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Posted in General on Aug 09, 2011
by Brian Mahany
It's just a few weeks until the IRS' last chance tax amnesty program for holders of foreign bank accounts ends. The program, called the Offshore Voluntary Disclosure Initiative or OVDI, ends August 31st. Many experts wonder if taxpayers will qualify if they wait much longer, however.
Under the rules, all application materials and payments must be complete or substantially complete by August 31st. That means amended returns, Reports of Foreign Bank and Financial Accounts (FBAR), clearance letters, application materials and copies of almost a decade worth of financial statements. It's the latter requirement that worries tax professionals.
It only takes a few days to amend returns and prepare FBAR forms IF the bank statements are available. Because the current program has an 8-year look back period, it may be hard to get foreign banks to quickly provide copies of old statements.
The IRS isn't saying what will happen to participants who miss the deadline, but in past programs, the penalties almost always increase. Luckily, there is still a little time left.
What are the benefits of participation? In return for filing under the amnesty program, taxpayers with undeclared foreign investment accounts avoid jail and loss of 50% of the highest historical balances of the foreign account. Absent amnesty, the penalties often exceed the amount in the account!
By participating in the account, penalties are fixed at 25% and that is for the entire 8 year period and not yearly. That is certainly steep but you still get to keep most of the account. Penalties can be as low as 12.5 or 5% for certain taxpayers who didn't use their foreign accounts or have small accounts (under $75,000). In some cases penalties can be waived if there was no income from the account (usually interest or capital gains) or if the income was properly reported.
Most tax penalties are based on the amount of the unreported income or unpaid tax. The penalty for failing to file FBARs and report the existence of the account is based on the value of the account.
Our research shows that many dual nationals and foreign-born Americans simply do not know of the filing requirement. For example, the Korean restaurant owner that emigrates to the US ten years ago but continues to send money "home" to family may not know that he has reporting requirements. Another example is the Indian living here but inherits an account in India. Owning the foreign account is legal but not telling Uncle Sam that you have it is a crime.
If you or anyone you know has unreported foreign or offshore accounts, now is the time to come clean. Even under the amnesty program, those that were playing "hide and seek" with the IRS will probably have to pay 25% of the account value. But those that can demonstrate minimal contact with the account (an inherited account for example) or have paid tax on the income from the account may pay far less.
Everyone who participates is virtually assured a free "get out of jail" pass unless the offshore money is tied to some type of criminal activity. Compared to penalties of up to 50% of the account value for each year the account was held, it's a good deal but the clock is ticking.
Interested in more information? Call attorney Brian Mahany at (414) 704-6731 (direct dial) or brian@mahanyertl.com
[Editor?s note: Brian Mahany is an attorney and partner at Mahany & Ertl, LLC. He has offices in Milwaukee, Detroit, Portland ME and San Francisco. Brian is a former Assistant Attorney General ? Tax and the state revenue commissioner for the State of Maine. He has been a lawyer for 28 years and is a frequent contributor to many CPA magazines including the Journal of Accountancy and a best selling author.
Brian works with us at G.
Last Updated by Brian Mahany on 2011-08-09 10:13:46
Posted in General on May 13, 2011
by Brian Mahany
Earlier today I was called by a fellow in Baltimore who lost $1700 to Roni Deutch. According to him, he paid her that money to get help with an offer in compromise application. Like many Americans, this gentlemen was overextended and wanted to settle up his tax debts with Uncle Sam. That was months ago. Nothing happened.
Apparently one of Deutch's telemarketers promised lots of help but took little action. The only action I can see is processing his payment. Earlier today he called Deutch (again) seeking a refund and found out the company was closed. It's true. According to published news reports, Roni Deutch is finished.
The Sacramento Bee reported a few hours ago that Roni is surrendering her law license and closing her doors. She claims she is broke and says she plans to "cry". The only ones who should be crying are the thousands of people who relied on those horrible commercials promising tax relief for "pennies on the dollar."
We have reported continuously about the cottage industry of tax relief scams that primarily advertise their "services" through mass market radio and television ad campaigns. The California Attorney General accused Deutch of ripping off Californians to the tune of $34 million. According to Roni, her firm has millions in debt and few assets. Unfortunately, she is not the only tax relief scam out there.
Prosecutors are also examining whether Deutch destoyed millions of a pages of records after being ordered by a court to turn them over to the state.
While Roni and her victims may be crying (probably many TV stations who are probably owed millions too), we are celebrating. At least there is one more huckster who won't be taking advantage of the poor any more. Think about it. Those who seek her services are the very same people who are struggling with too much debt.
There are millions of Americans who owe taxes. Some because of layoffs and some because of illness. Many of these folks scraped up every nickel they could find or borrow to pay a fraudster who promised tax relief for pennies on the dollar. Invariably, the story ends with broken promises and the tax debt continues to accrue interest and penalties. By the time they find us, they have no money to pay.
Last Updated by Brian Mahany on 2011-05-13 09:57:50
Posted in General on May 03, 2011
By Brian Mahany
The tax resolution business is full of fraudsters and scams. Many times I have reported on the horrors perpetrated by the likes of JK Harris, TaxMasters, American Tax Relief and my personal favorite, "settle your tax debts for pennies on the dollar" Roni Deutch. According to the California Attorney General, America's tax lady a/k/a Roni Deutch is in trouble again.
Last year we reported here that Roni Deutch was being sued by California for allegedly scamming customers out of $34 million in fees. Now, reports say that she shredded as many as 2.7 million pages of documents and failed to refund fees despite a court order. The Attorney General wants to see her jailed. According to press reports, the AG calls Deutch a "predator for profit".
Legitimate tax resolution professionals have little chance to compete with the late night TV hucksters promising to make your $100,000 tax bill go away for a couple hundred bucks. Many of these promoters charge between $5,000 and $10,000 in fees for an offer in compromise proposal that has little chance of success. The amount of work put into these proposals? Almost none.
The IRS does maintain an offer in compromise program that can help people who have lost their job or have little prospects of digging out of their tax debts. In some instances, bankruptcy may also be an option, although not if the tax debt involves certain business taxes - many of those are non dischargeable.
The best way to see if you qualify for a reduction of your tax debt is to consult with an accountant that specializes in tax resolution such as G. David Brimmer & Associates or a tax attorney. For a lot less money, you can learn if you qualify.
Last Updated by Brian Mahany on 2011-05-03 09:45:43
Posted in General on Apr 28, 2011
By Brian Mahany
JK Harris was ordered to pay $1.2 million dollars after being charged by the Texas Attorney General with violations of the Texas Deceptive Trade Practices -Consumer Protection Act. $800,000 of that money must go to victims - in this case, former customers of JK Harris.
Harris bills itself as the "largest tax representation firm" in the U.S. Some former clients and tax professionals think it is the largest tax scam in the U.S.
The Texas consumer fraud case is not the first time JK Harris has tangled with authorities and lost. In June of 2008 the company settled charges with 18 states and later that year was sued by the Missouri Attorney General. Apparently the company never learned.
According to the complaint filed by the state in a state district court, JK Harris defrauded customers by charging up front fees and suggesting customers could reduce their tax debts significantly. The state says the firm would calculate a "minimum settlement amount" that was deflated and non-representative of what the IRS would actually accept to compromise their tax debts. Once the taxpayer had signed up and completed the IRS paperwork for an offer in compromise, JK Harris would then tell customers they did not qualify.
At that point, JK Harris frequently tells taxpayers they should enter a payment plan for the full amount of the tax.
Taxpayers that balk and want their money back frequently run into problems. According to the Texas Attorney General, "Typically [JK Harris] refuses to return the money the consumers have paid for the services".
Nice scam. Find people who are down on their luck because of the economy, lost job or illness and take their last dollar with the idea that they can somehow get out of their back taxes. Once they sign up and pay, send them a letter saying they don't qualify and keep their money.
The Texas Attorney General calls their policy "unconscionable". I call it fraud. Whatever it's called, JK Harris was again caught and once again promised to clean up their act.
Tax resolution is complex and involves detailed negotiation with the IRS. Late night infomercials promising that people can simply pay "pennies on the dollar" are usually frauds. JK Harris isn't alone in this mess. Prosecutors have previously gone after Roni Deutch, American Tax Relief and TaxMasters.
About the author: Brian Mahany is Maine's former revenue commissioner and a former assistant attorney general. He can be reached here through 1-800-TAX RELIEF or through his law firm, Mahany & Ertl, LLC (www.mahanyertl.com).
Last Updated by Brian Mahany on 2011-04-28 09:49:36
Posted in General on Feb 20, 2011
By Brian Mahany
"Will I get caught?" is one of the most common questions we are asked by potential tax clients. Unfortunately, no one knows the answer.
Depending on the type of tax problem, your chances of getting caught vary widely. For example, in recent years, the IRS has installed sophisticated audit selection and refund fraud software. Getting an audit notice may be nothing more than an IRS computer saying your return varies from their preprogrammed norms. If your return is legit, a couple letters can often resolve the audit.
Sometimes, people get caught because a disgruntled employee, neighbor, jilted spouse or [fill in the blank] calls the IRS toll free tip line. If you didn't already know it, the IRS allows people to make anonymous complaints and has a reward program that can pay tens of thousands of dollars or more if a tip results in new tax collections. "Throwing someone under the bus" is not a new concept, except now the government pays for the information.
Many times, people are caught because the IRS is simply on the lookout for particular behaviors. Unreported offshore accounts, welfare benefit plans and employee leasing "subcontractor" schemes are examples of areas that currently generate much IRS interest and investigation.
In a few high profile tax cases court documents and testimony revealed that tax agencies actually paid foreign bank employees to steal information regarding the identities of their account holders. While he IRS hasn't done this directly, they have accepted stolen information obtained by other countries' tax agencies. In other words, the U.S. is reluctant to pay bribes to foreigners but looks the other way and accepts the information if a foreign government "purchases" the data.
Taking your chances with the IRS is often called the "audit roulette". Like the popular term Russian roulette, the stakes are quite high. If you avoid detection, you save money. If you lose, at best you have to pay all the tax you failed to pay, plus interest, plus penalties. Getting caught also means you are more likely to get audited again in the future.
I said that back taxes, interest and penalties were what happened to people who were lucky. If you are unlucky, you could find yourself in a federal prison. Statistically, the odds of just being audited are much, much greater than facing prison. Don't cite those statistics, however, to those who were selected for a criminal investigation and later indicted.
Of the many people with tax problems we have helped, most never set out to evade their taxes. In many cases, people fell on hard times, couldn't pay bills or decided to cut corners "just one time". Unfortunately, once you cheat the IRS or fail to file your return, the slippery slope becomes quite steep. One year becomes a second year and pretty soon you are so deep you can't easily come clean and pay your back taxes. Each year that you don't file or cheat, however, your chances of getting caught go up significantly.
Deciding to come into compliance is a difficult decision for many people. The one benefit, however, is that if you make the first contact you can generally always avoid jail. The IRS adheres to a strict first contact policy meaning they don't prosecute if the taxpayer comes forward first. If the IRS makes the first move, however, find a very good lawyer that concentrates in audit defense and criminal tax.
About the author. Brian Mahany is a lawyer in private practice and consultant to G. David Brimmer & Associates. He represents taxpayers across the United States and concentrates in tax court litigation, tax amnesty (voluntary disclosure initiative) filings and audit defense. Prior to entering private practice, Brian served as the head of Maine's Revenue Service, an Assistant Attorney General - Tax and a tax enforcement agent. He welcomes comments and questions, he can be reached at brian@mahanyertl.com
Last Updated by Brian Mahany on 2011-04-28 09:31:56
Posted in General on Feb 20, 2011
by Brian Mahany
Lester Morrison fancied himself as one of the busiest tax preparers in the New York City metropolitan area. At various times he operated multiple tax return services in New York and New Jersey. The IRS says that Morrison was filing fraudulent returns, thousands of them. Prosecutors say that the tax loss from his crimes is upwards of $25 million. On January 21st, U.S. District Court Judge Sidney Stein sentenced Morrison to 6 years in federal prison. When he is released, he is prohibited from preparing tax returns for others.
Morrison was also ordered to pay $17,340,000 in restitution. It is doubtful that the government will see more than a few thousand dollars of that money.
According to the indictment, Morrison and his business partners used the social security numbers and names of deceased kids to falsely claim them as dependents on clients' tax returns. They also created phony businesses so that their clients could deduct fictitious expenses, claimed false education credits and created false charitable contributions.
In 2003, Morrison prepared a return for a client that claimed children as dependents. The children had all died some 5 years earlier and were not even the children of the taxpayer.
In most criminal tax evasion cases, it is the taxpayer inflating expenses or hiding income. Preparer fraud is a bit different; here it is the preparer that commits the crime. What is in it for the preparer?
Morrison's indictment does not say. In most instances, the preparer promises much larger refunds in return for a very high fee. Although many tax services will prepare a simple return for under $100, these preparers charge hundreds or even thousands of dollars.
Fraudulent preparers usually couple their services with refund anticipation loans or RAL's. The preparer often has the loan proceeds or refund sent to an address he or she controls. The client gets a much higher refund and the preparer gets paid a ridiculous fee.
What happens when the fraud is exposed? The IRS has software designed to detect phony refund claims. For instance if you have not claimed any children, business expenses or charitable contributions for 5 years and suddenly have 3 kids, your own business - and thousands of dollars of contributions - and all on a bus driver's salary - expect an audit. Both the taxpayer and preparer can be left holding the bag and required to pay back the money plus interest plus penalties.
Are the taxpayers themselves innocent victims of these scams? Sometimes. If they read their own return before signing they certainly are aware of the fraud. The IRS generally does not prosecute the individual taxpayers - there are simply too many of them in the typical preparer scheme. But they do randomly target a few for prosecution and generally make all of them pay back the money.
Filing a false tax return is a felony, even if you did not actually prepare it. If you signed it (manually or electronically) and knew the information on the return was false, you could wind up in prison. In recent years the IRS has hired more criminal division special agents and ramped up their computer forensic techniques designed to spot questionable returns.
There is hope, however. The IRS operates a system of voluntary compliance. In almost every case, you can avoid criminal prosecution and prison if you come forward and admit your error before you are caught. The so-called "first contact" policy is designed to give people who feel remorseful a chance to come clean. If the IRS contacts you first, however, all bets are off. The IRS can and will prosecute even if you amend your returns and pay back the money if they found your mistake first.
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About the author. Brian Mahany is a tax lawyer and partner at the Milwaukee, Wisconsin law firm of Mahany & Ertl. He also consults with G. David Brimmer & Associates in Portland, Maine. Licensed by the U.S. Tax Court, he represents taxpayers throughout the United States. Prior to opening his own practice, Brian served as the director of Maine Revenue Services and as an assistant attorney general - Tax and a tax enforcement agent. He welcomes comments and questions, he can be reached at brian@mahanyertl.com.
Last Updated by Brian Mahany on 2011-02-20 10:23:30
Posted in General on Feb 20, 2011
By Brian Mahany
The IRS' 2011 offshore tax amnesty program is off and running. This is a repeat of the amnesty held in 2009; an amnesty that then only received 15,000 applications. Since then, the IRS has truly ramped up its audit and enforcement efforts designed to detect U.S. taxpayers with both unreported offshore accounts and unreported income.
Generally, tax agencies never hold two amnesty programs within the same decade. Holding them just two years apart is remarkable.
Why not have them more often? If an amnesty becomes too routine, taxpayers expect it and may decide to simply take their chances until the next amnesty is announced. In other words, having back-to-back amnesty programs can actually decrease compliance. The IRS program is a bit different (of course, the IRS has decided to call their 2nd amnesty an "offshore voluntary disclosure initiative")
Although the IRS calls the 2009 program a success, many view it as a failure. Tens of thousands of U.S. taxpayers with unreported income or accounts simply decided to sit on the fence and wait to see what happened.
In this case, the IRS brought high profile actions against UBS Bank in Switzerland to force the Swiss banking giant to disclose the names of their U.S. account holder. Congress also got in the act by passing enhanced bank disclosure mandates. Even the President jumped on the bandwagon and in several speeches blasted offshore "tax havens".
The result is that many more people now know that offshore accounts and offshore income must be reported. Even if a foreign account pays no interest (thus no income), the account must still be reported. Failure to report can result in penalties that equal 50% or more of the account value (not the value of the interest earnings.) Failure to report can also land you in the federal pen for up to 10 years.
Having a second amnesty makes sense. Now that awareness is much greater, the initiative gives taxpayers a second chance to come clean. The terms are not as great as the first but still offer a "get out of jail free" card and greatly reduced penalties.
As with any IRS program, there are a myriad of exceptions and rules. If you want to get the break on the penalties and avoid possible prosecution, you must act before August 31st. In most cases a lawyer can handle the process and provide the peace of mind for a few thousand dollars in legal fees.
If you aren't familiar with the filing requirements, speak with a tax attorney or CPA well versed in foreign bank account reporting requirements. Not every CPA is familiar with the rules.
About the author. Brian Mahany is a lawyer in private practice and consultant to G. David Brimmer & Associates. He represents taxpayers across the United States and concentrates in tax court litigation, tax amnesty (voluntary disclosure initiative) filings and audit defense. Prior to entering private practice, Brian served as the head of Maine's Revenue Service, an Assistant Attorney General - Tax and a tax enforcement agent. He welcomes comments and questions, he can be reached at brian@mahanyertl.com
Last Updated by Brian Mahany on 2011-02-20 10:09:54
Posted in General on Feb 20, 2011
By Brian Mahany
On January 11th, the U.S. Supreme Court dealt a major victory to the IRS. The court unanimously ruled that medical residents are full time employees and not subject to special exemptions reserved for students.
Since 1951, the Treasury Department has construed the student exemption to exempt from taxation students who work for their schools "as an incident to and for the purpose of pursuing a course of study." In 2004, the IRS changed the rule that said medical residents were entitled to the student exemption. The Service ruled that doctors in training must pay social security and Medicare FICA taxes.
The 2004 rule change generated the case that ultimately made it to the Supreme Court. Unfortunately for doctors, the court ruled in favor of the IRS. The rule change is expected to generate an estimated $700 million in new annual revenues.
The IRS rule now says that students are no longer exempt if they work full time as part of their study program. Medical residents typically work 50 to 80 hours per week.
Even though medical residency is mandatory for physicians and involves intense training, the IRS ruled that the residents were not students for tax law purposes. The residency program for newly graduated doctors is where most learn their specialty. For example, to become a neurologist, a person must first get their medical degree and then attend a residency program in a hospital neurology program.
The IRS has elected to apply the new rule effective April 1st, 2005. Physicians who haven't paid in hopes of a court victory should expect large assessments for back taxes, interests and penalties.
The case is Mayo Foundation for Medical Education and Research v. United States.
If you are a physician and have not paid taxes, contact G. David Brimmer and Associates as soon as possible. Failure to file and pay usually results in high interest and penalties and can often result in criminal prosecution and the loss of professional licenses.
About the author. Brian Mahany is a lawyer in private practice and consultant to G. David Brimmer & Associates. He represents taxpayers across the United States and concentrates in tax court litigation, tax amnesty (voluntary disclosure initiative) filings and audit defense. Prior to entering private practice, Brian served as the head of Maine's Revenue Service, an Assistant Attorney General ? Tax and a tax enforcement agent. He welcomes comments and questions, he can be reached at brian@mahanyertl.com
Last Updated by Brian Mahany on 2011-02-20 09:57:25
Posted in General on Dec 21, 2010
A lawsuit charging "tax relief" company Tax Masters of Texas with use of deceptive ads has been filed by Minnesota Attorney General, Lori Swanson. The Houston based business frequently runs television ads claiming it can settle IRS tax debts for a small percentage of the actual tax liability. The lawsuit alleges Tax Masters uses deceptive ads to entice clients who have IRS tax problems but fails to deliver on its promises.
This is the latest in a series of state prosecutions against prominent so-called "tax relief" companies. The suit reportedly asserts that Tax Masters falsely claims it can reduce delinquent taxes and halt collection efforts such as IRS liens and IRS levies. Other companies that have been or are subject to prosecution are J.K. Harris and attorney Roni Deutch.
As a former IRS Revenue Officer, I can attest that this is an all too common problem. Predatory companies claiming to be "tax relief" specialists target people who have IRS tax problems. Often, they're people who have been laid off, have medical problems or their homes are subject to foreclosure. High pressure techniques are used to persuade potential clients to pay large upfront fees, often in the range of $8,000, promising that former IRS employees or skilled professionals will work their cases. Frequently, little or no assistance is provided.
Not all tax relief companies are dishonest. However, settlement of delinquent taxes, called an Offer in Compromise, is a complex process. Reputable tax professionals that specialize in providing back taxes help can often make a difference.
At G. David Brimmer & Associates, www.877taxrelief.com, we don't make unrealistic promises. Rather, we thoroughly review our clients' financial situation and attempt to assess the potential acceptability of an offer prior to submission to the IRS. If the circumstances meet that test, we recommend pursuing an offer. If not, we suggest an alternative approach. While this is not a foolproof strategy, we have a high success rate. Remember, no one can promise an accepted offer. We also handle tax problems related to IRS levies and IRS liens, IRS wage levies, and most other IRS tax problems. Contact us through our website or call 1-877-TAXRELIEF.
(Ron Chase is retired from the IRS, where he worked as a Revenue Officer, Special Procedures Advisor, Offer in Compromise Specialist and Revenue Officer Group Manager for 33 years. For the past five years, he has functioned as an Enrolled Agent and Tax Consultant for G. David Brimmer & Associates. For more information on his other publications, visit his website at www.ronchaseoutdoors.com or blog site at www.trekalong.com and click on Chase Outdoors.)
Last Updated by Ron Chase on 2010-12-21 08:38:37
Posted in General on Dec 13, 2010
by Ron Chase
"Be wary of strong drink. It can make you shoot at tax collectors...and miss." - Robert A. Heinlein, Author
"Carrying a weapon is against Federal Regulations for Revenue Officers," IRS Revenue Officer Brad Bean naively cautioned his friend and co-worker Charlie Armor. "We're supposed to have armed Special Agents or local police escort us when firearms are deemed necessary." Veteran Revenue Officer, Charlie Armor was having none of it. "You never know when some nut case will attack one of us and we can't have twenty-four seven police protection. If someone threatens my life, I'm going to shoot first and worry about regulations later. I'd rather be a live defendant than a dead martyr," he asserted.
A hardened combat veteran and long-time Revenue Officer, Armor carried a 9mm, double action Ruger Pistol concealed in a shoulder holster and an assortment of weapons and ammunition in his car trunk. His Toyota Camry was a mobile fortress and he was a one-man mechanized arsenal. Old enough to be his father, Bean liked and respected Armor. "If it's good enough for Charlie, it works for me," Bean told his timid and unconvinced fellow Revenue Officer, George Zee. Bean started packing a 38 Special.
Before long, Bean had occasion to be thankful for his decision. Lamont Little, patriarch of a notorious local outlaw family, didn't much give a damn about anything. He was in the illegal drug business, threatened and intimidated friend and foe, and specialized in welfare fraud. A land excavator with employees, he didn't comply with tax laws, either. Ignoring income tax and social security withholding requirements, an IRS payroll tax audit resulted in a $150,000 tax deficiency assessment. Characteristically, Little refused to pay.
Assigned the case, Bean decided to seize Little's dump truck. Arriving at the Little compound with Armor and Zee, they were immediately surrounded by a hostile group of outlaw Littles and their employees. Issuing Mr. Little a Writ of Entry and Notice of Seizure, Bean announced that he was seizing the dump truck. Screaming taunts and obscenities, a ragtag parade followed Bean and Armor as they searched the cluttered premises for the truck. Upon finding the stipulated vehicle and affixing seizure tags, tempers flared. "No one is leaving here with my ($#!%&) truck," Little threatened.
Bean and Armor exchanged knowing glances. They had previously agreed that if they felt endangered, they would use their guns. Since he wasn't backing down, Bean decided to make a final attempt to resolve the matter peacefully before brandishing his weapon. Looking directly at Little, he averred, "We are not leaving without the truck. Federal Magistrate Edward Cole, who issued the writ, knows we're here and if there is any further interference, criminal charges will be brought against all of you. It's your call, Mr. Little," he challenged.
Little hesitated, he and Judge Cole had crossed paths before. "Too many witnesses and too many unknowns," he thought to himself. "Okay boys, find something else to do, let them have the ($#!%&) truck. It's not worth anything, anyways," he ordered. "They don't have the balls to collect taxes from the rich ($#!%&) who don't pay any taxes in Washington." Unwittingly, Little may have averted a gunfight.
Bean sold the dump truck at an IRS auction. Little was subject to several more IRS seizures by Bean, all would include armed escorts. Carrying a weapon became a normal part of doing business for Bean. He never had to use it.
(All names and locations are fictitious. Ron Chase is a retired IRS Revenue Officer who is currently a Tax Consultant for G. David Brimmer & Associates, www.877taxrelief.com, a firm that has provided tax relief and assistance to businesses and individuals with IRS tax problems for four decades. Professionals at G. David Brimmer & Associates recommend that anyone having tax problems avoid confrontations with the IRS. Never refuse to pay taxes, the IRS will win that battle. File and pay your tax returns timely or you may be subject to criminal prosecution. If you have unfiled returns, get expert assistance and promptly file them. Since Mr. Little had financial problems, he may have qualified for an Offer in Compromise or a manageable payment agreement. Never refuse to pay or put yourself in a position where the IRS begins seizing your assets. If you have serious IRS problems, get help and avoid the enforcement tactics encountered by Mr. Little.)
Last Updated by Ron Chase on 2010-12-13 08:46:59
Posted in General on Dec 13, 2010
by Ron Chase
When our client Mr. T first contacted us, he was in serious trouble with the IRS. He owed back income taxes and an IRS Revenue Officer was threatening to seize his assets and put him out of business. A housing contractor, the downturn in the economy had devastated him financially and he couldn't pay his taxes. Overwhelmed, he didn't know what to do or where to turn.
At G. David Brimmer & Associates, www.877taxrelief.com, our first action in such cases is to stop the bleeding. Unable to negotiate with the Revenue Officer, we filed a Collection Due Process (CDP) request, demanding a hearing and a halt to enforced collection activities. The CDP prevented seizure of his assets and convinced the Revenue Officer to grant us an extension to review possible options. The facts were difficult. Mr. T owed in excess of $150,000 and had an unfiled tax return. Our plan was twofold; prepare the unfiled tax return to determine the full extent of his liability and conduct a thorough analysis of his financial situation so we could recommend the best possible course of action.
Our financial review indicated that Mr. T was a candidate for an Offer in Compromise. However, the issues were complex, particularly regarding his income and expenses. When evaluating the acceptability of an Offer in Compromise, the IRS utilizes a complex income and expense formula to determine what it refers to as the value of Future Income. Normally, they use past income to make that determination. His income in recent years had been substantial, but had declined in the present due to the housing recession. Based on our financial analysis, we recommended that he submit an offer for $15,000 in accordance with IRS manual provisions that allowed for alternative income computations in special circumstances and a deviation regarding allowable expenses. Since Mr. T also had health problems, that was incorporated into our proposal. As always, we counseled Mr. T that there was no certainty that the IRS would accept his offer as submitted.
The IRS Offer Unit was unreceptive to Mr. T's offer from the outset. Unfortunately, this is an all too common occurrence. As a former IRS Revenue Officer, I can attest that there is a cultural bias against acceptance of offers in the IRS. Further, it is much easier for the IRS to reject rather than accept an offer. Another issue arose, as Mr. T was recently married and the Offer Unit wanted to include his wife's income in the Future Income analysis even though she didn't owe the taxes, maintained a different household and kept her finances separate. Despite providing substantial evidence to the contrary, the Offer Unit rejected his offer based on faulty equity determinations and a refusal to consider his declining net income in the present.
After a comprehensive discussion of the facts in the case with Mr. T, we filed a detailed appeal on his behalf with the IRS Appellate Division. Because an Offer in Compromise is a contract between the applicant and the government, the IRS cannot be compelled to accept an offer by initiating court action. The only option when an offer is rejected is an administrative appeal. Fortunately, the Appellate Division is generally a fair and objective arbiter. After extensive negotiations, the Appellate Division agreed with most of our arguments. Mr. T's entire tax liability was settled for a cash offer of $34,000.
While everyone's circumstances are unique, Mr. T's offer experience was not unusual. Contrary to many deceptive radio and television commercials, rarely does the IRS roll over and simply accept a proposed offer. Rather, approval is usually the result of hard work, persistence, knowledge of the pertinent laws and regulations and a proven strategy.
(Ron Chase is retired from the IRS, where he worked as a Revenue Officer, Special Procedures Advisor, Offer in Compromise Specialist and Revenue Officer Group Manager during his 33 year career. For the past five years, he has functioned as an Enrolled Agent and Tax Consultant for G. David Brimmer & Associates. For information on his other publications, visit his website at www.ronchaseoutdoors.com)
Last Updated by Ron Chase on 2010-12-13 06:40:15
Posted in General on Nov 16, 2010
by Ron Chase
Scallop fisherman George Fulton was in serious trouble. He owed thousands of dollars as a result of an IRS audit. An overly aggressive tax auditor denied every business expense for several years because he hadn't kept receipts. Worse, he had intentionally omitted some income received from the local fisherman's co-op. Married with six children, Fulton owed almost $100,000, and penalties and interest were accruing almost exponentially. Living on a remote island off the coast of New England, he thought he could avoid collection problems with the IRS. When IRS Revenue Officer Brad Bean confronted him, he angrily refused to pay.
Bean took his job seriously. Refusal to pay was unacceptable and an invitation for enforced collection action. He decided to seize Fulton's fishing boat, Oh Happy Daze. Researching public records, he found the boat was mortgaged for an amount greater than the current market value, hence there was no equity. Federal statutes prohibit no equity seizures. Undeterred, Bean decided to seize the vessel anyways and teach Fulton a lesson. The publicity would have the added benefit of improving tax compliance with other fishermen in the area.
Accompanied by his alcoholic IRS sidekick, James Zee, Bean secured the assistance of the U.S. Coast Guard to seize Oh Happy Daze at its mooring near Fulton's home in Codfish Harbor on Goose Island. Arriving at dusk in a Coast Guard Cutter, the seizure was a contentious confrontation. Having just finished a long, unsuccessful day of fishing, Fulton lost control, screamed obscenities, and tore up the seizure notices. Coast Guardsmen raised their assault rifles in defense and Oh Happy Daze was forcibly confiscated.
Fulton immediately contacted the Sunrise Fisherman's Association for assistance, who in turn appealed to Congresswoman Augusta Pringle to intervene and halt the seizure. The fishing community had been instrumental in electing Pringle to Congress; so late in the evening, she phoned IRS Area Manager, Lavender Carnahan, who knew nothing about the case. In fact, she knew nothing about taxes. Carnahan's sole concern and consuming focus was her next promotion. She sought to deflect any responsibility for the seizure onto others. Meanwhile, Oh Happy Daze was towed to a mainland marina and dry docked at Fulton's expense, naturally. Anticipating political interference, Bean made himself temporarily unavailable.
For nearly two weeks lawyers for the bank holding the boat mortgage demanded release, Pringle postured, and Carnahan and the IRS equivocated. Using a dubious boat valuation, Assistant U.S. Attorney Benjamin Broadway determined there might be equity for the IRS liens. IRS counsel verified that all required procedures had been properly followed. Bean was exonerated. Exorbitant dry dock and storage expenses continued to accrue against Fulton.
Problems begged solutions. Congresswoman Pringle wanted her reputation with the fishing community restored prior to the upcoming election. Lavender Carnahan needed to save face with Pringle and keep her promotion possibilities alive. The marina required payment of dry dock and storage fees. The bank demanded return of their boat. Fulton and his family were desperate.
Bean fashioned an agreement that satisfied almost everyone's needs. Fulton borrowed an additional $10,000 from the bank, paid the marina expenses, made a lump sum first payment on his tax liability and entered into a $5,000 a month installment agreement for the balance, now over $110,000. In exchange, Bean agreed to release Oh Happy Daze, which he dubbed Fulton's Folly, back to Fulton and the bank. Carnahan notified Pringle that she had satisfactorily resolved the matter and Pringle informed Sunrise Fisherman's Association that she had negotiated release of the boat. Management issued Bean a Special Achievement Award for his accomplishment. A problem remained: Fulton couldn't keep the installment agreement and additional IRS enforced collection efforts were imminent.
All names and locations are fictitious, but these IRS horror stories actually happen. Ron Chase is a retired IRS Revenue Officer who is currently a Tax Consultant for G. David Brimmer & Associates, www.877taxrelief.com, a firm that has provided tax relief and assistance to businesses and individuals with IRS tax problems for four decades. Professionals at G. David Brimmer & Associates recommend that anyone having tax problems avoid confrontations with the IRS. The IRS has tremendous power and will utilize it, sometimes injudiciously. Effective representation can avoid many of the problems George Fulton experienced. Aggressive auditors can be successfully managed and inappropriate seizures appealed and overturned. Never rely on IRS management or politicians to protect your interests. IRS management will usually shield employees from criticism and defend their actions. Politicians rarely impact on IRS decisions and are barred from direct involvement in IRS operations in most instances. George Fulton has a large family, heavily encumbered boat and apparent financial problems. He may be a strong candidate for an Offer in Compromise, which would settle his tax debt for less than the full amount due. Penalty abatements, having accounts declared uncollectible or arranging reasonable installment agreements are also possible options. If you have serious IRS tax problems, don't go it alone. For more information on Ron Chase publications, visit his website at www.ronchaseoutdoors.com.
Last Updated by Ron Chase on 2010-11-16 11:10:34
Posted in General on Nov 16, 2010
by Ron Chase
Contrary to frequent commercials by often disreputable tax firms, obtaining an IRS Offer in Compromise is no small accomplishment. Based on my experience as a retired IRS Revenue Officer and having worked as a Tax Consultant for the past five years, I can attest that there are many pitfalls in the offer process.
Most businesses and individuals who have significant tax debts usually have serious financial problems. Navigating an offer through the troubled waters of the IRS bureaucracy is a daunting task that requires knowledge, expertise and persistence. Unfortunately, predatory tax firms are an expensive, painful learning experience for many. Their standard modus operandi is to promise the moon, demand a large upfront fee and deliver little or nothing. During my last ten years in the IRS, I specialized in Offers in Compromise and encountered scores of such situations. None of them resulted in accepted offers. While there have been some successful prosecutions, this continues to be an all too pervasive problem.
The criterion the IRS uses to evaluate an offer is complex and often confusing, even for the most experienced professionals. Further, there is often a lack of consistency on how the IRS applies the various rules and requirements. IRS public service announcements notwithstanding, an offer rejection mentality is pervasive in the agency. Offers are met with skepticism and the IRS generally requires applicants to ?prove their case beyond a shadow of a doubt.?
Don't believe anyone who says they can promise you an accepted offer. My advice, have an expert complete a thorough, comprehensive financial evaluation prior to submitting an offer. Don't waste your valuable time and money on a lost cause. Many do not qualify for an offer. There are other alternatives, including payment arrangements, penalty abatements, filing under the appropriate chapter in bankruptcy and placing your tax liability in an uncollectible status. A reputable tax firm will recognize whether or not you are a candidate for an offer or if you should attempt an alternative solution. Again, no one can promise you an accepted offer.
At G. David Brimmer & Associates, www.877taxrelief.com, we have a unique approach to Offers in Compromise. We thoroughly review our clients' financial situation and attempt to disprove the acceptability of an offer prior to submission to the IRS. If the circumstances meet that stringent test, we recommend pursuing an offer. If not, we suggest an alternative approach. While this is not a foolproof strategy, we have a high success rate. If the IRS is unreasonable in response, we have an excellent track record appealing cases to the Appellate Division. Our clients are always in control of their own destiny.
Ron Chase is retired from the IRS, where he worked as a Revenue Officer, Special Procedures Advisor, Offer in Compromise Specialist and Revenue Officer Group Manager for 33 years. For the past five years, he has functioned as an Enrolled Agent and Tax Consultant for G. David Brimmer & Associates. For more information on his other publications, visit his website at www.ronchaseoutdoors.com.
Last Updated by Ron Chase on 2010-11-16 11:23:24
Posted in General on Nov 01, 2010
Mention young entrepreneurs and many folks will conjure up visions of the neighborhood kid mowing lawns or selling lemonade on a hot summer day. Today's post is about two very young kids selling pumpkins in Lewiston, Idaho (population 30,000), selling them until the tax man showed up. A few days ago an employee from the Idaho State Tax Commission ordered a 4 year old boy and his 6 year old brother to shut down their pumpkin stand.
The boys parents were told that the stand could reopen if the family obtained all necessary licenses and permits and collected sales tax on the pumpkins.
Let's see, health inspections, agricultural permits, weights and measures, business licenses, sales tax permits and perhaps transportation department approval for signs and parking. That cost could easily be in the thousands of dollars. A bit much for a six year old trying to save money for sports activities. Then again, even if they did get all the permits, Halloween would long be over and the labor department would probably arrest the parents for violations of child labor laws.
This type of heavy handedness gives tax officials and government a bad name.
When I ran Maine's state tax department between 1995 and 1998, we frequently encountered Christmas tree sellers operating 3 or 4 weeks a year. Some were tiny mom and pop operations and some were huge commercial enterprises. Tax authorities have a job to do - and certainly none of us like taxes - but a little discretion goes along way. Were the 4 and 6 year olds threats to Idaho's fiscal stability? Obviously not.
It is unknown whether the boys complied with the order or are now fugitives. Actually, they are probably folk heros by now.
News of the incident spread rapidly. Even TV commentator Glenn Beck picked up on the story.
Obviously, the parents had some involvement in the business. The local newspaper, the Idaho Reporter, carried a picture of one of the boys trying to pick up a pumpkin twice his size.
Thankfully, incidents this outrageous are few and far between. Tax officials do often become heavy handed however. If you are facing the closure of your business, seek professional help. Call your accountant or tax lawyer. many problems can be solved without expensive audits, enforcement actions or litigation.
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Brian Mahany is a lawyer in the Portland and Milwaukee law firm of MahanyLaw. He is also a consultant with G. David Brimmer and Associates. Previously Brian served as head of Maine's tax department. Brian blogs on a number of tax and financial topics. For more of his stories or to contact him directly, visit his website at http://www.mahanyertl.com
For help with mounting tax debts, call David Brimmer at 1-877-TAX RELIEF.
Last Updated by Brian Mahany on 2010-11-01 06:41:48
Posted in General on Oct 15, 2010
by Brian Mahany Esq.
There probably isn't one late night television viewer in the U.S. that has not seen an ad for tax relief. Roni Deutch and her claims of paying the IRS just pennies on the dollar, American Tax Relief and J.K. Harris are probably familiar to most. Unfortunately, many TV hucksters promoting tax relief are simply frauds.
What is so troubling is that these companies prey on people already in trouble. Most people unable to pay their taxes are already struggling financially. To then find out that the $10,000 or so up front fees paid to one of these tax relief companies is simply money wasted is devastating.
In October of this year, a federal judge finally shut down American Tax Relief. Earlier this summer, California Attorney General Jerry Brown sued attorney Roni Deutch for allegedly scamming clients out of $34 million in fees. And 18 states have pursued J.K. Harris for false and misleading ad claims. What does this mean for consumers who owe taxes?
The IRS does have programs to help delinquent taxpayers settle their tax debts. Although most accountants and lawyers are not familiar with the IRS' offer and compromise program, there are many that can. The rules are a bit complex and the process can take 2 years but it is possible to make peace with the IRS and not lose everything.
Before signing up with a tax relief company, ask some questions and get the answers in writing. Be especially wary if the company wants all its fees to be paid up front. Nationally, the IRS acceptance rate of tax settlement offers is very low, primarily because of the many tax relief scams out there. These scams often rely on extensive late night television advertising. Most of these companies have a very low acceptance rate and some never even submit a plan or follow up with the IRS.
A good accountant or lawyer who is familiar with the process often has a success rate well above 50%. That doesn't mean every taxpayer can get away with paying just "pennies on the dollar." A reputable professional can review your situation and tell you fairly accurately how much you will need to offer in order to have your offer accepted.
In successfully seeking to shut down American Tax Relief, the Federal Trade Commission noted that the company had even failed to pay its own taxes.
The tax professionals at G. David Brimmer and Associates have one of the highest acceptance rates in the nation - and IRS offers and compromise plans are mostly what we do. We enjoy an A+ rating from the Better Business Bureau! We provide services all over the U.S or anywhere else in the world where people have an IRS problem.
Call Brian Mahany today for more information. Brian is a licensed as an attorney in Maine and Wisconsin as well as the U.S. Tax Court. Brian is a partner in the Milwaukee, Wisconsin law firm of MahanyLaw, he also serves as a consultant for the firm of G. David Brimmer & Associates.
Call Brian Mahany or David Brimmer today at 1-877-TAX RELIEF for a free no obligation, confidential consultation about your IRS problem.
Last Updated by Admin on 2010-10-15 06:34:33
Posted in General on Aug 30, 2010
by Brian Mahany
According to an Internal Revenue Service report released last month, there are 1.8 million tax exempt organizations in the United States that collectively control well over $3 trillion in assets. In recent years, the IRS has increased its scrutiny of the non-profit center. The Criminal Investigation Division (IRS CID) is now jumping into the foray as well.
Earlier this year, the Treasury Inspector General, in response to a Congressional inquiry about tax exempts engaging in political activity, examined the Service's handling of nonprofit fraud referrals. The Service acknowledged that its criminal investigations in the nonprofit center have lagged in recent years. Apparently, that is about to change. Criminal investigations are expected to increase corresponding to the Service's overall strategy of more audits of the nonprofit industry.
According to IRS data, hospitals and non-profit colleges are particularly being scrutinized. Anecdotally, non-profits with unrelated business income and large executive compensation packages seem to be high up on the Service's radar. Locally churches are also being scrutinized. The author is aware of a hospital in some hot water over a parking ramp that serves more as a profit center than a convenience for staff and visitors. Ditto for the attached office building it operates for physician practices.
What does this mean for nonprofits? Now more than ever a thorough review of operations is suggested. Having such a review may avoid costly tax, interest and penalties down the road. For years, this one industry seemed to get a little extra leeway from Uncle Sam and the tax collector. No more.
Smaller nonprofits should pay particular attention to the compensation received by their executives. If most of the revenue of the agency goes to the executives or if the salaries seem disproportionate to the private sector, be wary. Agencies that engage in political speech or have ancillary nonbusiness activities should also be careful.
We are aware that most nonprofits provide valuable services to the community and that many have volunteer boards and finance committees. Unfortunately, the IRS is not directly interested in the experience of the volunteers or the value of the organization to the community. An experienced review can spot and correct problems early on and avoid future problems.
The recent decision to have more involvement by IRS CID makes the case even more compelling for a thorough review of a client's operation. Although the risk of criminal prosecution is still quite low, according to the Inspector General's report, those that were successfully prosecuted received an average prison sentence of 4 years, 3 months. Clearly the courts are not happy with officers and directors of nonprofits that abuse their special tax status.
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About the author: Brian Mahany is a principal of MahanyLaw, a boutique law practice concentrating in tax representation, white collar criminal and tax evasion cases, asset (fraud) recovery and select civil litigation. He has served on the boards of several nonprofits. In addition to his legal practice, Brian is a consultant with G. David Brimmer & Associates. Persons wishing to reach Brian can contact him directly at (414) 704-6731. He maintains offices in Milwaukee and Portland. Prospective clients with questions about tax compliance or nonprofit taxation are invited to contact David Brimmer at (877) TAX RELIEF (877-829-7354) for more information.
Last Updated by Admin on 2010-08-30 10:22:32
Posted in General on Aug 25, 2010
By Brian H. Mahany
It's a rainy day in Macau, a former Portuguese island colony off the coast of China. My work as an asset protection and asset (fraud) recovery lawyer frequently takes me to interesting spots in the world. This week is no exception.
Many nations are popular for Americans seeking to diversify their banking risks and protect their assets from creditors. Some Americans flee to foreign lands to avoid extradition on tax evasion charges. Two years ago I defended an individual kidnapped from Panama back to the U.S. to face such charges. No nation is as extreme as China, however, in its zeal to prosecute tax cheats.
Most civilized countries do not criminalize violations of the tax code. The U.S., of course, is an exception. Fail to pay your taxes in most nations and the tax authorities might be able to take your home, take your car, seize your bank account and maybe even take away your livelihood. But in most nations, they can't take away your freedom. The United States and China are not so progressive.
The headline in the Macau Post today is China's plan to scrap the death penalty for economic crimes. According to Amnesty International, the Chinese courts execute more people than the rest of the world. Some estimate over 5,000 yearly.
Presently an incredible 68 offenses carry the death penalty in China. Included are such crimes as murder and robbery to drug trafficking to tax evasion. That's right, tax evasion can land you in front of a firing squad in China.
The U.S. may be more zealous than most other nations in prosecuting tax cheats but only China can give the death penalty for such an offense, although that is likely to change.
Failing to file returns, pay taxes or filing false returns is risky business. Defrauding Uncle Sam will not subject you to the death penalty but it may land you in jail.
For those tax cheats seeking exile in Macau, don't worry. The death penalty has long been abolished here. In addition, there is no formal treaty governing extradition for tax cheats, although as western money pours into Macau, so does the reach and influence of Uncle Sam.
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Attorney Brian Mahany and G. David Brimmer and Associates help people with tax compliance, IRS collection and criminal tax problems. We can often help those with serious histories of tax problems reduce their debt, avoid prosecution and avoid jail.
For a no obligation consultation, contact attorney Brian Mahany directly at (414) 704-6731 or by email at brian@mahanylaw.com. Or contact David Brimmer at 877-TAX RELIEF (1-877-829-7354)
Last Updated by Admin on 2010-08-25 06:38:08
Posted in General on Aug 09, 2010
by Brian H. Mahany
A just released report shows the IRS collected $400,000,000,000 less in 2009 than in 2008. (Yes, that is 400 billion.) No surprise there - the economy remains in a slump and placing food on the table occupies a higher importance than paying taxes for many families.
The same report, released by the Treasury Inspector General for Tax Administration, also revealed that the government ramped up collection efforts and enforced collection procedures last year. Again, no surprises.
Looking at federal budget documents, the IRS hired an additional 2000 revenue agents last year. Couple that with hundreds of new revenue officers and criminal special agents and its easy to see the handwriting on the wall. Increased audits, more sophisticated revenue discovery techniques and more enforced collections are on the horizon this year.
Taxpayers can continue to expect more scrutiny. Those with unpaid taxes can really expect to see more "heat," including an increased risk of criminal prosecution.
The increase in tax enforcement has lead to an increase of late night infomercials promising to settle tax debts for "pennies on the dollar." Be careful! As this post is written, industry "leader" JK Harris shows an "F" rating from the Better Business Bureau.
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Brian Mahany is a lawyer and tax law consultant for G. David Brimmer & Associates. He is also a partner in the Milwaukee law firm of MahanyLaw (concentrating in tax law, fraud recovery and white collar criminal.) Brian is also a former assistant attorney general - tax and executive director of Maine Revenue Services.
Last Updated by Admin on 2010-08-09 19:15:30