Clinton Foundation Under Fire for Tax Errors

Filing an amended tax return is normally not that big of a deal.  It is not uncommon for folks to make mistakes or leave out information on their Form 1040 personal income tax filing.  To amend a previously filed Form 1040, you need to complete a “1040x.”  If you want to make corrections on multiple tax years, you need a separate 1040x for each year and you need to mail them in separate envelopes to ensure they are processed correctly.  The basic structure of a 1040x is pretty straightforward: Column A shows the figures as reported on your original 1040, Column B shows the corrected figures, and Column C shows the difference between the two.  Furthermore, barring other relevant facts, the filing of a 1040x does not automatically put you into a high audit risk group.

The problem with Hillary Clinton and her foundation is there are a few “other relevant factors” that have placed their actions in the spotlight (catch up on the story here).  For one, we’re talking about million dollar mistakes, meaning they put “zero,” when the correct number was something in the tens of millions of dollars range.  Kind of hard to swallow, right?  And similar “mistakes” were made three years in a row.  In the words of charity law experts:

It [is] not remarkable for a charity to refile an erroneous return once in a while, but for a large, global charity to refile three or four years in a row [is] highly unusual.

Now House republicans are calling for an IRS investigation.  Most letters to Commissioner John Koskinen would probably be ignored or referred out to a different IRS department in typical IRS style, but I’m guessing this one will get adequate attention.

 
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Board of Equalization is not of fan of Denny’s in California’s central valley

Have you been to one of the Denny’s operated by Abdul Halim? He operates three Denny’s restaurants located in Lathrop, Manteca, and Stockton. If you have a craving for a Moons Over My Hammy and live in the California’s central valley, you may soon be out of luck.

California’s Board of Equalization recently publicized its version of a perp walk. Abdul Halim, of Tracy, California will serve 10 years formal probation, perform 3,500 hours of community service, and pay $790,428 in restitution for pleading guilty to two felony and one misdemeanor count of sales tax evasion. The ordered restitution includes the sales tax, penalties, and interest owed to the BOE.

California’s Board of Equalization is charged with the duty of collecting and enforcing payment of California sales tax. BOE Investigators determined that Mr. Halim failed to pay nearly $525,000 in sales tax collected from Denny’s customers between 2007 and 2011.

If you need help fighting the BOE in California’s central valley or in the greater Sacramento area, call our law firm for a free consultation. We may be able to help save your business and keep you from being the next “perp” publicized by the BOE.

 
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FTB Dishes out Penalties in Droves

If you’re familiar with the way the California Franchise Tax Board (FTB) operates in the process of collecting delinquent taxes, then you know that they impose a bunch of different penalties.  There are some common sense penalties, like the penalty for filing late and the penalty for paying late.  But there are some other more obscure penalties that may surprise you:

1. Cost Recovery Fees

If the FTB has to do anything to collect the tax due (besides sending you a bill), then they are likely going to charge some sort of collection fee.  And when I say “anything,” I mean anything, such as filing a tax lien, seizing and selling property, intercepting a federal tax refund, filing enforcement, and even simply assigning your case to the collections department.  The fee is supposed to cover the theoretical costs of these revenue collection efforts and I’m sure are rarely commensurate with the actual collection costs.

2. Dishonored Payment Penalty

If your check bounces, or your FTB payment is otherwise rejected due to insufficient funds, then FTB will impose a $25 penalty.  If your payment is $1,250 or more, then the penalty is 2 percent of the payment amount.

3. Mandatory e-Pay Penalty

Certain large payments over $20,000, or payments made where the total tax liability exceeds $80,000, must be made electronically according to California law.  FTB imposes a 1 percent penalty for failure to comply.

4. Demand to File Penalty

If you don’t file your tax return by the filing deadline, then FTB charges a 25 percent late filing penalty.  If you still do not file after FTB demands that you file, then they will impose a 25 percent penalty on top of the initial failure to file penalty.  This is particularly brutal because they can actually impose penalties and interest even if your tax return shows that a refund is due!

5. Estimated Tax Penalty

This is the penalty imposed  for failure to pay an estimated tax installment.  It also applies when you pay late or underpay.

6. Post-Amnesty Penalty

Taxpayers who have been granted amnesty for any particular tax year must not subsequently owe any new or additional tax, otherwise… you guessed it, another penalty.

 
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Florida Man Charged with Violent Threats against IRS

There are some pretty fierce-sounding gangster names in the history of American white collar crime.  You’ve got your “Greasy Thumb,” your “Pistol Pete,” “The Butcher,” and “Big Tuna,” just to name a few.  I gotta believe that some of these guys imagined their thuggish names in print or revelled in the thought of becoming a household name.  But the latest tax criminal out of South Florida clearly didn’t give his nickname much thought.

“The Squirrel” borrowed an acquaintance’s phone to call the FBI and inform them that a nearby IRS building would “go up in smoke” in two hours.  The police traced the call to the phone’s owner who thought the perp’s name was “The Rabbit,” (obviously not a memorable enough name) but when he was found, he was quick to correct the authorities, telling them that his true moniker was actually The Squirrel (because that’s so much better, right?).  I can imagine him spelling it out for the FBI and making sure they got it right.  Maybe this is just me, but if I’m caught and I’m going to go through the trouble of correcting my thug name, I’m going to come up with something a little better than “Squirrel.”

And, although he did confess to placing that call to the FBI, the lawyer in me sees at least a couple harmless interpretations of the phrase “go up in smoke.”  Maybe he saw a vision of the place burning down and he called to warn them.  Maybe.  By the way, Florida seems to be a gathering place for not just anti-tax folks, but the serious IRS-haters and tax criminals.  I’m still not sure why.

If this article has inspired you to work on your own nickname, you might want to check out this gangsta name generator, although I personally have to question the results as mine came out “La Llorona,” which I think means “the crybaby” (feminine form).  Gangstaname.com generated a more accurate name, I think: “Machete Masta Crab Whacka.”

 
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IRS Fails Taxpayers Again in 2015

Based on the interim report published by the Treasury Inspector General for Tax Administration (TIGTA), the IRS achieved a 38.5 percent Level of Service and a 24.6 average hold time on IRS phone lines during the 2015 filing season.  I don’t really know what Level of Service entails, but I know that 38 percent is really only good if we’re talking batting average.  You may be wondering, “How do you get such a low score?  I could probably score higher than 38 percent on a test by guessing.”  Well, this is how: you get 45.6 million phone calls and you answer only 4.2 million of them.  BAM.  Done.

Read the report.  It will make you cringe.

 
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Tax Day 2015 Has Arrived!

Free food is great and all, but is that really what you want on Tax Day?  I suppose if you’ve already filed and you’re just waiting for a refund check, then you may have an appetite for a free Hard Rock Cafe burger, a Schlotzksky’s sandwich, or red velvet cake at Tony Roma’s.  But if you’re like many other taxpayers, you have had to work for every dime you earn and you maybe haven’t had time to get your taxes done yet.  Of course, it is also difficult to be motivated to file when you know you’re going to owe.  It you fit this description, then maybe you’re looking for a more valuable bit of Tax Day info, like how to file an extension.

Keep in mind that the automatic extension is “automatic” because it is granted to anyone who asks without the need to show reasonable cause, not because it happens automatically.  You have to so something.  You have to ask for it**.  The IRS website is extremely sluggish right now due to all the extra traffic it gets this time of year, but requesting an extension online using Form 4868 is still the fastest and most convenient way to do it.

You can file it with your electronic payment, through your tax filing software, or through your tax professional.  You’ll need your name, address, and social security number.  You will also be asked to estimate your 2014 tax liability, provide the amount you have paid towards that liability (if any), the amount you are sending in with the form (if any), and lastly, the total remaining liability.

So, what do you get when you file an extension?  How is six extra months?  Congratulations, you may take a deep breath and relax a little because you don’t have to file until October 15th now.  But, there is one big “BUT” associated with filing an automatic extension: an extension to file does not also give you an extension to pay.  If you don’t pay on time then you’ll be charged interest and late payment penalties.

**You don’t even have to request an extension if you are a US citizen living abroad, or if you are serving in the military outside the US.

 
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How to Get Fired if you Work for the IRS

As far as I know, an IRS employee can’t be fired just for leaving you on hold for 3 hours, or for giving you bad information that contradicts what the previous IRS employee told you, or for rejecting your Offer in Compromise (as long as procedures are followed). Of course, there could be additional actions and circumstances that might warrant termination, but generally speaking, these are not adequate grounds.

But according to rules established during the 1998 tax code reform, an IRS employee is supposed to be fired for the following actions unless the Commish determines that the employee should be given a second chance due to the presence of mitigating factors:

  • Purposely failing to obtain signatures required prior to certain asset seizures;
  • Lying under oath relevant to matters involving a taxpayer account;
  • destroying or falsifying evidence relevant to matters involving a taxpayer account;
  • Assault or battery of a taxpayer or fellow employee (that’s comforting, knowing that an IRS employee will likely get fired for cold-cocking a taxpayer) — but only if there is a conviction;
  • Purposely violating a provision in the IRC, Regs, IRM, or internal policies for the purpose of retaliating against or harassing a taxpayer or fellow employee;
  • Willful failure to file a tax return or underreporting income on a tax return…

There are others, but this list is getting tedious.  It’s funny to me that some of these prohibitions are related to actions against other IRS employees.  Don’t they get along over at the IRS, or what?

A House Committee has introduced a bill that would add another bullet point to this list above. H.R. 709, the Prevent Targeting at the IRS Act, would require the firing of IRS employees who act in their official capacity to target entities or individuals for personal or political reasons.  And presumably any offending employee would have to be fired regardless of how merciful the Commissioner wants to be.  Thank you Robert Wood for the info on H.R. 709.

In the meantime, I’ll keep an eye out for the Prevent Stupidity at the IRS Act.

 
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IRS Impersonation Scams More Prevelant Than Ever

TIGTA big shot, Timothy Camus, recently testified before the US Senate Finance Committee on the topic of “Tax Schemes and Scams.”  By TIGTA, I of course mean the Treasury Inspector General for Tax Administration.  And by “big shot,” I of course mean that he is the Deputy Inspector General for Investigations, and he wears a nice looking mustache, and he tells tax criminals that their day will come.

According to his testimony, IRS phone impersonation scams have quickly become one of TIGTA’s top concerns.  The agency had received only scattered reports of phone scams prior to the summer of 2013.  TIGTA started to track this crime in October 2013, and ever since then has kept statistics and concentrated efforts on eradicating this terrible, frustrating crime.

The way it works is the scammers call and threaten you with criminal penalties if you don’t pay a certain sum to address a tax problem that usually doesn’t even exist.  The victim is asked to load money onto a prepaid debit card and then call back with the card number.  These criminals used to target primarily the elderly or recent immigrants; the most vulnerable people who do not have sufficient command of the English language and/or those who do not have an understanding of the US tax system.  But Camus says that they have not been discriminating much lately.  He describes having received a call himself, at home, the weekend before his speech, and he told the guy, “your day will come.”  I have received phone scam calls too, most recently a very generic sounding recording using robo-call technology.

Here are some of the key phone scam statistics from Camus’ Senate testimony:

  • TIGTA has received over 366,000 complaints of phone scam calls (9,000 – 12,000 per week)
  • 3,052 victims paid out about $15.5 million
  • one poor fool paid over $500,000
  • 296 of these victims gave more than just money (i.e., social security number or other sensitive identifying information)

Camus says that this scam is the subject of an “ongoing multi-agency investigation.”  Let’s hope they figure out how to catch these guys because the IRS public service messages about how to avoid phone scams aren’t working as effectively as they should.

 
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The IRS Has Wisely Steered Clear of Instagram

The IRS’ use of social media has always seemed sort of awkward to me.  There’s the IRS Facebook account, for example.  Completely bare bones.  A couple pictures of IRS national headquarters, a blurb about this not being an official source of information about the IRS, and links to the official IRS homepage.   Zzzzzzzzzz.

Yes, I know it has 38,000 likes.  But you have to wonder if these people really “like” the IRS, or if they are acknowledging the IRS in the only way that Facebook allows, there being no “unlike” button.

The IRS doesn’t have an Instagram account.  Their complete social media portfolio includes Facebook, Twitter, YouTube, Tumblr, and IRS2Go, their mobile app (which I’m not sure really counts as social media).  But thank goodness they don’t; there is nothing really visual about what they do.  One look at an tax law firm Facebook page will confirm that.  What kinds of pictures would they post? Suits and cubicles, Friday potlucks, maybe some of the stuff they have seized and sold at auction?

Just for fun, I looked at some of the 46,738 photos with an IRS hashtag and they are nothing special.  Most of the #IRS posts are advertisements.  The second most common, as far as I can tell, are pictures that have nothing to do with the Internal Revenue Service.  Maybe IRS means something else in another country, that’s what I’m thinking.  Lots of Ford Mustangs – maybe a special edition or some fancy tuning.  By far the best ones are the memes.  There is one meme of a guy sitting in his car with a tethered cheetah sitting shotgun that says “When you get your tax return and start buying unnecessary sh*t.”  There are a few memes of skeletons “waiting for their tax refund” or “waiting at the IRS office.”  There is a cartoon in the style of Far Side (accredited to “Reynolds”) that shows a couple sitting at the IRS office.  The sign says “THE IRS” and the guy turns to his wife and says, “Like the sign says . . . it’s all THEIRS.”  My favorite, probably because I can identify with it best, is a screenshot of a cell phone displaying the IRS toll free phone number and the call timer at 50 minutes.  The caption: “This is why no one likes the #IRS…”  Thank you for that @caitlinmaguffee.  It helps to have a good sense of humor this time of year.

 
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