Archive for October, 2008
Thursday, October 30th, 2008
IRS has a great Small Business web page at IRS Business. Check out starting, operating or closing a business at Start/Close Business. Also, check the latest business news that gives small business owners information about the latest mileage rates, worker classification (employee vs. independent contractor) and other announcements See Business News. Get the IRS information on business expenses at Business Expenses.
But as always, remember this is IRS general information. For a more in-depth research and analysis check with your tax attorney or accountant.
Wednesday, October 29th, 2008
Most businesses withhold payroll taxes from employees’ salary checks. Taxes withheld are income, social security and medicare payments. Other withholding items are for State taxes, retirement funds and unemployment funds.
Right now in the hard economic times, business owners may be tempted to use the money they deduct from their employee’s wages for other expenses. The only problems is that the deductions are not the employer’s funds. The funds should be deposited into special accounts for payment to the proper taxing authorities.
If the employer does not make timely deposits, there will be penalties to pay. In addition, if the business goes down, the owner or “responsible person” in the business may assessed the missed deposits under IRC section 6672–the 100% penalty provision. The “responsible person,” usually the business owner will personally owe the money not properly withheld and paid over to the IRS.
If you, as a business owner, are subject to the 100% penalty assessment, contact your tax attorney right away.
See the IRS publication Click Here
Thursday, October 23rd, 2008
An estimated $5 to $7 trillion dollars are held in offshore tax havens according to Secretary General Angel Gurría of the Organization Economic Cooperation and Development (OECD) headquartered in Paris Click Here OECD. Why is this important? The IRS is gearing up to increase enforcement against US taxpayers hiding money in offshore tax havens. The OECD is an international organization, based in Paris, with over 30 countries making up its membership. The US is a member of the OECD. The OECD has called for offshore tax havens to enter into agreements with countries to provide business, banking and financial information for tax purposes.
For many years the US and OECD member countries have targeted offshore tax havens to provide more information for tax purposes. Many countries entered into Tax Information Exchange Agreements (TIEAs)with the US and other OECD member countries. The US has TIEAs with many of the offshore tax haven countries. The OECD recently determined that the exchange of information programs for tax purposes are not fully successful Click OECD.
This brings our own IRS into the scene. The IRS has studied our international tax gap, meaning some US citizens may not be reporting offshore income that is taxable. IRS Study In fact, the IRS is planning more international tax enforcement. IRS International
Recently, the IRS has gotten names of US citizens having secret bank accounts in Switzerland. You can be sure that the IRS will be contacting these account owners to question them about the money in those accounts and whether any tax is due. See NY Times Article
When you or your client gets that visit from the IRS regarding the secret bank account in Switzerland, make sure you are prepared to smartly respond to the IRS. If you need more information, contact me.
Monday, October 20th, 2008
You may not think international tax law applies to you, but it may. Do you have a bank account outside of the United States? If so, you are supposed to report it on your tax return. There is a check box on the tax return to report any foreign bank accounts. If you do not report your account, the IRS may come calling on you.
I worked as an attorney in the International Division of Office of Chief Counsel, IRS, for many years. As such, I assisted the IRS in gathering information from many foreign countries including most of the the Caribbean jurisdictions. So, there is a process for the IRS to collect foreign bank account and business/financial information.
The IRS has many ways to find out about your foreign activities. Many foreign countries have tax treaties with the US. All the treaties have an “exchange of information” section. The taxing authority of each country often spontaneously furnishes business and financial information to the IRS. Well, the IRS takes it from there. In addition, the IRS has Tax Information Exchange Agreements with many foreign jurisdictions. Offshore financial centers like the Cayman Islands, Bahamas, Bermuda and many other counties signed these agreements. Basically, the IRS can request business, banking or financial information from the foreign tax authority. The foreign tax authority will get the information and give it to the IRS.
So, do not think your financial or business information is out of the IRS’ grasp just because the information is in another country.
More on this interesting subject will be in another post soon. Keep coming back and read about it.
Tuesday, October 14th, 2008
Reuters reports, Reuters Article, that four former KMPG partners are going to trial on charges of allegedly cheating the government out of more than $1 billion through the use of improper tax shelters for hundreds of wealthy clients. The trial is scheduled this month.
The four men are charged with conspiring to evade taxes for more than 600 clients in a case that was touted as the largest criminal tax prosecution when it started in 2005 with 13 defendants.
The four men are charged with conspiring to evade taxes for more than 600 clients in a case that was touted as the largest criminal tax prosecution when it started in 2005 with 13 defendants, but is much smaller now.
Remember to keep clean with your taxes.
Saturday, October 11th, 2008
According to an Associated Press article, many states are increasing tax enforcement and collections efforts as state revenues decline in our present economic condition.
States like New York, California, Massachusetts and Illinois are ”beefing up” tax enforcement and collections. You can believe Virginia will, and is, doing the same thing. Sometime ago Virginia contracted with a collection agency in Livermore, CA, to collect past due taxes. This collection agency, Diversied Collection Services, Inc. gets taxpayer information from the Virginia Department of Tax. The agency starts calling and writing the taxpayer demanding payments. Check out the Virginia Department of Tax Here
I spoke to a person identifying herself as Fay Miller at Diversied the other day. I called on behalf of a client who, in the past, did not have money to pay taxes. Well, Ms. Miller demanded full payment of the client’s tax bill. Of course, this was done without the Virginia Department of Tax contacting me as the representative of my client. But, that is another story I will talk about later.
States are facing budget and revenue problems. The taxing authorities will be increasing enforcemnt efforts against companies, small businesses and individuals. Now that may mean turning over collection to collection agencies. I am appalled that the states, especially Virginia, contracts with a collection agency in California to contact Virginia taxpayers using the famous and infamous collection agency techniques.
I hope to find out more information about the Virginia contract with this collection agency and the process used to collect past taxes. Of course, everyone should file returns and pay taxes on time. The facts are, however, that some people have hard times and cannot pay the tax due.
Anyway read the entire AP story Click Here
Your Virginia Tax Attorney www.lowrancelaw.com
Friday, October 10th, 2008
How much money do you have in your offshore bank account? That’s right. Some people attempt to hide money and other assets in foreign countries–out of the US and, supposedly, hidden from the IRS.
Many private investigators and attorneys search for hidden, offshore accounts. Sometimes the money or other assets are hidden from a spouse in preparation for a divorce. Sometimes money is shuffled offshore to evade taxes. Tax evasion is a federal crime, as we all know. It is even a felony, too.
Helio Castroneves, a U.S. resident and two-time winner of the Indianapolis 500, was recently indicted by a grand jury on charges of conspiracy to defraud the United States of income taxes and with six separate counts of income tax evasion for tax years 1999 through 2004.
His sister and business manager, Katiucia Castroneves of Miami, and his attorney, Alan R. Miller of Michigan were also indicted. The crime, using an offshore Panamanian shell corporation to fraudulently conceal income received from business deals. Helio Castroneves received $6,000,000 in a three year contract, kicked back $5.4 million, kept $600,000 and only reported $50,000 on his federal income tax returns. Well, with that the IRS and the US Justice Department got busy.
In another scheme, like one was not enough, the three defendants hid $5,000,000 in an offshore “deferred royalty plan.” It is a complicated scheme, legal under certain circumstances, but not legal in the way these three carried out the scheme. The bottom line is that Helio earned the $5,000,000, allegedly lied about his control over the money and did not report any of the money as income. Well, the IRS jumped on that one too.
Take note of the governments statement on this story:
“Taxpayers, small and large, famous and not famous, should be aware of the enormously severe consequences they face if they fraudulently use offshore accounts to hide income, including potentially going to prison, paying back all their taxes plus interest and penalties, and being branded a felon for the rest of their lives,” said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division.
“Whether one makes a living parking cars or racing them, paying taxes is a responsibility that everyone shares. Our tax laws apply equally to everyone, regardless of status, class and income, and the U.S. Attorney’s Office will prosecute these cases vigorously,” said U.S. Attorney Acosta.
Hey, read the whole story: Click Here
But, remember to play straight with income and paying taxes. You do not want the IRS and/or the US Justice Department involved in your life.
In my next post I will talk about Switzerland disclosing secret bank account information to the IRS and the US Department of Justice.
Monday, October 6th, 2008
Lowrance Law LLC is a private law firm in McLean, VA, specializing in tax problems. I represent people having tax problems with the IRS. I focus on tax controversy matters (civil and criminal tax matters), and tax disputes for small businesses, individuals and other attorneys.
Today is the first posting to the Lowrance Law Firm’s Blog. In fact, the Lowrance Law website, Lowrance Law LLC, is online today. The purpose of this Blog is to discuss tax controversy issues, news about taxes, the Internal Revenue Service and the tax code. I will write about these subjects in ordinary, non-technical and understandable language. Discussing taxes can be very dry and technical, but I hope to add new insight to various tax issues.
For example, how do you feel when you receive a letter from the IRS? You probably feel queasy, nervous and dread opening the envelope. When you receive that letter you are involved in a tax controversy whether you realize it or not. The IRS will tell you they are examining your tax return regarding certain matters. They will ask you to provide more information, and they may invite you to come into the office to explain your tax return. Sometimes this starts a long road to solving your tax problems. Your particular tax problem may be “no changed” by the examining agent. If so, you are lucky. That means the IRS accepts your return as filed. If the IRS disallows your deduction or adds more income to your return, you may start on various appeals within the IRS perhaps leading to litigation.
In future posts, I will discuss the many ways of dealing with the IRS or the state taxing authorities. I will explain about IRS collection procedures, appeal procedures, how to deal with the Revenue Agents and how to find someone to represent you if needed.
You can read about the details of my experience as a tax attorney with the Office of Chief Counsel, IRS, on my website, Lowrance Law LLC. I worked with and advised IRS agents in many types of cases. I litigated many tax cases in the United States Tax Court, and I assisted the US Department of Justice in tax cases. My tax attorney experience combined with my litigation and investigative experience (former Special Agent, FBI) provides me with unique skills to deal with tax controversy matters.
This Blog will evolve over time with research links, links to other tax blogs and discussions that will help you understand how to deal with the IRS and other tax authorities.
Contact me with any questions.