Recent Tax Initiatives
Please note that the IRS has extended the FBAR filing deadline to October 15, 2009. Relative to who should make a voluntary disclosure of an offshore bank account, the IRS says:
Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution.
Feel free to contact Kundra and Associates for more information.
Notice: IR-2006-28: Feb. 14, 2006: The updated estimate of the overall gross tax gap for Tax Year 2001 is now $290 billion. Over 80% is from underreported taxes. Since 2001, the IRS increased its enforcement revenues from $33.8 billion in 2001 to $47.3 billion in 2005. Further audits of taxpayers earning $100,000+ topped 221,000 in fiscal year 2005. This is the highest number in the past 10 years. Total audits of all taxpayers topped 1.2 million in 2005, representing a 20% increase from 2004.
And now…the most recent “Dirty Dozen” tax scams–
IR-2006-25, Feb. 7, 2006-
- Zero Wages. Taxpayer attaches either a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 to his/her return that shows zero or little wages or other income; and may include statement of rebuttal as to information submitted to the IRS.
- Form 843 Tax Abatement. Involves the filer requesting abatement of previously assessed tax using Form 843. Many using this scam have not previously filed tax returns and the tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program.
- Phishing. Identity thieves acquire personal financial data to access accounts. Taxpayers receive e-mails that seemingly come from the IRS notifying of an outstanding refund. The taxpayer is urged to click on a hyperlink and is sent to an official-looking site soliciting a social security and credit card number. The IRS does not initiate contact via e-mail.
- Zero Return. Taxpayers enter all zeros on their federal income tax filings and report their withholdings; they then write “nunc pro tunc”– Latin for “now for then”–on the return.
- Trust Misuse. Promoters urge taxpayers to transfer assets into trusts with promises of reduced taxable income, deductions for personal expenses and lower estate or gift taxes. Currently over 200 investigations are underway.
- Frivolous Arguments. Examples: the 16th Amendment concerning congressional power to lay and collect income taxes was never ratified; wages are not income; filing a return and paying taxes are voluntary; and being required to file Form 1040 violates the 5th Amendment right against self-incrimination or the 4th Amendment right to privacy.
- Return Preparer Fraud. In fiscal year 2005, over 110 tax return preparers were convicted. Nonetheless, regardless of who prepares the return, the taxpayer is ultimately responsible for its accuracy.
- Credit Counseling Agencies. The IRS Tax Exempt and Government Entities Division is revoking the tax-exempt status of numerous credit counseling organizations operating under the guise of educating financially distressed consumers while charging debtors large fees and providing little or no counseling.
- Abuse of Charitable Organizations and Deductions. Tax-exempt organizations are used to improperly shield income/assets from taxation while maintaining ultimate control.
- Offshore Transactions. Hiding income via bank/brokerage accounts, using offshore credit cards, wire transfers, foreign trusts, employee leasing, private annuities and life insurance.
- Employment Tax Evasion. Improper worker-classification; double-dipping in reimbursement; in fiscal 2005, over 50 individuals were sentenced to an average of 30 months in prison.
- “No Gain” Deduction. Deducting one’s entire adjusted gross income (AGI) on Schedule A under “Other Miscellaneous Deductions.”