Perseverance Pays Off
It’s difficult to write about tax relief today after witnessing our beloved San Francisco Giants defeat the Detroit Tigers in a four-game World Series sweeeeeep! What a dramatic series, and what an amazing season! One of my favorite stories is that of Barry Zito, who didn’t even make the roster in the club’s 2010 World Series appearance. He never gave up and battled back to become one of the KEY players in the Giants’ postseason.
Anyone who files a whistleblower claim must have similar tenacity and perseverance. First it was Bradley Birkenfeld — who for his efforts and patience was awarded an unprecedented $104 million. And now we hear of another whistleblower getting a cool $38 million from the IRS Whistleblower Office. Only this time we don’t know the guy’s name and we don’t know the name of the firm with the illegal (or overly-aggressive) tax relief plots. It is IRS policy to keep these details private so the individual may continue to work and maintain a somewhat normal life. We only know about Birkenfeld because he agreed to allow the details to be publicized.
We have, however, heard from the whistleblower’s attorney who has expressed how pleased he is that the IRS has been able to keep things on the down low. He gives the Whistleblower Office brownie points (1) for actually following through on a whistleblower payout, and (2) for doing so in a professional manner.
Axl Rose on Punctuality
Guns N’ Roses was notorious for starting their shows late. I always believed it was a standard side effect of the rock n’ roll lifestyle; the drugs, the revelry, the general irresponsibility. But Axl Rose, GNR frontman, recently addressed the issue of punctuality in a rare television interview with Jimmy Kimmel. Ironically, his explanation came a couple decades too late.
In his first live TV appearance in 20 years, Axl Rose talked about some of his puzzling behavior, such as his ridiculous corn rows, his disappearing back stage in the middle of shows, and his chronic tardiness that had a tendency of alienating fans. Axl apparently lives by the mantra “punctuality is the thief of time” (a famous Oscar Wilde quote from the book The Picture of Dorian Gray). In other words, if he showed up on time, then chances are he would just have to wait, thereby wasting his own time. And why should a rock star have to wait for anybody?!
My sincere hope is you will not follow Axl Rose’s example when it comes to your taxes. It’s only October, but it’s not too early to start thinking about next filing season. Get your paperwork in order now so you’re not scrambling in April. If you’re going to need an accountant or tax attorney, save yourself some trouble and begin making plans now; it could mean the difference between tax relief and tax disaster.
IRS Phishing Hits New Low
By now we are used to reports of phony IRS emails spamming computers around the nation. We know that identify theft scams can result in loss of privacy, loss of property, tax problems, and countless hours of work trying to straighten things out with the IRS and other government agencies. The IRS has made it abundantly clear that they do not communicate to taxpayers via email, and if ever we were to receive an email that purported to be from the IRS, we can rest assured that it is a phony. We know to leave suspicious-looking emails alone (not open them) and immediately report them to phishing@irs.gov.
But now there are reports of phony IRS websites too (See IRS Special Edition Tax Tip 2012-13). The phony IRS websites look much like the IRS e-services website, but don’t have the all-important .gov designation. There’s a fool-proof way of steering clear of phony IRS websites. If you find yourself on a website that begins with www.irs.gov then you know you are on the official IRS website. If it begins with anything else, it shouldn’t take a tax attorney to tell you that it’s not the IRS!
TIGTA Finds Problems with IRS Hardship Program
Due to our nation’s economic downturn, the number of taxpayers who come to the IRS with a documented inability to pay their back taxes has tripled from calendar year 2011 to 2012. The IRS typically places these accounts into Currently Not Collectible (CNC) status where they remain, protected from IRS enforced collection activity, until the taxpayer’s financial situation improves.
Closing taxpayers’ balance due accounts as currently not collectible is a high-risk action because the balances due from the taxpayers may never be collected.
A recent TIGTA study shows that IRS personnel are approving cases for CNC status incorrectly and without managerial approval. What this means for the IRS is there are enormous tax collection opportunities being missed.
But this report also has implications on the taxpayer. Managers often check the numbers and check for documentation to support claimed expenses. When a case is slipped into CNC status without managerial approval, these details can easily be missed. And if the oversight is caught at a later date, the IRS has a bad habit of pulling cases out of CNC status without explanation or warning. Furthermore, if the case is not coded correctly (also a manager function), it will not be protected from enforced collection activity such as wage garnishment, bank levy, and asset seizure.
Don't Tip the Tax Collector
The law is very tough on tax assessors and collectors who extend tax relief in situations where it is not warranted. It is obviously illegal to bribe a property tax assessor or an IRS agent for reducing a tax bill. Illegal to accept a bribe and illegal to do the bribing.
L.A. County Tax Assessor, John Noguez, has been charged with accepting huge bribes in exchange for reduced tax assessments. Other charges include perjury, conspiracy and misappropriation — 24 felony counts in all. Noguez was arrested and taken into custody last week. If convicted, he will spend up to 30 years behind bars.
What about the guy who paid him off? He’ll get his too, if found guilty. Ramin Salari was charged with 23 felony counts including bribing public officials and conspiracy. Salari appears to be pleading not guilty. It is unclear how Noguez will plead.
Remember: bribes are expensive and risky. Hire a good tax attorney instead.
IRS Doc Requests
If you are working with the IRS in an effort to resolve a back tax debt, chances are you will have to divulge to them some, if not most, of your financial information. You may also be required to submit documentation to substantiate (or prove) that the information you have provided is accurate. And it’s not just out of curiosity; the IRS requires certain documents to verify that what you have told them is correct.
The most common types of documentation have to do with proving your income and expenses. Income is typically substantiated by submitting one or more paycheck stubs, and expenses are typically substantiated by providing bank statements, receipts, or other proof of payment. It is also common for the IRS to require you to demonstrate the absence of something. For example, proof that you do not have access to a 401(k) or proof that you were unable to obtain a home equity loan, etc.
If you are working with a tax attorney or other representative, they will advise you on what information will have to be provided to the IRS. And if it must be divulged, a tax attorney has the skills to present your case in a favorable light to help you obtain the best possible deal.
Bullet Tax?
If Cook County board president, Toni Preckwinkle, has her way, it’s going to be more expensive to buy bullets in Chicago. She is pushing for a $.05 per bullet tax to take effect as a means of curbing violent crime in a city that has tallied 409 homicides so far this year. And there’s also the bonus of raising about $1 million per year for county coffers. Yet our governments continue to burden citizens with additional tax responsibilities when the need for tax relief is greater than ever.
We’ve discussed sin taxes before: the cigarette tax, Denmark’s short-lived tax on fatty foods (the so-called “fat tax“), the soda tax controversy in New York and the bay area of Northern California. The problem is these taxes typically cause an unfair burden on those who use these things responsibly (although I’m not sure it’s possible to smoke cigarettes responsibly) and they fail to really control the “bad behavior.”
And this is not just the tax attorney talking; the same problems have been identified by opponents of the bullet tax. Won’t people go to neighboring counties to buy their ammo? Won’t this infringe on the rights of lawful gun owners? Why should law abiding citizens have to pay for the county’s budget shortcomings?
At the End of Shulman's Term
With Doug Shulman concluding his service as Commissioner of the Internal Revenue Service early next month, I thought it might be nice to look at some of the details of the office itself and look back at some prior Commissioners.
The Office of Commissioner was created by Congress on July 1, 1862 even though the modern history of the IRS really began in 1913, ten years after the income tax was abolished. IRS Commissioners are appointed by the President of the United States with the approval of Congress. There was no set term prior to 1998. For example, Guy T. Helvering was “sentenced” to over 10 years of service (from 1933 to 1943). He holds the record for the longest term as Commissioner. The shortest term was just over 3 months by Robert E. Hannegan which, coincidentally, was immediately following Helvering’s term in 1943.
Shulman came very close to serving a full 5-year term as he got his start back in March 2008. Shulman took over after Mark W. Everson, who also served a 4-year term. IRS has a complete list of all past Commissioners, in case you’re curious.
According to Shulman’s bio, his emphasis has been to strike a balance between providing excellent service to taxpayers (hopefully offering tax relief where appropriate) and enforcement of tax laws (i.e., collection back tax debt). Has Shulman succeeded?
Miccosukee Tribe Poised to Lose Tax Battle
Florida has recently established itself as the tax-refund-fraud capitol of the nation, but did you realize that it is also the stage for some hot sovereign immunity disputes?
One example is the Miccosukee Tribe of American Indians. Tribal members earn a substantial sum of money from their casino complex in Miami. The government (namely the IRS) has been diligently trying to get its hands on records that the IRS believes will show that the tribe has failed to withhold tens of millions of dollars in income taxes over the years. Yesterday a federal appeals court ruled in favor of the government: the tribe must comply with the terms of the IRS’ subpoena notwithstanding the tribe’s sovereign immunity. It appears as though the IRS is going to win this battle and there will be a number of large individual tax debts for them to enforce.
The law is clear. While American Indian governments are not subject to income tax by virtue of their sovereign immunity, when they act as employers, they must comply with all the ordinary employment tax rules, including reporting and paying employment taxes. Furthermore, the individual tribal members must pay taxes on their individual earnings. The IRS website contains a plethora of information regarding the tax treatment of Indian Tribal Governments.