Tax Problem Attorney Blog

A Southern California tax return preparer, Matthew Carl Berry, was convicted of one count of conspiracy to defraud the IRS pursuant to 18 U.S.C 371, and three counts of filing false federal income tax returns. According to the indictment among other things Berry prepared false documents to be used in IRS tax audits. According to the press release issued by the Department of Justice Tax Division’s criminal tax attorneys, Berry prepared fraudulent tax returns by claiming mortgage interest deductions for taxpayers who did not own homes. Berry faces up to 5 years imprisonment, and a fine of up to $250,000 for the conspiracy conviction, and another three years for the criminal tax convictions for filing false income tax returns. Berry could also be subject to civil tax preparer penalties pursuant to Internal Revenue Code § 6694.

If you have concerns about exposure to criminal tax fraud penalties or civil tax fraud penalties contact the tax dispute lawyers at Brager Tax Law Group, A P.C.

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Posted In: Tax Fraud , Tax Litigation and Tax Controversy , Tax Preparer Penalties

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The Ninth Circuit Court of Appeals in California upheld a decision of the United States Tax Court (Tax Court) denying innocent spouse relief pursuant to Internal Revenue Code § 6015. Generally spouses filing joint income tax returns are both liable for any taxes due. In certain circumstances, however, one spouse may be entitled to so-called innocent spouse relief. One of the keys to obtaining innocent spouse relief, however, is making the request in a timely manner. There are a number of different deadlines which must be met, or else innocent spouse relief will be lost. In Huynh v. Commissioner, T.C. Memo 2006-180 the taxpayer ran afoul of Internal Revenue Code § 6015(g)(2) . Not surprisingly the tax law requires that if a taxpayer wishes to claim innocent spouse relief it must be asserted in the same Tax Court case in which the taxpayer is disputing an income tax deficiency. However, Internal Revenue Code § 6015(g)(2) creates an exception if the innocent spouse claim was not an issue in the Tax Court proceeding. The exception to the exception, however, is that if the putative innocent spouse “participated meaningfully” in the proceeding than she can not later claim innocent spouse status.

The Tax Court noted that Mrs. Huynh participated in the prior tax deficiency proceeding by among other things, being present at meetings with the IRS’ Appeals Office, as well participating in pre-trial preparations, and settlement negotiations. Under these circumstances the Tax Court refines to allow Mrs. Huynh to later claim innocent spouse relief. Ms. Huynh was not represented by a tax attorney in either the first or second proceeding. Had she been properly advised by a tax attorney she would have raised her innocent spouse claim in the first proceeding.

If you believe you may be entitled to innocent spouse relief, contact California State Bar Certified Tax Specialist Dennis Brager, Esq.

Continue reading "Innocent Spouse Relief Not Permitted by Ninth Circuit" »

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Posted In: Tax Debt , Tax Disputes , Tax Litigation and Tax Controversy

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David Szen, the former traveling secretary for the New York Yankees, was sentenced on April 4, 2008 to 2 years probation for tax crimes. Szen was also ordered to pay a tax debt of approximately $10,285 in taxes, plus tax penalties and interest, as well as a fine in the amount of $7,500. Szen had waived his right to indictment and plead guilty to one count of filing a false tax return pursuant to Internal Revenue Code § 7206(1). It is likely that Szen will have additional civil tax debts.

According to the IRS, Szen while an employee of the New York Yankees, failed to report tip income of approximately $53,350 on his individual income tax returns for the tax periods 2001 through 2005. The tips came from unidentified players and coaches ranging from a few hundred to $10,000.

Sven took a leave of absence from the Yankees in July of 2007 pending the investigation by the Internal Revenue Service (IRS) Criminal Investigation Division and was later fired by the Yankees after pleading guilty.

According to the New York Post, the IRS has been investigating possible tax evasion by Major League Baseball clubhouse employees who pocket large, under-the-table tips from players for doing various nonbaseball related errands. The investigation took full swing after investigators noticed a large discrepancy in the amount of tips to clubhouse workers players claimed as tax deductions versus the amount of tip income clubhouse workers reported. The gap between deductions and nonreported tips ranges from around $100,000 to over $1 million per team.

If you have been accused by the IRS of tax fraud or tax evasion contact the Southern California tax lawyers at Brager Tax Law Group, A P.C.

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Posted In: Tax Fraud

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Tax lawyers from the Department of Justice are seeking to enjoin two tax return preparers from representing anyone before the Internal Revenue Service (IRS) , acting as tax preparers or engaging in any other tax related conduct. The IRS complaint also seeks an injunction barring the tax preparers from engaging in conduct which is subject to the tax preparer penalties of Internal Revenue Code § 6694. The injunction was requested pursuant to Internal Revenue Code § 7407 and Internal Revenue Code § 7408.

According to the IRS complaint the tax return preparers committed tax fraud by filing fraudulent tax returns, and fraudulent amended tax returns claiming deductions for bogus mining development costs. Interestingly the IRS complaint alleges that 7 of the customers who had fraudulent tax returns prepared were NFL football players. The IRS complaint does not reveal the names of the players, and there is no indication in the complaint that the players knew that tax fraud had been committed.

If you are a tax preparer who has been accused by the IRS of tax fraud, tax evasion or violation of the tax return preparer penalty rules under Internal Revenue Code § 6694 contact the Southern California tax lawyers at Brager Tax Law Group, A P.C. Our tax lawyers represent clients throughout California, including Orange County, the Inland Empire, San Bernardino County, and Riverside County including the cities of Newport Beach, Laguna Beach, San Juan Capistrano, San Clemente, Mission Viejo, Laguna Niguel, Laguna Hills, Dana Point, Huntington Beach, Long Beach, Costa Mesa, Anaheim and Santa Ana.

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Posted In: Tax Disputes , Tax Fraud , Tax Litigation and Tax Controversy , Tax Preparer Penalties

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Internal Revenue Code § 6672 provides that so-called responsible persons who willfully fail to pay corporate payroll taxes may be held personally responsible for the payment of the trust fund portion of these taxes. Internal Revenue Code § 6672 is sometimes referred to as the trust fund recovery penalty (TFRP). Who is a responsible person? As the court in Horovitz v. United States (WD PA 2008) explained: “responsibility is a matter of status, duty or authority.” The definition of responsible person is not limited to the person with the final say on which bills get paid, but includes others as well.

Horovitz illustrates the principle that more than one person can have liability for the trust fund recovery penalty. The CFO was deemed to be a responsible person since he had the full authority to sign checks, could hire and fire employees, signed payroll tax returns, was a corporate officer, and a 20% owner. The CEO was also held liable for the trust fund recovery penalty since he invested several million dollars in the business, owned 80% of the stock, had unlimited hiring and firing ability and check writing authority, and served as the CEO with day to day involvement in the business.

If you have payroll tax problems, and the IRS is threatening to impose the trust fund recovery penalty contact the Los Angeles, California tax litigation lawyers at Brager Tax Law Group, A P.C.

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Posted In: Payroll Tax Audits , Payroll Tax Problems , Tax Disputes

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In Kennedy v. Commissioner, T.C. Memo 2008-33, the United States Tax Court determined that the Internal Revenue Service (IRS) could not serve a tax levy on the taxpayer’s assets since it failed to send the collection due process (CDP) notice to the taxpayer’s last know address. Generally in order for the IRS to issue a tax levy it must first mail a Notice of Intent to Levy, and Right to Request Hearing, commonly referred to as a CDP Notice, pursuant to Internal Revenue Code § 6330. In Kennedy, the IRS mailed its notices to two different addresses. However, Mr. Kennedy never received them. Apparently this was because both addresses were incorrect. In fact the way Mr. Kennedy found out about the collection due process notice was when the IRS served a tax levy on his bank.

The Tax Court pointed out that Internal Revenue Code § 6330(a)(2) provides that the CDP notice must either be given in person, left at the person’s dwelling or usual place of business, or sent by certified or registered mail to the person’s last known address. Since the IRS failed to send the CDP notice to Mr. Kennedy’s last known address the CDP notice was invalid. By the time the case got to the Tax Court the IRS realizing this and had refunded the money seized by the tax levy. That, however, was not sufficient. In order for the IRS to serve any additional tax levies the Tax Court required that the IRS issue a new CDP notice, and give Mr. Kennedy an opportunity for a hearing first in the IRS’ Appeals Division, and then if Mr. Kennedy was not satisfied with the result he would be entitled to a brand new hearing in the Tax Court.

If you have received a tax levy, have tax debts, or other tax problems call the tax controversy lawyers at Brager Tax Law Group, A P.C.

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Posted In: Tax Debt , Tax Disputes , Tax Litigation and Tax Controversy

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The Internal Revenue Service (IRS) increased the number of tax audits of small and medium size corporations between fiscal year 2005, and 2007 according to a report by TRAC. The number of tax audits for corporations with assets of less than $5 million increased by 41%, and tax audits for corporations with assets of between $5 million and 10 million increased by 24%. Tax audits of corporations with assets from $10 to $50 million in assets rose by 29%. On the other hand IRS tax audits of the largest corporations, those with assets over $250 million, dropped by 38%. The number of tax audits for those corporations with between $100 million and $250 million dropped by 31%. Some see this as a sign that the IRS is cracking down on small businesses while it is easing up on the largest companies. However, the IRS says that in fact the IRS doesn’t need to audit as many large corporations because of the success of the IRS pre-filing agreement programs.

Whatever the merits of the argument, small and medium size business need to be aware of the increased risk of a tax audits

If your small or medium size business has an IRS, SBE, FTB or EDD tax audit, and you need help contact the Los Angeles, California tax dispute attorneys at Brager Tax Law Group, A P.C.

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Sometimes taxpayers want to be “creative” in filling out IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals). Stephen Miller got too creative, and he was found guilty of tax evasion in violation of Internal Revenue Code § 7201. He was sentenced to 46 months imprisonment. The conviction was upheld by the Court of Appeals. United States v. Stephen Miller (No. 06-11078) (5th Cir. 2008). Miller, who owed the Internal Revenue Service (IRS) about 2 million dollars filed an offer in compromise with the IRS in which he stated he had insufficient assets and income to pay the tax debt. The IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) he filed stated he only had $40,000 in assets including an IRA with a balance of $25,000. What he didn’t tell the IRS was that he had withdrawn $1,000,000 from his IRA, and transferred it offshore. When the IRS asked about the money taken out of the IRA he responded that the money had been used to pay off a loan Euromex Leasing Corporation in the Isle of Mann. As it turned out Euromex was a shell corporation controlled and formed by a financial planner that Miller consulted to hide his money from the IRS. And how did the IRS find out that it was all a lie? Simple, the financial planner turned Miller in when he wound up with his own tax fraud problems with the IRS.

If you have tax debts and don't want to be convicted of tax evasion call the tax attorneys at Brager Tax Law Group, A P.C.

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Posted In: Offers in Compromise , Tax Debt , Tax Fraud

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The Internal Revenue Service (IRS) has released Publication 971 on Innocent Spouse relief pursuant to Internal Revenue Code § 6015. Generally, individuals who sign joint tax returns with their spouses are both jointly and severally liable for any taxes not paid with the return without regard to which spouse created the tax problem. Under the provisions of Internal Revenue Code § 6015, however, some spouses may be able to get out from under their tax problems. Publication 971 gives the IRS take on innocent spouse relief. If you want to read the opinions of our tax lawyers on innocent spouse relief you can see the innocent spouse articles on our website.

Publication 971 points out the time periods for filing for innocent spouse relief. Requests for innocent spouse relief must be filed on IRS Form 8857 no later than two years from the date the IRS first attempts to collect the tax due. IRS attempts to collect the tax due are limited to:

• The filing of a claim for by the IRS in a court proceeding, including a proof of claim in a bankruptcy proceeding.
• An IRS offset of a refund claim for a different year, as long as the IRS notified the taxpayer about her right to file for innocent spouse relief.
• The filing of a lawsuit by the IRS to collect the tax due
• The issuance by the IRS of a collection due process (CDP) notice pursuant to Internal Revenue Code §6330.

The California Franchise Tax Board (FTB) has similar rules to the Internal Revenue Service for taxpayers who are requesting innocent spouse relief for taxes owed to the State of California.

If you have a tax problem, and believe that you may be entitled to innocent spouse relief , and wish to have one our tax lawyers represent you please contact us.

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Posted In: Tax Debt , Tax Disputes , Tax Litigation and Tax Controversy

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The United States Tax Court held that the IRS did not abuse its discretion when the Appeals Division upheld a notice of intent to levy issued under Internal Revenue Code § 6330. In West v. Commissioner, TC Memo. 2008-30, the Wests had obtained an offer in compromise from the IRS, but then violated its terms by failing to pay estimated taxes, failing to timely file tax returns, and failing to pay multiple tax penalties assessed against them during the 5 year period following the acceptance of their offer in compromise.

To make matters worse the IRS tried to notify the Wests about the impending default of the their offer in compromise, but the Wests had moved, and failed to notify the IRS of their new address. The Wests tried to rely on the failure of the IRS to notify their representative that their offer in compromise was in danger, but the Tax Court held that the IRS had no duty to notify their representative.

Points to Remember:

• If your offer in compromise has been accepted don’t forget to pay and file your taxes on time for at least the next five years.
• If you are involved in any type of tax dispute with the IRS make sure that you keep them updated with your current address.

If you have a tax dispute and need a tax lawyer call the tax attorneys, at Brager Tax Law Group, A P.C.

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Posted In: Offers in Compromise , Tax Debt

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When the Internal Revenue Service (IRS) files a tax lien it is required by Internal Revenue Code § 6320 to notify taxpayers within 5 business days of the filing of the tax lien. In addition, under Internal Revenue Code § 6320(b) it must provide for a hearing before the Internal Revenue Service’s Appeals Division. According to a report by the Treasury Inspector General for Tax Administration (TIGTA), the IRS may not have complied with Internal Revenue Code § 6320in all cases. For example, the IRS is required to send the tax lien notice to the last known address of the taxpayer; yet in some cases it failed to do so. The TIGTA report noted that the failure to do so was a legal violation by the IRS.

The TIGTA report also noted that the IRS failed to follow its own internal guidelines for sending copies of the tax lien notices to the taxpayer’s representatives in 40% per cent of the cases it sampled. Tax attorneys must be alert to the possiblity, that the IRS is not sending copies of all tax lien notices and other required documents to them. Taxpayers need to send copies of all important notices to their tax lawyers even if they think the IRS should be sending the notices directly to their representatives.

If the IRS has filed a tax lien against you contact Los Angeles, California tax attorney Dennis Brager.

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Posted In: Tax Debt

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A jury found a Colorado man guilty of failure to pay federal payroll taxes pursuant to IRC § 7202 and of filing false payroll tax returns pursuant to IRC § 7206(1). He was, however, acquitted of charges of tax evasion. Failure to pay IRS payroll taxes carries a penalty of up to 5 years in prison, and/or a $10,000 fine per count. Filing false tax returns, including false payroll tax returns carries a penalty of not more than 3 years in federal prison, and/or a $100,000 fine per count.

Like all employers Crabbe was required to file payroll tax returns, and to withhold income income taxes, social security taxes and Medicare taxes from employee paychecks, and to pay those amounts over to the IRS. When he failed to do so he exposed himself to both criminal tax liability, and to the trust fund recovery penalty (TFRP) as well. Once Crabbe has been sentenced it is likely the IRS will go after him to pay the unpaid payroll taxes. In general, responsible corporate officers who willfully fail to pay payroll taxes become personal liable pursuant to IRC § 6672 to pay those taxes. While many business owners get stuck paying corporate payroll taxes out of their own pocket, not too many go to jail for failure to pay. Nevertheless the case is a reminder that in appropriate situations the IRS can and does criminally prosecute people for failure to pay.

If you have payroll tax problems contact the tax attorneys at Brager Tax Law Group.

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Posted In: Payroll Tax Problems , Tax Fraud

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