Tax Fraud

Tax Problems Following a Divorce or Marital Problems? Innocent Spouse Relief May Be an Option

May 20, 2015 | by Dennis N. Brager

Many married couples find it advantageous to file a joint tax return rather than filing separately. This comes as no surprise as the federal government has built a number of tax advantages for married couples filing jointly into the tax code. These benefits include:

Depending income distribution, a lower rate of taxation than they would face filing separately.
Increased limits for charitable deductions

Failure to File Taxes? Expats can face a Customs Hold, Failure to File Penalty, and a Failure to Pay Penalty

May 15, 2015 | by Dennis N. Brager

If you are living in the United States it can be difficult to miss the numerous announcements and pronouncements of the impending April 15th tax deadline. And yet, every year thousands of US taxpayers will fail to file and pay taxes.

There are a variety of reasons for this failure. These reasons can include situations where the taxpayer simply doesn’t want to pay tax and is concealing income. In other circumstances the taxpayer may know that he or she would be unable to pay and thought that concealing income by not filing would help their tax situation. In still other circumstances the taxpayer may be a young person who simply did not realize that he or she had a filing obligation or the severity of consequences that can follow a failure to report and pay taxes.

While taxpayers could have filed IRS form 4868 prior to the tax deadline to extend their filing deadline by 6 months to October 15, 2015, those who failed to file or extend by the original filing date no longer have this option. However there may be options to correct the tax problem and to come back into compliance with the tax system.

Tax Preparer Fraud Can Lead to Serious Consequences for Both the Tax Professional and Filer

April 27, 2015 | by Dennis N. Brager

Most accountants, CPAs, and certified tax preparers are honest, hardworking people who are dedicated to their profession. Most tax professionals simply want to secure the best possible tax deal for their clients while following all best practices regarding accuracy. However some tax professionals may over emphasize their ability secure favorable tax treatment for their clients and may cross the line into overly aggressive tax minimization strategies. Even more troubling, other tax preparers may be corrupted by greed and act dishonestly by improperly obtaining or using client tax refunds or other client funds.

If you are a tax professional, you already understand the devastating impact allegations of this type can have on your professional reputation and livelihood. Therefore any tax professional potentially facing an investigation or referral to the IRS Office of Professional Responsibility (OPR) should immediately retain tax counsel. However laypeople may not understand that mistakes or other improprieties found in tax filings are ultimately the responsibility of the filer.

#1 Tax Lady Indicted for Tax Fraud

Failure to File Taxes Plus a Frivolous Tax Argument Can Equal a Prison Sentence

April 13, 2015 | by Dennis N. Brager

The Wisconsin owner of several self-help and life development companies received a rather jarring wake-up call when he was convicted on tax crimes and sentenced to a year in federal prison. Eric T. Plantenberg had failed to file taxes for ten years from 2000 to 2010 after he began subscribing to the views of the Church of Compassionate Service. According to court documents the Church of Compassionate Service is a group that advances frivolous tax arguments, chiefly to individuals who are receptive to an anti-tax or anti-government message. Arguments related to and reminiscent of the group’s anti-tax position have been determined to be clearly frivolous by the courts since at least the early 1980s.

What did the tax scam consist of?

It is not uncommon for those promoting tax scams or frivolous tax arguments to associate their argument with a fundamental right and legitimate tax structures. Such an approach can give the frivolous tax argument an air of legitimacy by association and the strength of the fundamental right can cause a layperson to have questions about the extent of rights such as the freedom of speech or religion. In the case of the Church of Compassionate Service, their argument was that a taxpayer could take a religious oath of poverty and become “minister” in their organization. The minister’s income would then flow into the church, operating as a “corporation sole”, thereby relieving the “ministers” of any income, and thus, the obligation to pay or file taxes. The church would then return the money to the “ministers”. The church did not hold religious service or otherwise have any members beyond the “ministers”.

Beware of the Unexpected Tax Refund Windfall & Other Pitfalls

April 9, 2015 | by Dennis N. Brager

Each and every year April 15th brings fear and dread for millions of Americans who fear that they will face a hefty tax liability. Some may even choose to put off the filing by requesting an extension prior to the filing deadline, but the fact remains that the tax will have to be reported and paid at some point. However, for some, their tax return may contain an unexpected surprise: a significant tax refund.

But, if you didn’t expect to receive anything back or if you expected to have to pay, proceed with caution. The refund may be the product on an IRS error. Although the original mistake may be the fault of the IRS, you can still face an audit and other serious tax consequences.

Why are tax refunds issued?

Four Family Members Who Defrauded IRS of more than $5 million in Payroll Tax Payments Face Prison

April 7, 2015 | by Dennis N. Brager

Temporary employment agencies have become a more prevalent part of the American work experience since the 2007 financial crisis and the difficult economic times that followed. While on one hand, temporary employment agencies can provide workers with an entry point into a new industry, on the other hand they require payment for their placement services that could otherwise be used to pay the worker a higher wage or to hire additional workers. Furthermore, when the temporary agency acts as the worker’s employer, certain duties and acts are required of the employer. Failure to satisfy these tax duties can lead to criminal prosecution and result in a prison sentence or significant monetary penalties.

How can an employer satisfy their obligation regarding business trust fund taxes?

Trust fund taxes are probably most familiar within the context of how a business withholds payroll tax from its employees’ paychecks every pay period. While the exact deductions on your paystub are likely to differ, commonly found ones include those for federal income tax, Social Security and Medicare taxes (FICA), state and local taxes, and voluntary deductions including an IRA or 401(k).

What are the top signs a criminal tax investigation is forthcoming?

March 13, 2015 | by Dennis N. Brager

While many people think that a criminal tax situation is something that cannot happen to them unless they had the intent to defraud the government, the truth is that criminal tax charges can be triggered by even a slight misstep. Mistakes on your taxes that are perceived as willful misstatements by an IRS agent, and accountant or tax preparer malpractice are but a couple of the common ways that well-meaning taxpayers find themselves facing serious criminal penalties including a federal prison sentence.

In short, the things an average person does not know about tax law or tax crimes can hurt them when faced with an IRS audit or criminal investigation. A tax lawyer can help a taxpayer by providing context for any actions or inactions that might be misinterpreted by the agent, and negotiate a more favorable outcome.

Indicators of Tax Fraud

Which is worse? A failure to file penalty or a failure to pay penalty?

February 18, 2015 | by Dennis N. Brager

US citizens, legal permanent residents, and other covered individuals have an obligation to file and pay taxes on all sources of worldwide income. If an individual does not satisfy his or her filing and payment obligations, he or she may be subject to penalties for a failure to pay taxes, the failure to file taxes, or both.

While the following article will address a number of the penalties which can apply for non-filed taxes or nonpayment of taxes, this article does not address when civil or criminal fraud penalties could apply. Furthermore, if the failure to file or pay includes the failure to report sources of foreign income or foreign accounts, additional problems are likely to arise. The experienced tax attorneys of the Brager Tax Law Group can discuss your concerns, identify legal problems and work to develop effective solutions to your tax compliance issues.

What are the consequences for failure to file taxes?

Swiss Bank Credit Suisse Pays $2.6 Billion in Penalties for Aiding Americans in Providing False Tax Information

February 17, 2015 | by Dennis N. Brager

Zurich, Switzerland-based Credit Suisse is the first global banking organization in more than 10 years to plead guilty to a crime. In May 2014, Credit Suisse pleaded guilty to conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the Internal Revenue Service (IRS). Under terms of the plea deal and other agreements with state and federal agencies, Credit Suisse will pay roughly $2.6 billion in penalties. While prosecutors have obtained guilty pleas from subsidiaries of global banking units, the Credit Suisse guilty plea shows that federal prosecutors are willing and able to pursue even the largest of banking, investing and private asset units.

This news should be especially worrying for US-based holders of undisclosed foreign accounts or those with links to Credit Suisse, since Credit Suisse has agreed to hand over all evidence regarding its activities. According to US Attorney General Eric Holder, “[The Credit Suisse] case shows that no financial institution, no matter its size or global reach, is above the law.” If you have failed to respond to a Foreign Account Tax Compliance Act (FATCA) letter or have failed to file FBAR, you could likewise face significant fines and penalties.

What wrongful tax acts were committed?

Is there an accountant-client privilege? Why should I work with a tax attorney?

February 13, 2015 | by Dennis N. Brager

Conversations between a CPA and his or her clients may or may not be shielded from disclosure to third parties. Whether the accountant-client privilege exists is a fact-specific inquiry where the fact that your disclosures may not have been confidential may not emerge until it is already too late. This is chiefly because federal law does not recognize a generalized privilege between accountants and their clients.

While a selection of states including Colorado, Missouri and Florida do recognize the privilege, the privilege will only apply in state courts or in federal courts that are applying state law. In federal courts applying federal law, only a limited statutory protection applies to accountant-client communications. In contrast, the attorney-client privilege is recognized by all 50 states and in the federal courts. Furthermore, additional confidentiality may be provided through the work-product doctrine.

What is the purpose of confidentially privileges?