Tuesday, May 26, 2015

Wilson Tax Law Group - The Newport Beach Tax Attorney Blog: IRS Committing Tax Evasion Triggers Congressional ...

Wilson Tax Law Group - The Newport Beach Tax Attorney Blog: IRS Committing Tax Evasion Triggers Congressional ...: In a prior post I commented about a report by the Treasury Inspector General for Tax Administration (TIGTA) that reviewed cases of willful...

IRS Committing Tax Evasion Triggers Congressional Inquiry


In a prior post I commented about a report by the Treasury Inspector General for Tax Administration (TIGTA) that reviewed cases of willful violation of tax laws by IRS employees for a 10 year period (FY 2004-2013). The review found 1,580 IRS employees who willfully understated their Federal tax liability or willfully filed their tax return late.  Of these, roughly two thirds of these tax cheats kept their jobs at the IRS (about 14% have now resigned or retired).

Former Senate Finance and current Senate Judiciary Committee Chairman Charles E. Grassley, R-Iowa, is now asking the IRS Commissioner to explain how and why the Service uses discretion to avoid terminating employees for willful violations of tax law.  A copy of his letter to the IRS Commissioner can be found here.

"Willful violation of tax law is a serious offense and the presumption is an employee guilty of the offense shall be terminated," wrote Grassley in letter dated May 19 to IRS Commissioner John Koskinen. Grassley said the Commissioner’s "discretion to mitigate the penalty of termination was intended to be a safety valve, not a tool to be used routinely to frustrate the intent of Congress."

The report found that a major portion of employees who willfully violated tax law remain employed at the IRS and experienced only minor punishments. The IRS gives discretion to the Commissioner on termination in such cases, and Grassley is seeking details on how and when that discretion is used.
The sole recommendation TIGTA made in the report was for the IRS to document its analysis of evidence and basis for its decision on whether or not to mitigate penalties to something less than termination, wrote Grassley. "The IRS doesn’t necessarily offer discretion on severe penalties to average citizens found in violation of tax law," he said. "There might be a double standard for the IRS’ own employees."

The good news is that Congress has initiated an oversight hearing into the matter.  Hopefully there will be some change because this does not sit well.

If you need assistance concerning taxes or an IRS investigation, 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 prosecutions and IRS and state tax matters. You can reach the Wilson Tax Law Group at 714-463-4430.



Thursday, May 7, 2015

Wilson Tax Law Group - The Newport Beach Tax Attorney Blog: IRS Commits Tax Evasion with Immunity

Wilson Tax Law Group - The Newport Beach Tax Attorney Blog: IRS Commits Tax Evasion with Immunity: On May 6th the Treasury Inspector General for Tax Administration  ("TIGTA" or internal government watchdog over the IRS) issued a ...

IRS Commits Tax Evasion with Immunity

On May 6th the Treasury Inspector General for Tax Administration  ("TIGTA" or internal government watchdog over the IRS) issued a scathing report that found, from 2003 through 2013, 1,580 IRS employees committed willful tax violations.   These cases included willful overstatement of expenses, claiming the First-Time Homebuyer Tax Credit without buying a home, and repeated failure to timely file required Federal tax returns.  

It should be noted that a willful act is the voluntary intentional violation of a known legal duty (timely filing of a tax return or accurate reporting of a tax obligation).   A willful violation of tax law is a criminal act.  This means jail time to the average person, but not IRS employees according to the TIGTA report.   


Current law requires that the IRS terminate employees who are found to have willfully violated tax law.  However, the law also gives the IRS Commissioner the sole authority to mitigate cases to a lesser penalty.  The TIGTA report disclosed that the IRS Commissioner exercised his sole authority on numerous occasions to mitigate termination of IRS employees who committed tax evasion.  


Although the IRS concluded their own employees committed criminal tax acts, 61 percent of these criminal tax evaders continue to work for the IRS.   In fact, some employees received promotions and awards within one year after their willful tax noncompliance cases were closed. The report does not disclose that any of these criminals were referred for prosecution.  The IRS Commissioner made sure these employees, some whom had significant and sometimes repeated tax noncompliance issues, and a history of other conduct issues, kept their positions and remained out of the media spotlight.   


As a reformed federal prosecutor and current tax defense attorney, I personally find it alarming that the IRS can prosecute every day citizens for the same exact acts it allows its own employees to commit with carte blanche immunity.  This leaves a curiously strong bad taste.  


If you need assistance concerning taxes or an IRS investigation, do not hesitate to contact a tax lawyer in Orange County.   According to the TIGTA report only IRS employees - not everyone else - 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 prosecutions and IRS and state tax matters. You can reach the Wilson Tax Law Group at 714-463-4430.


Wednesday, April 8, 2015

Wilson Tax Law Group - The Newport Beach Tax Attorney Blog: Tax Alert – IRS Change makes it Easier to Levy All...

Wilson Tax Law Group - The Newport Beach Tax Attorney Blog: Tax Alert – IRS Change makes it Easier to Levy All...: 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 sho...

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.