Los Angeles California Tax Attorney Blog

Los Angeles Tax Attorney:

Last year IRS filed tax lien against California Governator. The IRS tax lien against Schwarzenegger sought $79,000 for taxes or penalties related to informational tax returns pursuant to IRC 6721.

Almost a year later, Schwarznegger got his IRS tax lien released. According to TMZ, tax lien filed against the Governor was released last week.

It’s not clear whether Maria and Arnold paid the taxes or if these taxes and penalties were satisfied through the tax penalty abatement procedure. Regardless, Governor won’t have to worry about IRS seizing his cars or issuing tax levy on his bank accounts this Valentine.

Alleged IRS Tax Code violation fixed.

Now, if his wife stops violating California vehicle code...we’ll all be little safer.

Los Angeles Tax Attorney:

Internal Revenue Service IRS
released information on its tax audit and tax collection activity results from 2009. Tax Audit, Tax Collection and Tax Audit Category base on income can be found here .

Interesting points to note:

1) IRS Collected through tax levies and tax liens $48.9 Billion Dollars last year. However that was about $7 Billion less than in 2008.

2) IRS audited 1,099,639 tax returns last year which shows an increasing trend over the last 10 years. It is expected that IRS will increase its tax audit by 3.5% in 2010.

3) If you make less than $200,000, your chances of getting audited is about 1%.

4) If you make between $200,000 and million dollars, your chances of getting audited is about 3%.

5) If you make more than $1,000,000, your chances of getting audited is about 6.5%.

California Tax Attorney:

Internal Revenue Service IRS catches another tax evader.

Another UBS client pleaded guilty today in a criminal IRS tax case concerning FBAR and Offshore Bank Accounts. According to the Wall Street Journal, US Taxpayer Barouh operated a watch business since 1976 and hid some of his unreported income in various UBS offshore accounts.

A Florida man pleaded guilty to filing a false tax return by failing to report income on money held in UBS AG (UBS) Swiss bank accounts.

In addition to any jail sentence, Barouh has agreed to pay some $5 million, half the estimated amount he owned or controlled offshore, as well as any additional taxes, interest and penalties.

In all likelihood, this taxpayer probably could not have participated in the preferred voluntary disclosure program which ended last year. Before any criminal tax case comes to an indictment or reaches guilty plea stage, there would have been an ongoing tax investigation into this taxpayer before the tax amnesty program became available.

Based on the IRS FBAR-Voluntary Disclosure program, any taxpayer(s) under any tax investigation would not have qualified for the tax amnesty program which existed last year.

If you did not disclose your foreign bank account(s) to the IRS yet, there are several options that are availabe to avoid criminal exposure so you can avoid sleepless nights.

California Tax Attorney:

Last year Democrats Proposed 30% Tax on Foreign Banks that refuse to disclose US Taxpayers as part of continuing efforts by the IRS to quash offshore asset protection and tax evasion strategies conjured up by various financial planners. US Taxpayers with offshore or foreign bank account are required to disclose this information by filing IRS Foreign Bank Account Report.

The Baucus-Rangel bill proposed to impose a thirty percent (30%) withholding tax on income from U.S. financial assets held by a foreign financial institution unless the offshore bank agrees to disclose the identity of any U.S. taxpayers with an account at the foreign bank with additional condition to annually report on the foreign account balance including payments and withdrawals from the foreign bank account.

However, the FBAR game has suddenly changed with this new development from Germany. According to Tax Section of Businessweek , Germany has decided to buy stolen bank data from a former employee of an unidentified Swiss bank. The data contains names of German citizens who hold undisclosed foreign bank accounts.

Swiss government issued a statement expressing its concern over Germany’s decision to buy stolen information but IRS may make similar decision in light of the billions of dollars which the IRS may realize from its recent FBAR Voluntary Disclosure program.

Any offshore or foreign banks with complex operation will eventually realize that in the digital age, it would be nearly impossible to maintain banking secrecy as it existed in previous generations. The source for the stolen Swiss Bank data is from a computer specialist at the Swiss bank.

Los Angeles Tax Attorney:

Here is a quick summary of a recent US TAX COURT case against the Internal Revenue Service . The ruling on this case may apply to other documents filed with the tax court or the IRS including late filed FBAR Voluntary Disclosure Program.

Tax Court Petitioners MADDOX v.
COMMISSIONER OF Internal Revenue Service

TAX PROBLEM:

This case seems to reflect the current trend by IRS Attorneys when dealing with tax court petitions that they receive 90 days after issuance of Notice of Determination arising from IRS Tax Audit or Collection Due Process hearing.

IRS TAX CODE

Internal Revenue Code §6213(a) provides that a petition for redetermination of a deficiency determined by the Commissioner is timely filed if it is filed within 90 days after a notice of deficiency is mailed. Internal Revenue Code §7502 - If a petition is received by the Court after the 90-day period, then the postmark date can be deemed the date of delivery.

IRS MAY CHALLENGE TAX COURT PETITION IF RECEIVED 90 DAYS AFTER MAILING NOTICE OF DEFICIENCY

The IRS moved to dismiss this case on the ground that the petition was not filed within 90 days of the mailing of the notice of deficiency. Taxpayers state the petition was timely mailed even though not received by the Court within the 90-day period. IRS mailed on October 7, 2008, a notice of deficiency to taxpayers. A petition signed by taxpayers’ attorney, dated December 17, 2008, was received and filed by the Court on January 23, 2009, which was 108 days after the mailing of the notice of deficiency. The U.S. Postal Service (USPS) cancellation stamps appeared on the envelope, but the exact date of cancellation was illegible. January 5, 2009, was the 90th day after the mailing of the notice of deficiency. On March 11, 2009, the IRS filed a motion to dismiss for lack of IRS tax court jurisdiction.

TAXPAYER'S TESTIMONY MAY BE SUFFICIENT TO SHOW THAT TAX COURT PETITION WAS MAILED

Taxpayers’ attorney mailed the petition by placing it in the mailroom in his office building before 4 p.m. on Friday, January 2, 2009. The mailroom was locked, and only building tenants and the USPS had access. The outgoing mail was placed in a USPS basket.

Usually, the postmark placed on the envelope in which the petition has been mailed is accepted as evidence of timely mailing and timely filing. In this case, however, the postmark is illegible. Because taxpayer’s petition was received and filed outside the prescribed period, bearing an illegible USPS postmark, it will be considered timely filed only if petitioners can show the date that the postmark was made and that the date was within the 90-day period.

Taxpayers have shown that the envelope was postage prepaid and had a USPS cancellation. Taxpayers also testified that the petition was timely placed in the USPS mail before the expiration of the 90-day period and timely postmarked (illegibly). The envelope was received by the Court and the petition was filed.

The decision was entered against the Internal Revenue Service . The tax court denied the IRS' motion to dismiss tax court case and concluded that the tax court petition was timely postmarked, timely mailed and timely filed.

Note that some documents filed with the IRS may be deemed filed upon receipt while others are deemed filed upon mailing of the document. Check with your tax attorney on the filing variations.

Foreign Bank Account Tax Amnesty Attorney:

Failure to file FBAR can have devastating consequences to a taxpayer. We attached a summary of potential penalties and criminal tax exposure related to an unfiled FBAR- FBAR Tax Penalty Summary.

We've been receiving calls from stressed taxpayers regarding their unfiled FBAR- IRS Form TDF 90-22.1. We can't offer psychiatric help but you can reach me this weekend on my cell (310) 968 9820 if you have few questions which may help ease your mind.

FBAR Tax Attorney:

Internal Revenue Service IRS issued a statement this week stating that they will be pursuing foreign bank accounts held by US taxpayers in other countries including South Korea, Hong Kong, Singapore and several European countries.

US Senate also introduced a new tax and banking legislation which will further frustrate US taxpayers seeking tax shelters through foreign bank accounts.

Foreign Bank Account Tax Attorney:

If you are participating in the IRS Voluntary Disclosure program, you will be contacted by the IRS to review your case and conduct an interview so that the IRS may determine whether you qualify for the Voluntary Disclosure Program. In the upcoming posts, we'll go through some of the issues and strategies which may be of help in your case.

Make sure that you also have a copy of IRS Foreign Bank Account Report which you will need to submit to the IRS as part of the Voluntary Discloure Program. If you haven't already filed the FBAR, we'll file a post with the FAQ regarding the FBAR.

FBAR- IRS Voluntary Disclosure Attorneys

Even if the taxpayer has missed the October 15, 2009, deadline, IRS voluntary disclosure program may still be available to those with delinquent FBAR, unreported income or undisclosed foreign bank accounts. However, taxpayers need to proceed with caution if they are considering filing their voluntary disclosure post October 15, 2009. We recommend that you seek a competent FBAR- IRS Voluntary Disclosure Attorneys to navigate through these proceedings. A thorough risk analysis with your tax attorney must be performed before implementing any FBAR Voluntary Disclosure after 10/15/09.

Voluntary disclosure allows IRS taxpayers to resolve their tax debt or compliance issues with the IRS and reduce the probability of IRS criminal prosecution. Foreign Bank Account Report or FBAR which many US taxpayers have failed to file falls in the ambit of the Voluntary Disclosure program. Whether the foreign bank account is located at UBS or any other banks, the failure to file FBAR may result in criminal prosecution by the IRS.

Internal Revenue Service IRS Voluntary Disclosure is a program implemented by IRS Criminal Investigation Division which involves taking timely, accurate, and complete voluntary disclosures by IRS taxpayer in deciding whether to recommend to the Department of Justice that a taxpayer be criminally prosecuted.

Los Angeles Tax Attorney:

If you are looking for information on the IRS voluntary disclosure or the IRS FBAR program you can visit here FBAR - Why file IRS Voluntary Disclosure or here IRS Voluntary Disclosure for FBAR

If you owe a debt to a bank or any other creditor and they agree to forgive or reduce the balance of the debt, the canceled amount of the debt may be taxed by the Internal Revenue Service.

The Mortgage Debt Relief Act of 2007 generally allows IRS taxpayers to exclude income from the reduced debt on their principal place of residence. IRS taxpayers who were able to reduce debt owed their home through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may not be taxed on the amount of the canceled debt.

Up to $2 million of forgiven debt is eligible for this IRS income tax exclusion ($1 million if married filing separately). The tax exclusion does not apply if the debt forgiveness is due to services performed, trades or offsets with the lender or any other reason which is not directly related to a decline in real estate value of the taxpayer's home or their changed financial circumstance.

If you have any questions regarding the Internal Revenue Service Rules or Procedures (IRS) you may contact us here.

Long Beach Tax Attorney:

Here is a quick summary of a recent US TAX COURT case against the Internal Revenue Service to challenge whether a minor's relative may claim a tax credit.

HENRY LEE SCOTT v.
COMMISSIONER OF Internal Revenue Service

Tax Problem:

The issue for decision is whether taxpayer’s nephew and niece were his qualifying children for purposes of the earned income tax credit (EITC) provided by section 32.

Applicable Internal Revenue Code:

Internal Revenue Code §32(a)(1) allows an eligible individual an earned income credit against the individual’s income tax liability. The credit is increased if the taxpayer has any qualifying children

Internal Revenue Code §32(c)(3)(A). §152(c)(1)(B) sets forth the requirement that a qualifying child have “the same principal place of abode as the taxpayer for more than one-half” of the taxable year.

Principal Place of Residence Determines the Tax Credit

During 2004, 2005, and 2006, petitioner’s sister, Tameka Henderson, and her five children under the age of 19 resided in rented dwellings pursuant to written leases governed by the regulations of the Tennessee Low Income Housing Tax Credit Division. The leases each required that the premises be occupied only by the identified members of the household, which were Henderson and her five children. The leases covered property on Patton Street in Memphis in 2004 and 2005, and Walker Avenue in Memphis in 2006 to 2007. Taxpayer began living with Henderson when he was a teenager, after their mother died. In 2004, taxpayer was 31 years old. He lived with his sister and her children during at least part of 2004 and 2006, even though his name was never listed on the leases. The father of the children died in January 2004. Taxpayer contributed toward support of the children and was available as an emergency contact on records of the children’s schools. On his Federal income tax returns for 2004 and 2006, taxpayer listed one nephew and one niece as dependents and as qualifying children for purposes of the Earned Income Tax Credit. His return for 2004 used the Patton Street address as his address. His return for 2006 used an address on South Fourth in Memphis as his address. The petitions filed in these cases used Walker Avenue as taxpayer’s address. As of October 2007, taxpayer no longer used the Walker Avenue address.

US TAX COURT RULING
It is not improbable that taxpayer lived with Henderson and her children contrary to the terms of the leases. It is likely that after the death of the children’s father in January 2004, taxpayer assumed a paternal role toward his nephews and his niece as well as making payments toward their support. For 2004, therefore, we conclude that taxpayer and the children had the same place of abode for most of the year, that he cared for them as his own, and that they are qualifying children for purposes of the EITC. For 2006, however, there is other evidence suggesting that taxpayer maintained an address separate from Henderson’s. Because neither taxpayer nor Henderson adequately explained when he or they lived at the South Fourth address, we cannot conclude that taxpayer and the children shared the same abode for more than half of that year. Taxpayer’s nephew and niece are not qualifying children for 2006.

Los Angeles Tax Attorney:

Based on the numerous last minute IRS Voluntary Disclosures most tax attorneys expect a surge of US TAX COURT filings against the Internal Revenue Service to challenge the IRS tax and penalty assessments which may be proposed in the next several months. We'll update you with any new procedures or news concerning IRS audits which may be initiated through the IRS Voluntary Disclosure application submission.

Internal Revenue Service IRS Voluntary Disclosure Program

One of the most common questions we received from taxpayers regarding the IRS voluntary disclosure program was: "why should I make IRS voluntary disclosure?"

IRS Taxpayers with unreported offshore or foreign bank accounts or entities should make a voluntary disclosure because it allows them to become compliant, avoid large IRS civil penalties and generally reduce or eliminate the risk of IRS criminal prosecution.

Making a IRS voluntary disclosure also provides the opportunity to resolve all offshore tax issues at a reasonable settlement amount.

Taxpayers who do not submit an IRS voluntary disclosure may face IRS assessment of substantial penalties, including the fraud penalty and foreign information return penalties, and high risk of IRS criminal prosecution.