October 2010 Archives

Bust of Bogus Tax Relief Company in Beverly Hills a Reminder to those Dealing with the IRS to seek Advice of Qualified Tax Lawyer

October 31, 2010,

Our tax attorneys noted the recent closure of American Tax Relief in Beverly Hills for fraud and misleading advertising that claimed the company could settle delinquent federal and state taxes for pennies on the dollar.
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We reported recently on our Tax Problem Attorney Blog when Roni Deutch ran afoul of the California Attorney General for advertising that was allegedly misleading. Those facing charges for tax evasion need solid legal advice and should not be misled. A tax lawyer can save a client thousands of dollars by protecting their rights in disputes with the IRS. However, finding a reputable tax dispute law firm is a critical first step in the process.

The Los Angeles Times reports that the Federal Trade Commission accuses American Tax Relief of bilking 20,000 customers out of $100 million with false claims about the company's ability to reduce their tax debt.

The FTC said the company used TV, radio and Internet advertising to claim it could settle tax debt with the IRS for less than what was owed. It also claimed it could remove tax liens, stop wage garnishments and successfully challenge bank and tax levies as well as property seizures and "unbearable monthly payments."

The husband and wife couple had been operating the company for over a decade and charged upfront fees of up to $25,000. The company's assets were frozen by a Chicago judge who issued a restraining order. And a receiver has been appointed to manage the company.

Despite earning more than $60 million form the business, the couple allegedly failed to pay their own taxes.

Investigators said the company provided an "essentially useless service" while pushing people further into debt instead of helping them address their tax problems with the IRS. The company charged thousands to client credit cards and stopped answering customer calls after receiving payment, according to investigators, who hope to recover restitution for the victims.

There has been no reports of whether either owner even had a law degree.

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IRS Files Summary Judgment in FBAR Case

October 29, 2010,

In mid-October the IRS filed a summary judgment motion seeking FBAR (Foreign Bank Account Report, Form TDF 90-22.1) penalties of over $225,000 for a civil failure to file an FBAR. This is only the second civil FBAR case that I am aware of which didn’t involve an underlying non-tax crime. According to District Court documents Jon McBride held offshore accounts totaling in excess of $1,000,000. The case was filed in Utah in April of 2009, but the IRS had assessed the FBAR penalties about 18 months earlier. The facts, at least as recited by the IRS in its motion, are problematic for the defendant. Allegations include:

* Offshore Entities Set Up by a Firm which in its brochures specifically advised of the requirement to file an FBAR

* Funneling of Corporate Earnings Back to McBride and Others through the Use of Loans and Other Devices

* McBride was advised by a Financial Consultant in writing that the Use of the Offshore Entities were Problematic, and gave him an article describing offshore bank scams.

* McBride’s accountant provided a declaration that he had “discussed the FBAR filing requirement” and asked whether McBride had any offshore accounts.

* When questioned by an IRS Revenue Agent about offshore accounts McBride denied using them.

Sounds like McBride will have a tough time of it, although he hasn’t yet filed his opposition papers so we don’t know about his side of the story.

If you have offshore financial accounts, and are considering a voluntary disclosure contact the tax litigation attorneys at Brager Tax Law Group, A P.C.

IRS Loses Big in FBAR (Foreign Bank Account Report) Case

October 18, 2010,

Last month the IRS lost a case (United States v. J. Brian Williams) in which it tried to impose the 50% penalty for willfully failing to file a Foreign Bank Account Report, TD F 90-22.1 (FBAR). This appears to be the first case that has gone to court on FBAR penalties which did not involve someone who was also being charged with drug or other serious criminal charges, other than tax charges. J. Bryan Williams had already been convicted of tax evasion, and the IRS then brought as civil law suit to collect the FBAR penalty since Williams had failed to file FBARs. The IRS relied on the tax fraud conviction, and the fact that on his federal income tax return Mr. Williams had checked the box on Schedule B stating that he did not have an interest in a foreign financial account.

The judge rejected these contentions stating that “…the Government fails to differentiate tax evasion from failing to check the box admitting the existence of a foreign bank account.” The court also noted that “a taxpayer’s signature on a return does not itself prove his knowledge of the contents, but knowledge may be inferred from the signature along with the surround facts and circumstances.”

The case is good news for those taxpayers who have entered the voluntary disclosure program, and are now believe that the FBAR penalty that the IRS seeks to impose is too high.

On the other hand it’s important to note that in the Williams case, by the due date of the FBAR Mr. Williams’ Swiss Bank accounts had been frozen by the Swiss government, the IRS knew that the accounts had been frozen, and Mr. Williams knew that the IRS knew that the Swiss bank accounts had been frozen. Thus the argument went that Williams had no motivation not to file the FBAR because the IRS already knew about the accounts. It will be the unusual case where this type of factual scenario exists, and therefore the IRS will probably argue that Williams is distinguishable.

If you haven’t filed your FBARs and don’t know what to do call the tax attorneys at Brager Tax Law Group, A P.C. for a consultation.

Hotel owners first to be convicted of tax fraud under government's crackdown on offshore bank accounts

October 10, 2010,

A father and son have been convicted of federal tax evasion charges after authorities say they sold a hotel and used offshore bank accounts to hide $33 million from the Internal Revenue Service.

Los Angeles tax lawyers and others had been closely watching this case, which was the first trial since the U.S. Department of Justice announced the crackdown on offshore tax evasion in March 2009.
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In this case, the 77-year-old father and the 46-year-old son were found guilty of conspiring to defraud the Internal Revenue Service and filing false tax returns, according to Bloomberg News. The men owned hotels under the "Flatotel" brand. Both face up to 11 years in prison.

The IRS touted the conviction as a message to Americans who hide assets offshore. The push by the government in the last several years to crackdown on off-shore bank accounts has included a period of amnesty and other tactics aimed at getting citizens to voluntarily admit to hiding assets. Subsequently, the government has promised to increase the pressure on those found in violation of the law and to push for significant penalties for those facing criminal charges involving offshore bank accounts.

Prosecutors accused the pair of using offshore companies, family members and friends to pose as owners and of forging documents to cheat the IRS. The government contends the father and son owed taxes on undeclared income resulting from the use of mansions and luxury cars that the two claimed were owned by various corporations.

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