Vince Nardone: Tax and Controversy

Justice Department Highlights its Fiscal 2008 Tax Enforcement Results

The Tax Division announced highlights of its work during the past year regarding its enforcement efforts.  The Tax Division of the Department of Justice works with the Internal Revenue Service to pursue and enforce the revenue laws.  See the attached.

Download Justice Dept - Criminal Tax Enforcement

Suspect Fraud - Turn in Your Clients the IRS Says!

The Internal Revenue Service today solicited tax professionals to turn in clients and others if we suspect fraud is occurring.  See the attached materials from the IRS.  The IRS even provides us with instructions and forms on how to do so.  But, as tax professionals we need to be very careful and take into consideration or legal and ethical obligations to our clients and to our profession.  We certainly do not advocate or encourage any misconduct on behalf of our clients.  On the other hand, should we be the ones turning them in?  It depends, on your position and role with that client.  As a tax attorney, I cannot see to many instances where I would be doing so.  But, tax accountants must look at this from a different perspective and, in some instances, maybe required to inform the authorities of the wrong doing.  All I can say is seek competent tax counsel experienced in these type of matters before doing so.

Download DOC003

IRS Reports on Frivolous Claims to Avoid Paying Taxes, Tax Fraud - Civil

Today, the Internal Revenue Service issued a notice that lists four additional erroneous legal positions that taxpayers should refrain from using as an excuse to avoid paying their taxes. An individual or group may not avoid paying their fair share of taxes by making “frivolous” legal arguments such as those listed in this notice. The IRS publicizes these frivolous claims to help taxpayers understand the law and avoid penalties. More importantly, as Wesley Snipes has found out (the hard way), the government also prosecutes individuals from taking positions on tax returns that are frivolous in nature.

Notice 2008-14 lists positions identified as frivolous for purposes of the penalty under section 6702 of the federal tax code for filing a frivolous tax return or submitting to the IRS a frivolous request for a collection due process hearing or application for an installment agreement, offer-in-compromise, or Taxpayer Assistance Order. Taxpayers who file a tax return or make a submission based on a position listed in this notice are subject to a $5,000 penalty. This notice adds to the positions listed in Notice 2007-30, 2007-14 I.R.B. 883.

The positions that have been added are found in paragraphs 9(g), 11, 14, and 25. The four new frivolous claims pertain to the following: (1) Misinterpretation of the 9th Amendment to the U.S. Constitution regarding objections to military spending. (2) Erroneous claims that taxes are owed only by persons with a fiduciary relationship to the United States or the IRS. (3) A nonexistent “Mariner’s Tax Deduction” (or the like) related to invalid deductions for meals. (4) Certain instances of misuse or excessive use of the section 6421 fuels credit. In 2006, Congress increased the penalty for frivolous tax returns from $500 to $5,000. The increased penalty amount applies when a person submits a tax return or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous. See the attached Notice 2008-14.

Download tax_fraud_frivolous_claims.PDF

Criminal Tax Fraud and Investigations

I. DEPARTMENT OF JUSTICE INVESTIGATIONS, PROSECUTIONS, AND POLICIES [1]

A. Department of Justice – Responsible for federal tax litigation, other than that occurring in the U.S. Tax Court. The Department of Justice, including the U.S. Attorneys, is responsible for the conduct of all federal tax litigation, both civil and criminal, in the federal courts. Title 28 C.F.R. §0.70.

B. The DOJ, Tax Division, has been delegated the responsibility of authorizing or declining investigation and prosecution in criminal tax matters. Cases are investigated by the IRS and recommended for prosecution to DOJ.