Archive for the ‘Controversy’ Category
Monday, September 21st, 2009
The IRS will audit 6,000 U.S. companies to determine whether they pay all their required employment taxes to fund Social Security and Medicare benefits. See Bloomberg News
The IRS said the audits will provide data for its first statistical analysis since 1984 of how often companies misclassify workers to duck tax obligations, fail to pay taxes on fringe benefits such as personal use of company cars, and improperly pay taxes for company executives. The audits will begin in February, and the companies will be randomly chosen.
IRS will be looking at employee classificaitons, meaning “Independent Contractor or Employee.” It is simple. Companies owe taxes for an employee–state and federal withholding, FICA, FUTA, Medicare etc. Many companies will carry workers as independent contractors in order to save money and not withhold taxes. Many independent contractors should really be classified as “employees” because they meet the working conditions tests used by IRS to determine a workers status.
If a company is audited and workers are found to be employees instead of independent contractors, past taxes will be owed by the company and the worker.
It is best to get legal counsel as soon as you get notice of an IRS audit.
Bill Lowrance
Tags: employment tax, IRS Audits
Posted in Controversy, Employee, IRS Audits, Independent Contractor, employment tax | No Comments »
Thursday, May 21st, 2009
The IRS is planning more employment tax audits and examinations over the next three years. A national research project is underway right now and the IRS has announced that it will conduct detailed employment tax examinations of certain taxpayers. The selection process for taxpayers has begun and the program will last for three years.
The IRS estimates there will be over 3000 examinations and audits. Although the IRS may look at any line on an employment tax return during the examination, it will primarily focus on the following issues: (1) worker classification (employee vs. independent contractor), (2) fringe benefits, (3) officer’s compensation, and (4) reimbursed expenses.
Often the IRS will receive Form SS 8 from a worker who wants a determination of whether he/she is an independent contractor or employee. The IRS will collect information from the worker and from the company involved. The IRS will either conduct a compliance check, make a determination based on the information collected or conduct a detailed employment tax examinations. If the IRS determines the worker is and was an employee, there are serious tax implications for the employer. It could be costly for the employer in terms of back taxes.
There are several ways to challenge the IRS’ decision about whether the worker is an independent contractor or an employee. It is best to consult a tax professional if you have been contacted about an employment tax matter.
Bill Lowrance
Lowrance Law LLC
McLean, VA
703 506 1600
Tags: collect tax, Employee, employment tax, Independent Contractor, tax collection, Tax Problems
Posted in Attorney, Collections, Controversy, Employee, Independent Contractor, Tax Attorney, Tax Problems, employment tax | No Comments »
Thursday, May 7th, 2009
Here are a couple of the FAQs the IRS published yesterday on its web site regarding offshore accounts:
1. Why did the IRS issue internal guidance regarding offshore activities now?
The IRS has had a voluntary disclosure practice in its Criminal Manual for many years. Once IRS Criminal Investigation has determined preliminary acceptance into the voluntary disclosure program, the case is referred to the civil side of IRS for examination and resolution of taxes and penalties. Recent IRS enforcement efforts in the offshore area have led to an increased number of voluntary disclosures. Additional taxpayers are considering making voluntary disclosures but are reportedly reluctant to come forward because of uncertainty about the amount of their liability for potentially onerous civil penalties. In order to resolve these cases in an organized, coordinated manner and to make exposure to civil penalties more predictable, the IRS has decided to centralize the civil processing of offshore voluntary disclosures and to offer a uniform penalty structure for taxpayers who voluntarily come forward. These steps were taken to ensure thattaxpayers are treated consistently and predictably.
3. Why should I make a voluntary disclosure?
Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution.
Remember the IRS deadline for this voluntary disclosure deal is September 23, 2009.
Tags: cirme, foreign bank accounts, income tax, IRS, Offshore, Offshore Accounts, secret bank accounts, Swiss Accounts, Tax Attorney, Tax Crime, tax havens, Tax Problems
Posted in Attorney, Controversy, IRS, IRS Audits, Offshore Accounts, Tax Attorney, Tax Crime, Tax Litigation, Tax Problems, income tax, tax news | No Comments »
Thursday, May 7th, 2009
Yesterday, May 6, 2009, the IRS posted on its website FAQs on more details of the settlement offer for unreported offshore income. The FAQs discuss the recently announced program for voluntary disclosure to the IRS of offshore bank accounts. The official Voluntary Disclosure can be found Click Here.
Those meeting the terms of the disclosure program will have to pay back-taxes and interest for six years, and pay either an accuracy or delinquency penalty on all six years. They will also pay a penalty of 20% of the amount in the foreign bank accounts in the year with the highest aggregate account or asset value, but will avoid criminal prosecution. The FAQs provide examples of what it would cost to take the settlement offer, spell out the potential civil and criminal penalties for those that don’t take the offer, and address the consequences of attempted “quiet disclosure” (i.e., filing amended returns). See FAQs Click Here.
If you have an unreported offshore bank account, it is important to consider the Voluntary Disclosure program. Coming forward and disclosing your information may save you a lot of money in penalties and, more importantly, may avoid criminal prosecution. In my practice, we offer legal expertise in this area along with accounting expertise. A former IRS International Revenue Agent works exclusively for me on my client’s cases. We analyze your entire situation including foreign transactions, amended returns, reporting requirements and meeting and negotiating with the IRS.
As always, my practice is client focused.
Bill Lowrance
Lowrance Law LLC
703 506 1600
No Legal Opinion Here
Tags: cirme, foreign bank accounts, Offshore, Offshore Accounts, secret bank accounts, Swiss Accounts, Switzerland, Tax Authorities, tax crimes, tax evasion, tax havens
Posted in Attorney, Controversy, IRS, IRS Audits, Offshore Accounts, Tax Attorney, Tax Crime, Tax Litigation, Tax Problems | No Comments »
Wednesday, February 11th, 2009
If someone works for you, are they an employee or independent contractor? For an employee, you must withhold the usual taxes–social security, federal and state withholding, medicare and unemployment. The employee pays part of the withholding and you pay additional amounts. For an independent contractor, you pay a flat amount. No taxes, social security or other amounts are withheld. A small business paying employees pays a salary and also additional social security, medicare and unemployment taxes. It costs the small business more money to have employees working than to have independent contractors working.
So, as a business owner you decide to classify all your workers as independent contractors so that you do not have to withhold taxes, social security, medicare and unemployment taxes. Smart thinking, right? Well, maybe not so smart. The IRS has started an agency wide employment tax program that addresses worker classification and other employment tax issues, meaning you can look for more IRS enforcement in the future relating to worker classification.
The Treasury Inspector General for Tax Administration (TIGTA), TIGTA, recently reported that misclassification of employees as independent contractors affects millions of workers and contributes to ever increasing the tax gap. When an employee is misclassified, tax revenues are not reported or paid and the burden of uncollected taxes shifts to other taxpayers. Read Full Report Here
The IRS’ most recent estimate of the tax gap is approximately $345 billion. The employment tax portion of this figure due to under reporting is estimated to be about $54 billion with an estimated $1.6 billion being attributable to worker misclassification. However, the $1.6 billion estimate is based on Tax Year 1984 data. The IRS conducted a preliminary analysis of Fiscal Year 2006 operational and program data and found that under reporting attributable to misclassified workers is likely to be markedly higher than the $1.6 billion.
All this means is that the IRS sees significant losses in tax collection and will be instituting worker classification programs in the near future.
In my next post, I will tell you how the IRS decides if your worker is an employee or an independent contractor.
Bill Lowrance
McLean, VA
This post is not legal advice nor is it tax advice.
Tags: Employees, employment tax, Independent contractors, IRS, small businenss, Tax
Posted in Controversy, Employee, IRS, IRS Audits, Independent Contractor, Tax Problems, income tax | No Comments »
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
Bill Lowrance
Tax Attorney
Tags: cirme, collect tax, failure to pay, income tax, Office of Chief Counsel IRS, Tax, tax collection, tax crimes, tax evasion
Posted in Attorney, Collections, Controversy, IRS, IRS Audits, Tax Attorney, Tax Crime, Tax Liens, Tax Litigation, Tax Problems, Tax Research, Uncategorized, income tax | No Comments »
Monday, January 5th, 2009
Accounting Web posted a great article about famous tax cheats for 2008—sort of a looking back for tax cheaters.
The list: Wesley Snipes, Joe Francis (Girls Gone Wild), Nicholas Cage, Helio Castroneves and Paul Hogan (Crocodile) among others.
Read the whole story Click Here
Interesting story.
Bill Lowrance
Tags: cirme, failure to pay, income tax, IRS, Tax Crime, tax evasion
Posted in Attorney, Controversy, IRS, IRS Audits, Offshore Accounts, Tax Attorney, Tax Crime, Tax Problems, income tax | No Comments »
Tuesday, December 16th, 2008
Selling your property is almost impossible if the IRS has filed a tax lien. If you are trying to sell or refinance your home and there is a tax lien, you can file certificate of subordination of federal tax lien. There is no special form, but you or your representative can send in a letter requesting subordination of the lien. You must include certain information in the letter. Follow the instructions in IRS Publication 784.
The Internal Revenue Service today announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.
If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances. The process to request a discharge is in Publication 783. See Today’s IRS Announcement Here
As always if you need help, call me.
Bill Lowrance
Lowrance Law LLC
McLean, VA
Tags: discharge tax lien, federal tax lien, IRS, mortgage, refinance, subordination tax lien, Tax Liens
Posted in Controversy, IRS, Tax Attorney, Tax Liens, Tax Problems | No Comments »
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.
Bill Lowrance
Your Virginia Tax Attorney
Lowrance Law LLC
Tags: criminal tax, Department of Justice, foreign bank accounts, investigations, IRS, tax havens
Posted in Attorney, Controversy, IRS, Offshore Accounts, Tax Crime, Tax Litigation, Tax Problems, Uncategorized | No Comments »
Friday, November 28th, 2008
What can you do if the IRS audits your tax return and determines you owe more money? If the amount IRS says you owe is less than $25,000, and you disagree with that determination, you should file an appeal.
The two most active IRS divisions are the examination and collection functions. The examination division will audit your tax return and determine if you owe additional tax. The collection division attempts to collect taxes that you owe the IRS. In both situations, if you disagree with the IRS, you can file an appeal to the Office of Appeals, see Appeals. The Appeals mission is to settle tax disagreements without having to go to Court and a formal trial. The Office of Appeals is independent of any other IRS office and provides a venue where disagreements concerning the application of tax law can be resolved on a fair and impartial basis.
If the IRS audits your return and they make a determination of additioan taxes due. If the amount involved is less than $25,000, you can utilize the small case request for Appeals Division rather than the more complicated formal written protest. You can represent yourself if you can adequately explain why you disagree with the IRS findings. Basically, you send a letter requesting Appeals consideration and explaining the audit changes you do not agree with and the reason you don’t agree.
For specific guidance in preparing a small case request/protest, refer to Form 12203, Request for Appeals Review.
If the IRS determines you owe more than $25,000 in additional tax, you may want to consult with your CPA, accountant or tax attorney.
Bill Lowrance
Tags: audits, examination, IRS, taxes
Posted in Controversy, IRS, IRS Audits, Tax Attorney, Tax Problems | No Comments »
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