December 08, 2014

Discharging Property from a Notice of Federal Tax Lien Provides Taxpayers Relief

The tax attorneys at Nardone Law Group in Columbus, Ohio, frequently assist individuals and businesses that have been contacted by a revenue officer with the Internal Revenue Service, regarding federal tax liabilities. The IRS has substantial power to collect delinquent tax debts from taxpayers. If a taxpayer neglects to make payment of a federal tax liability, the IRS has broad authority and tools available to collect delinquent taxes, which includes the filing of a Notice of Federal Tax Lien. A Notice of Federal Tax Lien can cause a taxpayer significant financial harm, such as affecting one’s credit score or the potential of termination from employment. Therefore, it is crucial that taxpayers are aware of the various ways to obtain relief when issued a Notice of Federal Tax Lien.

In our prior article, Notice of Federal Tax Lien: Taxpayer Options and Alternatives, Nardone Law Group discussed several options that are generally available to assist taxpayers in minimizing the impact of a Notice of Federal Tax Lien. This article briefly highlights those options with a specific focus on the discharge of Notice of Federal Tax Lien process.   

How to Obtain Relief from a Federal Tax Lien

The law generally defines a lien as a charge or encumbrance that one person has on the property of another as a security for a debt or obligation. A Notice of Federal Tax Lien arises when a person (individuals, trusts, estates, partnerships, companies, etc.) fails to pay any federal tax after a demand by the government for payment.  When taxpayers are contacted by an IRS revenue officer with a Notice of Federal Tax Lien, it is important to know what options are available for relief.

There are four options that are generally available to a taxpayer to fully or partially resolve a Notice of Federal Tax Lien. They are: (i) Withdrawal, (ii) Release, (iii) Subordination, and (iv) Discharge, of a Notice of Federal Tax Lien. Each option has its own benefits and requirements that taxpayers must satisfy to obtain partial or full relief. Here, we will take a closer look at how taxpayers can discharge a Notice of Federal Tax Lien.

Discharging a Federal Tax Lien

When a taxpayer receives a Notice of Federal Tax Lien from an IRS revenue officer, the lien attaches to all of the taxpayer’s assets. The taxpayer can file an application, requesting that the IRS discharge certain property from the Notice of Federal Tax Lien. If the IRS approves the discharge, this option effectively allows the taxpayer to sell the discharged property free of any liens and encumbrances. Generally, the IRS will require the taxpayer to transfer the amount of sale proceeds that the IRS deems to be its monetary interest in the property to the IRS, as a payment towards the taxpayer’s tax debt.

NLG Comment: It is important to note that the Notice of Federal Tax Lien remains in effect and attached to all of the taxpayer’s other, undischarged assets until the taxpayer pays their tax liabilities in full. Only the specific property that was discharged is rendered free from the Notice of Federal Tax Lien.

The discharge of Notice of Federal Tax Lien process is a powerful tool for taxpayers. It allows taxpayers to utilize assets for various transactions, or to transfer those assets free and clear of any liens or encumbrances. The most common transactions that involve a discharge include:

  1. A sale of a personal residence.
  2. A sale of commercial real estate.
  3. The sale or purchase of a business, including the assets of that business.

Taxpayers who are subject to Notice of Federal Tax Lien restrictions, and need to initiate any of the above transactions, should ensure they seek out a well-qualified tax attorney, specializing in tax controversy matters, such as federal tax liabilities and disputes with the Internal Revenue Service.

Contact Nardone Law Group

Nardone Law Group routinely represents individuals and businesses in federal tax matters, including the discharge of Federal Tax Liens. If you have been contacted by an IRS revenue officer and are subject to a Notice of Federal Tax Lien, contact one of our experienced tax attorneys today. Nardone Law Group’s tax lawyers and professional staff have vast experience representing clients before the IRS. If you are subject to a Notice of Federal Tax Lien, we will thoroughly review your case to determine what options and alternatives are available.  

Contact us today for a consultation to discuss your case.

December 05, 2014

How to Notify Credit Bureaus to Update Taxpayers' Credit Reports, Once a Notice of Federal Tax Lien is Withdrawn

The tax attorneys at Nardone Law Group in Columbus, Ohio, routinely advise taxpayers who have unpaid federal tax liabilities and who may have been contacted by a revenue officer with the Internal Revenue Service. If a taxpayer neglects to make payment of a federal tax liability, the IRS has broad authority and tools available to collect delinquent taxes, which includes the filing of a Notice of Federal Tax Lien. A Notice of Federal Tax Lien can cause the taxpayer significant financial harm, so it is important for taxpayers to be aware of the various options and alternatives available to minimize the impact of a Notice of Federal Tax Lien. In our prior article on Notices of Federal Tax Lien, we discussed the various available options, as well as collection alternatives, that can provide taxpayers relief from a Notice of Federal Tax Lien. Particularly, the withdrawal of a Notice of Federal Tax Lien is very important because it can protect and restore a taxpayer’s credit history and credit score with the appropriate credit reporting agencies.

Withdrawal of Notice of Federal Tax Lien

Withdrawal of a Notice of Federal Tax Lien is primarily available where the IRS has made either a substantive or procedural mistake in filing the Notice of Federal Tax Lien against the taxpayer.  Withdrawal of a Notice of Federal Tax Lien is an excellent option for taxpayers, as it clears the tax lien from the public record, as well as from the taxpayer’s individual credit report. This effectively makes it as if the Notice of Federal Tax Lien never existed, giving the taxpayer a “fresh start.” (Click here for discussion of Withdrawal and the Fresh Start Program).  As a result, credit reporting agencies will update the taxpayer’s credit report to remove any reference to a Notice of Federal Tax Lien.

Notifying Credit Bureaus to Update Credit Report

It is important to note, that taxpayers must take certain steps to have their individual credit reports updated with the applicable credit bureaus. Once the IRS has withdrawn the Notice of Federal Tax Lien, including filing the appropriate documentation with the County Recorder’s Office, the taxpayer will need to dispute the Notice of Federal Tax Lien with each of the three credit bureaus to have it completely removed from the taxpayer’s credit report. As discussed below, each credit bureau has a different dispute process.

Equifax

1. The taxpayer will need to file a dispute directly with Equifax (along with documentation showing the lien has been withdrawn) either electronically through its online dispute process at the Credit Investigation Page, or by submitting a detailed letter (which Nardone Law Group can prepare) with copies of the supporting documentation to the following address:

    Equifax Information Services

    P.O. Box 740256

    Atlanta, GA 30374

2. Equifax will then investigate the dispute with the source of the information, typically the IRS.

3. Within a month of the request to dispute an inaccurate item on the taxpayer’s credit report, Equifax will notify the taxpayer of the results of is dispute investigation.

4. Based on the results of the investigation, Equifax will either update the current status of the disputed information or delete the item from the taxpayer’s file.

NLG Comment: After the Notice of Federal Tax Lien has been removed from the file, the other credit bureaus should eventually receive the corrected information. The best practice, however, is to contact each of the remaining two agencies and follow their dispute process. This will ensure that the taxpayer’s credit history is completely updated and will help to avoid any miscommunication throughout the dispute process.

Experian

1. The taxpayer will need to file a dispute with Experian, either electronically through its online dispute process here, or by mailing a detailed letter (which NLG can prepare) with copies of the supporting documentation to the following address:

    P.O. Box 4500

    Allen, TX 75013

2. The dispute request should include the following information: (i) full name, including middle initial; (ii) date of birth; (iii) social security number; (iv) all addresses where the taxpayer has lived during the past two years; (v) a copy of a government issued identification card (i.e., driver’s license); (vi) one copy of a utility bill, bank or insurance statement, etc.; and (vii) a list of the item(s) that are disputed.

3. Once Experian receives the taxpayer’s dispute request, it will contact the furnisher of the information or the entity that collected the information from a public record source (IRS or the court) to investigate.

4. The investigation may take up to 30 days, at which point it will send the client the results. The status of the dispute can be checked at the Experian status page.

TransUnion

1. The taxpayer will need to file a dispute with TransUnion, either electronically through its online dispute process at the TransUnion Credit Dispute Page, or by mailing a detailed letter (which NLG can prepare) with copies of the supporting documentation to the following address:

    TransUnion Consumer Solutions

    P.O. Box 2000

    Chester, PA 19022-2000

2. TransUnion will investigate by contacting the provider or furnisher of the information. The source of the information has either 30 or 45 days to investigate whether the information is accurate. If the source does not respond within the required time frame, TransUnion will remove the information from the report.

3. If the dispute is filed online, the client will be notified by e-mail with the results of the investigation.

As you can see, each credit bureau has its own specific procedure for disputing a Notice of Federal Tax Lien. It is important for taxpayers to be aware of these procedures, as the removal of a Notice of Federal Tax Lien from their credit history will greatly improve their credit score and help to eliminate future financial difficulties.

Contact Nardone Law Group

Nardone Law Group frequently assists individuals and businesses with federal tax matters, including the withdrawal of Notices of Federal Tax Lien. If you have been contacted by an IRS revenue officer and are subject to a Notice of Federal Tax Lien, or have questions on how to dispute the lien with credit bureaus, contact one of our experienced tax attorneys today. Nardone Law Group’s tax lawyers and professional staff have vast experience representing clients before the IRS. If you have been subjected to a Notice of Federal Tax Lien, we will thoroughly review your case to determine what options and alternatives are available.

Contact us today for a consultation to discuss your case.

November 21, 2014

United States Signs Intergovernmental Agreement with the Bahamas to Implement the Foreign Account Tax Compliance Act

The tax attorneys at Nardone Law Group in Columbus, Ohio, continuously monitor the Internal Revenue Service’s efforts to incentivize taxpayers to disclose foreign financial accounts, assets or entities. IRS programs, such as the Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures, allow taxpayers with undisclosed offshore accounts to come into compliance. Recent expansions to the streamlined filing procedures made them available to a broader population of U.S. taxpayers. U.S. taxpayers living outside the United States are able to take advantage of the Streamlined Foreign Offshore Procedures, while U.S. taxpayers residing within the United States may now utilize the Streamlined Domestic Offshore Procedures. Each program involves certain criteria that taxpayers must satisfy to obtain the program’s benefits. It is important that taxpayers review the relevant criteria to help decide which program is best suited for their needs, because waiting to come into compliance is no longer a viable option.

The IRS and U.S. Department of Justice have also reached agreements with an increasing number of countries, working to uncover taxpayers with undisclosed foreign financial accounts, assets or entities. Most recently, the U.S. and the Bahamas signed an intergovernmental agreement to implement the Foreign Account Tax Compliance Act. The full text of the agreement can be found here: Agreement between U.S. and the Bahamas. This agreement is part of an ongoing effort to uncover delinquent U.S. taxpayers with undisclosed foreign accounts and bring them into compliance.

U.S. and the Bahamas Reach Agreement to Implement FATCA

On November 3, 2014, the United States and the Commonwealth of the Bahamas signed an intergovernmental agreement to implement the Foreign Account Tax Compliance Act (FATCA). Enacted in 2010, FATCA targets non-compliant U.S. taxpayers with foreign accounts. FATCA focuses on reporting, either by the U.S. taxpayers themselves, or by foreign financial institutions in which U.S. taxpayers hold an account or a substantial ownership interest in an account held by a non-U.S. entity. The agreement between the U.S. and the Bahamas is designed to promote cooperation between the two countries in regards to FATCA.

Under the agreement, the Bahamas “shall obtain the information specified…with respect to all U.S. Reportable Accounts and shall annually exchange this information with the United States on an automatic basis.” The information to be obtained and exchanged, with respect to each U.S. Reportable Account includes:

i.  The name, address, and U.S. Taxpayer Identification Number (TIN) of each specified U.S. taxpayer that holds an account, or of each U.S. taxpayer who owns a substantial ownership interest in a non-U.S. entity’s account;

ii.  The account number (or functional equivalent in the absence of an account number);

iii. The name and identifying number of the Reporting Bahamas Financial Institution; and

iv. The account balance or value as of the end of the relevant calendar year or reporting period.

As you can see, the agreement gives the Bahamas significant authority to report U.S. taxpayers’ financial interests in Bahamas Financial Institutions. Taxpayers who fail to come into compliance can be subjected to substantial penalties, including civil and criminal fines. As the IRS and Justice Department increase their efforts to uncover undisclosed foreign financial accounts, now is the time to come into compliance and significantly reduce the risk of further negative impacts. Taxpayers with an undisclosed foreign account should consult with a tax attorney to figure out which method of offshore account disclosure is best suited for their needs and circumstances.

How Nardone Law Group Can Help

Nardone Law Group routinely represents individuals and businesses in federal and state tax issues, including the IRS Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures. If you have an undisclosed foreign account, asset, or entity, contact one of our experienced tax attorneys today. There are many factors for taxpayers to consider when determining what method of offshore account disclosure will produce the optimal results. We will thoroughly review your case to determine what options and alternatives are available.

Contact us today for a consultation to discuss your case.

November 18, 2014

Ohio Society of CPAs 2014 Dayton Fall CPE Conference

Vince Nardone is set to speak on Wednesday, November 19, 2014 at the Ohio Society of CPAs 2014 Dayton Fall CPE Conference taking place in Dayton, Ohio. Vince will cover IRS Audit Representation, where he plans to address key issues that the Internal Revenue Service is targeting, including how to prepare for and handle the audit with a consistent message. He will also share his expertise regarding how to maintain control of the situation by knowing what information to share with the IRS and how to anticipate future disputes. Again, we thank the Ohio Society of CPAs for this opportunity!

November 17, 2014

Installment Agreements Provide Taxpayers a Viable Collection Alternative When Facing Federal Tax Liabilities

The tax attorneys at Nardone Law Group in Columbus, Ohio, frequently advise individual taxpayers and businesses on how to utilize the Internal Revenue Service’s collection alternatives to manage their federal tax liabilities. In many instances, taxpayers are contacted by IRS revenue officers, whose sole purpose is to collect the tax from that taxpayer as quickly as possible. Aside from simply paying the tax liability in full, there are various collection alternatives available to taxpayers that can help reduce or eliminate tax liabilities arising from an IRS audit or examination, including, but not limited to: (i) installment agreements, (ii) offers-in-compromise, (iii) currently not collectible status, (iv) discharging taxes in bankruptcy, and (v) challenging the underlying tax liabilities.

This article is the first of a series that will focus on installment agreements as IRS collection alternatives. This article provides a general description of installment agreements and some of the various types that exist. Future articles in the series will provide a more in-depth discussion of each type of installment agreement, outlining the requirements and benefits involved. First, it is helpful to understand what an installment agreement is and how it can help a taxpayer manage their federal tax liabilities.

Installment Agreements as a Collection Alternative

According to the Internal Revenue Manual, installment agreements are “arrangements by which the Internal Revenue Service allows taxpayers to pay liabilities over time.” The IRS’ goal is for delinquent taxpayers to achieve full payment, but in some cases, Partial Payment Installment Agreements may be granted. Taxpayers are encouraged to pay their liabilities in full to avoid the costs of an installment agreement, which include a user fee, the accrual of penalties and interest, and the possible filing of a Notice of Federal Tax Lien.

There are a variety of installment agreements that businesses and individuals may qualify for, depending on the specific circumstances of the particular case. Some of the pertinent criteria to be considered are the amount of debt and the type of tax involved. Below are some of the possible installment agreements, available to businesses and taxpayers as an IRS collection alternative.

Types of Installment Agreements

1. Guaranteed – provide qualified taxpayers who have a one-time account delinquency the right to any agreement, if their taxes are $10,000 or less, and certain other conditions are met.

2. Streamlined – has two tiers – $25,000 or less, and $25,001 to $50,000 – and can be used on income tax liabilities, and out of business modules.

3. In-Business Trust Fund Express – can be utilized without securing financial information on BMF accounts, up to $25,000.

4. Routine – accounts are considered ‘routine installment agreements’ when the type of debt does not meet the criteria for any other type of installment agreement (Guaranteed, Streamlined, or IBTF-Express).

5. Partial Payment – if full payment cannot be achieved by the Collection Statute Expiration Date, and taxpayers have some ability to pay, the IRS can enter into Partial Payment Installment Agreements.

NLG Comment: Our series on installment agreements as a collection alternative will continue, with articles featuring each of the foregoing types of agreements, providing a detailed look at the requirements and benefits of each possible agreement. If you have questions about installment agreements, or IRS collection alternatives in general, contact one of our experienced tax attorneys today.

Contact Nardone Law Group

Nardone Law Group represents individuals and businesses in federal tax matters, including collection alternatives, such as installment agreements. If you or your business have been contacted by an IRS revenue officer, or are struggling with tax liabilities, you should contact one of our tax attorneys today. Nardone Law Group’s tax attorneys have vast experience representing clients before the IRS. We will thoroughly review your case to determine what options and alternatives are available, including an installment agreement.

Contact us today for a consultation to discuss your case.

November 14, 2014

Ohio Society of CPAs Columbus Accounting Show

November 14, 2014 — Vince Nardone, managing member of Nardone Law Group, LLC, spoke at the Columbus Accounting Show held by the Ohio Society of CPAs. Vince addressed the attendees regarding the representation of financially distressed businesses and individuals in front of the Internal Revenue Service, a topic that heavily impacts our clients. Thank you to the OSCPA for extending this opportunity!

November 13, 2014

Updated 'Streamlined Domestic Offshore Procedures' Target U.S. Residents with Undisclosed Offshore Accounts, Assets

The tax attorneys at Nardone Law Group in Columbus, Ohio, continuously monitor the latest developments in the Internal Revenue Service’s efforts to encourage taxpayers to disclose foreign accounts, assets, or entities. The recently expanded Streamlined Filing Compliance Procedures are available to a wider population of U.S. taxpayers living outside the country (via the ‘Streamlined Foreign Offshore Procedures’) and to certain U.S. taxpayers residing in the United States (via the ‘Streamlined Domestic Offshore Procedures’).

Our previous article, on the Streamlined Foreign Offshore Procedures, laid out the criteria and benefits of that program, as it relates to non-U.S. residents. This article provides a brief overview of the important requirements and effects of the Streamlined Domestic Offshore Procedures. Since the program’s expansion to U.S. residents is a fairly recent development, taxpayers may have questions about whether the Streamlined Domestic Offshore Procedures apply to them and, if so, what benefits the procedures provide. To answer these questions, we will start by reviewing the applicable criteria.

‘Streamlined Domestic Offshore Procedures’ Criteria

In addition to the general streamlined filing requirements, the Streamlined Domestic Offshore Procedures have specific criteria for U.S. residents. Taxpayers seeking to utilize the Streamlined Domestic Offshore Procedures must:

1. Fail to meet the applicable non-residency requirement (for joint return filers, one or both of the spouses must fail to meet the applicable non-residency requirement);

2. Have previously filed a U.S. tax return (if required) for each of the most recent three years for which the U.S. tax return due date has passed;

3. Have failed to report gross income from a foreign financial asset and pay tax as required by U.S. Law, and may have failed to file an FBAR and/or international information returns with respect to the foreign financial asset; and

4. Show that such failures resulted from non-willful conduct.

NLG Comment: For a review of the “applicable non-residency requirements,” as well as the “non-willful conduct” requirement, please see our previous article regarding ‘Streamlined Foreign Offshore Procedures.’

Compliance with the Streamlined Domestic Offshore Procedures

Once a taxpayer qualifies for participation under the Streamlined Domestic Offshore Procedures criteria, there are several important instructions the taxpayer must follow. Eligible taxpayers, seeking to utilize the streamlined domestic procedures, must:

1. Submit a complete and accurate amended tax return for the period(s) in question, together with any required information returns (Delinquent income tax returns may not be filed using these procedures);

2. Write “Streamlined Domestic Offshore” in red, at the top of the first page of each amended tax return, to indicate that the returns are being submitted under these procedures;

3. Complete and sign a statement of Certification by U.S. Person Residing in the U.S.;

4. Submit payment of all tax due, as reflected on the tax returns, and all applicable interest with respect to each of the late payment amounts;

5. Submit payment of the five percent miscellaneous offshore penalty, discussed below; and

6. File delinquent FBARs, and include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures.

Effect of Streamlined Foreign Offshore Procedures

At this point, you may be wondering, “Why would I want to use these procedures? What is the benefit?” Eligible taxpayers who utilize the Streamlined Domestic Offshore Procedures and comply with all of the applicable instructions will be subject only to a five percent miscellaneous offshore penalty. The five percent miscellaneous offshore penalty is based on the highest aggregate balance of the taxpayer’s foreign financial assets causing the tax compliance issue over the relevant period. All other penalties associated with the non-U.S. source income will be waived. The streamlined procedures do not, however, limit the civil penalties otherwise associated with the reporting of U.S. source income and do not provide protection from a possible criminal prosecution referral from the IRS.

Therefore, the Streamlined Foreign Offshore Procedures can be a very helpful tool for certain taxpayers seeking to become compliant with U.S. tax reporting and payment obligations related to their foreign accounts, assets, or entities.

Contact Nardone Law Group

This article is intended to highlight some important points of the Streamlined Domestic Offshore Procedures. If you have an undisclosed foreign account, asset, or entity, contact one of our experienced tax attorneys today. Nardone Law Group routinely represents individuals and businesses in federal and state tax issues, including the Streamlined Domestic Offshore Procedures. We will thoroughly review your case to determine what options and alternatives are available.

Contact us today for a consultation to discuss your case.

November 11, 2014

'Streamlined Foreign Offshore Procedures' Allow U.S. Taxpayers Residing Outside the U.S. to Disclose Offshore Accounts, Assets

Nardone Law Group’s experienced tax attorneys, located in Columbus, Ohio, routinely advise taxpayers about their U.S. tax reporting obligations regarding foreign financial accounts and the importance of reporting previously undisclosed foreign accounts. In our previous article, we provided an overview of the IRS’ Streamlined Filing Compliance Procedures. In 2014, the IRS expanded the streamlined procedures, making them available to a wider population of U.S. taxpayers living outside the United States (via the ‘Streamlined Foreign Offshore Procedures’) and, for the first time, to certain U.S. taxpayers residing in the United States (via the ‘Streamlined Domestic Offshore Procedures’).

This article highlights some important information regarding the Streamlined Foreign Offshore Procedures, which offers non-U.S. residents the opportunity to report previously undisclosed foreign financial accounts, assets or entities. Our next article will discuss the Streamlined Domestic Offshore Procedures, which provides U.S. residents the same opportunity. There are important, and sometimes subtle, differences between the two procedures, and taxpayers might have some questions about which category they qualify for and what benefits are associated with those categories. We will try to answer some of those questions now, starting with “Who qualifies as a non-U.S. resident?”

Non-Residency Requirements

The first question that should arise is: how does the Internal Revenue Service define a non-resident? A common misconception is that one must permanently live outside of the United States to be a “non-resident.” But, U.S. Citizens or Lawful Permanent Residents (i.e., ‘Green Card Holders’) satisfy the “applicable non-residency requirement” if the individual did not have a U.S. abode and was physically outside of the United States for at least 330 full days, in one or more of the most recent three years for which the U.S. tax return due date has passed.

NLG Comment: It is important to note that neither temporary presence of the individual in the U.S. nor maintenance of a dwelling in the U.S. by an individual necessarily mean that the individual’s abode is in the U.S. For joint return filers, both spouses must meet the applicable non-residency requirement.

Individuals, who are not U.S. Citizens or Lawful Permanent Residents, however, may meet the applicable non-residency requirement if the individual fails to meet the ‘substantial presence test,’ in one or more of the last three years for which the U.S. tax return due date has passed. The ultimate determination as to whether one satisfies the non-residency requirement, requires a detailed review of the facts and circumstances of each particular taxpayer’s case. Once it has been determined that a taxpayer qualifies as a “non-resident,” the next step is to consider the additional criteria.

‘Streamlined Foreign Offshore Procedures’ Criteria

In addition to the general streamlined filing requirements, covered in our previous article, the Streamlined Foreign Offshore Procedures have specific criteria for non-U.S. residents. Taxpayers seeking to utilize the Streamlined Foreign Offshore Procedures must:

1. Have failed to report the income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR with respect to a foreign financial account; and

2. Show that such failures resulted from non-willful conduct (i.e., conduct that is due to negligence, inadvertence or mistake, or conduct that is the result of a good-faith misunderstanding of the requirements of the laws.

NLG Comment: The certification of “non-willful” conduct is an essential component for taxpayers to understand when deciding whether they qualify for the Streamlined Foreign Offshore Procedures. The taxpayer must certify that their failure to report all income, pay all tax, and submit all required information returns, including FBARs, was due to non-willful conduct. If the IRS determines that the taxpayer intentionally falsified the certification, the taxpayer may be subject to prosecution. Taxpayers who are concerned that their failure to report income, pay tax, and submit required information returns was due to willful conduct, and therefore seek assurances that they will not be subject to substantial monetary penalties and/or criminal liability, should consider participating in the Offshore Voluntary Disclosure Program.

Effect of Streamlined Foreign Offshore Procedures

Once a taxpayer meets the applicable non-residency requirement and is eligible for the Streamlined Foreign Offshore Procedures, the taxpayer must file the delinquent or amended tax returns, along with any required information returns and any delinquent FBARs. The full amount of the tax and interest due in connection with these filings must be remitted with the delinquent or amended returns.

The major benefit of qualifying as a non-U.S. resident is that all penalties related to the disclosure will be waived. However, the streamlined procedures do not limit the civil penalties associated with the reporting of U.S. source income or provide protection from a possible criminal prosecution referral from the IRS. An experienced tax attorney can help taxpayers determine if they can take advantage of this program and the beneficial penalty waivers it provides. 

Contact Nardone Law Group

As this article illustrates, there are many factors for taxpayers to consider when determining what method of offshore account disclosure will produce the optimal results. It is important to have an experienced tax attorney evaluate your case to decide whether the Streamlined Foreign Offshore Procedures, the Offshore Voluntary Disclosure Program, or opting out and undergoing a regular civil examination is best for you. Nardone Law Group frequently represents individuals and businesses in federal and state tax issues, including the Streamlined Foreign Offshore Procedures. If you have an undisclosed foreign account, asset, or entity, contact an experienced Nardone Law Group tax attorney today. We will thoroughly review your case to determine what options and alternatives are available.

Contact us today for a consultation to discuss your case

November 06, 2014

Taxpayer's Criminal Conviction for Assisting in False Tax Return Filings Upheld by U.S. Court of Appeals

The tax attorneys at Nardone Law Group in Columbus, Ohio, are committed to keeping taxpayers updated regarding the Internal Revenue Service’s efforts to eliminate tax fraud, through civil and criminal investigations. In our prior article on IRS Audits and Examinations, we discussed the IRS’ ability to conduct civil investigations of taxpayers’ federal income tax returns and to impose accuracy-related penalties, resulting from any deficiencies. It is important to know that the IRS also has the ability to conduct criminal investigations, which may result in fines, as well as sentences of incarceration. Taxpayers who commit tax crimes, such as filing false returns, making fraudulent claims, or assisting others in similar acts, can face severe punishments if convicted. A recent decision by the U.S. Court of Appeals highlighted the government’s authority to criminally punish fraudulent taxpayers.  

Tax Fraud Results in 97 Month Jail Sentence

In the case of United States v. Bell, the U.S. Court of Appeals for the Ninth Circuit affirmed the conviction of a taxpayer who made false, fictitious, and fraudulent claims to the U.S. Treasury, and assisted in the filing of false tax returns. The case concerned a tax scheme, involving false Form 1099-OIDs, in which a taxpayer would file the form, which falsely stated that an amount of income tax had been withheld. The taxpayer would then rely on that false withholding figure to submit a fraudulent refund claim.

Bell filed five false income tax returns using this scheme. In addition to these false submissions and fraudulent refund claims on his own returns, Bell also promoted the tax scheme to other people, including his son. From October 2008 to October 2009, Bell assisted six taxpayers in filing fifteen tax returns using the Form 1099-OID scheme, collectively requesting $2.7 million in unwarranted refunds, and causing the IRS to mistakenly make refund payments exceeding $670,000.

At trial, Bell proceeded pro se (representing himself) and, according to the court, consistently refused to recognize the authority of the court or to participate in the proceedings.  At the end of trial, the district court delivered jury instructions, the government gave its closing argument, and Bell remained silent, effectively waiving his right to make a closing argument. The jury subsequently convicted Bell as charged. The district court calculated Bell’s sentencing guideline range to be 97 to 121 months, and accordingly sentenced him to 97 months of incarceration, followed by three years of supervised release. Ultimately, the U.S. Court of Appeals affirmed Bell’s conviction.

NLG Comment: This case is a prime example of the severe punishments taxpayers can incur when attempting to defraud the federal government. Not only can the IRS impose hefty civil fines and penalties, but it can also conduct criminal investigations, which can result in lengthy jail sentences. Furthermore, this case illustrates the importance of consulting with an experienced tax attorney to help navigate the intricacies of IRS investigations and any subsequent litigation that might arise.

Contact Nardone Law Group

Nardone Law Group routinely represents businesses and individuals who are undergoing an IRS audit or examination, including criminal investigations. If you have been contacted by an IRS revenue officer, or if you are currently facing a civil or criminal tax investigation, contact one of our experienced tax attorneys today. Nardone Law Group’s tax lawyers and professional staff have vast experience representing taxpayers before the IRS. We will thoroughly review your case and determine what options and alternatives are available.

Contact us today for a consultation to discuss your case.

October 31, 2014

Taxpayer's Failure to Substantiate Gambling Loss Deductions Results in Accuracy-Related Penalties

The tax attorneys at Nardone Law Group in Columbus, Ohio, routinely advise clients on tax law issues involved with gambling. One issue that taxpayers frequently encounter is the need to substantiate gambling losses before the IRS. Whether the taxpayer is a professional or recreational gambler, gambling losses can only be deducted to the extent of gambling winnings. Professional gamblers have the additional benefit of being able to deduct ordinary and necessary business expenses related to their gambling, such as travel, food, and lodging expenses. Amateur, recreational gamblers cannot deduct these expenses because they are considered personal in nature when the activity is not engaged for profit. Professional gamblers report their gambling winnings and losses on Schedule C, while recreational gamblers report their losses as itemized deductions.

Gambling is often a form of entertainment for most people and, as a result, they do not maintain detailed records of their gains and losses, like someone would for a business or other for-profit activity. Gambling losses usually exceed gambling winnings, so taxpayers often have issues substantiating their gambling losses. Adequate and thorough documentation is required to claim gambling losses, and can often help taxpayers substantiate and defend their claims to the IRS, should any discrepancies arise in an audit or examination. A recent decision by the U.S. Tax Court highlights the importance of adequate gambling records, as well as the IRS’ ability to assess accuracy-related penalties as a result of deficiencies.

Unsubstantiated Gambling Loss Deductions

In Jacqueline F. Burrell v. Commissioner, a recreational gambler was denied deductions for gambling losses beyond amounts conceded by the IRS for the years 2007 to 2009. The IRS’ determination found deficiencies of approximately $115,000 for the relevant period and, as a result, assessed accuracy-related penalties of nearly $23,000. The court found that the petitioner failed to properly substantiate additional losses, even though she submitted documents entitled “Cash Recycled” and “Cash Ledger.” The documents helped the court establish the amount of cash the taxpayer brought to the casinos each day, however, they did not show how much she left with at the end of the day.

Taxpayers are required to maintain permanent books of account or records, sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown on their federal income tax return. If taxpayers establish that an expense is deductible but are unable to substantiate a precise amount, the court may estimate the amount, bearing heavily against the taxpayer. In the case of gambling winnings and losses, taxpayers can substantiate their income and deductions by maintaining a detailed log.

The petitioner did not track her winnings and losses. However, based on casino letters and other documents, the IRS conceded that the petitioner was entitled to deduct approximately 70% of the total reported gambling losses for the three years involved. Since the petitioner had no records of her winnings and losses, the court held that the evidence was insufficient to entitle the petitioner to greater deductions for gambling losses than those conceded by the IRS. Consequently, the court found the petitioner liable for the accuracy-related penalty of $23,183.20.

NLG Comment: This case exemplifies the importance of keeping detailed records, for both professional and recreational gamblers. Adequate documentation of financial gains and losses can help taxpayers substantiate claims on their federal income tax returns, as well as defend against potential liabilities in the event of an IRS audit or examination.

Contact Nardone Law Group

Nardone Law Group frequently represents individuals who are undergoing an IRS audit or examination, including professional and amateur gamblers. If you have been contacted by an IRS revenue officer, or if you have questions regarding deductions for gambling losses, contact one of our tax attorneys today. Our tax lawyers and professional staff have vast experience representing and advising professional and non-professional gamblers regarding substantiating gambling losses. Adequate documentation is vital to ensuring compliance with all relevant tax reporting requirements. We will thoroughly review your case to determine what options and alternatives are available.

Contact us today for a consultation to discuss your case.

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