When you need tax help, it only makes sense to look for in-depth experience in all of the tax laws relevant to you and your business. Federal and California state tax laws are constantly changing, and it isn’t easy for the average taxpayer to keep up with all of the changes from one tax year to the next. You need professional guidance from a tax lawyer.
Accountants and tax preparers can handle certain tax matters, but there are some situations where working with a tax attorney has its advantages. The attorney client privilege offers protection for your communications with your attorney. This is particularly important if you are concerned that the IRS may bring a criminal tax case against you.
What to Expect from a California Tax Lawyer
Tax laws change regularly, and are a challenge to adequately decipher under the best of circumstances. Even with the requisite due diligence and the help of a CPA, you may find yourself the recipient of a letter from the IRS “inviting you to an audit.” If you’ve been audited by the IRS and disagree with their findings, all is not lost.
Your rights as a U.S. taxpayer include the right to contest an IRS bill which you feel is inaccurate or unfair by filing an appeal. The key to gaining a satisfactory result from an appeal is strict adherence to each step of the process. Guidelines and deadlines must be closely followed.
How it Works
Periodically, the Brager Tax Law Group surveys tax preparers and/or taxpayers on a variety of issues. Our most recent survey targeted tax preparers and their interaction with the IRS in a number of areas, including disclosure programs, FBARs and marijuana businesses.
The survey contained several quantitative questions with a scale from 1 to 5 with 1 as poor and 5 as excellent. The lowest scoring statement was respondents’ experience in getting a response from the IRS within a few business days, which scored only 1.96. The highest score was on respondents’ experience in participating in the Offshore Voluntary Disclosure Program, which scored 3.20. Overall interactions with the IRS scored 2.79.
No survey respondents have been contacted by the IRS subsequent to filing amended returns as part of the Offshore Streamlined Procedure submissions.
Your tax return must include all your income, whether or not it was earned on U.S. soil. Income earned in a foreign country is taxable by the IRS and must be claimed on your tax return. It may also be taxed by the country where it is earned, causing a double taxation situation. However, you may be able to deduct the tax that you pay to another country. But this can be tricky. Number one, it must be considered deductible by the IRS, which can depend on the country where you are living. Secondly, you must be able to prove you paid the taxes – this can be difficult due to the difference in tax years, and documentation available in various countries.
The Taxpayer Advocate is a tireless champion of taxpayer rights. The Taxpayer Advocate is required by law to issue reports to Congress. Her most recent mid-year report was recently released. One of her issues was that the IRS continues to levy on retirement accounts even though the IRS guidance to its revenue officers is “insufficient to protect taxpayer rights.” As her report points out, the IRS has identified three steps which MUST be taken before a Notice of Intent to Levy can be issued on a retirement account such as IRA Qualified Pension, Profit Sharing, and Stock Bonus Plans under ERISA, and Retirement Plans for the Self-Employed (such as SEP-IRAs and Keogh Plans). These steps are:
- Determine what property (retirement assets and non-retirement assets) is available to collect the liability;
- Determine whether the taxpayer’s conduct has been flagrant; and
Our tax attorneys have had many clients with Superannuation accounts in Australia. For those of you not familiar with Superannuation accounts, these are the Australian version of our tax-favored retirement plans. These Superannuation accounts, sometimes referred to as Supers, can be very problematic for immigrants from Australia to the U.S., because they may or may not be subject to taxation in the U.S. The ownership of a Super may trigger the requirement to file an FBAR (Foreign Bank Account Report, FinCEN Form 114, formerly TDF 90-22.1) and/or Form 8938, Form 3520 or Form 3520-A. The proper treatment of a Super under U.S. tax law has been the subject of many articles on the internet and confusion abounds. Part of this confusion is because there are different types of Supers and, depending upon the facts and circumstances, the U.S. tax treatment may differ.
Over a year ago, one of our tax lawyers had a conversation with the IRS’ Offshore Voluntary Disclosure Program (OVDP) hotline to ask about the treatment of a Super. We were told that no Form 3520 was required. The person we spoke to was obviously reading from a script and, of course, we asked for a copy. Just as predictably, we were told that it was an “internal document,” and, therefore, we couldn’t get it. This led our tax lawyers to file a Freedom of Information Act (FOIA) Request in early April 2015, which was received by the IRS, appropriately enough, on April 15th. The substance of the request was as follows:
Please provide all documents, including internal guidance materials and training materials, that have not previously been published in the Internal Revenue Manual or on the IRS’ website (including but not limited to memoranda, staff manuals, Powerpoint presentations, videos and any other materials) concerning or related to the IRS’ treatment of Australian superannuation accounts (aka “ASAs”) or other non-U.S. deferred compensation arrangements or employee trusts (but not including Canadian arrangements or trusts) for purposes of United States taxation and information return filing under the Internal Revenue Code (26 U.S.C. §1, et seq.), the Bank Secrecy Act (31 U.S.C. §15, et seq.), the Offshore Voluntary Disclosure Program (aka the “OVDP”), the Offshore Voluntary Disclosure Initiative (aka the “OVDI”), the Streamlined Filing Compliance Procedures (aka the “SFCP”) and/or Transitional Treatment under OVDP/I, including any such documents used by or available to IRS personnel working at the IRS’ Offshore Voluntary Disclosure Civil Hotline at (267) 941-0020.
Bankruptcy Appellate Panel Finds in Favor of the Taxpayer in Late-Filed Taxes Discharge Question
In the previous blog post we set forth the facts in a bankruptcy proceeding where the IRS argued that taxes filed even one day past assessment would result in the nondischargeability of the debt in bankruptcy. In this post we will examine the Bankruptcy Appellate Panel’s (BAP) analysis and issued guidance in the proceeding In re Kevin Wayne and Susan Martin, EC-14-1180-KuKiTa (9th Cir. BAP 2015).
Bankruptcy Court Found the Tax Debts Were Dischargeable
One’s failure to understand the obligations and duties one holds under the U.S. Tax Code can always result in significant additional penalties and interest on any unsatisfied tax debt. Aside from these serious penalties, a proposed provision contained within the pending 2015 highway & transit funding bill, aka the Surface Transportation Reauthorization and Reform Act of 2015, would introduce new consequence on top of fines and penalties for certain taxpayers with “seriously delinquent taxes.” This new measure would permit the IRS to submit a list of individuals who are subject to non-renewal, cancelation, and restrictions on their U.S. passports.
The Bill has been passed by both the House, and the Senate, but there are still impediments to its final implantation. A provision in the bill authorizes the U.S. government to revoke, deny, or limit one’s U.S. passport if the person owes more than $50,000 in “seriously delinquent tax debt.” This $50,000 threshold includes all penalties and interest that may be added on due to a taxpayer’s failure to satisfy a tax debt that is due and owing. However, the tax enforcement provisions regarding the cancelation of one’s passport can only be utilized after the IRS has filed a lien or a levy against the taxpayer. The Bill provides that if the provision passes, it will go into effect on the first day of 2016.
Many groups are likely to be effected by these harsh potential new penalties. However, few groups are likely to be as affected as the 8 million strong American expatriates already grappling with FATCA and other offshore account compliance initiatives. Facing FATCA or other tax penalties and failing to address the matter before January 1st could lead to dire circumstances for expats due to potential passport cancelation. While the $50,000 threshold seems like it would be difficult to reach, penalties and interest can add up much more quickly than the average taxpayer would imagine.
One of the top priorities for the IRS and Department of Justice has been the focus on offshore financial accounts held by U.S. taxpayers, and used to avoid or defeat the assessment of tax. Underscoring the need for an increased focus on offshore tax enforcement is a 2008 U.S. Senate report showing that the use of offshore accounts results in the loss of more than $100 billion in tax revenues each year. From the DOJ’s use of “John Doe” summonses to force credit card and financial companies to release information about account holders, to FATCA and the Swiss Bank program, the U.S. government is committed to identifying and prosecuting taxpayers who avoid their tax obligations.
What is the Swiss Bank Program?
At its core, the Swiss Bank program allows Swiss Banks to pay fines, promise changes in the bank’s behavior, and pledge compliance and cooperation with FATCA and other offshore tax enforcement efforts in exchange for a deferred prosecution or non-prosecution agreement with the U.S. government. The deferred prosecution agreement provides the bank with legal assurances that it will not face further consequences for its alleged illegal behavior. Under terms of the Swiss Bank Program banks must: