Tag Archive for Tax Blog

Chomping At The Bit? Hold Your Horses… Don’t File Too Early!

“Tax Season is Here”, “Tax Season is Here”… slogans everywhere, big box companies advertising for you to come in the door, other software companies selling DIY tax software (by the way I do NOT recommend that – see why HERE)… Oh Wait! Even the IRS says its “Free File” has been open since early January!! So what should the poor common man do?

First, let’s all take a deep breath, here procrastination for a month or so may be the key to avoid a mess on your hands later! Besides procrastination, what other reasons could there be to wait to file your taxes?

Corrected Forms And Amendments: Read More
Written by | Posted in IRS

Captive Cases Series – Case Law Conclusion: The Need For A Valid Business Purpose

In looking at the cases, a few points immediately become apparent.

First, all the captives that were challenged by the Internal Revenue Service4 were formed because of business necessity. They are all great examples of the business purpose test outlined in the Frank Lyon case, where has the following factors:

1. there is a genuine multiple-party transaction

2. with economic substance that is

3. compelled or encouraged by business or regulatory realities,

4. that is imbued with tax-independent considerations, and Read More

Written by | Posted in Tax Risk Management

IDR Enforcement Procedures Date of January 2 Postponed to March 3, 2014

Four days after we posted “Ready or Not… 2014 LB&I Information Document Request (IDR) Enforcement Process“, the Internal Revenue Service postponed the effective date to March 3, 2014.

The IRS Large Business and International (LB&I) Division announced that it will be extending the effective date of the enforcement procedures as outlined in the November 4, 2013 LB&I Directive on Information Document Requests Enforcement Process to March 3, 2014, to provide the clarification that is necessary to ensure that the procedures governing IDR issuance and enforcement are easily and clearly understood.

Kudos to the IRS for recognizing that the implementation of this procedure has issues Read More

Written by | Posted in Audit • IRS

Failing To File A Tax Return – Willfulness Is A State Of Mind

Nary a day goes by that a client doesn’t ask me the question, “Why am I being charged criminally with failing to file my tax returns? Lots of people get behind on their taxes and fail to file their returns for a few years, but they are not prosecuted. Why me?”

One small word is all that distinguishes civil tax liability from criminal tax liability. What is that pestilent word? It is willfulness. That very word strikes fear in the hearts of taxpayers. Why? Because it means the difference between whether a taxpayer will be subject to nothing more than a penalty or whether the taxpayer will spend several years – if not longer – confined to a cold, dank, cell. To add insult to injury, as harsh a sentence as prison can be, it does not absolve a taxpayer of paying hefty fines and penalties upon release. Read More

Written by | Posted in Federal • IRS • Tax Fraud/Evasion/Crimes

7 Habitual Mistakes Companies Make – Chapter 5 (18)

TaxConnections Blog Post
More Facts Resolve Tax Risks –
Bringing the Financial Institution to the Party –

THE FINANCIAL INSTITUTION played the main role in selling the transaction product to the taxpayer and most times assured the taxpayer that the structure was not untoward in light of expert opinions obtained. Accordingly, the financial institution should be held partially responsible for their role in devising and offering the product.

Similarly, the opinions the financial institution obtained could assist the taxpayer’s case and should be disclosed to the taxpayer, who in turn may elect to provide the contents to the IRS. Read More

Written by | Posted in Tax Risk Management

Don’t Forget to Add the Salt When Cooking Up an IRS Voluntary Disclosure

Picture this: You are sitting behind your desk when your phone rings. No, it’s not your spouse calling to find out why you are late for dinner. Although if that was the first thing that came to mind, there might be some hidden meaning in it. Instead, it is a new client. His name is John. John is a resident of New Jersey. John contacts you for advice regarding foreign, unreported bank accounts in the Netherlands. You recommend that John apply to the Offshore Voluntary Disclosure Program.

As part of this process, you file amended federal income tax returns on John’s behalf. John then pays a whopping 27.5% offshore penalty on the highest aggregate balance in his foreign bank accounts during an eight-year look-back period. Finally, John pays additional taxes and penalties for each of the preceding eight years. Read More

Written by | Posted in IRS • OVDP

“Kiss of Death” Says IRS – Protect Your Identity From Theft

Was it Oscar Wilde who said, “Most people are other people. Their thoughts are someone else’s opinions, their lives a mimicry, their passions a quotation”? Poor Oscar lived during those simple times, when identities actually represented a person’s personality & all of it’s unique traits.

The world has come a long, long way since, your identity is now associated with everything you touch, from something as simple as your email account or other social media to your Social Security Number, bank accounts, credit cards etc. As we enter the maze of the digital world, we have to beware of the dragon that is the identity thief!

I had a close encounter with identity theft when a client’s e-file was rejected with a unique Read More

Written by | Posted in Individual • IRS

Captive Cases Series – Case Law Conclusion: The Harper Test, Part I: What Is Insurance?

Today, I want to turn to the Harper Test, which states that a captive must comply with the following three factors:

(1) whether the arrangement involves the existence of an “insurance risk”;

(2) whether there was both risk shifting and risk distribution; and

(3) whether the arrangement was for “insurance” in its commonly accepted sense.

I’ve already discussed the idea of risk shifting and risk distribution. For the next few posts, I want to focus on factors 1 and 3, starting with one, that the arrangement involves the existence of an “insurance risk.” Read More

Written by | Posted in Tax Risk Management

FATCA Implentation Unimpeded by Republicans!

According to Reuters, A senior United States Treasury Department official said on January 22, 2014 that Republican Party opposition to a new law meant to fight offshore tax dodging by Americans will not impede the Obama administration’s efforts to implement it worldwide.

The Republican National Committee (RNC) on January 24, 2014 called for the repeal of a U.S. anti-tax-evasion law (FATCA), siding with BIG BANKS, libertarians and American expatriates that have criticized the Obama administration statute.

At its winter meeting in Washington, the RNC approved by voice vote a resolution in favor of abolishing the 2010 Foreign Account Tax Compliance Act (FATCA), set to take effect in Read More

Written by | Posted in FATCA

Captive Cases Series – The IRS’ War on Captives; UPS, Pt. III

Following is an excerpt from my book U.S. Captive Insurance Law:

After mentioning the general facts, the appellate court first noted, “It is not perfectly clear on what judicial doctrine the holding rests.” Next, the court noted that this was essentially a sham transaction case, with the IRS arguing that the court should not respect the transaction, because its only motive was tax avoidance. The court first outlined the basic concept of the sham transaction doctrine:

This economic-substance doctrine, also called the sham-transaction doctrine, provides that a transaction ceases to merit tax respect when it has no “economic effects other than the creation of tax benefits.” Even if the transaction has economic effects, it must be Read More

Written by | Posted in Tax Risk Management

Lifting The Veil On The Black Market Peso Exchange – Part II

THE MECHANICS

The Black Market Peso Exchange (BMPE) consists of two interrelated activities. One occurs in Colombia: the purchase of accumulated drug dollars in America. And the other occurs in the United States: the actual delivery of drug dollars to the money exchanger’s associate in the United States.

1. Purchase of Dollars in Colombia

The BMPE process begins when the cartel financial manager is contacted by his cartel representative in the United States, and advised that a particular trafficking organization in Miami is ready to turn over money owed to the cartel. For purposes of this example, a Read More

Written by | Posted in Federal • IRS • Treasury Regulations

Energy Star Sales Tax Holiday Returns To Maryland February 15th

Maryland’s annual Shop Maryland Energy sales tax holiday begins at 12:01 a.m. February 15, 2014 and ends at 11:59 p.m. February 17, 2014. Now in its fifth year, the program allows for the waiver of the state’s 6% sales tax on qualified Energy Star appliances purchased in Maryland during this period. Energy Star products are those products designated as meeting or exceeding the Environmental Protection Agency’s efficiency requirements for the program.

The sales tax holiday applies to Energy Star labeled:

• Air conditioners,
• Washers and dryers, Read More

Written by | Posted in Sales/Use Tax
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