January 2009 Archives

Tax Problems Continue For Kerik

January 28, 2009,

Bernard Kerik’s tax problems have not stopped. The former New York City police commissioner was indicted on December 2, 2009 on charges that Kerik “corruptly obstructed and impeded, and attempted to obstruct and impede, the due administration of the Internal Revenue laws.” This second indictment supersedes the previous indictment filed November 8, 2007. Among the acts cited in the indictment are filing false federal tax returns, taking fraudulent deductions, failing to report income, and providing false information to his accountants. Kerik has pled not guilty.

According to an article in the Washington Post Kerik had been trying to fend off charges of tax evasion and tax fraud for many months.

Kerik, former US interim minister of interior Iraq, rose to fame in 2004 as President Bush’s nominee to replace Tom Ridge as the Secretary of Homeland Security. After it was discovered he employed an illegal immigrant as his children’s nanny, he withdrew from the nomination process.

If you have tax problems contact certified tax specialist Dennis Brager.

IRS Investigation Into UBS Tax Evasion Case Expands

January 28, 2009,

According to a report in the Wall Street Journal the Internal Revenue Service (IRS) now believes that the number of UBS clients who hold offshore accounts is higher than the 17,000 originally reported. The IRS believes that UBS helped these clients commit tax fraud by helping them hide their income from the IRS. According to the article UBS is in talks with the Department of Justice to avoid possible felony indictments by paying a penalty in the rage of 1.2 billion dollars.

UBS become front page news when a former UBS executive told the IRS that UBS routinely advised its customers that they weren’t required to disclose their Swiss bank accounts to the IRS. Of course that was a bad bit of advice which could expose people to tax evasion and related charges since U.S. citizens are required to make a disclosure of their offshore bank accounts in two places. First, on Schedule B of their Form 1040 in response to question 7a “At any time during 2008, did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?” Second, holders of foreign bank accounts must report their existence on Form TDF 90-22.1.

In July 2008 a District Court judge in Miami granted an IRS summons to turn over the records with the names of US taxpayers who requested their accounts be kept hidden from the IRS. Clearly such records would be part of a chain of evidence that the IRS could use to bring tax evasion charges. UBS has yet to turn over the records, and according to the Journal the IRS is considering whether to ask the judge for an additional order forcing the turnover of the records.

I have mentioned before the possibility of avoiding tax evasion and tax fraud related charges by making a voluntary disclosure to the IRS, but it appears that the window of opportunity to do so may be narrowing soon.

If you would like to discuss your tax problems with a tax litigation attorney please call Brager Tax Law Group, A P.C.

Non-Payment of Payroll Taxes Results in Tax Fraud Conviction

January 13, 2009,

Many business taxpayers fail to pay over payroll taxes to the Internal Revenue Service ("IRS"). By doing so they expose themselves to personal liability pursuant to Internal Revenue Code Section 6672 known as the Trust Fund Recovery Penalty (TFRP). Generally, corporate officers, shareholders and others who have the responsibility for withholding and paying over payroll taxes can be held personally responsible for the trust fund portion of the payroll taxes if they willfully fail to pay these amounts to the IRS. Sometimes business owners who are undergoing tough financial times are tempted to take this risk. In my experience the thinking is that if a company doesn’t pay its vendors it will be out of business in short order. On the other hand the IRS tends to be slow about insisting on payment, and it can be months or even years in some situations before the IRS gets serious. Based upon this analysis the business owner decides to take a calculated risk, and hope that business picks up before the IRS shows up.

Jack Easterday found out the hard way that the stakes can be very high indeed. Mr. Easterday was convicted of willful failure to pay over employee payroll taxes in violation of Internal Revenue Code Section 7202. Mr. Easterday’s conviction was upheld by the Ninth Circuit Court of Appeals. United States v. Easterday. The extremely scary part of the decision by the Ninth Circuit was that the Court held that Easterday was guilty even though he may have been able to prove that the company didn’t have sufficient funds to pay the payroll taxes.

If you have payroll tax problems, or any other type of tax problem you can contact the tax lawyers at Brager Tax Law Group.

IRS Taxpayer Advocate Issues Report

January 9, 2009,

Nina Olson, the National Taxpayer Advocate, issued her annual report to Congress in which she lists the 20 most serious tax problems as required by Internal Revenue Code (IRC) § 7803(c)(2)(B)(ii)(III). They are:

1. The Complexity of the Tax Code
2. The IRS Needs to More Fully Consider the Impact of Collection Enforcement Actions on Taxpayers Experiencing Economic Difficulties
3. Understanding and Reporting the Tax Consequences of Cancellation of Debt Income
4. Employment Taxes
5. IRS Process Improvements to Assist Victims of Identity Theft
6. Taxpayer Service: Bringing Service to the Taxpayer
7. Navigating the IRS
8. IRS Handling of ITIN Applications Significantly Delays Taxpayer Returns and Refunds
9. Access to the IRS by Individual Taxpayers Located Outside the United States
10. Customer Service Within Compliance
11. Local Compliance Initiatives Have Great Potential But Face Significant Challenges
12. Customer Service Issues in the IRS’s Automated Collection Syste (ACS)
13. The IRS Should Proactively Address Emerging Issues Such as Those Arising From “Virtual Worlds”
14. Suitability of the Examination Process
15. The IRS Correspondence Examination Program Promotes Premature Notices, Case Closures, and Assessments
16. The Impact of IRS Centralization on Tax Administration
17. Incorrect Examination Referrals and Prioritization Decisions Cause Substantial Delays in Amended Return Processing for Individuals
18. Inadequate Files Management Burdens Taxpayers
19. The IRS Miscalculates Interest and Penalties But Fails to Correct These Errors Due to Restrictive Abatement Policies
20. Inefficiencies in the Administration of the Combined Annual Wage Reporting Program Impose Substantial Burden on Employers and Waste IRS Resources

Tax Problem 21 was an update of a previous item. According to the National Taxpayer Advocate the IRS’s private tax debt collection initiative is failing In most respects.

More detail on some of these tax problems in future blog posts. For the moment you may wish to check out the post at ataxingmatter describing the National Taxpayer Advocate's previous criticisms of the private tax debt collection initiative here.

If you are having tax problems contact the tax attorneys at Brager Tax Law Group, A P.C.

Madoff Ponzi Schemes, Securities Fraud and the Internal Revenue Service

January 6, 2009,

Once investors get over their initial shock that they were being bilked by Bernard Madoff in a massive Ponzi scheme they will be looking for ways lessen the impact. One of those ways is through the tax laws. Our tax attorneys have identified at least two possibilities. The first is that investors may be entitled to a theft loss pursuant to Internal Revenue Code Section 165. Unfortunately the year the loss can be deducted will probably be the subject of a tax dispute. Generally theft losses are deductible in the year of discovery. However, if there is still a possibility of recovery the deduction may need to be deferred.

Another idea is filing amended income tax returns for the last three years, taking the position that the payments received which had been reported as capital gains, dividends or interest were in fact a return of capital, and therefore non-taxable. This position is supported by Greenberg v. Commissioner, a 1996 case decided by the United States Tax Court. The Internal Revenue Service ("IRS") believes, however, that the rule in Greenberg only applies in limited situations. IRS Legal Memorandum ILM 200305028. It is likely that those who file amended returns will be subjected to a tax audit, and that barring a change of heart by the Internal Revenue Service will need to hire a tax litigation attorney to assist them.

Generally the tax law allows only three years from the date the original tax returns were filed to file amended returns. For most taxpayers this means that if they act quickly they can file amended returns for 2005, 2006, and 2007.

If you have a tax problem call certified tax specialist Dennis Brager.