Miscellaneous Tax Information

Madoff Ponzi Schemes, Securities Fraud and the Internal Revenue Service

January 6, 2009 | by Dennis N. Brager

Once investors get over their initial shock that they were being bilked by Bernard Madoff in a massive Ponzi scheme they will be looking for ways lessen the impact. One of those ways is through the tax laws. Our tax attorneys have identified at least two possibilities. The first is that investors may be entitled to a theft loss pursuant to Internal Revenue Code Section 165. Unfortunately the year the loss can be deducted will probably be the subject of a tax dispute. Generally theft losses are deductible in the year of discovery. However, if there is still a possibility of recovery the deduction may need to be deferred.

Another idea is filing amended income tax returns for the last three years, taking the position that the payments received which had been reported as capital gains, dividends or interest were in fact a return of capital, and therefore non-taxable. This position is supported by Greenberg v. Commissioner, a 1996 case decided by the United States Tax Court. The Internal Revenue Service (“IRS”) believes, however, that the rule in Greenberg only applies in limited situations. IRS Legal Memorandum ILM 200305028. It is likely that those who file amended returns will be subjected to a tax audit, and that barring a change of heart by the Internal Revenue Service will need to hire a tax litigation attorney to assist them.

Generally the tax law allows only three years from the date the original tax returns were filed to file amended returns. For most taxpayers this means that if they act quickly they can file amended returns for 2005, 2006, and 2007.

State Board of Equalization Sales Tax Audit Can Lead to Other Tax Problems

November 10, 2008 | by Dennis N. Brager

An article in the California Franchise Tax Board (FTB) November 2008 Tax News publication highlighted the other tax problems that can arise from a tax audit by the California State Board of Equalization (SBE or BOE). Many sales tax audits by the BOE result in a changes to a company’s gross receipts. The BOE tax auditors have instructions to provide the FTB with audit reports which show that not all sales were reported. In turn the FTB may open an income tax audit resulting in additional state income tax due.

Although not mentioned in the FTB Tax News article, when the FTB is done with its tax audit it routinely provides that information to the Internal Revenue Service (IRS), and the IRS may, in turn, begin a federal income tax audit. With all of these tax audits, and with potential tax penalties and interest there is the possibility that a business could wind up paying more to the taxing agencies then it took in.

For these and other reasons it is important to have a qualified tax attorney represent your business; especially if you believe that there are any significant issues on your California Sales tax returns. Feel free to call the tax problem attorneys at Brager Tax Law Group, A P.C.

California BOE Sales Tax Audit Program

October 13, 2008 | by Dennis N. Brager

On Nov. 7th I will be speaking at the at the 2008 Annual Meeting of the California Tax Bar on Sales and Use Tax Audits: A Guide for Tax Professionals. My co-panelist will be Robert Tucker, a tax specialist from the California State Board of Equalization (SBE or BOE). We will be discussing how to handle a sales tax audit including procedural rules and tips for dealing with the SBE.

The 2008 Annual Meeting of the California Tax Bar runs from Nov. 6 through 2008, and attracts hundreds of tax attorneys, and tax accountants from around the state. Additional topics include:

Criminal Tax Investigations Offshore Enforcement California Tax Litigation SBE New Rules for Tax Appeals Federal and California State Trust Fund Recovery (TFRP) Penalties

UCLA Tax Controversy Institute Taxpayer Advocate Panel

October 13, 2008 | by Dennis N. Brager

On Oct. 28th I will be moderating a tax controversy panel at the 2008 UCLA Tax Controversy Institute. The panel will include Steve Sims, Taxpayer Advocate, Franchise Tax Board, Todd Gilman, Taxpayer Advocate, State Board of Equalization, Michelle Mosley, Taxpayer Advocate, Employment Development Department, Dorothea T. Curran, Local Taxpayer Advocate, Internal Revenue Service (Los Angeles).

Other tax panels include:

Innocent Spouse

California Franchise Tax Board (FTB) Lists Warning Signs of a Bad Tax Preparer

April 3, 2008 | by Dennis N. Brager

The California Franchise Tax Board (FTB) joined with the California Tax Education Council (CTEC) to warn taxpayers about unregistered tax return preparers. In California only certified public accountants (CPA), attorneys, Internal Revenue Service enrolled agents, and CTEC-Registered tax return preparers are legally permitted to charge for preparing tax returns. According to the FTB it is believed that there are 3,000 to 4,000 tax return preparers throughout California breaking the law. The FTB then set forth some signs that should set off alarm bells. For example if a tax preparer:

Claims to be a registered tax preparer but is not listed on CTEC’s Website.

Fails to give you a name, address, phone number, and bond information.

Dennis Brager Quoted in the Daily Journal

April 2, 2008 | by Dennis N. Brager

California Certified Tax Specialist Dennis Brager the founder of the Brager Tax Law Group, a P.C. , was quoted in an article published in the March 7, 2008 edition of the Los Angeles and San Francisco Daily Journal, a leading California legal publication. The article discussed a new law which provides tax benefits for federal judges who sell their proposal to avoid recusals. Specifically Internal Revenue Code § 1043 provides that certain government officials such as federal judges including United States Tax Court judges who sells property to avoid conflict of interest rules may defer gain on the property if they acquire certain replacement property until the replacement property is sold.

If you have a tax problem and would like to have your case heard in the United States Tax Court, call tax litigation attorney Dennis Brager.

Internal Revenue Service (“IRS”) Interest Rates Drops According to Notice 746

January 16, 2008 | by Dennis N. Brager

The Internal Revenue Service (“IRS”) has released Notice 746 which provides information about penalties and interest, and lists the latest interest rates. According to the notice interest rates will go down one percentage point in January.

Not surprisingly the IRS generally pays 1% less on money it owes to taxpayers (overpayments) then it expects taxpayers to pay to it (underpayments). Interest is compounded daily, and is in addition to penalties. The interest rates on underpayments and overpayments are as follows:

Periods	Percentage Rates
	Underpayment	Overpayment
July 1, 1996 through March 31, 1998	9	8
April 1, 1998 through December 31, 1998	8	7
January 1, 1999 through March 31, 1999	7	7
April 1, 1999 through March 31, 2000	8	8
April 1, 2000 through March 31, 2001	9	9
April 1, 2001 through June 30, 2001	8	8
July 1, 2001 through December 31, 2001	7	7
January 1, 2002 through December 31, 2002	6	6
January 1, 2003 through September 30, 2003	5	5
October 1, 2003 through March 31, 2004	4	4
April 1, 2004 through June 30, 2004	5	5
July 1, 2004 through September 30, 2004	4	4
October 1, 2004 through March 31, 2005	5	5
April 1, 2005 through September 30, 2005	6	6
October 1, 2005 through June 30, 2006	7	7
July 1, 2006 through December 31, 2007	8	8
Beginning January 1, 2008	7	7

Different rates may apply to corporations, or to certain tax motivated transactions. If you owe the IRS more than $75,000 and would like to find out if you can settle for less with the IRS contact tax problem attorney Dennis Brager.