Tax Problem Attorney Blog

I just returned from an ABA meeting of tax lawyers in Washington, D.C. It seemed like all of the tax attorneys (or at least the tax litigation attorneys) could find nothing to talk about, but Foreign Bank Account Reports, i.e. TDF 90-22.1 (FBARs),voluntary disclosures, and offshore bank accounts. Over a period of two days I spend at least 8 hours in formal meetings with other tax lawyers talking about FBARs, and more hours over drinks and food talking about FBARs. The main theme was that the rules surrounding tax amnesty are being enforced more harshly than many tax attorneys had hoped would be the case. A few highlights of what I heard, the good, the bad, and the ugly:

• 225 revenue agents have been assigned to conduct civil tax audits in voluntary disclosure of offshore bank account cases
• IDRs (Information Document Requests) can be expected in most offshore bank account cases within the next few weeks
• The goal of IRS management is to close a “substantial portion” of the tax audits by the end of 2010
• IRS has started to identify taxpayers who made quiet voluntary disclosures of their offshore bank accounts, and these cases will be worked as “full blown” civil tax audits—meaning these taxpayers are potentially subject to multiple 50% FBAR penalties
• It is too soon to tell how post Oct. 15th voluntary disclosures will be treated for civil tax purposes—speculation continues to center on 25 to 35 per cent
• IRS has rolled out a “third generation” IDR which the IRS believes is more streamlined
• Basis issues will be negotiable, i.e. if basis information is unavailable revenue agents will likely accept reasonable alternatives, e.g. value security as of 1/1/2003
• Even if a timely 2008 FBAR was filed, if the highest offshore bank account value was in 2008, the 20% penalty will be calculated based upon 2008 value
• Revenue Agents do not “currently” have the authority to waive de minimus violations – there is no such thing as being half pregnant.

If you have a foreign financial account call the tax litigation lawyers at Brager Tax Law Group, A P.C. to get more information on voluntary disclosures and FBARs.

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Posted In: Offshore Bank Account Problems , Tax Debt , Tax Disputes , Tax Fraud , Tax Litigation and Tax Controversy , Tax Preparer Penalties

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When the IRS files its federal tax lien it attaches to all of the taxpayer’s assets, including his home, bank accounts, cars and personal belongs. The federal tax lien ensures that if real property is sold any proceeds will go to the IRS to pay its tax lien. The IRS can also foreclose on its federal tax lien, and sell any property that the taxpayer owns.

There is a myth that the IRS won’t seize and sell a taxpayer’s home. Like most myths there is a grain of truth to it. In order to sell a taxpayer’s primary residence the IRS must obtain an order from a federal district court pursuant to Internal Revenue Code Section Section 6334(a)(13). However, if negotiations break down, or the statute of limitations on collection is about to expire, the IRS can and will seek a court order, and most courts will grant such orders. This is one reason why it is critical, especially in large dollar cases, that taxpayers obtain advice from a tax attorney with experience dealing with these types of tax problems.

A recent case from South Dakota illustrates that tax problems do not get better with age. United States v. Boscaljon (SD SD 2010). The Boscaljons owed about $200,000 dating back to 1993 and 1994. The IRS went to court to sell their residence. At the time of trial the taxpayers were both 74 years old, and living apparently primarily on social security, plus Mrs. Boscalon’s earnings from her $8.75 per hour, 20 hour per week job. Mr. Boscaljon had been diagnosed with cancer, had just completed chemotherapy, and had suffered a heart attack. Despite these facts the IRS brought suit to seize and sell the Boscaljons’ home. So much for a kinder, gentler IRS.

If you have tax liens, tax levies, or other tax problems contact the tax litigation lawyers at Brager Tax Law Group, A P.C.

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Posted In: Tax Debt

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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.

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Posted In: Miscellaneous Tax Information , Tax Debt , Tax Litigation and Tax Controversy

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In conversations with the IRS Foreign Bank Account Report (FBAR) hotline, I have been told that the IRS plans on issuing a second FBAR FAQ to supplement the first FBAR FAQ which was issued by the IRS only last month. As readers of this blog know, the first FBAR FAQ was issued to answer questions required the IRS Tax Amnesty program for unreported offshore financial accounts. Once the new FBAR FAQ has been issued by the IRS I will be posting a link to it here on our blog.

If you have an offshore tax problem contact the tax controversy lawyers at Brager Tax Law Group, A P.C. to have a consultation which will be covered by the attorney client privilege.

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Posted In: Offshore Bank Account Problems , Tax Debt , Tax Fraud

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Earlier this year Robert Allen Stanford became infamous when he was accused by the Securities and Exchange Commission (SEC) of engaging in a gigantic fraud. It turns out that Robert Allen Stanford also has massive tax problems. According to a Motion to Intervene filed by the Internal Revenue Service (IRS) in the SEC matter, Stanford and his wife Susan Stanford owe the IRS over $226, 000,000 for the 1999 through 2003 tax years. In addition they may owe additional taxes for other years. The IRS has already filed tax liens against the Stanfords for 2002 and 2003, however, the Stanfords' filed a petition in the United States Tax Court (Tax Court) to dispute the amount of the tax owed. The Stanfords’ petition to the Tax Court for 2002 and 2003 was an appeal from a collection due process (CDP) hearing. The federal tax liens, are fully effective, however, upon filing by the IRS, and if the Stanfords had a prior opportunity to dispute the amount of the tax due then they would not be entitled to another chance due so in the CDP hearing. The entire tax lien and tax levy process was slowed when the District Court in the SEC case issued a general order barring creditors from proceeding with claims against the Stanfords. The IRS motion seeks to allow it to move forward with tax litigation and collection against the Stanfords.

If you have tax liens, or tax levies please call the tax controversy lawyers at Brager Tax Law Group, A P.C.

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Posted In: Tax Debt

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The United States Tax Court has upheld a ruling by the Internal Revenue Service (IRS) turning down Koko Taylor’s offer in compromise, and allowing the IRS to proceed with a tax levy against all of her property and income. It also upheld the tax lien filed against her. Koko Taylor is a well known blues singer sometimes called the “Queen of the Blues.” The Tax Court opinion by Judge Paige Marvel details Koko’s rise from a poor orphan to a successful professional recording artist with a performing career spanning some 50 years.

Koko Taylor fell behind on her obligations to the IRS, and incurred tax debt of about $300,000 as of September 2006. To make a very long story short Koko’s tax lawyers filed for a collection due process (CDP) hearing with the IRS, and submitted three different offers in compromise including an effective tax administration offer in compromise. In the last offer in compromise, Koko’s tax attorneys proposed that she pay $125,000 and 50% of her annual net income should it exceed $125,00 per year.

The IRS rejected her offer in compromise, and the Tax Court agreed with the rejection of the offer in compromise. Let’s keep in mind that Koko Taylor was 80 years old, and her only substantial asset was her home valued at around $240,000—after taking into account its so-called “quick sale value.” She also was an insulin dependent diabetic, and had two heart attacks as well as high blood pressure. The IRS called these conditions “not uncommon for someone her age.” The IRS further determined that Taylor could pay her taxes in full without economic hardship even though that meant she would have to sell her home, continue to perform into her 80s, and live on a budget of $3,300 per month. Part of Koko’s tax problems were no doubt exacerbated by her continuing failure to stay current on her estimated tax payments which allowed the IRS and the Tax Court to rule against her on technical grounds. Nevertheless, the case represents a graphic demonstration that the so-called kinder and gentler IRS is not currently in evidence, and illustrates the difficulties of obtaining an offer in compromise. It is these difficulties which require a tax expert to navigate these treacherous waters.

If you have tax problems, and you are considering an offer in compromise or an installment payment agreement, or another alternative to your tax problems call the tax lawyers at Brager Tax Law Group, A P.C.

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Posted In: Tax Debt

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According to CNN former Sen. Tom Daschle, President Barack Obama's nominee for secretary of Health and Human Services has some tax problems. CNN says he failed to pay taxes on a car and driver he had been loaned by a wealthy friend, and failed to disclose it on his tax return. At first it was not clear why he should have reported it on his tax return since it sounded more like a gift. However, a later report by The Wall Street Journal says that the car and driver was provided to him by InterMedia Advisors LLP, an investment firm specializing in buyouts and industry consolidation where Daschle served as chairman of the firm's executive advisory board after he left the Senate. That should have been reported, but there might be a partial offset as an employee business expense, and the firm should have included it on his W-2, or included it on his Form 1099 if he was an independent contractor.

If you have tax problems you can call our tax attorneys whether or not you are a former senator.

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Posted In: Tax Debt , Tax Disputes

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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.

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Posted In: Miscellaneous Tax Information , Tax Debt , Tax Disputes

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According to the Government Accountability Office (GAO) the Internal Revenue Service (IRS) hasn’t been doing a very good job collecting payroll taxes. Payroll taxes are amounts that employers withhold from employee wages for federal income taxes, Social Security, and Medicare (so called trust fund taxes) as well as the employer’s matching contributions. The willful failure to pay these payroll taxes is a violation of the criminal tax law, a felony punishable by up to 5 years in jail under Internal Revenue Code (IRC) Section 7602.

The GAO study found that over 1.6 million businesses owed over $58 billion dollars in uncollected payroll taxes. The GAO concluded that the IRS didn’t file tax liens quickly enough, and that it didn’t go after the owners of businesses for the trust fund recovery penalty (TFRP) fast enough. The report also suggested that the IRS wasn’t seizing business assets often enough, pointing out that there were only 667 seizures in fiscal 2007, down from over 10,000 in 1997. The report was a rather scathing indictment of the IRS, and various U.S. Senators were quick to jump on the "bash the IRS bandwagon." Senator Norm Coleman called on the IRS to “ratchet up its efforts” to recover billions in unpaid payroll taxes, and to hold “tax cheats” accountable.

The IRS responded that among other efforts it is developing and testing streamlined procedures to file injunctions against business with repeat payroll tax problems, and shut them down quickly. Apparently this would include employers whose principals were previously assessed a trust fund recovery penalty, as well as those who have operated multiple entities with payroll tax problems.

If your business has payroll tax problems you are at risk of the IRS putting you out of business, and assessing the trust fund recovery penalty resulting in owners, and officers having substantial personal tax liability. If you would like assistance in dealing with these, and other types of tax problems contact the Los Angeles California tax attorneys at Brager Tax Law Group, A P.C.

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

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One of the important protections from the Internal Revenue Service ("IRS") is a taxpayer’s right to obtain a hearing with the IRS Appeals Division before an IRS collection officer can issue a tax levy. This hearing is known as collection due process, or CDP hearing. CDP hearings are permitted by virtue of Internal Revenue Code Section (IRC) Section 6330. Congress thought that some taxpayers were abusing the CDP hearing process to delay the collection of payroll taxes. As a result Section 8243(a) of the "Small Business and Work Opportunity Tax Act of 2007" amended IRC 6330(f) to permit a tax levy without first giving a taxpayer owing payroll taxes a pre-levy CDP notice if the levy is a “disqualified employment tax levy.” A “disqualified employment tax levy” is defined in IRC section 6330(h) as a tax levy served to collect the payroll tax liability of a taxpayer if that taxpayer or a predecessor requested a CDP hearing under IRC section 6330 for unpaid employment taxes arising in the two-year period prior to the beginning of the taxable period to be collected by the tax levy.

Earlier this year the IRS issued an internal memorandum intended as a temporary guidance to IRS revenue officers until the Internal Revenue Manual can be updated to reflect these changes. The memo is helpful in that it contains a chart to help determine whether a tax period is subject to the disqualified employment tax levy rules.

If you have a payroll tax problem contact California Certified Tax Specialist Dennis Brager for a consultation.

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Posted In: Payroll Tax Problems , Tax Debt

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Last month, the United States Tax Court (Tax Court) overturned an Internal Revenue Service ("IRS") ruling, and granted innocent spouse status to the widow of former San Francisco Mayor Joe Alioto. Alioto v. Commissioner of Internal Revenue, T.C. Memo. 2008-185. Innocent spouse relief was allowed pursuant to Internal Revenue Code (IRC) Section 6015(f)
which allows relief if “taking into account all the facts and circumstances it is inequitable to hold the individual liable.” One of the tests that the Tax Court, and the IRS looks at in determining whether an individual is entitled to equitable innocent spouse relief is whether payment of the tax would cause an economic hardship. It is sometimes difficult to convince the IRS that anyone living at anything above the poverty level is suffering economic hardship, and this case was no different.
At the time of trial, Mrs. Alioto had about $100,000 in a retirement account, and little else in the way of assets. She was earning about $121,000 per year. The IRS determined that no economic hardship would ensue if Mrs. Alioto was forced to pay the approximately $2 million dollars that she owed as a result of filing a joint income tax return with the Mayor. The Tax Court took a more liberal view of things holding that indeed she would suffer economic hardship, and went on to allow innocent spouse relief.

If you have a tax problem, and believe that you maybe qualify for innocent spouse relief contact the tax litigation lawyers at Brager Tax Law Group, A P.C.

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Posted In: Innocent Spouse , Tax Debt

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The United States Tax Court (Tax Court) has held that in innocent spouse cases under Internal Revenue Code (IRC) § 6015 it will consider evidence at trial that was not part of the administrative record. Porter v. Commissioner, 130 T.C. No. 10 (2008). The innocent spouse ruling in Porter was consistent with the Tax Court’s earlier ruling in Ewing v. Commissioner, 122 T.C. 32 (2004), vacated on unrelated jurisdictional grounds 439 F.3d 1009 (9th Cir. 2006).

Ms. Porter submitted a Form 8857, Request for Innocent Spouse Relief to the IRS. Ultimately, the IRS granted innocent spouse relief as to a portion of the tax liability, but denied innocent spouse relief with respect to the remainder. Ms. Porter filed a Petition with the Tax Court to dispute the Internal Revenue Service's unfavorable determination. When she got to the Tax Court, the IRS tried to prevent Ms. Porter, who was not represented by a tax attorney, from presenting all of her evidence. The IRS tax attorneys argued that judge could only here evidence that had previously been submitted to the IRS. The Tax Court held that in cases where someone is requesting innocent spouse relief, he or she is entitled to a trial de novo. That is she is entitled to present all of her evidence without regard to whether it was previously provided to the IRS.

If you believe that you may be entitled to innocent spouse relief contact the tax attorneys 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 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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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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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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A district court in Michigan dismissed a complaint challenging an Internal Revenue Service (IRS) tax levy on a couple’s home. The couple owed income taxes of around $300,000 and payroll taxes of another $161,000. They filed a quite title action pursuant to 28 USC 2410, and they also filed an unauthorized collection action under Internal Revenue Code § 7433 seeking damages. The court held that it lacked jurisdiction to hear either claim. With respect to the quiet title action such actions are available if an IRS tax lien is filed, but not when a tax levy is served. As most tax problem attorneys know there is a big difference between a tax lien and a tax levy, and the court held that the proper method of fighting a tax levy is not through a quiet title action.

The court also dismissed the unauthorized collection action because the couple hadn’t exhausted their administrative remedies. Internal Revenue Code § 7433 allows a taxpayer to sue the IRS if it has engaged in unlawful collection actions such as an improper tax levy; however Treas. Reg. § 301. 7433-1(d) bars a suit until after a claim has been filed with the IRS. Even though the couple had notified the IRS of their claim the court held that the format they used was incorrect since they didn’t address the claim to the right individual at the IRS, list their current home address and telephone number, or meet several other formalities.

The results in this case were not particularly surprising. It does, however, once again point out the importance of completely understanding all of the IRS rules and tax procedures. It also once again illustrates that the IRS can and does seize taxpayers’ homes, and those who assume it can’t happen are mistaken.

Tax problems need to be dealt with at an early stage. It is possible that an offer in compromise or an IRS payment agreement could have saved this couple’s home. If you need help with a tax problem of any kind contact the tax lawyers at Brager Tax Law Group, A P.C.

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The 10th Circuit Court of Appeals has reversed a decision of the United States Tax Court (Tax Court), and held that an Internal Revnue Service Appeals Officer was not impartial within the meaning of Internal Revenue Code (IRC) § 6330. Cox v. Commissioner, No. 06-9004 (2008), reversing, Cox v. Commissioner, 126 T.C. No.13 (2006). A taxpayer is generally entitled to a collection due process (CDP) hearing before an impartial Appeals Officer before the IRS may levy on his property. If the IRS files a tax lien the taxpayer is entitled to a hearing to contest the tax lien, but only after the tax lien has been filed. In Cox, the taxpayer had received a CDP hearing for the years 2000. In that hearing the Appeals Officer determined that he could not recommend an alternative to a levy since among other things the Coxes hadn’t paid their estimated taxes.

Subequently, the Coxes requested a CDP hearing with respect to the taxes they owed for 2001 and 2002. When the same Appeals Officer was assigned the CDP hearing the Coxes asked the case to be reassigned to a new Appeals Officer since, they argued, the Appeals Officer was not impartial because of his prior involvment. The IRS refused, and ultimately the Coxes appealed to the United States Tax Court. The Tax Court reviewed IRS Treas. Reg. § 301.6330-1(d)(2) which provides that even though an Appeals Officer has had prior involvement with the same taxpayers for a different tax year the Appeals Officer may still conduct the subsequent CDP hearing. The Tax Court upheld the IRS Regulation. On appeal, however, the 10th Circuit reversed. Arguably the 10th Circuit’s decision may be limited to the facts since in Cox the Appeals Officer had reviewed the 2001 and 2002 as part of his decision in the 2000 CDP hearing. In any event the Tax Court is not bound to follow the 10th Circuit’s ruling in cases that are not appealable to the 10th Circuit. Golsen v. Commissioner,54 T.C 742 (1970). It is not, however, unusual for the Tax Court to re-examine its decision where it has been reversed by a Circuit Court of Appeal even though it is not required to do so.

If you have IRS tax problems or California tax problems contact Los Angeles, California State Bar Certified Tax Specialist Dennis Brager.

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Posted In: Tax Debt , Tax Disputes

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The Internal Revenue Service (IRS) has published final regulations on releases of federal tax liens and discharges of property. These regulations provide rules for how to go about obtaining the release of a federal tax lien after the tax debt has been paid, or in situations where the statute of limitations on collecting the tax liability has expired.

The regulations also provide rules for obtaining tax lien releases in other situations. For example the IRS may issue a certificate of discharge if the IRS interest in the specific property subject to the IRS tax lien is worthless. This can be useful if you own real property which you would like to sell, but is encumbered by an IRS tax lien. Say your property is worth $500,000, and there is a first mortage of $550,000, followed by an IRS tax lien for $300,000. You would like to sell the property, and the bank has agreed to a short sale. The title company will not issue title insurance, and therefore you want be able to close on the sale without a release from the IRS. The regulations allow for the issuance of a certificate of discharge in this circumstance because the value of the IRS lien is zero. However, it can take some persuasion to get the IRS to issue the certificate of discharge, and the IRS is not required to issue the certificate. Our experience is that the IRS can take 30 days or more to issue a discharge of the tax lien. We recommend applying for a certificate of discharge as soon as you know you want to sell the property.

An important change to the final regulations requires to issue a certificate of release of the tax lien in situations where only one year of a multi-year tax lien has been satisfied. For example, the IRS may have filed a tax lien for the years 2000 through 2004. If you paid the tax for the year 2000, the IRS would not issue a tax lien release for the 2000 year. Under the new regulations the IRS is required to do so.

If you have tax liens and tax levies in excess of $75,000 call the California tax lawyers at Brager Tax Law Group, A P.C.

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Posted In: Tax Debt

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The Internal Revenue Service (IRS) says that tax audits have increased during the fiscal year ended Sept. 30, 2007. For example the IRS audited 84% more returns of individuals with income of over $1 million dollars than the previous year. This amounted to a tax audit rate of almost 10%.Tax audits of individuals with income of $200,000 or more rose almost 30%. Overall the IRS conducted tax audits of more individuals than at any time since 1998.

Business also came in for an increased tax audit rate. S corporation tax audits were up 26%, and partnership tax audits were up by almost 25%.

Tax levies, and tax liens by the IRS were also a growth area, with the IRS filing 3.8 million tax levies and almost 700,000 tax liens during 2007

Contact Los Angeles, California Brager Tax Law Group, A P.C. if you or your business needs help with a tax audit, tax appeal or tax debt.

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

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Small businesses which get behind on their debts also often fail to pay their payroll taxes resulting in payroll tax problems for the owners. Not paying payroll taxes is a big mistake since the Internal Revenue Service (IRS) can collect the trust fund portion of the payroll tax debt from responsible officers of a corporation under Internal Revenue Code § 6672. Not all corporate shareholders , however, are necessarily persons liable for trust fund taxes under Internal Revenue Code § 6672. For example, if the payroll tax problems were concealed from the owner he might not be personally liable. Some tax lawyers may have thought that an LLC would provide similar protection for its members, but that’s not always true.

According to the Second Circuit Court of Appeals in New York that’s not the case for a sole member of an LLC. McNamee v. IRS, 488 F. 3d 100 (2nd Circuit 2007). McNamee, who was apparently an accountant (I don’t know whether he was a CPA), represented himself in court, and didn’t have a tax lawyer. McNamee was the sole member of a limited liability company formed under Connecticut state law. Like most states, Connecticut provides that a member of a single owner LLC is generally not liable for its debts.

IRS regulations allow single-owner limited liability company to choose whether to be treated as a corporation--or to be disregarded as a separate entity. If an LLC elects to be treated as a corporation the owner is subject to double taxation--once at the corporate level and once at the individual shareholder level. On the other hand, the LLC may chooses not to be treated as a corporation, either by affirmative election or by the failure to make any election. In the later instance IRS regulations provide that the LLC is disregarded, and that the member is fully liable not just for the trust fund taxes, but all the payroll taxes including interest and penalties accrued on the overdue payroll taxes. The Second Circuit Court of Appeals found that the IRS regulations were valid, and in so doing hit McNamee personally with a large tax debt.

The rules are different for a multi-member LLCs which is classified by default as a partnership. According to IRS Revenue Ruling 2004-41, absent special circumstances such as transferee liability, members of such entities are not personally liable for payroll tax debts of the LLC without a separate assessment by the IRS under Internal Revenue Code § 6672.

If you or your company has a tax dispute contact Brager Tax Law Group, A P.C. Our tax lawyers represent companies and individuals all over California including Los Angeles County, 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 with payroll tax problems with the California Employment Development Department (EDD), and the IRS.

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

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The Internal Revenue Service (IRS) has provided new instructions for persons who wish to file wrongful levy claims against the IRS pursuant to Internal Revenue Code § 6343(b). These instructions are set forth in IRS Publication 4528 (Rev. Nov. 2007). If the IRS were to take your property to pay taxes that someone else owed a wrongful levy claim is one of the ways to get your property back.

Why would the IRS seize your property to pay someone else’s taxes? Well it might just be a mistake, but that’s unlikely. One way it might happen is if a closely held corporation ran into IRS or California payroll tax problems. Perhaps the owner decided that rather than deal with this tax problem he would start another company; we will call it “Newco.” When the IRS gets wind of this if it determines that Newco is a transferee, nominee or alter ego of the original company (let’s call it “Oldco”) it will levy (that is seize) the assets of Newco to satisfy the payroll tax liability of Oldco.

Newco may have some defenses to the IRS levy. For example in some cases if Newco paid fair market value for the assets of Oldco it is possible that Newco may not be responsible for Oldco’s payroll taxes. In order to get the money back it would be appropriate to file a wrongful levy claim with the IRS. Another possible remedy is to file suit in United States District Court under Internal Revenue Code Section 7426(a)(1).

Perhaps the most important thing to know about a wrongful levy claim is that it must be made within 9 months of the seizure, so you need to act very quickly. If you think that the IRS has improperly served a levy on your property please contact the California tax lawyers at Brager Tax Law Group, A P.C.

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

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The Internal Revenue Service (IRS) has extended its policy of granting express installment agreements for in business trust fund taxes through at least June 6, 2008. See IRS Memo dated June 6, 2007 Express installment agreements are available to in-business taxpayers who have payroll tax problems of less than $10,000. These taxpayers may allowed to enter into installment agreements without providing a completed Collection Information Statement (IRS Form 433-B). An express installment agreement can’t last longer than 24 months. Taxpayers requesting express installment agreements must be in compliance with all IRS tax deposit and tax filing requirements as set forth in Internal Revenue Manual (IRM) 5.14.1.5.1. In addition if a taxpayer qualifies for an express installment agreement then:

• No Trust Fund Recovery Penalty determination is required; however the revenue
officer must ensure that the Assessment Statute Expiration Date (ASED) is
protected.
• No managerial approval is required.
• A lien determination is required.

Thus in all probability even if an express installment agreement is granted then an IRS tax lien will be filed. See IRM 5.12.2.4.2.

If you or your company owes in excess of $75,000 in payroll taxes to the IRS or have other IRS or California payroll tax problems call California tax attorney Dennis Brager.

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Posted In: Payroll Tax Problems , Tax Debt

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The Internal Revenue Service’s (IRS) Taxpayer Advocate Nina Olsen has released her 2007 Annual Report to Congress. It consists of two large volumes outlining:

• The Most Serious Problems Encountered by Taxpayers
• Key Legislative Recommendations, and Additional Legislative Recommendations
• Most Litigated Issues
• Case and Systemic Advocacy.

The Taxpayer Advocate’s Report has a great deal to say, and we will be commenting on many of those items over the next months. Number 9 on the list is tax preparer penalties, and the bypass of taxpayer representatives including tax attorneys, and CPAs. The Taxpayer Advocate’s Report criticizes the IRS for not doing more to enforce tax preparer penalties. She notes that only $2.8 million in penalties were assessed for FYE Sept. 2007. However, this is about a 50% increase over the prior year.

The Internal Revenue Service’s top tax attorney, IRS Chief Counsel Don Korb has already been quoted in IRS Notice, IR-2007-213 as saying that looking at the tax preparer penalty regulations will be a “top priority” for the IRS in 2008. It looks like a bumpy ride for tax preparers, tax attorneys, and CPAs in 2008.

If you are a tax preparer, tax attorney, or CPA who has been targeted by the IRS, contact California State Bar Certified Tax Specialist Dennis Brager.

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

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