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Tag Archive for Michael DeBlis III

Offshore Voluntary Disclosure Initiative (OVDI): Time is of the Essence

TaxConnections Blog post

Since 2009, the IRS has offered taxpayers with undisclosed foreign financial accounts the opportunity to “come clean” under its Offshore Voluntary Disclosure Initiative (OVDI). According to the Internal Revenue Service, more than 38,000 U.S. taxpayers have entered the program. They have paid more than $5.5 billion to resolve issues, with an estimated $5 billion yet to come.

What is OVDI? It is a program of limited duration that offers significant benefits to taxpayers who may have engaged in conduct that could be viewed as criminal. Benefits include immunity from criminal prosecution and avoidance of the full brunt of civil penalties that otherwise could far exceed amounts concealed in offshore accounts. The OVDI program can Read more

Rippling Effects Of Simple Source Of Interest Rule

How It Can Produce Surprisingly Gratifying Results For Foreign Persons

The simple rule for the source of interest paid by individuals has become an international tax shelter for tax-averse foreign persons. The active ingredient in virtually all international tax haven operations is the deduction of interest from a stream of business income otherwise subject to high taxation. The second ingredient is the deflection of interest, free of further U.S. tax, to some benign low-tax environment.

In order to understand how the source rule for interest can produce surprisingly gratifying results for foreign persons, it is necessary to understand the rule itself. And what is that rule? Interest paid by individuals, partnerships, and trusts takes its source from their place of Read more

Is That Worker An Employee? Part II

a. Behavioral Control

I. INDEPENDENT CONTRACTORS SHOULD RETAIN CONTROL OF THEIR WORK

The most fundamental difference between employees and independent contractors is that employers have the right to tell employees exactly what to do and how to do it. This is a recipe for disaster for the employer that intends to treat its workers as independent contractors. Whatever you do, don’t supervise or control an independent contractor as if he was one of your employees. It’s perfectly okay to provide detailed guidelines or specifications for the results that you expect from your contractors. But how those results are achieved must be left entirely up to the contractor. Read more

Is That Worker An Employee? Part I

QUESTIONS AND ANSWERS ON WORKER CLASSIFICATION

If you own or manage a business that uses independent contractors, you need to know when you can or cannot treat a worker as an independent contractor. This article answers some of the common questions about worker classification.

INTRODUCTION

Misclassification of employees as independent contractors is now a common phrase uttered by state and federal legislators and regulators. State task forces have been formed to crack down on businesses that do not pay unemployment insurance and workers’ compensation premiums or withhold taxes for workers whom the state believes are employees and not Read more

Hazards of Failing To File A Tax Return

TaxConnections Picture - 1040 and HandcuffsAll of us procrastinate. But some take things to dangerous extremes – putting off the filing of tax returns for a few years, or even many years. According to the IRS, each year some ten million people fail to file their tax returns. Non-filers, as the IRS calls them, are skating on thin ice. They face both criminal and civil consequences. Luckily, these problems can be resolved if addressed, but they can also bring imprisonment and financial ruin if ignored.

The IRS has become increasingly adept at finding and pursuing non-filers. Put simply, it’s not a matter of “if” the IRS will find you, but what will happen to you “when” they do. It is important to recognize that inability to pay the tax is NOT a valid excuse for not filing.

Failure to file your tax return timely has two potential consequences. First, the government can prosecute you for willful failure to file (a misdemeanor carrying a maximum sentence of one year in prison for each tax year) or for tax evasion (a felony carrying a maximum sentence of five years in prison for each tax year). Second, the IRS can make tax assessments on its own using its “substitute for return” procedures.

With respect to tax prosecution, people are prosecuted for failure to file or for tax evasion not because it is the easiest or cheapest way for the IRS to collect the tax. Instead, people are prosecuted because of the deterrent effect it has on the rest of the taxpaying public. For those poor souls who become ensnared in this process, it can destroy families and careers. Proper representation is an absolute necessity. Read more

Strategic Decision-Making In Criminal Tax Cases – Part 2

TaxConnections Member and Blogger Michael DeBlis posts about criminal tax casesTO FILE OR NOT TO FILE AN AMENDED RETURN TO CORRECT AN ORIGINAL RETURN THAT HAS CRIMINAL TAX DIMENSIONS – THAT IS THE QUESTION

Your client has filed a fraudulent return underreporting his tax liability. He now has misgivings. He comes to you and expresses great concern. What should you do?  This is a continuation of Part 1 that was posted October, 2, 2013.

EGGSHELL AUDITS: KEEPING THE SHELL OF THE EGG FROM CRACKING WHEN THERE ARE CRIMINAL TAX ISSUES

In an “eggshell audit,” you must walk on eggshells to represent your client effectively in the civil examination without exposing the fraud, all the while honoring your duties to the tax system not to mislead the revenue agent. Although it is theoretically too late for disclosure once the civil examination has begun, the practitioner might still be able to obtain a reasonable level of assurance from the revenue agent that he will not refer the matter to CI, so that disclosure of the fraud will not result in a referral for criminal investigation.

There are many instances in which disclosure to the agent may be the best option. For example, if the taxpayer has failed to pay income from foreign bank accounts, the IRS may be willing to allow the taxpayer to disclose the problem, pay a reduced penalty, and move on without a criminal referral. In other cases, you may be convinced Read more

Strategic Decision-Making In Criminal Tax Cases – Part 1

TaxConnections Member and Blogger posts about criminal tax casesTO FILE OR NOT TO FILE AN AMENDED RETURN TO CORRECT AN ORIGINAL RETURN THAT HAS CRIMINAL TAX DIMENSIONS – THAT IS THE QUESTION

Your client has filed a fraudulent return underreporting his tax liability. He now has misgivings. He comes to you and expresses great concern. What should you do?

The crime of tax evasion is complete upon filing the return. There are two possible exceptions. First, if the taxpayer filed the return before the normal due date (April 15 for an individual taxpayer and March 15 for a calendar year corporation), the taxpayer can purge the fraud by filing a non-fraudulent amended return on or before the normal due date. This opportunity also applies if a superseding return purges the fraud during an applicable extension period.

More times than not, the taxpayer cannot qualify for these exceptions and the question becomes one of damage control. Is it wise to file an amended tax return – after the due date – to correct an original return that has criminal tax dimensions? There are two schools of thought. First are those practitioners that oppose filing an amended return to correct an original return that contains an understatement of tax liability. They rely on the common-sense argument that doing so will establish one of the key elements of tax evasion: tax due and owing. Thus, making such an admission does nothing more than bring the taxpayer one step closer to conviction and his attorney one step closer to an ineffective assistance of counsel claim, having assisted the government in proving its case against his client. Read more