017 in Tax Appeals

If you are unable to file your tax return by the April 15 deadline, or if you cannot pay the taxes that are due at that time, you are likely experiencing financial hardship. Unfortunately, this hardship will only be compounded by the penalties that the IRS charges for failure to file or failure to pay taxes. However, you may be eligible for relief through a first-time penalty abatement (FTA) waiver.

What is FTA?

The IRS created the FTA waiver in 2001 to encourage compliance with tax requirements. Under this program, both individuals and businesses who have been compliant in the past can receive amnesty for penalties levied against them.

According to a 2012 report by the Treasury Inspector General for Tax Administration (TIGTA), more than 90 percent of the people who qualify for FTA do not use it because they are unaware that it is available. 

Continue Reading ››

 Posted on October 12, 2017 in Taxation Law

In the United States, we are all too aware of the taxes that affect our everyday lives, such as sales tax and income tax. However, there are additional taxes that apply in special situations, including when someone leaves assets to his or her heirs after their death and when a person gives someone a large gift of money or property. These taxes are known as transfer taxes, and people should be aware of the tax laws that apply in these situations.

Estate Tax

When a person dies, taxes may apply to the transfer of his or her property to his or her heirs. A complete accounting of one’s assets will be made, including cash, real estate, investments, and business interests, using the fair market value of these items. The total value of this property is known as the Gross Estate. Deductions from this amount may apply for debts, expenses related to estate administration, property left to charities, and property left to a surviving spouse.

Continue Reading ››

 Posted on September 29, 2017 in Taxation Law

The IRS is turning to large-scale data analysis to help detect criminal activity among taxpayers. It is doing this through the creation of two initiatives, each with a different focus. Both initiatives will heavily rely on data gained through the IRS’s civil departments that will be used by the agency’s Criminal Investigation Division.

Initiative 1: International Tax Enforcement Group

Foreign tax compliance, including the reporting of offshore accounts, has long been a priority for the IRS. Recently, the IRS announced that a new team, the International Tax Enforcement Group, will analyze massive amounts of collected data in an attempt to find non-compliant tax filers.

The team will be comprised of IRS investigators who have foreign compliance experience and base them out of a central location, the Washington, D.C. field office.

Continue Reading ››

 Posted on September 15, 2017 in Small Business Taxes

If you are setting up a new business or restructuring an existing one, you might consider electing to be taxed as an S Corporation, which means you are electing to have your entity taxed under Subchapter S of the federal tax code. Such entities will also be considered as an S corporation for California tax purposes.

Provided that the business qualifies, it may be beneficial from a tax perspective for an entity to be considered an S corporation as the business will be able to avoid federal double taxation because there is no corporate federal income tax on the profits of the company. All profits and losses are passed on to the entity’s shareholders.

Structure of an S Corporation

An S corporation must meet certain requirements and has certain benefits, including:

Continue Reading ››

 Posted on September 08, 2017 in Taxation Law

Limited liability companies (LLCs) are often touted for their tax flexibility. In fact, that is one of the reasons why people choose to set up their business as an LLC.

LLCs are commonly called pass-through tax entities for federal income tax purposes. This is because the LLC will not be responsible for these taxes. Instead, the LLC’s individual members will pay the federal income taxes.

However, LLCs must comply with certain filing requirements and possibly pay a state minimum tax in California and may need to pay a California LLC fee. The proper forms and amount of taxes and fees will be determined by the setup of the LLC and also by certain elections made.

California follows the federal check-the-box regulations. Accordingly, LLCs are classified as follows:

Continue Reading ››

 Posted on August 31, 2017 in Taxation Law

If you have a delinquent tax debt, the Internal Revenue Service (IRS), California Franchise Tax Board (FTB), or California Board of Equalization (BOE) may have the power to take your property. This power to seize, or levy, your assets is why you should seek to remedy the delinquency as soon as possible through an installment agreement or other means.

The levy process is meant to satisfy your tax debt. The IRS, FTB, or BOE may seize your property and sell it, if necessary, and apply the proceeds to your delinquent taxes. The cost of the sale may also have to be paid by the taxpayer through the levied property.

The following property is subject to seizure:

• Wages, salary, or commission. Dividends and payments on promissory notes are also subject to seizure. Your wages can be levied continually until your tax obligation is paid in full.

Continue Reading ››

 Posted on August 18, 2017 in Taxation Law

You may not be a millionaire celebrity or a huge corporation, but that does not mean you cannot be guilty of tax evasion. Even though these are the types of people and entities typically associated with tax evasion, any person who files tax returns could find himself or herself under investigation for this serious crime.

According to the Internal Revenue Code § 7201, tax evasion involves “[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof.”

Thus, this law sets forth two kinds of tax evasion:

1. The willful attempt to evade or defeat the assessment of a tax; and

2. The willful attempt to evade or defeat tax payment.

For example, if the taxpayer transfers assets to prevent the IRS from determining his or her tax liability, he or she could be found guilty of evasion of assessment. If the assets were transferred after a tax liability is due, he or she could be found guilty of payment evasion.

Continue Reading ››