The Statute of Limitations on an IRS Audit
Generally, the IRS can include returns filed within the last three years in an audit. According to information contained on the IRS website, the IRS tries to audit tax returns as soon as possible after they are filed. This means that most IRS audits will be of returns filed within the last two years.
The IRS can choose to add additional years to an audit if a substantial error is identified. In those cases, the IRS will not go back more than the last six years.
How Long Do I Have to Claim a Refund?
Just as the IRS must audit a tax return within a certain period of time, taxpayers also have Read More
Identity theft is a serious crime and of increased concern in recent years. Identity theft occurs when someone uses another person’s personal information, such as name or Social Security Number (SSN), without permission, to commit fraud or other crimes. There are several different types of identity fraud and the taxpayer’s response to each should be tailored to address the unique circumstances involved. In tax crime cases that involve identity theft, the victim must take specific steps to rectify the situation and the first step is identifying what type of identity theft has taken place.
What are the Different Types of Identity Theft?
There are two basic types of identity theft: refund theft and employment theft. Refund theft Read More
The most common federal tax crime is tax evasion, which is specifically defined in 26 U.S.C. § 7201 as a failure to report taxes, reporting taxes inaccurately, or failing to pay taxes. To establish a case for tax evasion under section 7201 of the Internal Revenue Code (IRC), the government must prove each of the following beyond a reasonable doubt: that the taxpayer attempted to evade or defeat a tax or payment of a tax; an additional tax was due and owing; and the taxpayer acted willfully. If the IRS proves its case for tax evasion against a taxpayer, the penalty can be significant including monetary fines and jail time.
Who Can Be Prosecuted for Tax Evasion?
Tax Appeals conferences are typically rather informal. There is generally no stenographer present to record the issues of fact and tax law discussed, unless specifically requested by the taxpayer via specific procedures. When you or others provide testimony during the tax appeals conference, it is not under oath; however, matters of fact must be stated on a signed affidavit under penalty of perjury (1). If you have evidence to support your position, you must disclose it prior to the appeals conference through your signed affidavit. You cannot simply wait until the appeals conference to present your evidence to the appeals officer for the first time. If you attempt to do so, the Appeals officer can decide to return the entire case back to the local office for verification of the evidence.
When you reach the Appeals conference, the Appeals officer may ask you to provide Read More
If you are being investigated for a criminal tax offense, you might wonder what tax crime defense strategies you can assert to avoid prosecution or severe penalties. The defense you assert must be specifically tailored to the criminal charge being brought against you. Because the IRS must prove each element of your crime beyond a reasonable doubt, your goal in coming up with a winning defense should be to negate at least one of the elements of the offense. For example, a taxpayer being prosecuted for tax evasion may attempt to show that there was no additional tax due and owing, or that the unreported income was offset by unclaimed deductions or constituted a gift or nontaxable receipt. A taxpayer prosecuted under IRC § 7206(1) may mount a defense by arguing that the false statement was not material. Read More
Applicants eligible under the Streamlined Foreign Offshore Procedures must follow particular steps to ensure that their returns are processed under the special program. If the taxpayer does not complete the process in a satisfactory fashion, the taxpayer will not be able to take advantage of the streamlined foreign offshore procedures. This article provides an overview of the necessary procedures, however it is recommended that you contact an experienced tax attorney for advice on the best course of action for your specific case.
What is the Scope and Effect of the Foreign Procedures?
Taxation is just one of many areas of law involved in disputing a workers status as either an employee or an independent contractor for the purposes of payroll taxes. Because of recent improvements in the exchange of information between federal and state agencies, one investigation into a workers status may trigger another. Or, a dispute by one worker can domino into additional disputes by other workers. If a business owner misclassified a workers status a number of years ago, it could be found responsible for significant federal and state employment tax deficiencies and penalties, as well as a variety of benefits if the worker sues and is ultimately determined to be an employee.
The IRS use the following list of 20 factors to examine the nature of the relationship between a business and a worker and make a determination between employee or Read More
The IRS has instated some very aggressive rules to force Foreign Financial Institutions and Non-Financial Foreign Entities to enter into FATCA agreements and fully comply with new strict reporting requirements on the assets and financial accounts of US persons. While the rules and strategies in this area of tax law have undergone a number of changes in the past few years, this is an area of tax law that I have been working in since the 1980’s under various offshore voluntary disclosure programs and initiatives as a San Diego tax attorney.
Under the rules governing the international tax reporting obligations of foreign entities with financial accounts of U.S. person, a “withholding agent” paying U.S. source interest, dividends, rents, royalties or making a “withholdable payment” in any other form to a Read More
When faced with an IRS audit, an effective strategy can be the key to obtaining a favorable outcome for the taxpayer. Early in the audit process, the taxpayer or his or her qualified representative should consider the policy against repetitive examination, the IRS policy on reopening examinations, and the various statutes of limitations that apply to examination of the taxpayer’s records and books.
1. The IRS Policy Concerning Repetitive Examinations
An initial consideration is whether or not the taxpayer’s audit violates the IRS’s policy against repetitive examinations. The policy against repetitive examinations applies when the taxpayer has been audited in the past two years, and the audits resulted in essentially no change. If you are a taxpayer who has been audited once in the past two years and Read More
When a U.S. person receives certain gifts or bequests from foreign corporations, those amounts may be considered as part of the U.S. person’s gross income under US International Tax regulations. The Internal Revenue Code’s regulations specifically state that when a “purported gift or bequest” is received “directly or indirectly,” the amount is included in the U.S. person’s gross income “as if it were a distribution from the foreign corporation” (1). As a result of this characterization, the purported gift or bequest has two possible treatments for tax purposes: as a dividend to the extent of the corporation’s earnings and profits, and as capital gain to the extent of the corporation’s excess over earnings and profit. Read More
Foreign corporations engaged in business in the United States must comply with particular record-keeping and international tax reporting obligations under the Internal Revenue Code. The code sections pertaining to foreign-owned domestic corporations and businesses also apply to U.S. taxpayers who engage in business with these companies. These rules are enumerated under IRC §§ 6038A and 6038C, which were enacted in the 1980s and later strengthened and expanded throughout the 1990s.
Reporting Obligations Prior to IRC § 6038
Prior to the enactment of IRC §6038A, U.S. parent corporations were required to report transactions that occurred between the corporation and its foreign affiliates and between Read More
Certain events, such as when a U.S. taxpayer receives a gift from a foreign person, trigger an international tax filing requirement. This event triggers the requirement to file form 3520. In general, the Form 3520 is merely an informational return, as foreign gifts typically do not result in tax consequences for the taxpayer. However, there are some significant penalties for failing to file a Form 3520 in connection with a foreign gift (1).
What is a Foreign Gift?
A foreign gift is money or other property received by a U.S. taxpayer from a foreign person. To be considered a foreign gift, the recipient must elect to treat the property or money as a gift or bequest, and exclude the amount from gross income. Note, however, that amounts paid for qualified tuition or medical payments made on behalf of a U.S. person are not Read More