Tax Problem Attorney Blog

How to Resolve a Payroll Tax Dispute

April 25, 2017 | by Dennis N. Brager

Payroll tax disputes often arise when a worker is paid as an independent contractor, but the IRS or California Employment Development Department (EDD) believes that the worker is an employee. There are some differences between federal and state requirements, but a business will often have to deal with both the IRS and EDD when a worker misclassification problem arises.

The 20-Factor Test

Many employers believe that as long as they have a contract stating that a worker is an independent contractor, they are covered. This is not true. A worker is legally classified as an employee or independent contractor based on the circumstances of the employment relationship.

The California Franchise Tax Board’s Financial Hardship Programs

April 24, 2017 | by Dennis N. Brager

The California Franchise Tax Board (FTB) encourages taxpayers facing a financial hardship to work with the FTB to find a way to pay off their tax debt. The FTB can give California taxpayers more time to pay, or settle tax debt for less than the full amount in some cases. Each method of solving your California income tax problems has its own requirements and benefits, so ask a California tax attorney which program can help with your situation.

Delay Collection Activities Due to Financial Hardship

The FTB will delay collection activities for taxpayers that are facing financial hardship. This is similar to being put into currently not collectible status by the IRS. The FTB does not advertise this option much, because it does not bring them any closer to collecting money from you to pay off your California tax debt.

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.

Should I Take Advantage of the IRS Offshore Voluntary Disclosure Program?

April 18, 2017 | by Dennis N. Brager

The IRS Offshore Voluntary Disclosure Program (OVDP) offers taxpayers with unreported income from foreign financial accounts a chance to come into compliance with the law. The program benefits taxpayers by offering lower penalties and eliminating the threat of criminal prosecution for failing to file Foreign Bank Account Reports (FBARs).

Failure to file an FBAR can result in both criminal and civil penalties. The criminal penalties can be fines of up to $250,000 and five years in jail. The civil penalties for a willful failure to file an FBAR can be up to the greater of $100,000 or 50 percent of the account balance.

To avoid these onerous penalties, taxpayers can come into compliance in a variety of ways. They can file the past due returns quietly, which is known as a quiet disclosure. They can use the Streamlined Filing Compliance Procedures, or the OVDP, depending on the circumstances of their offshore bank account problems.

The IRS Classification Settlement Program Can Reduce Your Tax Debt

April 17, 2017 | by Dennis N. Brager

The IRS Classification Settlement Program (CSP) is designed to allow businesses to settle a tax debt owed due misclassifying employees as independent contractors. Along with safe harbor relief under Section 530, the CSP can be an effective tool for businesses involved in payroll tax disputes.

The Costs of Misclassifying Employees

Many businesses would like to treat their workers as employees, but the status of the employment relationship is not determined solely based on the employer’s classification of the worker. Rather, the facts and circumstances of the employment arrangement will determine whether the worker is an employee of independent contractor. In particular, courts will look at the behavior control, financial control, and relationship of the parties when classifying a worker.

What Are the Qualifications to File FBARs Under the IRS Streamlined Offshore Reporting Procedure?

April 13, 2017 | by Dennis N. Brager

The IRS expanded its streamlined filing compliance procedures in 2014 to allow more taxpayers with offshore bank accounts to take advantage of the program. The procedures are now available to some taxpayers living in the United States, as well as many U.S. taxpayers living outside the country.

Benefits of Streamlined Filing Compliance Procedures

The main benefit of the streamlined filing compliance procedures is that they allow taxpayers with unreported foreign financial accounts to become compliant with the law without facing severe criminal and civil penalties. Eligible foreign U.S. taxpayers will have all penalties waived, and eligible domestic taxpayers will pay only a miscellaneous offshore penalty of five percent of the balance of the foreign accounts.

Do I Have to File an FBAR If I’m Not a U.S. Citizen?

April 11, 2017 | by Dennis N. Brager

The Bank Secrecy Act may require you to file a FinCEN 114, Report of Foreign Bank and Financial Accounts (FBAR), even if you are not a U.S. Citizen. The FBAR must be filed annually by all “United States Persons”, which includes U.S. citizens, U.S. residents, and certain entities. The FBAR must be filed if your total interest in foreign accounts exceeds $10,000 at any point during the calendar year.

FBAR Filing Requirements for Non-Citizens

The IRS has its own rules for determining if you are a resident for tax purposes. If you meet either the green card test or the substantial presence test, the IRS considers you a resident, and you must comply with all tax filing requirements, including filing an FBAR.

What Is an Abusive Tax Shelter?

April 4, 2017 | by Dennis N. Brager

An abusive tax shelter is an investment scheme that attempts to reduce income tax without serving any other economic purpose. The value of income or assets is not changed, so the sole purpose of an abusive tax shelter is to avoid tax.

The IRS attempts to deter participations in abusive tax shelters through tax audits, summons enforcement, litigation and other methods. There is also an abusive tax shelter hotline, where anyone can anonymously provide information about abusive tax shelter transactions.

Analyzing an Abusive Tax Shelter

How Can I Stop IRS Collection Actions?

April 3, 2017 | by Dennis N. Brager

The IRS is a fearsome creditor that can gain access to many of your assets to satisfy your tax debt. Unlike other creditors it doesn’t need to bring a lawsuit to go after you’re the bulk of your assets. The IRS has the ability to use any of the following collection actions against you:

Serve a levy on your bank account
Serve a levy on your wages

How to Relinquish Citizenship for Tax Purposes

March 31, 2017 | by Dennis N. Brager

Before you relinquish your U.S. citizenship in order to avoid paying taxes, be advised that some taxpayers will be subject to an expatriation tax, also known as the “exit tax” upon renunciation of citizenship. The IRS will effectively act as though you sold all of your worldwide assets in a taxable transaction the day before you expatriated. Long-term capital gains tax rates are currently as high as 23.8%, including the net investment income tax, so plan your expatriation will the help of a tax attorney.

How to Relinquish Citizenship

Both U.S. citizens and green card holders are considered U.S. taxpayers, and each category of taxpayers has different rules for relinquishing their tax citizenship. Citizens must officially relinquish their citizenship, shown by a certificate of loss of nationality or by a U.S. court’s cancelation of a naturalized citizen’s certificate of naturalization.