Los Angeles California Tax Attorney Blog

Los Angeles Tax Attorney - Senator Barack Obama has released his Internal Revenue Service (IRS) 1040 Tax Return for taxyears 2000-2006. You can view 2006 IRS Tax Return filed by Obama here.

He filed his IRS tax return jointly with his wife Michelle Obama. Based on cursory review of his IRS tax returns for 2000-2004, Senator Obama's tax returns looks super clean and would survive any scrutiny from IRS tax audit. There are few items on 2005 and 2006 which could have been treated differently but would have had a negligible tax impact.

It would be interesting to review Clinton's tax returns.

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Tax Attorney Advice - Each year there are over 10 million IRS taxpayers who haven't filed their taxes or IRS 1040 tax return.

Taking the following action may save a lot of taxes and avoid criminal prosecution by the IRS. If you are being contacted by the IRS or are receiving threatening letters from the Internal Revenue Service, you may need to contact a tax attorney for guidance.

File All Tax Returns

Taxpayers should file all tax returns that are due, regardless of whether or not full payment can be made with the return. Depending on an individual’s circumstances, a taxpayer filing late may qualify for a payment plan. All payment plans require continued compliance with all filing and payment responsibilities after the plan is approved.

Facts About Filing Tax Returns

Failure to file a return or filing late can be costly. If taxes are owed, a delay in filing may result in penalty and interest charges that could increase your tax bill by 25 percent or more per year.
There is no penalty for failure to file a tax return if a refund is due. But by waiting too long to file, you can lose your refund.

In order to receive a refund, the return must be filed within 3 years of the due date. If you file a return, and later realize you made an error on the return, the deadline for claiming any refund due is three years after the return was filed, or two years after the tax was paid, whichever expires later.

Taxpayers who are entitled to the Earned Income Tax Credit must file a return to claim the credit even if they are not otherwise required to file. The return must be filed within 3 years of the due date in order to receive the credit.

If you are self-employed, you must file returns reporting self-employment income within three years of the due date in order to receive Social Security credits toward your retirement.

Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for a variety of enforcement actions. Continued non-compliance by flagrant or repeat nonfilers could result in additional penalties and/or criminal prosecution.

Documents Required to File Your Taxes - IRS Tax Return Form 1040:

Forms W-2 – Forms from employers showing wages for the year.

Forms 1099 – Forms from banks and other financial institutions showing interest and dividends. Forms 1099 also report self-employment income.

Information on expenses to claim on the return, such as itemized deductions, child care expenses, or employee business expenses.

Social Security numbers for dependent children and any other person claimed as a dependent

A copy of the last tax return filed.

We are tax attorneys and serve our clients in the following areas: New York, Los Angeles, Chicago, Houston, Philadelphia, Phoenix, San Antonio, San Diego, Dallas, San Jose, Detroit, Jacksonville, Indianapolis, San Francisco, Columbus, Austin, Memphis, Baltimore, Fort Worth, Charlotte, El Paso, Milwaukee, Seattle, Boston, Denver, Washington DC, Las Vegas, Portland, Oklahoma City, Tucson, Albuquerque, Long Beach, Atlanta, Fresno, Sacramento, New Orleans, Cleveland, Kansas City, Mesa, Virginia Beach, Omaha, Oakland, Miami, Tulsa, Honolulu, Minneapolis, Colorado Springs, Arlington.

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California and Hawaii Taxpayers must be careful with their tax preparer or face tax audit or criminal tax problems.

Long Beach Tax Attorney - For many IRS and California FTB taxpayers, this is the beginning of the tax return filing season. California Franchise Tax Board today reminded the more than 9.7 million taxpayers who use tax preparers for the income tax filing season to make sure their preparer is a qualified tax professional. Over the last several years there have been numerous IRS and FTB tax audits and tax court cases which have revealed a continuing pattern of tax fraud by certain tax preparers.

If you have been a victim of tax fraud or are in trouble with the IRS or FTB, you should consider consulting with a tax attorney.

"Taxpayers are responsible for errors made on their tax returns even if they are made by a tax preparer," said Controller John Chiang. "If you use a tax preparer, make sure you are dealing with a qualified, honest and professional one."

While honest tax preparers offer a valuable service to millions of taxpayers, dishonest tax preparers can manipulate tax returns to inflate expenses and deductions, claim unallowable credits or take excessive exemptions.

Last year, FTB investigators arrested four tax preparers on felony charges of filing fraudulent tax returns and FTB employees visited 715 tax preparation offices as part of their ongoing efforts targeting unlicensed tax preparers. Penalty letters were issued to only 91 unregistered tax preparers. Of those, 31 individuals complied and registered within the 90-day deadline, 28 stopped preparing returns, and 32 were assessed the $2,500 penalty for preparing tax returns without a license.

The IRS and FTB advise taxpayers to be aware popular claims made by fraudulent tax preparers:

Claiming they can get bigger refunds than other tax preparers. Someone unfamiliar with your financial situation cannot make such a guarantee.

Basing their fee on a percentage of the refund amount rather than the complexity of the tax return.

Filing schedules where the information is fraudulent or lacks documentation to support the income or deductions.

Refusing to sign the tax return as the paid preparer or not providing a copy for the taxpayer’s records. The preparer is required by law to sign the return.

Require you to sign a blank return or in pencil.

The preparer is not properly licensed or registered.

California tax residents in Alhambra Arcadia Artesia Beverly Hills Burbank Calabasas Carson Cerritos Chatsworth Culver City Diamond Bar Downey El Monte El Segundo Gardena Glendale Hacienda Heights Harbor City Hermosa Beach Hollywood Industry La Canada Lakewood Lancaster Lawndale Lomita Long Beach Los Angeles Malibu Manhattan Beach Marina Del Rey Montebello Monterey North Hollywood Northridge Norwalk Palmdale Pasadena Pomona Rancho Palos Verdes Redondo Beach Rolling Hills Rosemead San Dimas San Fernando San Gabriel San Marino San Pedro Santa Clarita Santa Fe Springs Santa Monica Sherman Oaks Studio City Torrance Valencia Van Nuys West Covina West Hollywood West Los Angeles and Woodland Hills may contact a tax attorney at 310 788 9820.

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Tax Audit- Independent Contrator or Employee: Factor Test for Payroll Tax Audit or Tax Court Litigation in California.

California Tax Attorney- As IRS and State taxing agencies including California Employment Development Department (EDD) increase tax audit of business payroll records, we are noticing an increased attempts to reclassify indepedent contractors to employee status. Some IRS and EDD tax auditors are taking unilateral determination during the tax audit process that all independent contractors should be treated as employees. The following is a brief summary of common law legal factors to consider in employee vs. independent contractor analysis.

If you are located in the following areas- Los Angeles, Long Beach, San Jose, Oakland, Santa Ana, Irvine and San Francisco, and need to consult with a tax attorney regarding payroll reclassification audit of independent contractor to employee status, contact us at 888 553 8000.

Independent Contractor v. Employee Tax Audit: Behavioral control

Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of:

A)Instructions the business gives the worker. An employee is generally subject to the business' instructions about when, where, and how to work.All of the following are examples of types of instructions about how to do work:

When and where to do the work
What tools or equipment to use
What workers to hire or to assist with the work
Where to purchase supplies and services
What work must be performed by a specified individual
What order or sequence to follow

The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right.

B) Training the business gives the worker. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods.

Independent Contractor v. Employee Tax Audit: Financial control

Facts that show whether the business has a right to control the business aspects of the worker's job include:

A) The extent to which the worker has unreimbursed business expenses. Independent contractors are more likely to have unreimbursed expenses than are employees. Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. However, employees may also incur unreimbursed expenses in connection with the services they perform for their business.

B) The extent of the worker's investment. An employee usually has no investment in the work other than his or her own time. An independent contractor often has a significant investment in the facilities he or she uses in performing services for someone else. However, a significant investment is not necessary for independent contractor status.

C)The extent to which the worker makes services available to the relevant market. An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.

D)How the business pays the worker. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid by a flat fee for the job. However, it is common in some professions, such as law, to pay independent contractors hourly.

E) The extent to which the worker can realize a profit or loss. Since an employer usually provides employees a workplace, tools, materials, equipment, and supplies needed for the work, and generally pays the costs of doing business, employees do not have an opportunity to make a profit or loss. An independent contractor can make a profit or loss.

Independent Contractor v. Employee Tax Audit: Type of relationship

Facts that show the parties' type of relationship include:

A) Written contracts describing the relationship the parties intended to create. This is probably the least important of the criteria, since what really matters is the nature of the underlying work relationship, not what the parties choose to call it. However, in close cases, the written contract can make a difference.

B) Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. The power to grant benefits carries with it the power to take them away, which is a power generally exercised by employers over employees. A true independent contractor will finance his or her own benefits out of the overall profits of the enterprise.

C) The permanency of the relationship. If the company engages a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship.

D) The extent to which services performed by the worker are a key aspect of the regular business of the company. If a worker provides services that are a key aspect of the company's regular business activity, it is more likely that the company will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.

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Tax Attorney Analysis of Potential IRS Tax Court Ruling-Tax Audit or Tax Problem From Plastic Surgery Expense Deductions.

Los Angeles - San Franciso Tax Attorney - The rate of plastic surgery in California especially in Los Angeles, Beverly Hills, Malibu, Pacific Palisades, Manhattan Beach, Palos Verdes, Newport Beach, Orange County, San Jose, San Franciso have seen dramatic increases over the last decade.

As tax attorneys, we are often asked by our clients in the entertainment industry whether certain surgical enhancements may be claimed as a deduction or expense.

Most tax lawyers are aware of the IRS Tax Court case involving “Chesty Love.” To generate more revenue from her profession as a stripper, Chesty Love decided to get breast implants to make her a size 56-FF and expensed the cost of the surgery. IRS tax court judge allowed Chesty to write off the cost of her operation equating her breast enhancement as a necessary expense alas “stage prop” to generate revenue.

However, can ordinary IRS taxpayers deduct breast implants or eye surgery and not run into tax problems in the event of a tax audit?

According to the IRS Attorney Tax Revenue Ruling #200357 issued by the IRS ,amounts paid by individuals for breast surgery, breast implants, vision correction surgery, and teeth whitening medical care expenses within the meaning of IRS Code § 213(d) may be deductible under § 213 of the Internal Revenue Code?

Hypothetical IRS Tax Court Case Scenario 1- Breast Implants and Tax:
Taxpayer A undergoes mastectomy surgery that removes a breast as part of treatment for cancer and pays a surgeon to reconstruct the breast.

Hypothetical IRS Tax Court Case Scenario 2 - Lasik and Tax:
Taxpayer B wears glasses to correct myopia and pays a doctor to perform laser eye surgery to correct the myopia.

Hypothetical IRS Tax Court Case Scenario 3 - Teeth Whitening and Tax:
Taxpayer C’s teeth are discolored as a result of age. C pays a dentist to perform a teeth-whitening procedure. A, B, and C are not compensated for their expenses by insurance or otherwise.

IRS Tax Court Rulings:
General IRS Tax Law or Tax Code Applicable to Medical Expenses:
Section 213(a) allows a deduction for expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, spouse, or dependent, to the extent the expenses exceed 7.5 percent of adjusted gross income. Under § 213(d)(1)(A), medical care includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.

Medical care does not include cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. Section 213(d)(9)(A). Cosmetic surgery means any procedure that is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. Section 213(d)(9)(B).

Tax attorney would argue that A’s cancer is a disfiguring disease because the treatment results in the loss of A’s breast. Accordingly, the breast reconstruction surgery ameliorates a deformity directly related to a disease and the cost is an expense for medical care within the meaning of § 213(d) that A may deduct under § 213 (subject to the limitations of that section).

Tax Attorney would argue that cost of B’s laser eye surgery is allowed under § 213(d)(9) because the surgery is a procedure that meaningfully promotes the proper function of the body. Vision correction with eyeglasses or contact lenses qualifies as medical care. See Rev. Rul. 74-429, 1974-2 C.B. 83. Eye surgery to correct defective vision, including laser procedures such as LASIK and radial keratotomy, corrects a dysfunction of the body. Accordingly, the cost of the laser eye surgery is an expense for medical care within the meaning of § 213(d) that B may deduct under § 213 (subject to the limitations of that section).

In contrast, IRS tax attorney would argue that the teeth-whitening procedure does not treat a physical or mental disease or promote the proper function of the body, but is directed at improving C’s appearance. The discoloration is not a deformity and is not caused by a disfiguring disease or treatment. Accordingly, C may not deduct the cost of whitening teeth as an expense for medical care.

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California and Hawaii Taxpayers Struck by IRS Payroll Tax & Income Tax Problems Created by IRS Tax Evasion and Tax Avoidance Schemes.

Los Angeles - San Jose Tax Attorney: According to the Internal Revenue Service, lawyers from the IRS with the support of tax attorneys from DOJ announced that IRS has obtained civil injunctions against more than 100 tax promoters of illegal IRS tax avoidance schemes and fraudulent IRS tax return preparers in an ongoing crackdown that began in 2001.

Many of the illegal tax promoters targeted taxpayers in Los Angeles, Alhambra Burbank Carson Cerritos Downey El Monte Lawndale Lomita Long Beach Oakland Palmdale Pasadena Pomona San Jose Santa Monica Studio City Van Nuys West Los Angeles and Woodland Hills with income tax and payroll tax avoidance schemes. These taxpayers along with the tax promoters may receive IRS tax audit notice as part of the ongoing IRS tax investigation.

Many of the IRS Tax related injunctions, obtained in cooperation with the tax attorneys at Department of Justice, also order the IRS tax promoters to turn over taxpayer lists and to cease preparing IRS federal income tax returns for others.

Signaling a renewed fight against tax fraud and tax evasion, the IRS stepped up the use of injunctions to stop the tax evasion and tax fraud schemes designed to avoid income tax and payroll tax debt.

The IRS becomes aware of abusive tax promoters through a variety of means, including ongoing IRS tax audit, state of California tax audits,or referrals from external sources such as tax professionals.

The IRS is currently investigating more than 1,000 additional tax avoidance promoters for possible referral to the Justice Department and conducting individual and business tax audit on thousands of IRS tax scheme participants.

If you are currently being audited or think that you might be under IRS tax investigation, you may contact our offices located in Oakland, San Jose, San Mateo, Long Beach, Pasadena, Torrance, Los Angeles and San Francisco to speak with an experienced IRS tax attorney.

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Los Angeles Tax Attorney - We serve California taxpayers with IRS or California State tax problem, tax audit, tax levy, tax lien, offer in compromise residing in the following areas: Alhambra Beverly Hills Burbank Carson Cerritos Culver City Downey El Monte Gardena Glendale Lawndale Lomita Long Beach North Northridge Palmdale Pasadena Pomona Rancho Palos Verdes Redondo Beach Rolling Hills San Gabriel San Pedro Santa Clarita Santa Fe Springs Santa Monica Sherman Oaks Studio City Torrance Valencia Van Nuys West Covina West Hollywood West Los Angeles and Woodland Hills.

All taxpayers should be aware of tax preparers such as Hazel Harris who according to government complaint targets elderly customers who receive Social Security benefits and generates fraudulent income tax refunds on their behalf.

The Government and IRS Tax complaint states that Harris tells her clients she is an accountant who specializes in refunds for Social Security recipients. In order to increase business, she is alleged to have advised potential customers to contact current clients who have received refunds as a result of her fraudulent return preparation.

Harris reportedly generates improper tax refunds by reporting only half of her customers’ Social Security benefits as taxable income, and by fabricating amounts of taxes withheld. Additionally, she has prepared the clients’ returns for multiple years at one time, regardless of whether a return has already been filed for those years.

The government alleges that Harris has prepared more than eight-thousand federal income tax returns for others since 2001. According to Internal Revenue Service (IRS) estimates, she has claimed over $3.5 million in fraudulent refunds.

Continue reading " Tax Fraud-California Taxpayers Defend Against False IRS Tax Return " »

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Los Angeles Tax Attorney — The Internal Revenue Service announced today that Hawaii and California taxpayers in Los Angeles, Long Beach, Honolulu, El Monte, Torrance, Pasadena, Santa Monica, Redondo Beach, Irvine, Santa Ana who normally do not file a tax return but must do so this year in order to receive their 2008 IRS tax economic stimulus payment.

IRS Taxpayers who haven’t filed tax returns in the past must have at least $3,000 of income from any combination of earned income, Social Security retirement or disability benefits, certain Railroad retirement benefits, or disability compensation, disability pension, or survivor benefits paid by the Veterans Affairs. The minimum economic stimulus payment is $300 for individuals and $600 for married couples. Contact your IRS tax attorney to verify your tax status.

To obtain a payment, all people who are eligible for payments of up to $600 for individuals ($1,200 for married couples) must file a tax return in order for the IRS to know their name, address and eligibility. Parents also may qualify for a $300 payment for each eligible child younger than 17. Valid Social Security numbers are required.

Continue reading " IRS Tax Refund-Hawaii and California Taxpayers Must File IRS Tax Return to Receive Tax Stimulus Payment or Tax Refund " »

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Los Angeles Tax Attorney - According to Concurring Opinions US News & World Report has a list of top 20 US Law Schools. These rankings may be a spoof but the list stays pretty much the same year to year with few shuffles here and there.

For those interested in the Los Angeles area law schools- UCLA, USC, Loyola, Southwestern, Pepperdine and Whittier, the the complete rankings will list all the nationally accredited law schools.

The rankings will also post information on LLM programs for specialist areas inclduing tax and bankruptcy law.

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IRS Tax Audit Rate Increase for Los Angeles area Taxpayers and Businesses.

Long Beach Tax Attorney -The IRS continues to make strong progress in a number of key tax collection, IRS tax audit and tax enforcement areas. Taxpayers in the Los Angeles area including Pasadena, Long Beach, Sherman Oaks, Woodland Hills, Santa Monica, Redondo Beach, Torrance, Gardena, Santa Ana, Irvine, Anaheim, El Monte and Palmdale received more IRS Tax audit notices than in prior years.

The IRS tax audit, tax collection and IRS tax enforcement efforts increased again last year. IRS audited 84 percent more returns of individuals with incomes of $1 million or more than during 2006. Overall, IRS tax enforcement revenue reached $59.2 billion, up from $48.7 billion in 2006 and nearly $34.1 billion in 2002.

Highlights of the enforcement and services numbers for fiscal year 2007, which ended on September 30, include:

Individuals
IRS Tax Audit rates increased in 2007, both for overall individual rates and for higher-income taxpayers.
Tax Audits of individuals with incomes of $1 million or more increased from 17,015 during fiscal year 2006 to 31,382 during fiscal year 2007, an increase of 84 percent. One out of 11 individuals with incomes of $1 million or more faced an audit in 2007.

Overall, the total individual returns audited increased by 7 percent to 1,384,563 in 2007 from 1,293,681 in 2006. That’s the highest number since 1998.

Audits of individuals with incomes over $200,000 reached 113,105 returns, up 29.2 percent from the prior year total of 87,885.

The IRS increased audits of individual returns with income of $100,000 or more, auditing 293,188 of these returns in 2007, up 13.7 percent from last year’s total of 257,851.

The IRS filed 3.8 million tax levies and almost 700,000 IRS tax liens during 2007, an increase from the previous year and a substantial increase from five years earlier.

Businesses

In the business arena, the IRS continued efforts to review more returns of flow-through entities – partnerships and S Corporations. While large corporate audits are down slightly, IRS has increased focus on mid-market corporations – those with assets between $10 million and $50 million dollars. The IRS enforcement budget in 2007 was similar to the budget in 2006, and in times of flat budgets, the agency cannot increase activity across the board but must address the areas where there is growth and potential risk.

IRS Tax Audit of S Corporations increased to 17,681 during 2007, up 26 percent from the prior year’s total of 13,984.

IRS Tax Audit of partnerships increased to 12,195 during 2007, up almost 25 percent from the prior year’s total of 9,777.

IRS Tax Audit of mid-market corporations increased to 4,473, up 6 percent from last year’s total of 4,218.

IRS Tax Audit of businesses in general rose to 59,516, an increase of almost 14 percent from the prior year’s total of 52,223.

Although the IRS Tax Audit of large corporations dipped slightly in 2007 to 9,644 IRS Tax Audit, the number of IRS Tax Audit is up 14 percent from the fiscal year 2002 level.

The key to proper IRS tax audit defense is to establish tax audit strategy at the beginning of the audit. If you are being audited by the IRS or California FTB and need an experienced tax attorney contact a Tax Attorney at Tax Lawyers Group.

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Torrance Tax Attorney —The Internal Revenue Service(IRS) announced today that it has automated the user fee calculations for IRS taxpayers entering into an installment agreement throughout California including IRS taxpayers seeking payment plan in the Los Angeles, Long Beach, Pasadena, Torrance, Gardena, Garden Grove, El Monte, Sherman Oaks, Woodland Hills, Orange, San Jose.

Previously, IRS taxpayers were required to submit a paper IRS Form 13844 to request a reduced user fee. Now, eligibility for reduced fees is determined automatically by the IRS.

An IRS installment agreement allows IRS taxpayers who have tax problems to pay their full tax debt in smaller, more manageable amounts, though penalties and interest continue to accrue on the unpaid portion of that IRS tax debt. IRS taxpayers are charged a one-time fee to set up an installment agreement with the IRS. A reduced fee is available for qualifying taxpayers.

Contact a tax attorney if you have any tax problems (310) 788 9820.

Continue reading " IRS Tax Problem? Installment Payment Plan for California taxpayers in Los Angeles, Long Beach, Torrance, Pasadena, Gardena, Orange and Riverside County. " »

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Many Los Angeles, Long Beach, Orange, Riverside, San Jose area business owners and taxpayers who have IRS tax problems may not have been aware of the tax settlement program called offer in compromise. Tax attorneys who handle these type of cases should prepare a comprehensive tax and financial analysis in order to prepare the most favorable tax settlement proposal which would result in minimum tax debt being paid to the IRS.

Although the IRS discourages and may create obstacles to have your IRS taxes reduced, a good tax attorney will often be able to prepare legal arguments that would contest and challenges put forth by the IRS concerning the tax settlement proposal.

An IRS Offer in Compromise allows taxpayers to settle their tax liabilities for less than the full amount. The objective of the IRS Offer in Compromise program is to accept a compromise when it is in the best interests of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements.

Major Changes to the IRS Offer in Compromise Program

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), created major changes to the IRS IRS Offer in Compromise program as it relates to lump sum offers, periodic payment offers, and a determination as to when an offer is accepted. These changes affect all offers received by the IRS on or after July 16, 2006.

Continue reading " IRS Offer in Compromise - Resolve Tax Problem - Los Angeles, Long Beach California Tax Attorney " »

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