Miscellaneous Tax Information

What Are the Penalties for Failure to File a Tax Return?

April 20, 2017 | by Dennis N. Brager

If you owe tax and fail to file a return on time, the IRS can assess both civil and criminal tax penalties. The penalty for failure to file is separate from the penalty for failure to pay taxes, and both civil and criminal penalties can be assessed for the same return.

Penalty for File to File a Tax Return

The penalty for failure to file is 5 percent of the tax owed per month. Contrast that with the failure to pay penalty of only half a percent per month, and you can see why it is a good idea to file your return on time, even if you cannot pay your tax.

Can You Request the IRS Waive Penalties Based on Medical Hardship?

February 14, 2017 | by Dennis N. Brager

The IRS may offer penalty relief for taxpayers who can show a reasonable cause for failing to file tax returns or pay taxes. IRS penalties can be waived in certain cases, but the IRS will examine all of the facts and circumstances to determine if a reasonable cause exists in your particular case.

A typical situation that the IRS will consider a sound reason for failing to file or pay taxes is death, serious illness, incapacitation, or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family. If you owe a substantial amount of IRS penalties, you may want to consult with a tax attorney.

Facts Need to Establish Reasonable Cause Due to Medical Hardship

Can a California Tax Lawyer Help Me with Tax Problems in Other States?

December 15, 2016 | by Dennis N. Brager

Tax laws vary greatly from state to state, and in fact, nine states don’t even charge a state income tax. With such diversity of tax laws, it isn’t feasible for a tax lawyer to be fully versed in the statutes of all the other 41 states. However, federal tax laws apply to all 50 states, and a tax attorney with experience dealing with the IRS may be able to assist you with federal tax problems even if you live or do business in another state.

A California Tax Lawyer for State and Federal Tax Problems

For federal tax problems, it’s important to find an attorney that specializes in tax matters. The United States Tax Court will admit attorneys that are members of the bar in any state or Washington D.C. without requiring an examination. If you have a case before the Tax Court, an attorney from another state can help you if they are admitted to practice before the Tax Court.

Brager IRS Survey Yields Surprises

September 29, 2016 | by Dennis N. Brager

Periodically, the Brager Tax Law Group surveys tax preparers and/or taxpayers on a variety of issues. Our most recent survey targeted tax preparers and their interaction with the IRS in a number of areas, including disclosure programs, FBARs and marijuana businesses.

The survey contained several quantitative questions with a scale from 1 to 5 with 1 as poor and 5 as excellent. The lowest scoring statement was respondents’ experience in getting a response from the IRS within a few business days, which scored only 1.96. The highest score was on respondents’ experience in participating in the Offshore Voluntary Disclosure Program, which scored 3.20. Overall interactions with the IRS scored 2.79.

No survey respondents have been contacted by the IRS subsequent to filing amended returns as part of the Offshore Streamlined Procedure submissions.

IRS Appeals Division Slashes Taxpayer Rights

September 20, 2016 | by Dennis N. Brager

The IRS announced that effective Oct. 1, 2016, it will rarely conduct Appeals Conferences in person. More specifically, Internal Revenue Manual (IRM) 8.6.1.4, blandly entitled “Conference Practices,” provides that ALL conferences will be held by telephone except under certain specific enumerated circumstances. Those circumstances are as follows:

There are substantial books and records to review that cannot be easily referenced with page numbers or indices
The ATE [that’s Appeals Team Employee, aka Appeals Officer, or Settlement Officer] cannot judge the credibility of the taxpayer’s oral testimony without an in-person conference

IRS Taxpayer Advocate Releases Mid-Year Report; Dings IRS on Levying on Retirement Accounts

July 27, 2016 | by Dennis N. Brager

The Taxpayer Advocate is a tireless champion of taxpayer rights. The Taxpayer Advocate is required by law to issue reports to Congress. Her most recent mid-year report was recently released. One of her issues was that the IRS continues to levy on retirement accounts even though the IRS guidance to its revenue officers is “insufficient to protect taxpayer rights.” As her report points out, the IRS has identified three steps which MUST be taken before a Notice of Intent to Levy can be issued on a retirement account such as IRA Qualified Pension, Profit Sharing, and Stock Bonus Plans under ERISA, and Retirement Plans for the Self-Employed (such as SEP-IRAs and Keogh Plans). These steps are:

Determine what property (retirement assets and non-retirement assets) is available to collect the liability;
Determine whether the taxpayer’s conduct has been flagrant; and

The Failure to File Taxes in a Timely Manner May Impact a Taxpayer’s Eligibility for Bankruptcy Discharge

February 17, 2016 | by Dennis N. Brager

Close up of a yellow pencil erasing the word, 'Bankruptcy.' Isolated on white.
The Internal Revenue Code and the Bankruptcy Code are each complex laws, but when they intersect things can get quite confusing, and seemingly inconsequential facts can have serious legal consequences. In a recent unpublished opinion, In re Kevin Wayne and Susan Martin, EC-14-1180-KuKiTa (9th Cir. BAP 2015), the Bankruptcy Appellate Panel (BAP) provided some guidance as to the effect the non-filing of a tax return or the filing of a tax return post-assessment can have on one’s eligibility for discharge through bankruptcy. While the court did not provide a bright-line rule, it did provide an explanation as to the applicable standards regarding what constitutes a “return” for purposes of a bankruptcy discharge. Taxpayers and their bankruptcy and tax attorneys can consider and apply the announced standard to gain a better insight into the impact their non-filing may have on contemplated bankruptcy proceedings. Of course the story may not be over, and the IRS may still appeal the BAP ruling.

Providing further clarity and a rejection of the harsh consequences imposed by a literalist approach and the IRS-advocated positions, the court also addressed a number of other arguments regarding the proper definition of a “return” and the analytical framework when determining a taxpayer’s eligibility for a bankruptcy discharge. In doing so the BAP rejected an approach that had gained favor in other courts. In doing so the BAP refused to follow other courts which had interpreted tax and bankruptcy law in a way which would make a tax debt nondischargeable whenever a tax return is filed even one day late. It also rejected the IRS position that once the IRS makes an assessment in the absence of a filed tax return that tax debt is non-dischargeable even though the taxpayer subsequently files a tax return.

The Taxpayers Failed to File Their Tax Returns for Multiple Tax Years

Filing Taxes Each and Every Year is Essential

March 11, 2015 | by Dennis N. Brager

If you were to ask people about the things that they should do every single year, they are likely to mention visiting the doctor for a physical, taking their car in for preventative maintenance, and maybe even a tradition that the person spearheads every year. It is unlikely, however, the individual will mention their yearly duty to file and pay taxes. While taxes are due each and every year, they are typically something that we prefer not to dwell on, unless forced to. In fact, many people will not even consider taxes until days before the due date when the media is saturated with messages about tax filing. As tax attorneys we work to provide strategies that mitigate the risk or consequences of civil or criminal tax exposure. The simplest one is to file your tax return on time!

Nearly all citizens and green card holders have an obligation to file taxes

Nearly all US citizens or legal permanent residents, have an obligation to file taxes due to their level of income or for other reasons. For instance for the 2014 tax year, an individual under age 65 who is filing as single would have an obligation to file taxes if he or she makes $10,150 or more. The same would apply to a married couple filing jointly if they earn more than $20,300 a year. In some cases even smaller amounts of income can require the filing of a tax return. In short, the income thresholds to trigger a tax reporting obligation are not high and apply to almost all US citizens and green card holders.

US Taxpayers: Beware of these FATCA and Tax Scammers

February 3, 2015 | by Dennis N. Brager

tax preparer.jpg Tax scams have likely been around for as long as taxes have been collected. In light of the significant penalties, fines, prison sentences and other consequences that can be imposed for tax non-compliance issues, taxpayers have good reason to be apprehensive or nervous if they are contacted by someone claiming to represent the Internal Revenue Service (IRS). Thus, if you are contacted by an IRS agent, it is always prudent to verify their identity, the fact that they are employed by IRS, and request a callback number at the IRS where the agent can be reached. Furthermore, if you are contacted by an individual claiming to represent the IRS or the US government, an experienced tax professional can often more readily recognize the signs of a tax scam.

At the Brager Tax Law Group we recognize that well-meaning taxpayers can face serious consequences if they are taken in by a tax scam. This post will identify and discuss a number of the more common tax scams and their consequences as identified by the IRS.

Tax preparer fraud can result in new tax problems

Quiet Voluntary Disclosures as an Alternative to the Offshore Voluntary Disclosure Program (OVDP) Are Becoming More Risky

November 14, 2013 | by Dennis N. Brager

Owners of foreign bank account reports (FBAR) have several options to clean up this ugly webinar, and in the related tax litigation attorneys (our firm included) have advised that in appropriate cases a quiet disclosure is a viable option. While our opinion has not changed there are three developments that make it more likely that quiet disclosures will lead to tax audits and the possibility for exposure to FBAR penalties exceeding the OVDP in-lieu penalty. I will be addressing two here, and one in a second post which will be available soon.

First, earlier this year the GAO released a report critical of the IRS for failing to follow-up and audit taxpayers who had filed quiet disclosures. Second, as of July 1, 2013 FBARs must be filed electronically. This is the case even for late filed FBARs! What this means is that it just got easier for the IRS to identify individuals who are filing quiet disclosures. No more manually combing through records to identify late-filed FBARs. Identification of persons who filed quiet disclosures is now just a few key-strokes away.

While this should not discourage taxpayers who believe that their behavior was non-willful, and therefore that the highest FBAR penalties are inapplicable, from filing quiet disclosures, it is a cautionary note for those who hope to win the audit lottery, and never hear from the IRS. Also foreign account holders who are considering a quiet disclosure should analyze the non-willful penalties, which could be imposed if they are audited. The IRS position is that for each foreign financial account that was not listed on the FBAR a separate $10,000 penalty will be imposed. We have seen clients, many from Asian countries, who have 15 or more accounts at a time. Since the statute of limitations on FBAR penalties is six years, someone with 15 accounts who failed to file FBARs could be subject to a penalty of $900,000 ($10,000 x 15 accounts x 6 years)!!
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