Your IRS Questions Answered Here…

Question: I’ve been getting letters from the IRS saying I owe back taxes. This is taking over my life and I can’t sleep. What should I do?

Answer:  Owing money to the IRS or State can be intimidating and throw your life out of whack, but ignoring your back taxes will only make things worse. It’s important to take immediate action.  The IRS has over 148 types of penalties they can assess, and the worst part is they can also charge interest on the original penalties. Penalties can be a high percentage of the total amount owed to the IRS.

The IRS has 10 years to collect from the date you filed your return and they won’t go away.  Not only can they freeze your bank account and take the money, but they can garnish your wages and legally take as much as 75% of your net paycheck, without a court order!

You need a professional expert to help you deal with the IRS.  You can’t do this on your own. As a matter of fact, going or talking to the IRS without expert representation could be the worst thing you can do.  The taxpayer Bill of Rights allows you to be represented by a qualified practitioner who can negotiate a resolution to the IRS in your best interest.

Funny Tax Quote

It’s easy to find out who is going to become a tax collector.  In the nursery, give all the kids lemons.  The one who squeezes it dry is going to work for the IRS.

Marketer’s Key Performance Indicator Scores a Zero with the IRS

Craig Walcott of Monument, CO, pled guilty to one count of attempting to evade the payment of income taxes in court in November, 2018.

Walcott owned and operated a multi-level nutritional supplemental marketing business and also owned and leased residential real estate. The IRS notified Walcott in April, 2010 of an assessment of taxes and penalties of more than $450,000 for the tax years 2005, 2006 and 2007. Walcott tried to evade payment of his tax liability by transferring properties to nominee entities, using fictitious mortgages to encumber his property to conceal their equity and continuing to file false tax returns understating his income.  Walcott did not file any income tax returns for the years 2012, 2013 and 2014.

As part of the plea agreement, Walcott agreed to pay $628,733 in restitution to the IRS.  Sentencing is scheduled for February 25, 2019, where he could face a maximum sentence of five years in prison, supervised release and monetary penalties.

Interesting Tax Facts

  • Since 2001, there have been more than 4.500 changes to the tax code, not including the Tax Cuts and Jobs Act of 2017, signed into law December 22, 2017.
  • More than one-fifth of paper tax returns contain errors.  The IRS reports that while the error rate for electronically filed returns is less than 1%, paper filers are 21 times more likely to make a mistake.  Errors can cause tax returns to get audited or rejected, so you’re better off filing electronically and lowering your risk.
  • A good 17% of workers violate the tax code when filing their returns.  The majority of the violations are treated by the IRS as honest mistakes.
  • Only 30% of households itemize deductions, and that amount is anticipated to be lower because of the new tax laws taking effect with the 2018 tax filing.
  • IRS employees also break the law. A 2015 report showed that almost 1,600 IRS worker willfully evaded taxes over the course of 10 years.

 

Source:  The Motley Fool

Pharmacy Owner Will Need Sedatives After Sentencing

Jerry Harper, Jr., the owner of Family Discount Pharmacy with several locations in Virginia, was sentenced to 41 months in prison for failing to account for, and pay, employment taxes.

From 1998 to 2014, Harper was responsible for collecting and paying employment taxes for the pharmacy chain.  Although Harper withheld the taxes from his employee’s paychecks, he did not turn those taxes over to the IRS.  In 15 years, Harper only filed one quarterly employment return with the Internal Revenue Service.

The amount of employment tax liability was more than $5 million.  Harper admitted in court that he used that money to pay personal expenses, including $100,000 for his son’s pharmacy school tuition, $370,000 for real property in Virginia and North Carolina, made over $500,000 in stock investments and wired over $1 million to his personal bank account.

In addition to his prison time, Harper is ordered to serve 2 years supervised release, pay restitution in the amount of $5,069,555.73 and a fine of $25,000.

What Are the Panama Papers?

Leaked by an anonymous source in 2015, the Panama Papers as they are called today, contained 11.5 million documents detailing financial and attorney/client information taken from the Panamanian law firm and wealth management services of Mossack Fonseca, the fourth biggest offshore law firm worldwide.

The leaked documents contain identity information about the shareholders and directors of 214,000 shell companies set up by Mossack Fonseca as well as some of their financial transactions.  While having offshore accounts is not illegal, not reporting them to the IRS is a violation of the Foreign Bank and Financial Account (FBAR) in the US.

According to The Economist, “The most obvious use of offshore financial centers is to avoid taxes. Tax havens are at the core of a global system that allows large corporations and wealthy individuals to avoid paying their fair share.”

The list of names in the papers included heads of states from around the world, including Vladimir Putin, Mauricio Macri, President of Argentina and Petro Poroshenko, President of Ukraine, members of organized crime cartels, wealthy individuals including 9 from the US, and celebrities such as Stanley Kubrick, David Geffen, Emilio Estevez and Bobby Fischer.  Sports stars Tiger Woods and MBL player Alfonso Soriano.

Medical Doctor Tests the IRS

Dr. Joseph Jacob Hummel a medical doctor from North Carolina, pled guilty to charges of corruptly obstructing the due administration of the internal revenue laws.

As shown in court, Dr. Hummel purchased a home from a friend, who repaid Hummel for the purchase a short time later.  While being interviewed by Special Agents from the IRS regarding the real estate transaction, Dr. Hummel falsely stated that he rented the property to the original owner and tried to support this statement with a sham lease.

Dr. Hummel faces a maximum of three years in prison, supervised release and monetary fines.  His sentencing is scheduled for March 26, 2019.

Tax Evasion is What Brought Down Michael Cohen

Once again, it’s tax evasion that will send someone to prison every time, and in Michael Cohen’s case, brought by Federal Prosecutors in New York, it’s no different for the former lawyer of President Trump.   Cohen was sentenced to 36 months in prison, which in part was for five counts of tax evasion.

The tax evasion charges stem from his failure to report income earned from his taxi fleets in New York and Chicago on his 2012-2016 income tax returns totaling over $4 million.  In addition, Cohen failed to report $100,000 he made selling property in Ocala, FL in 2014, a $30,000 profit he earned for arranging the sale of a couture Birkin handbag and $200,000 in consulting fees he made from an assisted-living company.

In addition to jail time, as part of his plea deal, Cohen has agreed to pay restitution to the Internal Revenue Service in the amount of $1.5 million.

Your IRS Questions Answered Here…

Question:  I received a notice from the IRS because I did not have the funds to pay the taxes I owed on my 2017 income tax return.  I also was late in filing my tax return. Not only is the IRS demanding the tax I owe, but they have slapped on these huge amounts for penalties and interest.  I had extenuating circumstances that caused all of this. This isn’t fair…what can I do?

Answer:  Your Tax Resolution Specialist can request a removal (abatement) of penalties 2 ways:  1) “First Time” Penalty Abatement and 2) a Reasonable Cause Argument. The IRS writes off billions of dollars in penalties each and every year, but you must know how to do it correctly.

A First Time Penalty Abatement  (FTPA) can be requested if you have a “clean” compliance record, meaning you have not incurred a Failure to File or Failure to Pay penalty for the 3 years preceding the year you are requesting the first time penalty abatement on.  FTBA is generally granted in most cases, regardless of what the underlying reason is, if you are eligible.

There are 9 main “Reasonable Cause” arguments to get your penalties removed.  They are: 1) Death, Serious Illness or Unavoidable Absence 2) Fire, Casualty or Natural Disaster  3) Unable to Obtain Records (common issue with couples going through a divorce)  4)  Mistake was made by the taxpayer or tax preparer  5)  Erroneous Advice or Reliance on a tax preparer  6)  Written/Oral Advice from the IRS  7)  Ignorance of Tax Laws  8)  Reasonable Cause/Ordinary Business Care and Prudence  9)  Undue Economic Hardship.

When using a “Reasonable Cause” argument, the event that caused you to file late or prevented you from paying the tax when due must correlate to the tax years involved and supporting documentation is essential.  Your Tax Resolution Specialist will guide through which documents are needed and submit a formal request in writing.  For instance, let’s say you were going through a divorce and you ex-spouse withheld records from you needed to file a complete and accurate income tax return and you filed your return last because of this.  You could request abatement of these penalties using one of the above reasonable cause arguments, specifically #3 above.

IRS Terror Tale of the Month

Unless you have been living under a rock, you’ve probably heard of Paul Manafort and the millions he failed to pay the IRS in taxes. Due to the brief time Manafort spent as President Donald Trump’s campaign manager during the 2016 election, Manafort’s tax fraud and other crimes were often spun based on political leanings. However, the fact remains that the millions Manafort owed and the lengths to which he went to defraud the IRS are astonishing. Here are a few of the highlights that make this story so extraordinary.

Manafort was first arrested in October 2017 on a series of charges that included engaging in a conspiracy to launder money and failing to file reports of foreign bank and financial accounts. Prosecutors claimed Manafort laundered more than $18 million and that he failed to report at least $16 million in taxable income between 2010 and 2014. A great deal of his unreported income came from the Ukraine, where Manafort worked as a political consultant.

In an attempt to hide this income and pay less than he owed to the IRS, Manafort would falsely classify income as a loan and list false business expenses, like claiming to have paid 132,000 euros to a yacht company or $45,000 for cosmetic dentistry. Additionally, when filing his taxes in 2012, Manafort didn’t disclose that he had a foreign bank account. At this time, Manafort in fact had 30 foreign bank accounts around the world in Cyprus, St. Vincent and the Grenadines, and the United Kingdom.

When all was said and done, Manafort was hit with 18 different charges and faced 80 years in prison. In August 2018, a jury found Manafort guilty  of eight of those charges, including all five counts of tax fraud. Manafort has since pleaded guilty to other charges, and the case is still ongoing.

Pail Manafort may have enjoyed a long, powerful political career, but when the IRS comes knocking, they always get what they’re owed.