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IRS Hitting Wealthy & Businesses With Huge Penalties

Teig Lawrence IRS Hitting Wealthy & Business With Huge Penalties

The IRS is aggressively targeting high net-worth individuals and businesses.  The reason is simple, there is more meat on the bone when the government catches a big fish.  Technology has also made it much easier for the government to catch a big fish.

Even the most benign non-compliance can lead to unfair penalty assessments.  Large penalty assessments have become the norm in cases involving foreign non-compliance.  The IRS routinely assesses significant penalties in cases involving Forms 3520, 3520-A, 5471, 8938, and FinCen 114 (FBAR).  Other significant penalties assessed by the IRS include: Failure-to-File (FTF), Failure-to-Pay (FTP), Accuracy-Related Penalty, and Civil Fraud.

Some of these penalties are generated automatically while others are assessed by an examiner.  Regardless of the assessment process, all the penalties mentioned above may be challenged by taxpayers.  The key to penalty relief is demonstrating to the IRS that the taxpayer has “reasonable cause” for their non-compliance.

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Skating On Thin Ice: IRS Does Not Recognize Organization’s 501(c)(3) Status

IRS Does Not Recognize Organization’s 501(c)(3) Status

Various 501(c)(3) organizations may pursue charitable activities or operate to pursue altruistic purposes. However, what if such activities or purposes do not fall within the Internal Revenue Code’s requirements for charitable organizations? Besides jeopardizing the ability of donor taxpayers to deduct contributions, the organizations may find that they are taxable and have certain filing requirements other than annual Form 990 filings. In a recent Private Letter Ruling, the Internal Revenue Service highlighted that “charitable” organizations, such as hockey organizations, that ultimately take care of their own members may not be so charitable for tax purposes.

501(c)(3) Organizations, Generally

Generally, charitable organizations must meet certain requirements to be exempt for federal tax purposes.[1] First, the organization must operate for limited purposes (e.g., religious, charitable, scientific, testing for public safety, literary, or educational purposes). Second, individuals must not privately benefit from the net earnings of the organization. Finally, the organization must not engage in substantial propaganda or lobbying activities, and the organization must not participate in (or intervene in) any political campaign for or against a political candidate.[2]

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Jury Convicts Roman Catholic Priest of Tax Evasion, Money Laundering, And Wire Fraud – Court Orders Restitution

Jury Convicts Roman Catholic Priest of Tax Evasion, Money Laundering, And Wire Fraud – Court Orders Restitution

A jury recently convicted Marcin Stanislaw Garbacz, a Roman Catholic priest, of 50 counts of wire fraud, nine counts of money laundering, one count of interstate transportation of stolen money and five counts of making and subscribing a false tax return.  For the tax return years 2013 through 2017, the defendant had unreported income totaling $235,818 and income tax due totaling $46,008.  As a result, the district court ordered tax-based restitution to the IRS of $46,008 under the Mandatory Victims Restitution Act.  United States v. Garbacz.

The recent case of United States v. Garbacz reinforces the fact that the federal government often prosecutes tax violations, even violations involving relatively small amount of unpaid tax such as that involved in the case—some $46,008 over the course of five years.  The case also illustrates the restitution provisions at when federal convictions involve amounts owed to the IRS.

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IRS Has Begun Sending Letters To Taxpayers That May Need To Take Action Related To Qualified Opportunity Funds

IRS Has Begun Sending Letters To Taxpayers That May Need To Take Action Related To Qualified Opportunity Funds

The Internal Revenue Service has started sending letters to taxpayers that may need to take additional actions related to Qualified Opportunity Funds (QOF).

Taxpayers who attached or indicated they attached a Form 8996 to their return may receive Letter 6250, Self-certifying as Qualified Opportunity Fund (QOF). This letter lets them know that if they intended to self-certify as a QOF they may need to take additional action to meet the annual self-certification requirement.

To correct a 2018 self-certification as a QOF, these taxpayers should file an amended return or an administrative adjustment request (AAR). If an entity that receives the letter fails to take action to self-certify as a QOF, the IRS may refer its tax account for examination. Investors who made an election to defer tax on eligible gains invested in that entity may also be subject to examination for an invalid election.

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Treasury Warns Against Taking Deductions Related To PPP Funds

Treasury Warns Against Taking Deductions Related To PPP Funds

As many practitioners and taxpayers know, the Paycheck Protection Program was created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which Congress enacted in March. The PPP program provides loans that can be forgiven tax free if portions of the proceeds are spent on items such as payroll.

However, immediately after Congress passed the CARES Act, questions arose whether expenses funded with PPP loans would be deductible if the loans were forgiven. Soon after, the IRS issued Notice 2020-32, 2020-21 IRB 837, which stated that expenses funded with the forgiven PPP loans would not be deductible—avoiding a double tax benefit to businesses.  But that Notice still did not answer the question that many practitioners raised: would expenses funded with a PPP loan be deductible if the loan was not forgivable until a subsequent year?

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IRS Criminal Investigation Releases Fiscal Year 2020 Annual Report; Identifies $2.3 Billion In Tax Fraud

IRS Criminal Investigation Releases Fiscal Year 2020 Annual Report; Identifies $2.3 Billion In Tax Fraud

The Internal Revenue Service today released the Criminal Investigation Division’s annual report, highlighting the agency’s successes and criminal enforcement actions taken in fiscal year 2020, the majority of which occurred during COVID-19. A key achievement was the identification of over $10 billion in tax fraud and other financial crimes. 

“The special agents and professional staff who make up Criminal Investigation continue to perform at an incredibly high-level year after year,” said IRS Commissioner Chuck Rettig. “Even in the face of a global pandemic, the CI workforce initiated nearly 1,600 investigations and identified $2.3 billion in tax fraud schemes. This is no small feat during a challenging year, and their work is critical to protecting taxpayers and the integrity of our tax system.”

Key focuses of CI in fiscal year 2020 included COVID-19 related fraud, cybercrimes, with an emphasis on virtual and cryptocurrencies, traditional tax investigations, international tax enforcement, employment tax, refund fraud and tax-related identity theft.

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IRS Rules On Closing A Partnership

IRS Rules On Closing A Partnership

partnership is a relationship between two or more partners to do a trade or business. Each person contributes money, property, labor or skill and shares in the profits and losses of the business.

Partners who want to close their partnership must take certain actions whether they’ve been in business a few months or many years. They must file final forms and schedules. Here’s information on typical final forms and schedules that a partnership needs to file when ceasing operations.

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IRS Adds Bar Code To Inform Taxpayers They Owe Money

IRS adds QR technology to key balance due notices to help taxpayers

For the first time, the IRS is adding barcode technology to notices sent to millions of taxpayers.

Starting this month, the CP14 and CP14 IA notices that inform taxpayers that they owe money on unpaid taxes and their payment options are now equipped with QR bar codes to help those taxpayers securely and easily navigate to the IRS.gov website.

Taxpayers can now use their smartphones to scan a QR code in the CP14 or CP14 IA to go directly to IRS.gov and securely access their account, set up a payment plan or contact the Taxpayer Advocate Service.  

Scanning the QR code on the CP14 or CP14 IA gives the taxpayer direct access to the information they need on IRS.gov to resolve their account balance online without the need to call or interact with the IRS directly.

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IRS Finalizes Regulations For 100 Percent Bonus Depreciation

IRS Finalizes Regulations For 100 Percent Bonus Depreciation

The Treasury Department and the Internal Revenue Service today released the last set of final regulations PDF implementing the 100% additional first year depreciation deduction that allows businesses to write off the cost of most depreciable business assets in the year they are placed in service by the business.

The 100% additional first year depreciation deduction was created in 2017 by the Tax Cuts and Jobs Act and generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property (including used property) acquired and placed in service after September 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property.

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IRS To Mail Special Letter To Estimated 9 Million Non-Filers, Urging Them To Claim Economic Impact Payment By Oct. 15

IRS To Mail Special Letter To Estimated 9 Million Non-Filers, Urging Them To Claim Economic Impact Payment By Oct. 15

Later this month, the Internal Revenue Service will start mailing letters to roughly 9 million Americans who typically don’t file federal income tax returns who may be eligible for, but have not registered to claim, an Economic Impact Payment. 

The letters will urge recipients to register at IRS.gov by Oct. 15 in order to receive their payment by the end of the year. Individuals can receive up to $1,200, and married couples can receive up to $2,400. People with qualifying children under age 17 at the end of 2019 can get up to an additional $500 for each qualifying child.

The letters are being sent to people who haven’t filed a return for either 2018 or 2019. Based on an internal analysis, these are people who don’t typically have a tax return filing requirement because they appear to have very low incomes, based on Forms W-2, 1099s and other third-party statements available to the IRS. But many in this group are still eligible to receive an Economic Impact Payment.

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Know The IRS Collection Statue Expiration Date

Keith Jones:The IRS Collection Statue Expiration Date

IRS Collection Statue Expiration Date (CSED)
“It is a basic concept of law that once a statute of limitation has passed, no action barred by the statute may take place.”

–Procedurally Taxing

The IRS collections statute expiration date (CSED) is the date after which the IRS can no longer collect a tax debt.

When things are simple, the CSED is easily calculated as 10 years from the date of assessment.

This means that no matter how little the IRS has been able to collect on a tax debt assessed in April of 2007, they must cease collection on that debt in April of 2017.

However, when you’re working with the IRS, things are rarely as simple as you’d like. There are a handful of events that can result in extending the CSED date (sometimes called “tolling events”).
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IRS Reminds Businesses Filing Cash Transactions

IRS Reminds Businesses Filing Cash Transactions

IRS reminds businesses filing cash transaction reports about e-file option; batch filing now available

The Internal Revenue Service reminds businesses required to file reports of large cash transactions that e-filing is a fast, easy and secure option for filing their reports. Now, businesses can batch file their reports, which is especially helpful to those required to file many forms.

Although businesses have the option of filing Form 8300, Report of Cash Payments Over $10,000, on paper, many have already found the free and secure e-filing system is a more convenient and cost-effective way to meet the reporting deadline. The form is due 15 days after a transaction and there’s no charge for the e-file option.

Although many cash transactions are legitimate, information reported on this form can help stop those who evade taxes, profit from the drug trade, engage in terrorist financing and conduct other criminal activities. The government can often trace money from these illegal activities through the payments reported on Form 8300 and other cash reporting forms.
Businesses that file Form 8300 electronically get free, automatic acknowledgment of receipt when they file. In addition, electronic filing is more accurate, reducing the need for follow-up correspondence with the IRS.
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