Tax Problem Attorney Blog

What Should I Do If I Have an Unreported Offshore Account at a “Bad Bank”?

December 14, 2017 | by Dennis N. Brager

If you have an account at one of the IRS “bad banks” and you used the Offshore Voluntary Disclosure Program (OVDP), you will face a 50 percent offshore penalty on the highest aggregate account balance during the disclosure period, instead of the regular 27.5 percent offshore penalty. On top of that, the 50 percent penalty applies to the balance of all of the taxpayer’s accounts being disclosed, not just the ones that are held at bad banks.

For example, a taxpayer with a single account at a bad bank worth $20,000, but with $1,000,000 in unreported foreign accounts at other banks, would face the 50 percent offshore penalty on the full account balance of $1,020,000. With penalties this high, you may wonder whether offshore disclosure is even worth the trouble. In fact, it may be even more important for taxpayers with accounts held at bad banks.

Not only can the IRS assess penalties equal to 50 percent of the aggregate account balance for willful FBAR violations, but criminal prosecution can also be pursued. The OVDP—although it can be costly—offers protection from criminal prosecution related to unreported offshore accounts.

I Don’t Agree With the Findings of My IRS Examiner. Should I Appeal?

December 11, 2017 | by Dennis N. Brager

Appealing the results of an IRS examination is usually beneficial to a taxpayer if there is a basis for disputing the findings. The process doesn’t cost anything (although it’s highly recommended that you retain a tax audit attorney), and could potentially result in significant tax savings, making it a good investment for many taxpayers. You could go directly to Tax Court to resolve your issues instead, but this is a more costly procedure, and you can generally go to Tax Court after filing your IRS appeal if you still aren’t satisfied.

Keep in mind that you should have a legitimate reason for disputing the tax liability before filing an appeal. If your only issue is that you can’t pay the tax, you can file an Offer in Compromise or request an installment agreement that allows you to pay off your tax debt over time.

How to Request an Internal IRS Appeal

Is There Anything I Can Do to Stop an IRS Wage Garnishment?

December 7, 2017 | by Dennis N. Brager

It’s best to try to stop a wage garnishment before it happens. If you owe the IRS back taxes and do not have any arguments for why the tax assessment is improper or incorrect, you should consider entering into an installment agreement or negotiating an Offer in Compromise. This will prevent any collection actions—such as a wage garnishment or bank account levy—as long as you fulfill your end of the agreement.

However, you may reach the point where a wage levy is imminent and you don’t have much time to stop it from happening. Fortunately, the IRS is required to give you a Collection Due Process (CDP) notice before initiating a wage garnishment against you.

Stop Wage Garnishment at a Collection Due Process Hearing

How Do I Know Which Offshore Voluntary Disclosure Option to Use?

December 4, 2017 | by Dennis N. Brager

You will need to get a tax litigation attorney’s opinion on whether or not you willfully failed to file Foreign Bank Account Reports (FBARs) and report foreign income on your tax return. The answer to this question has several consequences, including the following:

Non-willful FBAR violations carry a $12,459 penalty per violation, while willful violations result in a penalty that is the greater of $124,588 or 50 percent of the balance in the account at the time of the violation
Taxpayers who failed to file FBARs non-willfully are eligible for the Streamlined Filing Compliance Procedures, which allow you to amend previous year tax returns for the previous three years, and disclose your unreported foreign bank accounts

When is Tax Debt Dischargeable in Bankruptcy?

November 30, 2017 | by Dennis N. Brager

Some types of tax debt can be discharged in a Chapter 7 bankruptcy, and a debtor may pay less than the full amount owed for some taxes in a Chapter 13 bankruptcy. The amount of tax relief that is available will depend on several factors including:

The type of bankruptcy you are filing
If your tax debt is old enough to be discharged (explained in detail below)

How to Discharge Property From an IRS Tax Lien

November 27, 2017 | by Dennis N. Brager

The blanket IRS tax lien automatically applies to all of your property whenever you owe taxes to the IRS. This lien does not result in immediate collection of your tax debt like a bank account seizure or wage garnishment, but it does encumber your property, making it difficult to sell or refinance once the IRS files its Notice of Federal Tax Lien. If you need to sell your property or get rid of the lien, you need to request a discharge from the IRS.

How to Get a Tax Lien Discharged

Once the IRS records a lien, generally by filing it against your real property at the county recorder’s office, any subsequent purchaser takes the property subject to the lien. Since a buyer is not going to want to be responsible for your delinquent tax debt, you will likely need to negotiate a lien discharge before you can sell your home.

How to Avoid Big Fines for FBAR Violations

November 22, 2017 | by Dennis N. Brager

If you were previously unaware of your obligation to file Foreign Bank Account Reports (FBARs), you have a strong argument that your conduct was non-willful, which could qualify you for reduced penalties under the Streamlined Filing Compliance Procedures. However, once you are aware of your obligations, you can no longer turn a blind eye to your unreported foreign accounts or you risk being considered a willful violator, subject to harsher penalties and disqualified from using the Streamlined Procedures.

Get an FBAR Attorney’s Opinion on Willfulness

If there was ever a situation where you should NOT attempt to handle a tax issue on your own, determining whether you willfully violated your foreign reporting requirements is it. The penalties for a willful FBAR violation may be the greater of $124,588 or 50 percent of the balance in the account at the time of the violation, for each violation. If you submit your amended returns under the Streamlined Procedures, but the IRS later decides that you were a willful FBAR violator, you could subject yourself to these penalties, along with the potential threat of criminal prosecution.

Exceptions to The Three-Year Statute of Limitations for IRS Tax Audits

November 20, 2017 | by Dennis N. Brager

The general rule of the IRS is to audit returns that have been filed in the last three years. Because of this, some taxpayers may breathe a sigh of relief once the three-year period has expired, but the rules regarding the statute of limitations are not quite that simple. There are circumstances where the IRS can go back even further to audit your return or assess additional tax, and the IRS has unlimited time to assess tax in the case of an unfiled return.

IRS Audits for Substantial Errors

If the IRS detects a substantial error on your return, the IRS can wait up to six years after your return was filed to conduct an audit. A substantial error involves an understatement of income of more than 25%, based on the income claimed on the return. Congress has extended this definition of a substantial error to include basis overstatements which result in less capital gains tax being owed after the sale of property. Some of those are discussed below.

How to Respond When the IRS Makes a Mistake

November 17, 2017 | by Dennis N. Brager

Charged with administering, enforcing, and collecting taxes from millions of Americans, the IRS understandably makes mistakes. If the IRS is trying to charge you penalties or assess taxes incorrectly, or is attempting to seize your bank account or put a lien on your house, you have options for disputing the IRS action and arguing your case.

How to Handle Incorrect Tax Assessments

If the IRS sends you a Notice of Deficiency and you do not believe you actually owe the tax, you should file a petition in Tax Court. You have 90 days from the date of the notice to file your petition. If you miss this chance, you will only be able to argue your case in court AFTER paying the full amount and filing a refund claim.

South Carolina Bank Involved in Employment Tax Fraud Scheme

November 15, 2017 | by Dennis N. Brager

The former Vice President of a South Carolina-based bank has pleaded guilty to conspiring to defraud the United States by participating in an employment tax fraud scheme that resulted in over $1 million in unpaid payroll taxes. This case shows that the Department of Justice will go after those who are complicit in employment tax fraud in addition to businesses or individuals that fail to remit payroll taxes.

Douglas Corriher made several loans to a bank customer who operated staffing companies in North Carolina. These loans were made through nominees to circumvent federal laws that limit the amount that can be loaned to a single entity. Engaging in illegal activities is one of the badges of tax fraud, so these illegal loans may have indicated to the IRS that an intentional violation of a known legal duty was occurring.

The staffing company handled the payroll responsibilities—including remitting payroll taxes and filing W-2 forms—for thousands of low-wage temp workers. The W-2 forms indicated that the employment taxes had been withheld from the workers’ wages, even though they had not actually been paid.