Tax Problem Attorney Blog

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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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) 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 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) 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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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 issued FS 2008-10 warning taxpayers about tax fraud by tax preparers. The IRS points out that while most tax return preparers are honest a few are not, and that taxpayers need to be careful when choosing a tax return preparer. While it may seem like a tax preparer who’s willing to break the rules may save you some money in the long run it’s the taxpayer not the tax preparer who will pay the additional taxes, plus penalties and interest. As the IRS points out tax evasion or tax fraud is a felony punishable by years in prison, and a $250,000 fine.

A few of the IRS suggestions for finding a reputable tax preparer include:

Avoid preparers who base their fee on a percentage of the amount of the refund.

Review your return before you sign it and ask questions on entries you don't understand

Find out the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared

The IRS also states: “Reputable preparers will ask to see your receipts.” Here we have to disagree with the IRS. Many reputable tax return preparers DO NOT ask to see receipts; nor are they required to. Recent guidance, by the IRS with respect to tax return preparer penalties pursuant to Internal Revenue Code Section 6694 confirms this. See IRS Notice 2008-13. While it may be helpful for a tax return preparer to look at some of your receipts to get a sense of whether you are doing a good job with your recordkeeping looking at all your receipts will in most cases land you with a bill larger than necessary.

Brager Tax Law Group, A P.C. represents taxpayers who have had tax returns prepared improperly. We also represent tax return preparers including attorneys, CPAs and enrolled agents who have been accused of preparing improper tax returns for their clients. For more information contact California tax attorney Dennis Brager.

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Posted In: Tax Disputes , Tax Fraud

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The Internal Revenue Service (IRS) has long been required to send notices to a Taxpayer’s last known address. However, California state law has never specifically provided the address to which notices are sent, although according to the legislative history the California Franchise Tax Board (FTB) has as a matter of internal practice generally followed the IRS rules. New legislation which is effective on Jan. 1, 2008, now requires that the FTB send notices to a taxpayer’s last know address. Much like federal law the new state law defines “last know address” as the address that appears on the taxpayer's last return filed with the FTB, unless the taxpayer has provided to the Franchise Tax Board clear and concise written or electronic notification of a different address, or the Franchise Tax Board has an address it has reason to believe is the most current address for the taxpayer. Revenue and Taxation Code 18416(c).

TIP. If you move after you have filed your federal or state income tax returns it’s a good idea to notify both the IRS, and Franchise Tax Board, just in case they want to contact you. Who knows, sometimes they actually need your address to send you good news.

If you are undergoing a tax audit, and you move it would be foolhardy not to notify them. Why? This is one time when out of sight, out of mind it is not a good rule to rely on. If the IRS or the FTB sends a notice to your last know address, and you don’t get it because you have moved you are still responsible for responding in a timely fashion. If you don’t you could be subject to penalties, or lose various rights of appeal. In my practice I consistently meet with new clients who have lost their rights because they didn’t receive IRS and FTB notices because they moved, and didn’t notify the taxing agencies. On the other hand, Brager Tax Law Group has had great success helping clients who didn’t receive notices because the IRS failed to follow its own procedures in determining their last known address.

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Posted In: California Franchise Tax Board , Tax Disputes , Tax Litigation and Tax Controversy

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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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The California Franchise Tax Board (FTB) has been given the green light by the California Legislature to disallow deductions for payments made for personal services if the payor fails to provide a Form 1099 or a W-2. For many years the California Revenue and Taxation Code has provided that the FTB may disallow any deductions for personal services if the individual making the payments fails to file the appropriate reporting forms when due. An identical statute applies to corporations. There was some concern that there were technical problems with the statute so the FTB sponsored a bill to “clarify” the statute. That bill became effective on January 1, 2008.

Note that the statute says “may” not must or will. This leaves some room for arguing that this discretion should not be exercised, perhaps because the failure to file the documents wasn’t willful, or was otherwise due to excusable neglect.

In addition to the deductions being disallowed taxpayers can be hit with a penalty of $50 for each form not filed. Perhaps that’s not much for each form, but for even a mid-size company it can add up pretty quickly. In addition the Internal Revenue Service (IRS) imposes a $50 penalty under Internal Revenue Code § 6721, and in cases of intentional disregard of the filing requirement the penalty goes to $100 per form.

If you have a California income tax audit or a IRS or California tax dispute, and you need tax representation call the Southern California tax lawyers at Brager Tax Law Group, A P.C. We represent clients with California tax problems in Los Angeles County, Orange County, Riverside County, and the rest of Southern California, and the country.

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Posted In: California Franchise Tax Board , Tax Disputes , Tax Litigation and Tax Controversy

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