Archive for the ‘Uncategorized’ Category
Wednesday, June 30th, 2010
Yesterday I attended the live broadcast of a legal education program put on by the American Bar Association discussing the IRS Employment Tax National Research Project. As part of this project, the IRS intends to audit 6,000 businesses, both small and large, per year between 2010 and 2013. Part of what the IRS will be examining in these audits is the classification of employees; namely, whether they are classified as employees or independent contractors. If the IRS determines that a business is misclassifying an employee, tax liabilities and penalties can be severe.
To avoid controversy, an employer must take the steps to determine whether their workers fall into the category of an independent contractor or an employee. This process is often very complex and involves analysis of work procedures and corporate organization, along with examination of banking records and other criteria. While such a distinction is often case-specific, the general guideline is that a worker is considered an employee if the employer has the right to control the worker regarding what job is performed and how it is performed. Whether this right is exercised is irrelevant.
If you operate under the assumption that you are working with independent contractors rather than employees, and therefore do not have to withhold federal income and payroll taxes, it is important to remember to send a Form 1099 for the contractor to file. If the IRS does audit your business and determines that you are working with employees rather than independent contractors, filing Form 1099s could mean your company is entitled to the statutory safe harbor provided by section 530 of the Revenue Act of 1978.
Now that the IRS is enacting its Employment Tax National Research Project, it is more important than ever to make sure your company is up to date with the filing status of its workers. Failure to remain up to date with stricter IRS policy could result in tax liabilities.
If you are notified of an IRS audit or you want to discuss your employment practices, please don’t hesitate to contact me for further information:
Bill Lowrance, (703) 506-1600, firstname.lastname@example.org
Monday, June 28th, 2010
There are of course benefits to filing a joint tax return with your spouse: eligibility for tax deductions and lower tax rates come to mind. However, there can be severe repercussions that come from filing jointly, and those occur when items are improperly reported on or when income is even omitted from the tax return. If the IRS determines there are erroneous items in your return, such as unreported income or incorrect deductions, and you and your spouse have filed jointly, then both of you will be held responsible for the liabilities.
However, situations arise where one spouse may not have known about the erroneous items, or may have been coerced into signing for them. To combat such situations, the IRS created Innocent Spouse Relief. Provided you meet the qualifications, Innocent Spouse Relief allows you to be relieved of the consequences arising from a fraudulent return.
1. You and your spouse filed jointly
2. On the return, there is an erroneous item that is your spouse’s fault
3. You can prove that when you signed the return, you held no knowledge of the erroneous item
4. The circumstance shows it would be unfair to hold you accountable
On the IRS website there is a tool for determining if you are eligible for Innocent Spouse Relief. It can be found here.
If your spouse has embezzled their income, or attempted to defraud the IRS without your knowledge in any other way, even if you signed a joint tax return together, you can avoid the penalties. Provided you meet the qualifications of Innocent Spouse Relief, by filing Form 8857 you will begin the process of detaching yourself from the liabilities. Keep in mind that the IRS requires this form to be filed within two years after they attempt to collect the tax.
Contact me for more information on your options:
Bill Lowrance. (703) 506-1600. LowranceLaw.com
Sunday, June 20th, 2010
There are many reports in the news media about the latest Swiss efforts to turn over formeraly “secret” Swiss UBS bank account to the IRS. The Boston Globe:
“Swiss lawmakers yesterday ended a standoff and approved the bank’s settlement with the United States, clearing the way for the names to be transmitted to tax authorities as early as this week. Lawyers said Americans who ignored an IRS offer last year to reduce penalties in exchange for voluntary disclosures now are flooding their offices with calls seeking advice on how to avoid possible sanctions that could include prison sentences.” See http://tinyurl.com/24jpfa9.
The Swiss Parliment approved the agreement to allow UBS to turn over thousands of bank accounts held by US citizents. The Washington Post:
“The Swiss parliament approved a deal Thursday to help the Internal Revenue Service obtain the names of Americans with secret accounts at Switzerland’s largest bank.
The approval averted a renewed conflict between the U.S. and Swiss governments over bank secrecy. If the deal had collapsed, Swiss banking giant UBS faced the threat of potentially crippling U.S. legal action.
Instead, the breakthrough paves the way for the Swiss government to turn over the names and account details of as many as 4,450 U.S. clients of UBS suspected of using undeclared accounts to hide income and evade taxes.” See http://tinyurl.com/2akzgc6.
There is still time for you go to the IRS and voluntarily disclose your “secret” bank account. There is a process and my law firm is actively engaged in handling such disclosure to the IRS. Contact me if you want to explore voluntary disclosure to the IRS or you want more information.
703 506 1600
Sunday, March 8th, 2009
Now that tax season is here, I want to get back to writing more interesting tax facts, articles and information. My law practice is busy and taking my time t away from the luxury of writing for this blog.
International and domestic tax enforcement will be very active in the future. I will write about this soon and what you can expect and what actions will help your position if the IRS comes to your door.
One interesting item is an article from the Boston Globe, Click Here. This is a picture gallery along with a short description of recent famous tax frauds including Secretary of Treasury Geithner, Tom Daschle, Helio Castroneves and Nicolas Gage among many others. Read the story and view the pictures.
Thanks to Paul Caron, Tax Prof Blog for his post on this.
Sunday, January 11th, 2009
According to the NYT, the Swiss Bank UBS, the world’s largest wealth manager, is going to return about $18 billion dollars to more than 19,000 account holders most of whom are US citizens. The US citizens holding the accounts, according to the IRS and Justice Department, have evaded at least $300 million a year in taxes, and that does not count penalties and interest.
In its article, “What to Do if UBS is Outing Your Secret Account,” NYT lists possible strategies to take in dealing with the IRS – see also NYT artcle about UBS’ plan to disclose accounts. If you have held such an account, your best choice to try and avoid criminal prosecution is to voluntarily disclosure your situation to the IRS. You may not be prosecuted, the choice is up to the Justice Department and the IRS, but you will have to report all your accounts and income and pay taxes, penalties and interest. Of course, paying money is better than sitting in a prison cell.
When I worked as an attorney in the Office of Chief Counsel, IRS, I specialized in criminal and civil tax matters involving offshore tax havens and hidden money. We had to decide how to investigate cases, get the money back and determine civil or criminal steps to take. We often collected millions of dollars in unpaid taxes, penalties and interest.
If you have the offshore account that has not been reported, do not wait for the IRS to knock on your door.
Tuesday, January 6th, 2009
The Treasury Inspector General for Tax Administration (TIGTA) is the only government entity that conducts internal audits the IRS. Well, now you can read the most recent interesting report that covers their audit April 1, 2008 through September 30, 2008. The report is TIGTA’s semiannual report to Congress.
There are some “blockbuster” (technical tax term) statements and recommendations in the report.
TIGTA says that IRS must focus on closing the Tax Gap noting that IRS does not consistantly assess penalties or penalize taxpayers for making false statements when filing returns. TIGTA recommends that IRS expand its enforcement efforts. As I have predicted before, along with other tax experts, in the future IRS will be increasing enforcement efforts. In fact, Chief Counsel, IRS, is looking for more attorneys, see Click Here
TIGTA said: “Now, more than ever, the IRS must focus efforts to close the Tax Gap – the difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily and on time. In audits conducted over this reporting period, TIGTA found that the IRS has neglected to consistently assess penalties on non-compliant businesses and individuals. Additionally, TIGTA noted that the IRS generally does not penalize taxpayers for making false statements when filing official tax forms. The IRS must aggressively address the lack of taxpayer compliance and hold those in violation accountable for their actions.”
Read the whole report: Click Here
Thursday, December 4th, 2008
Thanks to Tax Prof Blog for A NYT Story on the expanded US Justice Department and IRS investigation of foreign banks, Credit-Suisse and HSBC and their private banking services.
The new investigation relates to the present investigation into UBS Bank in Switzerland See See Prior Post. The IRS and US Department of Justice (DOJ) are really looking for US citizens who are stashing money and assets in foreign accounts without reporting such accounts in filings with the IRS. This investigation will come to fruition in the next several months to a year or more. In this type of investigation, the government moves forward slowly and methodically. The IRS and DOJ have to conduct the investigaitons using various international information gathering treaties and agreements.
Don’t worry, however, the wheels of justice grind slowly. The IRS and DOJ will eventually get some information about US citizens putting money in foreign bank accounts. The information will be used to identify the people, find their tax filings, updated contact information and reported financial holdings. The resulting case will go through either the civil or criminal process. If you have a foreign account you have reported to the IRS, carefully plan your future.
Your Virginia Tax Attorney
Lowrance Law LLC