Posted on March 21, 2017 in Taxation Law

You may or may not know of someone who has not filed income taxes. It may be tempting each year to not file with the Internal Revenue Service (IRS); however, such an omission can lead to serious consequences.

California Filmmaker Josh Kornbluth was one of these non-filers. He did not file income taxes for seven years in the 1990s. He stopped filing taxes one year when his tax returns got more complicated after taking on freelance writing assignments. He said that he never got caught, which caused him to continue to not file.

"The first time, I got very nervous," Kornbluth told reporters. "But then I noticed that nothing happened to me. The next day after I didn't file was the same as the day before. It just became sort of a habit not to file."

Eventually, he realized that not paying his taxes meant that he was not supporting his country. He also got engaged and was expecting a child, leading him to make changes in his life. In the end, Kornbluth came clean and began to file. He chronicled his income tax experience in his film "Love & Taxes," which premiered in 2015.  

Continue Reading ››

 Posted on March 10, 2017 in Taxation Law

Recently, House Republicans introduced a health insurance bill that would replace the Affordable Care Act (also known as ACA or “Obamacare”). This bill was pulled before the House could vote, but its analysis is worthy as future bills may be forthcoming. The new bill was called the American Health Care Act (AHCA). Industry experts analyzed the effects of the bill and predicted that this plan, or any Obamacare replacement plan, would create “winners and losers.”

Both healthcare plans would have tax implications. Obamacare has an individual mandate requiring most taxpayers to obtain health insurance or pay a penalty when filing tax returns. It also offers tax credits. Obamacare offers a broad range of insurance premium subsidies based on household income and the local cost of healthcare insurance. The AHCA would have eliminated the required mandate and changed the tax credits that can be claimed. 

Continue Reading ››

 Posted on February 22, 2017 in Taxation Law

Cybercriminals target tax professionals in order to gain access to sensitive client data. With this data, criminals can file tax returns fraudulently and be issued a tax refund. Tax professionals have a duty to keep client data secure. When client data is compromised, tax professionals must take certain steps to protect themselves and their clients. Following certain steps can also help prevent tax refunds from being issued to cybercriminals. 

1. Inform the Internal Revenue Service and law enforcement agencies.

• Notify the IRS. Your local IRS Stakeholder Liaison will take a report of client data compromise. The liaison will then inform the IRS Criminal Investigation unit on your behalf. It may be possible for the IRS can block the fraudulent returns based on the stolen data. For this to happen, reporting the breach to the IRS must occur quickly.
  
  

Continue Reading ››

 Posted on February 15, 2017 in Small Business Taxes

The California State Board of Equalization (BOE) has changed sales and use tax Regulation 1702.5. This regulation governs when a responsible party must personally pay taxes owed by a business entity that is closed or abandoned. These changes could alter your tax obligation, and so it is important to understand the new regulation and seek counsel to determine if it modifies your circumstances. These changes could prohibit the BOE from seizing your personal assets. The amendments to the law will be effective on April 1, 2017.

Amendments to Business Tax Regulation 1702.5 

The current regulation is defined by the following: “Any responsible person who willfully fails to pay or to cause to be paid... any taxes due from a [business entity] shall be personally liable for any unpaid taxes and interest and penalties on those taxes not so paid upon termination, dissolution, or abandonment of the business...” (Emphasis added.)

Continue Reading ››

 Posted on February 08, 2017 in Taxation Law

Many individuals and businesses turn to a tax preparer for the extra assurance a preparer gives that taxes will be filed properly. While most tax preparers provide a valuable service, some preparers use tax season to scam customers as well as state and federal governments.

Different Schemes Used by Tax Preparers

Tax preparers can set up schemes to defraud in a number of ways. For example, a tax preparer could claim credit or deductions for which the individual was not eligible. A tax preparer could also divert tax refund checks to his or her own bank account.

These schemes can be very lucrative. Last year, a California tax preparer was ordered to pay more than $7 million dollars in restitution after she pled guilty to tax fraud.

Penalties for Taxpayers

If the IRS determines that your tax preparer submitted fraudulent returns, you will likely face consequences. The IRS takes the view that the taxpayer is ultimately responsible for the filing. 

Continue Reading ››

 Posted on January 30, 2017 in Taxation Law

The IRS has announced that it has received nearly $10 billion as part of a special program offered to taxpayers who were shielding assets in undisclosed offshore accounts. The $10 billion dollars was paid by 55,000 taxpayers who utilized the Offshore Voluntary Disclosure Program (OVDP). This sum includes taxes, interest, and penalties.

The OVDP is offered to those with undisclosed income from foreign financial accounts and assets and allows them to come into compliance with tax returns and report obligations. The program incentivizes taxpayers to voluntarily disclose these assets before the IRS finds out about them later. If the IRS discovers that an offshore account has not been disclosed, more severe penalties and possible criminal prosecution can result.

Similar to the OVDP, taxpayers have used a second program called the Streamlined Offshore Disclosure Program to pay approximately $450 million in taxes, interest, and penalties.

Continue Reading ››

 Posted on January 18, 2017 in IRS Scams

Scammers have long pretended to be the IRS in order to prey on taxpayers in the hopes of scaring them into paying hundreds or thousands of dollars. In reaction to this, the IRS warns consumers of these scams, which take on many forms. 

Recently, there has been an uptick in IRS scams coming from India. One 29-year-old woman, who ultimately gave into the scammer’s request for money, said that the person who called her had a foreign accent and confused basic English phrases. 

Twice in the conversation, the scam victim said the person on the phone said she owed 1,000 rupees, which is the currency used in India. Both times he corrected himself and said she owed $1,000.

The scammer demanded that she go to a nearby grocery store and purchase an iTunes gift card. The scam victim complied and gave him the card number to an iTunes card worth $500.

Continue Reading ››

 Posted on December 21, 2016 in Taxation Law

With voters' approval of Proposition 64 in November 2016, recreational marijuana has been legalized in California. This new law also creates tax implications for marijuana dispensaries now and changes that have to be implemented in 2018.

One of the benefits that supporters of Proposition 64 cited was that legalizing recreational marijuana would bring in more tax dollars to the state. This is true, according to estimates that project an additional $1 billion per year in tax revenue after the law goes into effect in 2018.

However, while the law will raise additional tax dollars, the state may also lose money because it will no longer collect taxes on medical marijuana sales.

Proposition 64 and Medical Marijuana

Since November 9, 2016, California no longer implements a sales tax on medical marijuana sales. This is because users of medical marijuana feared that if Proposition 64 passed, marijuana prices would be driven up. Thus, it was agreed that medical marijuana would be sales tax exempt if the proposition passed.

Continue Reading ››

 Posted on August 11, 2016 in Taxation Law

Summertime is the time when everyone is getting married. And you may think that once the wedding is over, you're done planning and it's time to relax, at least until it's time to start planning for a family. Before you take that next step, you need to consider your future, even if it's just the two of you. Estate planning is important now so that you're planned for later.

Las Will and Testament

Most people only think about a will when they think of estate planning. This document is important because you choose the person who will oversee your estate along with choosing who inherits your assets. You'll also appoint a guardian for any future children.

Living Will

While your last will and testament plan for when you pass away, a living will outlines important decisions you need to make while you're still alive. For example, if you fall ill and are unresponsive, you can't make decisions regarding certain medical treatment. Your living will makes those decisions ahead of time.

Continue Reading ››

 Posted on August 04, 2016 in IRS Scams

Each year, IRS puts out a series of press releases warning taxpayers of twelve schemes they call the "Dirty Dozen." The items on the list can change from year to year, and several typically have to do with taxpayers attempts to game the system by understating income, overstating deductions, engaging in "tax shelter" transactions, and so forth.

But for the past several years, the top three items on the list have been identity theft, phone scams, and phishing schemes - situations in which ordinary people are vulnerable simply because they are trying to comply with the tax laws.

Each year IRS identifies literally millions of returns in which a thief has used someone else's Social Security number to claim refunds. While the agency says it is making progress in detecting and preventing identity theft, "criminals continue to look for increasingly sophisticated ways to breach the tax system," including phishing and phone scams.

Continue Reading ››