Wednesday, April 8, 2015

Tax Alert – IRS Change makes it Easier to Levy All Your Assets

There was an important recent change to the format of the IRS’s “final” Notice of Intent to Levy that all tax practitioners and clients should be aware of.  Most of us tax geeks are well aware of the difference between a regular IRS collection notice and a “final” Notice of Intent to Levy that includes the right to a collection hearing under IRC 6330.  This is something that typically confuses the client, but not the tax practitioner. However, the IRS very recently changed the format of the “final” Notice of Intent to Levy and the new version of the “final” notice looks very much like a regular IRS collection notice.   As a result, tax practitioners might, at first glance, be as confused as their clients.
It is unclear why the IRS made this non-publicized change to the “final” Notice of Intent to Levy, but it is definitely more difficult now to tell the difference between the “final” notice and a regular collection notice.  As a result, it is recommended that tax practitioners and clients pay extra special attention to their IRS collection notices because the consequences can be dire.  Tax practitioners can no longer advise their clients to lookout for the IRS collection notice that says “final” or “right to a hearing” on the front page of the letter because the newer version contains no such language on the front page.
It should be noted that the current revision of the “final” Notice of Intent to Levy appears to only apply for notices issued by the IRS Automated Collection Systems (ACS). ACS has stopped using Letter 1058-C “Final Notice of Intent to Levy,” and instead, is using Notice LT11.  I understand that Revenue Officers may still be using Letter 1058.  This will make it extra confusing because one division of the IRS will be issuing a “final” Notice of Intent to Levy that looks completely different than the same notice being issued by the other divisions of the IRS.  Additionally, it is also unclear whether the IRS will change the format of the “final” Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6330.  Previously the “final” notice given for a federal tax lien under 6620 and the “final” notice given for federal tax levy under 6330 used a similar format, making it easier to spot the “final” notice regardless of whether the letter related to a tax lien or tax levy. This is no longer the case.
Obviously this is a rather important change as the “final” Notice of Intent to Levy is the letter that every tax practitioner is on the lookout for in order to freeze IRS collection enforcement by filing a Collection Due Process or Equivalent Hearing.  IRS Notice LT11 looks fairly similar to the CP501, CP503, or a CP504 “Notice of Intent to Levy”.   The IRS CP notices of course do not trigger collection due process appeal rights and if you fail to respond to these notices it will not generally result in an IRS levy aside from tax refunds and other very limited sources.   However, if you fail to respond to LT11 the IRS can levy most assets after the waiting period.
It appears that the LT11 notice has been around for a while.  I have never seen this notice in action until just recently when a client forwarded it to me.  The IRS didn't send me a copy of the Notice LT11 even though I am listed on the Power of Attorney (POA).  Just another reason why I always make my clients forward me copies of any tax notices they receive even though the tax authorities are supposed to send the POA the same notices.  Upon receipt of Notice LT11 from my client I pulled her tax account transcripts to check the activity on her account. Interestingly, there was nothing in the account transcript indicating that she was issued Notice LT11 or notified of any collection appeal rights.  I went to the IRS website and ran a search of the Notice LT11.  The webpage discussing Notice LT11 was recently updated on February 15, 2015.   It appears to be a very recent change.  Perhaps the IRS is having some hiccups with the initial roll out of this notice, which might explain, but not certainly not justify, why the IRS did not send the POA a copy of the notice or why my client's tax account transcript didn't reflect that the IRS issued the notice.   
The bottom line is that ACS is now using Notice LT11 instead of Letter 1058-C.   The new Notice LT11 looks very much like a regular IRS collection notice so it can be misleading even to the tax practitioner.  The regular notices do not contain collection appeal rights and if you don't respond to the regular notice the IRS cannot levy all of your client's assets.  However, Notice LT11 is no regular IRS collection notice.  If you fail to file a collection appeal the IRS can levy most assets.  So be careful and do not miss the collection appeal deadline thinking the LT11 notice is just a regular IRS collection notice. 
Letter 1058 makes clearer on its face that the notice is the “final” collection notice before the IRS will levy most assets and that the taxpayer has a right to file a collection appeal due process appeal.  Notice LT11 does not.  Unlike Letter 1058, Notice LT11 does not explicitly state on the front page that the taxpayer has “collection appeal rights under 6330” and, unlike Letter 1058, Notice LT11 does not state on the front page that it is the "final" collection notice.  You have to read the fine print on the subsequent pages to figure this out.  It sort of resembles a notice from a predatory lending company.  Thus, Notice LT11 makes it very difficult to initially realize that it is the “final” Notice of Intent to Levy and that collection due process appeal rights follow. Because the IRS is shifting its practices and it is unclear how many people know about this extremely important change, tax practitioners and clients are advised to keep an even closer eye on any collection notices issued by the IRS.

If you need assistance concerning a tax collection matter, do not hesitate to contact a tax lawyer in Orange County.   The Orange County Tax Attorneys at Wilson Tax Law Group have experience in federal tax audits, appeals, collections, state and local tax matters, and criminal tax defense.  You can reach the Wilson Tax Law Group at 714-463-4430 or 949-397-2292.



Thursday, April 2, 2015

Dirty Dozen 2015 Tax Scams

Each year the IRS posts the worst tax scams across America.   The IRS works with the Department of Justice and its criminal division to shut down these tax scams, but its a never ending saga and scammers steal billions of dollars each year from the public fisc.  Lets take a look at this year's dirty dozen list:

Here is the list the dirty dozen tax scams of 2015:

  • Aggressive and threatening phone calls by criminals impersonating IRS agents remains an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent months as scam artists threaten police arrest, deportation, license revocation and other things. The IRS reminds taxpayers to guard against all sorts of con games that arise during any filing season

  • Fake emails or websites looking to steal personal information (phishing). The IRS will not send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS and be wary of clicking on strange emails and websites. They may be scams to steal your personal information. 

  • Identity theft continues to be a problem especially around tax time. The IRS is making progress on this front but taxpayers still need to be extremely careful and do everything they can to avoid becoming a victim.
  • Unscrupulous return preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. Return preparers are a vital part of the U.S. tax system as approximately 60 percent of taxpayers use tax professionals to prepare their returns.

  • Offshore tax cheats and the financial organizations that help them should know that it’s a bad bet to hide money and income offshore. Taxpayers are best served by voluntarily disclosing their offshore income and accounts and getting their taxes and filing requirements in order. The Offshore Voluntary Disclosure Program (OVDP) is available to help.

  • Stating refund amounts before looking at documents, asking individuals to sign blank returns and fees based on a percentage of the refund are signs of a bad tax preparer. Scam artists use flyers, advertisements, phony store fronts and word of mouth via community groups and churches in seeking victims 

  • Fake charitable organizations with names that are similar to familiar or nationally known to attract donations from unsuspecting contributors. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities by checking the status of charitable organizations before contributing.

  • Hiding income by filing false Form 1099s or other fake documents is a scam not to mention criminal. The mere suggestion of falsifying documents to reduce tax bills or inflate tax refunds is a huge red flag when using a paid tax return preparer. Taxpayers are legally responsible for what is on their returns regardless of who prepares the returns.

  • Using abusive tax structures to avoid paying taxes is a bad idea and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered.

  • Inventing income to claim tax credits is another sign of a bad scam. Taxpayers are best served by filing the most-accurate return possible because they are legally responsible for what is on their return.
  • Erroneously claiming the fuel tax credit is generally limited to off-highway business use, including use in farming. Consequently, the credit is not available to most taxpayers. But yet each year a sizable group of taxpayers erroneously claim the credit to inflate their refunds.
  • Using frivolous tax arguments to avoid paying taxes is wrong and most such arguments have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes.The penalty for filing a frivolous tax return is $5,000.

Wilson Tax Law Group - The Newport Beach Tax Attorney Blog: DOJ Declines to Charge Lerner with Contempt

Wilson Tax Law Group - The Newport Beach Tax Attorney Blog: DOJ Declines to Charge Lerner with Contempt: The Department of Justice (DOJ) has decided that it will not move forward with a criminal-contempt prosecution of Lois Lerner, the former h...

DOJ Declines to Charge Lerner with Contempt

The Department of Justice (DOJ) has decided that it will not move forward with a criminal-contempt prosecution of Lois Lerner, the former head of the IRS’s Exempt Organizations Division. As many may recall, Lerner had refused to testify before a House Committee investigating the IRS's handling of Republican organizations applying for tax-exempt status. 
 
In a letter to House Speaker John Boehner, R-Ohio, dated March 31, the DOJ said it was not pursuing the case because Lerner had not waived her Fifth Amendment privilege by making an opening statement and because she made only general claims of innocence.
 
House Ways and Means Oversight Subcommittee Chairman Peter Roskam, R-Ill., said the decision came as no surprise and that he would continue to "investigate all the facts" and hold her accountable for any criminal wrongdoing to which she was a party. "It has long been clear that this administration has no interest in providing accountability for the innocent Americans who had their civil liberties violated by the IRS," said Roskam in a statement. "Justice’s decision not to prosecute Mrs. Lerner for her refusal to engage with Congress in no way clears her of wrongdoing."
 
People are divided on both side of the fence.  You may recall that during the investigation the IRS destroyed all of Lerner's emails so they could not be provided to the Oversight Subcommittee charged to investigate the matter.  
 
 
If you have a tax exempt organization or non profit and need legal assistance, do not hesitate to contact the Orange County Tax Law Office of the Wilson Tax Law Group at 949.397.2292.

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.

Thursday, February 12, 2015

IRS Blasted for Seizing Assets of People who Deposit Cash Under $10,000

On February 11 Congress blasted the IRS Commissioner John Koskinen on the Service’s use of civil-asset forfeiture laws, demanding to know why innocent small business owners are being target when they have committed no crime. 

This issue is two fold: 1) whether IRS collection officers are under pressure to fill quotas on assets seizures, which is prohibited by law to reward these people based on the amount they have collected; and 2) the IRS practice of seizing the bank accounts of people suspected of "structuring," that is, of making cash deposits worth less than $10,000 to avoid reporting requirements, when in fact small business owners may make several deposits under $10,000 for a variety of reasons and none of them are illegal.
 
I can say with personal experience this is a real problem.  In fact, I was involved in case where the IRS/DOJ seized the funds of a small business owner from his bank account and prosecuted him for "structuring" when in fact that person paid all the taxes on the deposits associated with those funds.  He operated a cash business and the bank told him not to make deposits over $10,000 because that was "bad".   He made sure his deposits where under $10,000, but reports all the income from the deposits and paid all the taxes.  In this case, there was zero harm to the government because there was no tax loss.   Regardless, the IRS seized all his funds and prosecuted him for structuring in federal district court.
 
I am glad to know Congress is looking into these practices by the IRS/DOJ of seizing funds just because the person makes deposits under $10,000.  The person needs to intend to violate the Bank Secrecy Act.   I also believe their should be some harm to government, such as underreporting of taxes or other illegal activity, although this is not a requirement of "structuring."
 
You can contact Joe Wilson at the Wilson Tax Law Group if you have questions about structuring.   Our office phone number is 714-463-4430.
 
 

Tuesday, February 10, 2015

2015 Dirty Dozen Tax Scams


Each year the IRS posts the worst tax scams across America.   The IRS works with the Department of Justice and its criminal division to shut down these tax scams, but it’s a never ending saga and scammers steal billions of dollars each year of public funds.  Let’s take a look at this year's dirty dozen tax scam list:

 
  1. Aggressive and threatening phone calls by criminals impersonating IRS agents. I have had numerous clients call me who received these phone calls.  Hang up on these people and let them know you are sending their information to the FBI.

 
  1. Fake emails or websites looking to steal personal information (phishing).  If you get an email from what appears to be the IRS delete it and do not open it.  Call a tax attorney or the IRS for assistance to determine if you have a real tax issue.

 
  1. Identity theft continues to be a problem especially around tax time. File your tax return early, the IRS typically accepts the first return filed.  So if you file your return before the scammer, it will be much easier to resolve.  

 
  1. Return preparers who prepare bogus returns for clients to claim deductions and credits that they are not entitled to claim.
 

  1. Offshore tax evasion and the financial organizations that advice people they no longer need to pay taxes if they move their money offshore.  Contact a tax attorney if you have undisclosed assets offshore and need assistance to resolve this.

 
  1. Stating refund amounts before looking at documents, asking individuals to sign blank returns and fees based on a percentage of the refund are signs of a bad tax preparer.

 
  1. Fake charitable organizations with names that are similar to familiar or nationally known to attract donations from unsuspecting contributors.
 

  1. Hiding income by filing false Form 1099s or other fake documents.  This is a criminal act and the IRS will attempt to put you in jail.  

 
  1. Using abusive tax structures to avoid paying taxes. When in doubt, clients should seek an independent opinion from a qualified tax attorney regarding complex products they are offered.

 
  1. Inventing income to claim tax credits. Clients are best served by filing the most-accurate return possible because they are legally responsible for what is on their return.

 
  1. Erroneously claiming the fuel tax credit. This credit is not available to most taxpayers. But yet each year a sizable group of clients erroneously claim the credit to inflate their refunds.

 
  1. Using frivolous tax arguments to avoid paying taxes.

If you need assistance concerning a tax matter, do not hesitate to contact a tax lawyer in Orange County.   Tax scams are immune to the efforts being taken by the US government.  The Orange County Tax Attorneys at Wilson Tax Law Group have experience in federal tax audits, appeals, and criminal prosecutions and IRS matters. You can reach the Wilson Tax Law Group at 714-463-4430.