Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts

Monday, March 16, 2015

Be Careful Claiming Your Charitable Deduction for 2014


The IRS loves to audit people who claim charitable deductions.  The reason is that there are very strict record-keeping rules when it comes to charitable deductions and most people are not aware of them so the IRS usually finds a way to disallow the deduction, which of course triggers increased taxes, penalties and interest.  Do not let this happen to you.

 Generally, to claim a charitable contribution deduction for gifts of $250 or more in cash or property to charity, donors must get a written acknowledgment from the charity.  This is usually not a big deal.  For donations of property, the acknowledgment must include, among other things, a description of the items contributed.  Typically the place you donate the property gives you a blank receipt.  So you need to fill it out and make sure you list all the items donate.  You also need to determine the value of the property contributed if it is not cash, which sometimes can cause problems if the amount determined is incorrect.

 The law also requires that taxpayers have all acknowledgments in hand before filing their tax return.   The IRS does not like it when you go back to the charity to get an acknowledgment.  That said I have done this in the past and have been able to substantiate the deduction to the IRS' satisfaction.  However, I do not recommend doing this if you can avoid it. 

 Only taxpayers who itemize their deductions can claim gifts to charity.  You should also know there are special reporting requirements that apply to vehicle donations and taxpayers wishing to claim these donations must attach any required documents to their return. For example, Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the return. Furthermore, the deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500.

 Additionally, there are a number of bogus groups masquerading as a charitable organization to attract donations from unsuspecting contributors.  This is one of the top 12 abuses listed by the IRS for 2015.  You should take a few extra minutes to ensure your hard-earned money or property goes to legitimate and currently eligible charity. 

 Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations.  Also, don’t give out personal financial information, such as Social Security numbers or passwords to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money. People use credit card numbers to make legitimate donations but please be very careful when you are speaking with someone who called you.

 Also, don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

 If you have questions or concerns about a charitable deduction, or would like representation that includes advising you on the tax aspects of business transactions and how they should be reported on tax return to avoid tax problems or place you in the best position on the occasion you are contacted by the IRS or the state tax authorities, please contact the Wilson Tax Law Group

 To schedule an initial consultation, please contact our Orange County tax lawyers at (949) 397-2292 or use our online contact form.

Wednesday, September 10, 2014

Taxpayer Prevails against the Franchise Tax Board after Ex-Spouse Attempts to Destroy her Tax Relief Case

Just like the IRS, the California Franchise Tax Board (FTB) also has a program to allow one spouse to be relieved of existing joint liabilities if that spouse can prove that she or he meets the requirements for "innocent spouse" relief. These types of cases whether at the IRS or FTB level can be hotly contested and the other ex-spouse can intervene and attempt to impede the determination to relieve the liability for the claimant spouse. In a recent case, McShea, California State Board of Equalization, No. 509192, April 22, 2014, released August 2014, a taxpayer demonstrated that the FTB erred in its denial of her request for innocent spouse relief from unpaid California personal income tax liabilities.

In the McShea case, the FTB initially granted the taxpayer complete equitable relief for 1993 and partial equitable relief for 1994. However, the taxpayer’s ex-husband appealed the grant of relief, arguing that they had agreed to share the tax liabilities for the tax years at issue. As a result, the FTB changed its position, determining that it had erroneously granted equitable relief.

In reviewing the case, the Board of Equalization determined that the following factors weighed in favor of reversing the FTB’s proposed action on appeal:

• the taxpayer’s marital status (divorced for at least 12 months prior to the date the innocent spouse determination was being made);

• the taxpayer’s compliance with the income tax laws in the years following the years for which relief was requested;

• the presence of severe domestic abuse during the taxpayer’s years of marriage;

• and the taxpayer’s lack of knowledge or reason to know, when she was ordered by a judge to sign the 1993 and 1994 joint returns in 2007, that her ex-
husband would not or could not pay the tax liabilities.

The FTB argued that the taxpayer could have clarified at the couple’s 2007 court hearing whether her ex-husband intended to remit payment for the 1993 and 1994 tax liabilities on or about the time he filed the 1993 and 1994 returns. However, the State Board of Equalization determined that due to the years of abuse and the taxpayer’s belief that she needed to sign the returns in order to receive the child support her ex-husband owed, the taxpayer was afraid to confront her ex-husband and the judge concerning the payment of the 1993 and 1994 tax liabilities at the time she signed the returns and, therefore, she did not know or have reason to know that her ex-husband would not or could not pay the tax liabilities.

This is a great result for the innocent spouse, especially in a situation where the ex-spouse intervened and attempted to persuade the tax authorities not to grant the innocent spouse relief. It is extremely important that when making a claim for innocent spouse that all the factors are considered and that the claimant is prepared to get into a heated battle with the ex-spouse. Sometimes the other ex-spouse does not intervene and sometimes the ex-spouse intervenes but only to help the innocent spouse obtain the relief being requested. So you really need to vet the situation prior to making the claim so that you are prepared to deal with all the possible scenarios. Innocent spouse relief is a powerful tool that can be used to abate the existing tax liabilities, thus in the appropriate circumstances, it should not be overlooked.

If you have questions or want to pursue this type of claim, you can contact the Wilson Tax Law Group at 714-463-4430. Our attorneys are experts in innocent spouse relief and can assist or advise you regarding these types of matters.

Wednesday, September 3, 2014

IRS Phone Scams Run Rampant - Tips to Keep Your Client Protected

The IRS has been issuing a number of alerts about telephone scams. I have personally had at least two clients who have been targeted by these phone scammers. Lucky for them I was able to warn them not to call them back and the phone scammers were unable to defraud my clients. Unfortunately, thousands and thousands of other people across the US have been the victims of these extremely slick phone scammers. They have defrauded people out of millions of dollars.

How it works is the scammers call people on their cell phone and home phones claiming to be employees of the IRS. They often demand money to pay taxes and threaten people by saying if you don't immediately pay they are going to seize their assets or have them arrested. Some may try to con you by saying that you're due a refund. The refund is a fake lure so you'll give them your banking or other private financial information. Don't be fooled by these scammers.

I have personally talked to the scammers after they have reached out to my clients. They have real phone numbers and when you call them back they answer as if they were working for the IRS. They can sound convincing when you talk with them because they may even know a lot about you.

They may alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS badge numbers. If you don't answer, they often leave an “urgent” callback request.

The IRS has created a list of five things the scammers often do but the IRS will not do. So if any one of these five things occurs it is a sign that it is a scam.

The IRS will never:

1. Call you about taxes you owe without first mailing you an official notice.

You always receive a notice assuming the IRS has your current mailing address. You should make sure your current address is on file with the IRS if for no other reason so you know if the phone call is a scam.


2. Demand that you pay taxes without giving you the chance to question or appeal the amount they say you owe.

3. Require you to use a certain payment method for your taxes, such as a prepaid debit card.

4. Ask for credit or debit card numbers over the phone.

5. Threaten to bring in local police or other law-enforcement to have you arrested for not paying.

So if you get a phone call from someone claiming to be from the IRS and asking for money, here's what to do:

•If you know you owe taxes or think you might owe, call the IRS at 800-829-1040 to talk about payment options. You also may be able to set up a payment plan online at IRS.gov. You can also contact your tax professional and have them look into this for you.

•If you know you don't owe taxes or have no reason to believe that you do, report the incident to TIGTA at 1.800.366.4484 or at www.tigta.gov. The Treasury Inspector General for Tax Administration (TIGTA) was established under the IRS Restructuring and Reform Act of 1998 to provide independent oversight of IRS activities.


•If phone scammers target you, also contact the Federal Trade Commission at FTC.gov. Use their “ FTC Complaint Assistant ” to report the scam. Add “IRS Telephone Scam” to the comments of your complaint.

The IRS currently does not use unsolicited email, text messages or any social media to discuss your personal tax issues. If you would like more information on reporting tax scams, or if you have been the victim of IRS identify theft or believe that your information may have been compromised, you can contact the Wilson Tax Law Group at 714-463-4430. At Wilson Tax Law our attorneys have experience in these matters and can assist to get you through this process.


Wednesday, June 18, 2014

IRS Increases the FBAR Penalty for People with Offshore Accounts

In efforts to increase offshore tax compliance, the IRS just made brand new changes to its current offshore disclosure programs. 

The streamlined procedures have been expanded to accommodate a wider group of U.S. taxpayers who have unreported foreign financial accounts.  This is a very good thing because now more people can use the procedures than could have before.

The original streamlined procedures announced in 2012 were available only to non-resident, non-filers. Taxpayer submissions were subject to different degrees of review based on the amount of the tax due and the taxpayer’s response to a “risk” questionnaire.

The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States. The changes include:

  Eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year;

   Eliminating the required risk questionnaire;

   Requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct.

For eligible U.S. taxpayers residing outside the United States, all penalties will be waived. For eligible U.S. taxpayers residing in the United States, the only penalty will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue.

 Offshore Voluntary Disclosure Program (OVDP) Modified: The changes announced today also make important modifications to the OVDP. The changes include:
 •  Requiring additional information from taxpayers applying to the program;

 •  Eliminating the existing reduced penalty percentage for certain non-willful taxpayers in light of the expansion of the streamlined procedures;

  •  Requiring taxpayers to submit all account statements and pay the offshore penalty at the time of the OVDP application;

 • Enabling taxpayers to submit voluminous records electronically rather than on paper;

  Increasing the offshore penalty percentage (from 27.5% to 50%) if, before the taxpayer’s OVDP pre-clearance request is submitted, it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or Department of Justice.

I will add more in a later post.  You can find the news release here.   Please contact the Wilson Tax Law Group if you have questions about offshore bank account disclosures or FBAR matters under the July 1, 2014 or transitional procedures.  We have handled numerous offshore cases.

Update:  The IRS has published FAQ's for the Transition Rules drawing a clear line as to who can qualify for the pre-July 1, 2014 penalty rates.

Q: What if I made a request for OVDP pre-clearance before July 1, 2014, but not a full voluntary disclosure? 

A: A taxpayer will not be considered to be currently participating in OVDP for purposes of receiving transitional treatment unless, as of July 1, 2014, he has mailed to IRS Criminal Investigation his voluntary disclosure letter and attachments as described in OVDP FAQ 24.  Thus, a taxpayer who makes an offshore voluntary disclosure as outlined in FAQ 24 on or after July 1, 2014 will not be eligible for transitional treatment under OVDP, even though he may have made a request for OVDP pre-clearance before July 1, 2014.

These transitional FAQs can be found here.

The FAQ for the effective-July 1, 2014 OVDP can be found here.