Tax Problem Attorney Blog

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.

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Posted In: Miscellaneous Tax Information , Offshore Bank Account Problems , Tax Fraud , Tax Litigation and Tax Controversy , Tax Preparer Penalties

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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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Disbarred New York attorney Kenneth Heller was among 7 UBS clients charged a few weeks ago with failing to file Foreign Bank Account Reports, TDF 90.22-1 (FBARs), and tax evasion as a result of failing to report his Swiss bank accounts to the IRS. The case would be just one more in a string of FBAR and tax fraud criminal tax cases, but something in the complaint caught my eye. Some of the records that the IRS Criminal Investigation Division used to prepare its tax fraud case against Heller were obtained from Heller’s tax preparer—both documents and through an interview of the tax preparer. The records included instructions to the tax preparer to go to Switzerland to review the offshore bank account records. There was also a letter from the tax preparer to Heller reminding him that he had to report the income from the Swiss bank accounts.

This illustrates a vital point that as a tax controversy lawyer I remind clients about all the time. In a criminal tax case many times the first witness is the client’s tax preparer. There is no accountant client privilege in a criminal tax fraud case! Had these communications been between Heller and his tax attorney it is likely that the attorney-client privilege would have shielded them from IRS . While the IRS might have been able to bring a tax evasion case without the tax preparer the statements by the tax preparer will no doubt be extremely damaging.

If you have a tax problem including unreported offshore financial accounts contact the tax controversy lawyers at Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud , Tax Preparer Penalties

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In May, the IRS Office of Professional Responsibility (OPR) issued penalty guidelines, sometimes referred to as a “penalty grid” for imposing penalties on tax preparers, and others who are tax attorneys, CPAs, or enrolled agents who fail to file timely income tax returns. The late filing of an income or employment tax return by a CPA, tax attorneys, or enrolled agent is considered a violation of IRS Circular 230, punishable by suspension from practice before the IRS. The guidelines issued by OPR first point out that sanctions are determined on a fact specific basis, and the penalty grid is not intended to establish a rigid standard. The guidelines including the actual penalty grid made be found at the OPR website.

The penalty grid imposes a guideline penalty of two to four months for each late filed tax return, even though no tax was due. If the tax return is still not filed at the time OPR contacts the tax preparer then the guideline is four to six months for each non-filed tax return. If the late filings continue for four or more years than the baseline can be doubled! Thus a simple late filing of tax returns for four years can result in a suspension from practice for 32 months even though no tax is due.

If you are CPA, tax lawyer, or enrolled agent who has not filed his tax returns you have a serious tax problem, and you may wish to contact the tax controversy attorneys at Brager Tax Law Group, A P.C.

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Posted In: Tax Preparer Penalties

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Effective April 1, 2009 the Internal Revenue Service (IRS) Office of Professional Responsibility (OPR) will have a new Director— tax controversy attorney Karen Hawkins, Esq. Having known Karen professionally for a number of years I am confident that she will bring a well needed dose of practicality to OPR. Karen has worked tireless in many areas of tax litigation including most notably the innocent spouse arena where she successfully persuaded Congress to pass legislation clarifying (someone would say expanding) the availability of judicial review for innocent spouse cases under IRC Section 6015(f).

OPR has the responsibility for enforcing standards of competence, integrity and conduct for tax attorneys, CPAs, and enrolled agents who practice before the IRS. It enforces Circular 230, the rules and regulations which govern tax lawyers, CPAs, enrolled agents and others who practice before the IRS. Tax lawyers, CPAs and enrolled agents who violate Circular 230 are subject to discipline which may include suspension of practice before the IRS, and/or monetary fines.

Tax practitioners may run afoul of OPR if, for example, tax preparer penalties are imposed against them pursuant to IRC Section 6694 which provides for monetary penalties against tax preparers for various types of incorrect tax returns. Sometimes tax preparers agree to pay what in some instances is a small penalty under IRC Section 6694 rather than fight to have it set aside. This is generally a mistake since agreeing to an IRC Section 6694 penalty will almost always lead to an investigation by OPR, and possibly a suspension from practice.

If you are a tax preparer, tax lawyer, enrolled agent, or CPA facing tax preparer penalties, or in investigation by OPR contact the tax controversy attorneys at Brager Tax Law Group, A P.C.

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Posted In: Tax Preparer Penalties

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Michael Fuller, an accountant from Florida, and Carl Perry, a food broker from Greenville, South Carolina, were sentenced on May 5, 2008 in federal court for tax evasion. Fuller was found guilty by a jury in July of 2007 and Perry pleaded guilty in May 2007 for conspiracy to defraud the United States pursuant to 18 U.S.C. 371. United States Circuit Judge William Wilkins sentenced Fuller and Perry to twelve months and one day in prison and three years probation, respectively.

Fuller and Perry committed tax evasion during a period from the late 1990's till 2001. According to the Department of Justice, Perry used offshore accounts and other entities, which were set up by Fuller, to hide income from the Internal Revenue Service (“IRS”). A credit card was also set up with another offshore bank which was funded with Perry’s untaxed income. Fuller filed false income tax returns and other documents with the IRS to hide their tax evasion scheme.

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

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

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

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

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

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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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The Internal Revenue Service (IRS) has issued a memorandum outlining its procedures for investigating tax preparers who show patterns of abuse, and thus may be subject to tax preparer penalties. The memo sets forth some interesting information. At least in cases initiated through LMSB (Large and Midsize Business) Division the approval of the IRS Director of Field Operations is necessary. Once an investigation has been approved the IRS may select up to 30 tax returns prepared by the preparer, and a tax audit of those returns will be opened. Of course this means that the tax return preparer’s clients will be contacted, and once the preparer’s client’s realize that they are being subjected to a tax audit solely because of who prepared their tax return it is likely they will find a new tax preparer in short order. They may also tell their friends, who are also clients, about their tax audit. In short a preparer investigation can quickly devastate a thriving practice even if the tax preparer is ultimately determined to have acted properly. For this reason it is critical that any hint of an IRS investigation must be responded to quickly, with the hope of rapidly putting it to an end.

If you are a tax preparer, and believe you may have been targeted by the IRS for a tax preparer penalty investigation contact California State Bar Certified Tax Specialist Dennis Brager.

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Posted In: Tax Preparer Penalties

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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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