Tax Problem Attorney Blog

Tax Fraud Involves NFL Players

May 8, 2008 | by Dennis N. Brager

Tax lawyers from the Department of Justice are seeking to enjoin two tax return preparers from representing anyone before the Internal Revenue Service (IRS) , acting as tax preparers or engaging in any other tax related conduct. The IRS complaint also seeks an injunction barring the tax preparers from engaging in conduct which is subject to the tax preparer penalties of Internal Revenue Code § 6694. The injunction was requested pursuant to Internal Revenue Code § 7407 and Internal Revenue Code § 7408.

According to the IRS complaint the tax return preparers committed tax fraud by filing fraudulent tax returns, and fraudulent amended tax returns claiming deductions for bogus mining development costs. Interestingly the IRS complaint alleges that 7 of the customers who had fraudulent tax returns prepared were NFL football players. The IRS complaint does not reveal the names of the players, and there is no indication in the complaint that the players knew that tax fraud had been committed.

If you are a tax preparer who has been accused by the IRS of tax fraud, tax evasion or violation of the tax return preparer penalty rules under Internal Revenue Code § 6694 contact the Southern California tax lawyers at Brager Tax Law Group, A P.C. Our tax lawyers represent clients throughout California, including Orange County, the Inland Empire, San Bernardino County, and Riverside County including the cities of Newport Beach, Laguna Beach, San Juan Capistrano, San Clemente, Mission Viejo, Laguna Niguel, Laguna Hills, Dana Point, Huntington Beach, Long Beach, Costa Mesa, Anaheim and Santa Ana.

Trust Fund Recovery Penalty (TFRP) Upheld Against Both CFO and CEO

May 2, 2008 | by Dennis N. Brager

Internal Revenue Code § 6672 provides that so-called responsible persons who willfully fail to pay corporate payroll taxes may be held personally responsible for the payment of the trust fund portion of these taxes. Internal Revenue Code § 6672 is sometimes referred to as the trust fund recovery penalty (TFRP). Who is a responsible person? As the court in Horovitz v. United States (WD PA 2008) explained: “responsibility is a matter of status, duty or authority.” The definition of responsible person is not limited to the person with the final say on which bills get paid, but includes others as well.

Horovitz illustrates the principle that more than one person can have liability for the trust fund recovery penalty. The CFO was deemed to be a responsible person since he had the full authority to sign checks, could hire and fire employees, signed payroll tax returns, was a corporate officer, and a 20% owner. The CEO was also held liable for the trust fund recovery penalty since he invested several million dollars in the business, owned 80% of the stock, had unlimited hiring and firing ability and check writing authority, and served as the CEO with day to day involvement in the business.

If you have payroll tax problems, and the IRS is threatening to impose the trust fund recovery penalty contact the Los Angeles, California tax litigation lawyers at Brager Tax Law Group, A P.C.

Tax Court Collection Due Process Case Dismissed

May 2, 2008 | by Dennis N. Brager

In Kennedy v. Commissioner, T.C. Memo 2008-33, the United States Tax Court determined that the Internal Revenue Service (IRS) could not serve a tax levy on the taxpayer’s assets since it failed to send the collection due process (CDP) notice to the taxpayer’s last know address. Generally in order for the IRS to issue a tax levy it must first mail a Notice of Intent to Levy, and Right to Request Hearing, commonly referred to as a CDP Notice, pursuant to Internal Revenue Code § 6330. In Kennedy, the IRS mailed its notices to two different addresses. However, Mr. Kennedy never received them. Apparently this was because both addresses were incorrect. In fact the way Mr. Kennedy found out about the collection due process notice was when the IRS served a tax levy on his bank.

The Tax Court pointed out that Internal Revenue Code § 6330(a)(2) provides that the CDP notice must either be given in person, left at the person’s dwelling or usual place of business, or sent by certified or registered mail to the person’s last known address. Since the IRS failed to send the CDP notice to Mr. Kennedy’s last known address the CDP notice was invalid. By the time the case got to the Tax Court the IRS realizing this and had refunded the money seized by the tax levy. That, however, was not sufficient. In order for the IRS to serve any additional tax levies the Tax Court required that the IRS issue a new CDP notice, and give Mr. Kennedy an opportunity for a hearing first in the IRS’ Appeals Division, and then if Mr. Kennedy was not satisfied with the result he would be entitled to a brand new hearing in the Tax Court.

If you have received a tax levy, have tax debts, or other tax problems call the tax controversy lawyers at Brager Tax Law Group, A P.C.

IRS Tax Audits of Small and Medium Size Businesses Increase

April 22, 2008 | by Dennis N. Brager

The Internal Revenue Service (IRS) increased the number of tax audits of small and medium size corporations between fiscal year 2005, and 2007 according to a report by TRAC. The number of tax audits for corporations with assets of less than $5 million increased by 41%, and tax audits for corporations with assets of between $5 million and 10 million increased by 24%. Tax audits of corporations with assets from $10 to $50 million in assets rose by 29%. On the other hand IRS tax audits of the largest corporations, those with assets over $250 million, dropped by 38%. The number of tax audits for those corporations with between $100 million and $250 million dropped by 31%. Some see this as a sign that the IRS is cracking down on small businesses while it is easing up on the largest companies. However, the IRS says that in fact the IRS doesn’t need to audit as many large corporations because of the success of the IRS pre-filing agreement programs.

Whatever the merits of the argument, small and medium size business need to be aware of the increased risk of a tax audits

If your small or medium size business has an IRS, SBE, FTB or EDD tax audit, and you need help contact the Los Angeles, California tax dispute attorneys at Brager Tax Law Group, A P.C.

Fraudulent Offer in Compromise Results in Tax Evasion Conviction

April 16, 2008 | by Dennis N. Brager

Sometimes taxpayers want to be “creative” in filling out IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals). Stephen Miller got too creative, and he was found guilty of tax evasion in violation of Internal Revenue Code § 7201. He was sentenced to 46 months imprisonment. The conviction was upheld by the Court of Appeals. United States v. Stephen Miller (No. 06-11078) (5th Cir. 2008). Miller, who owed the Internal Revenue Service (IRS) about 2 million dollars filed an offer in compromise with the IRS in which he stated he had insufficient assets and income to pay the tax debt. The IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) he filed stated he only had $40,000 in assets including an IRA with a balance of $25,000. What he didn’t tell the IRS was that he had withdrawn $1,000,000 from his IRA, and transferred it offshore. When the IRS asked about the money taken out of the IRA he responded that the money had been used to pay off a loan Euromex Leasing Corporation in the Isle of Mann. As it turned out Euromex was a shell corporation controlled and formed by a financial planner that Miller consulted to hide his money from the IRS. And how did the IRS find out that it was all a lie? Simple, the financial planner turned Miller in when he wound up with his own tax fraud problems with the IRS.

If you have tax debts and don’t want to be convicted of tax evasion call the tax attorneys at Brager Tax Law Group, A P.C.

IRS Innocent Spouse Relief Publication Released

April 15, 2008 | by Dennis N. Brager

The Internal Revenue Service (IRS) has released Publication 971 on Innocent Spouse relief pursuant to Internal Revenue Code § 6015. Generally, individuals who sign joint tax returns with their spouses are both jointly and severally liable for any taxes not paid with the return without regard to which spouse created the tax problem. Under the provisions of Internal Revenue Code § 6015, however, some spouses may be able to get out from under their tax problems. Publication 971 gives the IRS take on innocent spouse relief. If you want to read the opinions of our tax lawyers on innocent spouse relief you can see the innocent spouse articles on our website.

Publication 971 points out the time periods for filing for innocent spouse relief. Requests for innocent spouse relief must be filed on IRS Form 8857 no later than two years from the date the IRS first attempts to collect the tax due. IRS attempts to collect the tax due are limited to:

• The filing of a claim for by the IRS in a court proceeding, including a proof of claim in a bankruptcy proceeding.

Tax Court Upholds Tax Levy

April 15, 2008 | by Dennis N. Brager

The United States Tax Court held that the IRS did not abuse its discretion when the Appeals Division upheld a notice of intent to levy issued under Internal Revenue Code § 6330. In West v. Commissioner, TC Memo. 2008-30, the Wests had obtained an offer in compromise from the IRS, but then violated its terms by failing to pay estimated taxes, failing to timely file tax returns, and failing to pay multiple tax penalties assessed against them during the 5 year period following the acceptance of their offer in compromise.

To make matters worse the IRS tried to notify the Wests about the impending default of the their offer in compromise, but the Wests had moved, and failed to notify the IRS of their new address. The Wests tried to rely on the failure of the IRS to notify their representative that their offer in compromise was in danger, but the Tax Court held that the IRS had no duty to notify their representative.

Points to Remember:

IRS Has Problems With Tax Liens

April 15, 2008 | by Dennis N. Brager

When the Internal Revenue Service (IRS) files a tax lien it is required by Internal Revenue Code § 6320 to notify taxpayers within 5 business days of the filing of the tax lien. In addition, under Internal Revenue Code § 6320(b) it must provide for a hearing before the Internal Revenue Service’s Appeals Division. According to a report by the Treasury Inspector General for Tax Administration (TIGTA), the IRS may not have complied with Internal Revenue Code § 6320in all cases. For example, the IRS is required to send the tax lien notice to the last known address of the taxpayer; yet in some cases it failed to do so. The TIGTA report noted that the failure to do so was a legal violation by the IRS.

The TIGTA report also noted that the IRS failed to follow its own internal guidelines for sending copies of the tax lien notices to the taxpayer’s representatives in 40% per cent of the cases it sampled. Tax attorneys must be alert to the possiblity, that the IRS is not sending copies of all tax lien notices and other required documents to them. Taxpayers need to send copies of all important notices to their tax lawyers even if they think the IRS should be sending the notices directly to their representatives.

If the IRS has filed a tax lien against you contact Los Angeles, California tax attorney Dennis Brager.

Internal Revenue Service (IRS) Convicts Business Owner of Failure to Pay Payroll Taxes

April 4, 2008 | by Dennis N. Brager

A jury found a Colorado man guilty of failure to pay federal payroll taxes pursuant to IRC § 7202 and of filing false payroll tax returns pursuant to IRC § 7206(1). He was, however, acquitted of charges of tax evasion. Failure to pay IRS payroll taxes carries a penalty of up to 5 years in prison, and/or a $10,000 fine per count. Filing false tax returns, including false payroll tax returns carries a penalty of not more than 3 years in federal prison, and/or a $100,000 fine per count.

Like all employers Crabbe was required to file payroll tax returns, and to withhold income income taxes, social security taxes and Medicare taxes from employee paychecks, and to pay those amounts over to the IRS. When he failed to do so he exposed himself to both criminal tax liability, and to the trust fund recovery penalty (TFRP) as well. Once Crabbe has been sentenced it is likely the IRS will go after him to pay the unpaid payroll taxes. In general, responsible corporate officers who willfully fail to pay payroll taxes become personal liable pursuant to IRC § 6672 to pay those taxes. While many business owners get stuck paying corporate payroll taxes out of their own pocket, not too many go to jail for failure to pay. Nevertheless the case is a reminder that in appropriate situations the IRS can and does criminally prosecute people for failure to pay.

If you have payroll tax problems contact the tax attorneys at Brager Tax Law Group.

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.