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August 2014 Archives

If it Sounds Too Good to be True....

Taxes are a certainty. The Internal Revenue Service (IRS) spends millions of dollars every year on collection efforts and, as we have noted, have the ability to employ a broad set of powerful tools to obtain compliance from a taxpayer.

Audit Finds Many Tax-Exempt Organizations Fail to Pay Payroll Tax

When most people think of tax payments, they may first think of their income tax, as it may be the largest tax they pay over the course of a year. Property tax may come next, along with sales tax. But if you own or work for a business that has employees, the tax that you should always pay attention to is your payroll tax.

The AJAC Project

On July 2, 2014, the IRS released the second phase of reforms to the Appeals' function within the Service as part of continuing efforts under its Appeals Judicial Approach and Culture ("AJAC") Project. The changes outlined in Phase Two of AJAC, which take effect on September 2, 2014, provide guidance for employees trying to resolve various Examination cases worked in Appeals. Proceedings on appeal from taxpayer examination, audit reconsideration, claim and overassessments, innocent spouse relief, and certain penalty-specific cases are among those affected by the AJAC Phase Two guidance.

Jurisdiction and Taxes

Jurisdiction is very important in tax law. Determining whether a person or an entity has the right kind of contact with a jurisdiction determines whether it pays taxes in that jurisdiction. The recent news involving Medtronic, its purchase of an Irish company and whether that would enable it to avoid some U.S. taxes involves issues of jurisdiction and where income is attributed.

A Concise Guide to The IRS Officer in Compromise Program

The IRS offer in compromise program allows Taxpayers (individuals and businesses) to settle their outstanding balance for less than the full amount owed. Although this may appeal to many Taxpayers, stringent requirements must be met before the IRS will approve an offer. First, an applicant must be current with all IRS filing and payment requirements. This includes estimated tax payments, if applicable. In addition, persons who are in active bankruptcy proceedings are not eligible for an offer in compromise. These two items are determinative and the IRS will return your offer in compromise without consideration if either of the aforementioned apply.

Offshore Voluntary Disclosure Program - Certain Current Participants Eligible for Streamlined Program.

Most persons residing in the United States and abroad have heard of the IRS' increasing scrutiny of U.S. Taxpayers' offshore financial accounts. Taxpayers with interest in foreign financial accounts whose aggregate balance exceed $10,000 are required under the Bank Secrecy Act to report such accounts to FinCEN on a yearly basis. Failure to do so comes with the possibility and threat of steep civil and criminal penalties. Many Taxpayers, including immigrants to the United States and expatriates doing business abroad, neglected this reporting requirement.

Financial Complexity and The Potential for Tax Fraud

Tax law is technical. There are no philosophers of Natural Tax Law, and even though taxes are perceived to be, along with death, one of the few certainties in life, they are arbitrary and changeable. The tax laws of the United States, to a great degree, are whatever the Congress, or perhaps more precisely, the staff of the Joint Committee on Taxation, say they are.

Tax Changes on Hold in Congress

The tax laws are constantly in flux and you need to remain vigilant and aware of how changes in tax law, regulations and interpretation may affect your tax obligations. The political process that brings about these changes is typically messy and convoluted, but the recent scandal involving the Internal Revenue Service (IRS) over the scrutiny of some political organization's 501(c)(3) applications received has further roiled the waters of tax law. A couple of important matters for tax law enforcement are seemingly in limbo in the Congress, as Republicans are refusing to approve bills that would provide the IRS with additional authority to gather information regarding taxpayers financial transactions and other tools that would be used to collect currently uncollected taxes.

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