Recently in Miscellaneous Tax Information Category

Quiet Voluntary Disclosures as an Alternative to the Offshore Voluntary Disclosure Program (OVDP) Are Becoming More Risky

November 14, 2013,

Owners of foreign bank accounts who have failed to file foreign bank account reports (FBAR) have several options to clean up this ugly tax problem. I briefly discussed them in a recent webinar, and in the related PowerPoint presentation. One of the options is a "quiet voluntary disclosure." Although the quiet voluntary disclosure has been blessed by the IRS in the Internal Revenue Manual, public statements by IRS representatives, both written and oral, have indicated that the quiet voluntary disclosure is disfavored, and that the IRS would like to see all offshore account holders file under the Offshore Voluntary Disclosure Program (OVDP). For example, FAQ 15 of the 2012 Offshore Voluntary Disclosure Program states:
Global Money

The IRS is aware that some taxpayers have attempted so-called "quiet" disclosures by filing amended returns and paying any related tax and interest for previously unreported offshore income without otherwise notifying the IRS. ...

Taxpayers are strongly encouraged to come forward under the OVDP to make timely, accurate, and complete disclosures. Those taxpayers making "quiet" disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years (emphasis supplied).

FAQ 16 provides:
The IRS is reviewing amended returns and could select any amended return for examination. The IRS has identified, and will continue to identify, amended tax returns reporting increases in income. The IRS will closely review these returns to determine whether enforcement action is appropriate. If a return is selected for examination, the 27.5 percent offshore penalty would not be available. When criminal behavior is evident and the disclosure does not meet the requirements of a voluntary disclosure under IRM, the IRS may recommend criminal prosecution to the Department of Justice (emphasis supplied).

Still, experienced tax litigation attorneys (our firm included) have advised that in appropriate cases a quiet disclosure is a viable option. While our opinion has not changed there are three developments that make it more likely that quiet disclosures will lead to tax audits and the possibility for exposure to FBAR penalties exceeding the OVDP in-lieu penalty. I will be addressing two here, and one in a second post which will be available soon.

First, earlier this year the GAO released a report critical of the IRS for failing to follow-up and audit taxpayers who had filed quiet disclosures. Second, as of July 1, 2013 FBARs must be filed electronically. This is the case even for late filed FBARs! What this means is that it just got easier for the IRS to identify individuals who are filing quiet disclosures. No more manually combing through records to identify late-filed FBARs. Identification of persons who filed quiet disclosures is now just a few key-strokes away.

While this should not discourage taxpayers who believe that their behavior was non-willful, and therefore that the highest FBAR penalties are inapplicable, from filing quiet disclosures, it is a cautionary note for those who hope to win the audit lottery, and never hear from the IRS. Also foreign account holders who are considering a quiet disclosure should analyze the non-willful penalties, which could be imposed if they are audited. The IRS position is that for each foreign financial account that was not listed on the FBAR a separate $10,000 penalty will be imposed. We have seen clients, many from Asian countries, who have 15 or more accounts at a time. Since the statute of limitations on FBAR penalties is six years, someone with 15 accounts who failed to file FBARs could be subject to a penalty of $900,000 ($10,000 x 15 accounts x 6 years)!!

Continue reading "Quiet Voluntary Disclosures as an Alternative to the Offshore Voluntary Disclosure Program (OVDP) Are Becoming More Risky " »

Internal Revenue Service's Office of Professional Responsibility (OPR) Censures Tax Attorney

July 19, 2012,

The IRS' Office of Professional Responsibility (OPR) recently censured a tax lawyer, who failed to disclose multiple conflicts of interest.


While having an attorney-client relationship with the benefit plan's promoter, the tax attorney wrote several opinions for prospective plan participants. These opinions pertained to a benefit plan's qualification under Internal Revenue Code section 419A. The tax lawyer later became a co-trustee of the plan, and during his tenure, he represented individual participants before the IRS concerning their tax problems. The plan's promoter was paying him throughout this time.

The tax attorney, who was not identified, never advised any of his clients of the conflicts and failed to obtain informed consents from any of the parties involved. The conflicts arose when the attorney agreed to represent multiple parties with opposing interests, to become the co-trustee of the plan and to receive compensation from the promoter. His obligations to other parties and his own self-interest limited his ability to represent each of his clients successfully. Because they were unaware of the conflicts, the clients were unable to seek alternative legal counsel.

The attorney has agreed to cooperate in the investigation, recognized his violations and will take additional continuing education ethics classes over the next two years. The IRS' OPR Director Karen L. Hawkins reminded attorneys that informing clients of conflicts of interest "is not a mere nicety." She continued, "Taxpayers who pay handsomely for tax advice and representation have a fundamental right to expect competent and diligent representation unfettered by a practitioner's responsibilities or obligations to someone else, or by the practitioner's self-interest."

Those who violate Circular 230 are subject to monetary penalties, censure, suspension and disbarment. Not just tax attorneys, but also enrolled agents, and CPAs are subject to the provisions of Circular 230, and therefore must avoid representing conflicting interests, unless appropriate conflict waivers are obtained.

Continue reading "Internal Revenue Service's Office of Professional Responsibility (OPR) Censures Tax Attorney " »

Tax Problem Attorney Blog Named to Top 20 Tax Law Blogs List

November 22, 2011,

Brager Tax Law Group appreciates all the votes that came in for our Tax Problem Attorney Blog and is proud to announce that Tax Problem Attorney Blog has been named one of the top 20 Tax Law Blogs by LexisNexis.

The voting isn't over, though. Brager Tax Law Group is asking for your vote once again in the selection of the Top Tax Law Blog of the year. You will need to be registered in order to vote. If you haven't previously registered, follow this link to create a new registration or use your sign in credentials from your favorite social media site. Registration is free and does not result in sales contacts.

Then follow this link to VOTE and check the box Tax Problem Attorney Blog. tax-law-topblog-220x180.jpg

Voting ends on November 28, 2011 so be sure to Vote!!!

We appreciate your support.

OPR (Office of Professional Responsibility) Disbars a CPA, and an Enrolled Agent under Circular 230 for Failure to File Tax Returns

August 3, 2011,

The IRS Office of Professional Responsibility (OPR) alleged that Joseph Kozelsky did not file timely tax returns for 2001 through 2007 and did not timely pay his federal tax liability. As a result of his tax problems he was disbarred from practice before the Internal Revenue Service. Mr. Kozelsky didn't help himself very much, since he failed to respond to the IRS's complaint within 30 days. As a result the facts alleged by the IRS were deemed admitted, and the administrative law judge ("ALJ") issued an order that Mr. Kozelsky engaged in disreputable conduct and should be disbarred.

The IRS publishes rules for professionals practicing before the IRS, and those rules are set forth in Circular 230. We have previously published an article on the procedures involved in an OPR disciplinary matter. Circular 230 includes rules for individuals preparing tax returns, providing tax advice, and representing individuals before the IRS. Failure to timely file tax returns constitutes disreputable conduct under Circular 230 and subjects the offender to sanctions. In the case of Mr. Kozelsky, the IRS proposed disbarment from practice before the IRS and the ALJ presiding over the case agreed and ordered disbarment on November 17, 2010 since Mr. Kozelsky failed to respond to the OPR's complaint.

If no appeal is filed within 30 days of the ALJ's default order, the default order becomes final. Since Mr. Kozelsky appealed the ALJ decision to the IRS's Appellate Authority on December 23, 2010, 6 days after the 30 day deadline, his appeal was not considered, and his disbarment became final.

Enrolled Agents are subject to the same Circular 230 rules as CPAs, and in a separate case, an Enrolled Agent was also disbarred from practice before the IRS. OPR filed a complaint against Susan Tomsha-Miguel alleging her failure to file timely tax returns, she failed to respond within 30 days, and the ALJ presiding over the case entered a default judgment for the IRS. The ALJ determined that the appropriate sanction was disbarment from practice before the IRS. In addition to CPAs and Enrolled Agents, Circular 230 rules and sanctions regarding failure to file tax returns also apply to tax attorneys (see post titled "Attorney Disbarred under Circular 230 Rules for Failure to File Tax Returns").

Continue reading "OPR (Office of Professional Responsibility) Disbars a CPA, and an Enrolled Agent under Circular 230 for Failure to File Tax Returns " »

Tax Attorney Blames OCD for Failure to File Business Income Taxes

March 25, 2011,

Tax lawyers representing a man accused of failing to file business income tax returns told the judge that obsessive-compulsive disorder was responsible for their client's tax problems, the Calgary Herald reported.

Business tax debt can sink a business; frequent issues tax attorneys are called to deal with include payroll tax problems and tax audits.
That's not to say OCD is involved in the majority of the cases. But in this case, the man blames the condition for his inability to file business income tax returns. He faces 60 days in jail and a $10,000 fine if convicted of disobeying a court-issued compliance letter. The company, Harvest Brewing, is accused of not filing returns in 2004 and 2005. His attorney said Ronald Thomsen's personal taxes are up to date because they are easy to file and the taxes are deducted right from his pay.

But when it comes to the business taxes, his client's medical condition prevents him from dealing with the paperwork. The business taxes were about $45,000 a year in the five years prior to the years in question. However, Canada Revenue Agency does not know how much is now owed because they haven't received any documentation in years. The business's accountant has told Thomsen she would have the outstanding taxes filed by May but he has refused to turn over the paperwork.

That refusal is part of the medical condition, according to his tax attorneys.

Continue reading "Tax Attorney Blames OCD for Failure to File Business Income Taxes " »

Julius Baer Offshore Bank Account Information To Be Released

January 17, 2011,

Rudolph Elmer, an ex Julius Baer executive turned over offshore bank account information to WikiLeaks today, according to Bloomberg News. According to the release, data on 2000 offshore bank accounts has been turned over, and WikiLeaks plans on making the data public; although it says it will take at least two weeks to verify the information, and release it.

We can be sure that the IRS will be reviewing that list, and seeing if Americans on it have filed timely Foreign Bank Account Reports (FBAR). Those U.S. persons who have a financial interest, or signatory authority over a foreign bank account are required to file a Foreign Bank Account Report on Form TDF 90-22.1 by June 30th of the following calendar year. Those that haven’t may find themselves the target of criminal tax fraud charges. Even if no criminal tax evasion charges are filed the IRS can impose a civil penalty which can reach 50% of the balance in the offshore account.

There may still be time for holders of Julius Baer offshore accounts to file a voluntary disclosure with the IRS in order to minimize the chances of criminal tax charges, and possible reduce the amount of the civil FBAR penalties.

If you have an offshore account at Julius Baer, or at another offshore bank feel free to contact the tax litigation attorneys at Brager Tax Law Group, A P.C. to arrange a consultation.

IRS Tax Problem Tips

December 21, 2010,

I found the following tips to eliminate tax problems in an old file. Not sure if a tax lawyer came up with them, but thought I would pass them along.

* Always put staples in the right hand corner. Go ahead and put them down the whole right side. The extractors who remove the mail from the envelopes have to take out any staples in the right

* Never arrange paperwork in the correct order, or even facing the right way. Put a few upside down and backwards. That way they have to remove all your staples, rearrange your paperwork and re-staple it (on the left side).

* Line the bottom of your envelope with elmer's glue and let it dry before you put in your forms, so that the automated opener doesn't open it and the extractor has to open it by hand.

* If your very unfortunate and have to pay taxes, use a two or three party check.

* On top of paying with a three party check, pay one of the dollars you owe in cash. When an extractor receives cash, no matter how small an amount, he has to take it to a special desk and fill out of few nasty forms.

* Write a little letter of appreciation. Any letter received has to be read and stamped regardless of what it is or what its on.

* Write your letter on something misshapen and unconventional. Like on the back of a Kroger sack.

* When you mail it, mail it in a big envelope (even if it's just a single EZi form). Big envelopes have to be torn and sorted differently than regular business size ones. An added bonus to the big envelope is that they take priority over other mail, so the workers can hurry up and deal with your mess.

* If you send 2 checks, they'll have to staple your unsightly envelope to your half destroyed form.

* Always put extra paper clips on your forms. Any foreign fasteners or the like have to be removed and put away.

* Sign your name in ink on every page. Any signature has to verified and then date stamped.

* These are just a few of the fun and exciting things you can do to the man. These methods are only recommended when you owe money.

If you would like to talk to one our tax lawyers for more realistic solutions to solving your tax problems contact the tax litigation attorneys at Brager Tax Law Group, AP.C.

Tax Lady Roni Deutch’s Tax Resolution Company Sued by Attorney General

September 2, 2010,

According to a complaint (Part 1 Part 2) filed by the California Attorney General against a well known tax attorney Roni Deutch, she has violated numerous state consumer protection laws, along with the rules of professional conduct governing the conduct of all California attorneys, tax attorneys included. Roni Deutch is well known to viewers of her TV commercials promising to solve tax debt problems through offers in compromise, levy releases, and installment agreements.

The complaint makes many allegations including that:

* Roni Deutch advised clients that they may suspend their installment payments to the IRS once they have engaged her tax attorneys for tax debt resolution services. Deutch tells clients that once they retain Roni Deutch A P.C., the clients are not legally obligated to continue making installment payments to the IRS.

* Roni Deutch’s tax attorneys each regularly carry caseloads as high as 600 to 700 clients at one time, but during especially busy periods can service as many as 1,200 clients at one time.

* Roni Deutch tell clients that their success rate in resolving clients' back tax liability with the IRS is as high as 99%. In fact, her success rate is dramatically lower. In a majority of their clients' cases, Deutch never actually submits a request for tax debt relief. According to Deutch’s own figures, of those clients who retain her tax problem resolution law firm for the offer in compromise service, only 10% successfully receive an offer in compromise from the IRS.

* Roni Deutch solicits clients for her tax debt resolution services in a number of ways, including a television and radio advertising campaign. In these advertisements, Roni Deutch gives clients specific and non-representative examples of clients who have purportedly reduced their tax liability by as much as $150,000 by hiring Roni Deutch A P.C. At least some of these representations are false and misleading.

* The advertisements list a toll-free telephone number for consumers to call to receive a free "tax analysis." When consumers dial the telephone number listed, the "tax analysis" they receive is a sales pitch for Ronni Deutch’s tax problem resolution services from her sales agents, who are hired solely for their ability to sell. Their sales agents are not required to have any background, experience, or familiarity with federal tax law or the IRS.

Of course these are only allegations, and not proven facts, and Roni Deutch has released a statement saying she will fight the suit. If the allegations are true, however, it will probably mean the end of Ronni Deutch’s tax problem resolution service business, and probably her career as a tax attorney as well. The complaint is a cautionary tale for those taxpayers with tax problems. As in all areas of life if the promises sound too good to be true then it’s time to take a closer look.

If you have a tax problem in excess of $75,000, and would like to learn more about your options contact the tax litigation attorneys at Brager Tax Law Group, A P.C.

IRS Says it Will Subpoena CPAs

May 21, 2010,

A couple of weeks ago I was at the ABA Tax Section Meeting which as I mentioned previously gathered tax lawyers from around the country. Since I spent most of my time at meetings involving FBARs (Foreign Bank Account Report TD F90-22.1), I missed another meeting. It turns out that (according to published reports) Janet Johnson, the Internal Revenue Service deputy division counsel for criminal tax stated that that the IRS Criminal Investigation (CI) unit would subpoena accountants in criminal tax cases. By itself that’s hardly surprising since criminal tax attorneys have known for many years that IRS special agents routinely interview the tax preparer, and the accountant can wind up as the lead witness against his own client.

The part that was surprising was that she stated the government would issue a grand jury subpoena even to a Kovel accountant, i.e. one that was retained by a tax attorney for the purpose of assisting the tax attorney in advising the client.

In an ominous note Johnson stated , “Whether or not that accountant comes to testify can be very serious for the accountant. The grand jury may decide he is part of the problem.”

If you have a tax problem, or are a CPA who has a client with a tax problem feel free to contact the tax lawyers at Brager Tax Law Group, A P.C. for a consultation.

Taxpayer Advocate Reports Tax Liens as Serious Tax Problem

January 20, 2010,

The Internal Revenue’s (IRS ) tax lien filing polices were in the Taxpayer Advocate’s 2009 Report to Congress listed as the second most serious tax problem facing taxpayers today. This is not a big surprise to those tax lawyers who deal with IRS tax collection problems on a regular basis. I often tell clients that the most difficult objective is to try and get the IRS to release a tax lien prior to making full payment of a delinquent tax liability.

The Taxpayer Advocate’s Report details how the IRS files tax liens without regard to whether or not the taxpayer has assets, and despite the fact that in many instances the filing of a tax lien does not protect the IRS, and only exacerbates the taxpayer’s inability to pay. The Report also points out that the Internal Revenue Manual puts obstacles in the path of their employees who decide not to file a tax lien-- requiring managerial approval, and documentation of any decision not to file a tax lien.

One would only hope that the IRS tax Collection Division takes serious note of the criticisms by the Taxpayer Advocate, and that it not continue to file tax liens as method of punishing taxpayers; however, the IRS responses to the Report make clear that Congressional action will be necessary for any significant tax lien relief.

Taxpayers with tax problems must therefore continue to explore other avenues of relief including offers in compromise, installment payment agreements, audit reconsideration, and bankruptcy to resolve their tax problems.

If you have tax problems call the tax lawyers at Brager Tax Law Group, Inc. for a consultation.

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.

State Board of Equalization Sales Tax Audit Can Lead to Other Tax Problems

November 10, 2008,

An article in the California Franchise Tax Board (FTB) November 2008 Tax News publication highlighted the other tax problems that can arise from a tax audit by the California State Board of Equalization (SBE or BOE). Many sales tax audits by the BOE result in a changes to a company’s gross receipts. The BOE tax auditors have instructions to provide the FTB with audit reports which show that not all sales were reported. In turn the FTB may open an income tax audit resulting in additional state income tax due.

Although not mentioned in the FTB Tax News article, when the FTB is done with its tax audit it routinely provides that information to the Internal Revenue Service (IRS), and the IRS may, in turn, begin a federal income tax audit. With all of these tax audits, and with potential tax penalties and interest there is the possibility that a business could wind up paying more to the taxing agencies then it took in.

For these and other reasons it is important to have a qualified tax attorney represent your business; especially if you believe that there are any significant issues on your California Sales tax returns. Feel free to call the tax problem attorneys at Brager Tax Law Group, A P.C.

California BOE Sales Tax Audit Program

October 13, 2008,

On Nov. 7th I will be speaking at the at the 2008 Annual Meeting of the California Tax Bar on Sales and Use Tax Audits: A Guide for Tax Professionals. My co-panelist will be Robert Tucker, a tax specialist from the California State Board of Equalization (SBE or BOE). We will be discussing how to handle a sales tax audit including procedural rules and tips for dealing with the SBE.

The 2008 Annual Meeting of the California Tax Bar runs from Nov. 6 through 2008, and attracts hundreds of tax attorneys, and tax accountants from around the state. Additional topics include:

Criminal Tax Investigations
Offshore Enforcement
California Tax Litigation
SBE New Rules for Tax Appeals
Federal and California State Trust Fund Recovery (TFRP) Penalties

and much more.

For more information see

UCLA Tax Controversy Institute Taxpayer Advocate Panel

October 13, 2008,

On Oct. 28th I will be moderating a tax controversy panel at the 2008 UCLA Tax Controversy Institute. The panel will include Steve Sims, Taxpayer Advocate, Franchise Tax Board, Todd Gilman, Taxpayer Advocate, State Board of Equalization, Michelle Mosley, Taxpayer Advocate, Employment Development Department, Dorothea T. Curran, Local Taxpayer Advocate, Internal Revenue Service (Los Angeles).

Other tax panels include:

Innocent Spouse
Independent Contractor Audits and
Criminal Tax Audits

If you would like to attend contact UCLA at