Why does the IRS audit taxpayers? This insider information that might really help you

Why does the IRS audit taxpayers? This insider information that might really help you

Does this seem like a silly question? Well it's not. Because slowly but surely, the IRS audit process has changed over the last 10 years and it is critical you understand why, if you or your business is the one who is the subject of an IRS examination. In this video, tax attorney Anthony Parent speaks about both the public statements the IRS has made, along with his law firm's clinical experience helping thousands of taxpayers deal with an overbearing IRS. While so many articles are written by tax lawyers, accountants, CPAs and other tax professionals about the IRS Audit Red Flags, Attorney Parent explains the reasons why these articles are obsolete. Believe it or not, the IRS used to audit, or in IRS-speak “examine,” every single taxpayer. The reason is that when the income tax was first enacted in 1913, it only applied to those who were truly wealthy. No income tax was due until your income exceeded an inflation adjusted $500,000. And the top tax rate of 6% did not come into play until your income was at the equivalent of $12 million. Because the income tax affected so few people, the IRS had the resources to audit every single return. This changed of course. When Congress blatantly and openly broke the central promise of income tax by applying the tax to nearly everyone — not just the truly wealthy as promised. This drastic change created a flood of new taxpayers that the IRS audit team could not keep up with. So the IRS began to audit only a portion of taxpayers year after year. The purpose of these audits was to primarily ensure compliance. Believe it or not, assessing additional revenue was not the main goal of the examination division. Again, it was compliance compliance compliance. So anyone could be subject to an audit. The IRS really wanted to spread the misery around, and it did. Along with multibillion dollar corporations the IRS would also routinely audit the plumber down the street. But things changed politically. The IRS is one of the least-liked organizations in the world. And many politicians don’t want to be seen as supporting the IRS. Yet, they don’t want that revenue the income tax brings in to dry up. So what’s the play for someone who needs to look like they are on the taxpayers side, but are still completely in love with that revenue the IRS brings in? Well it’s simple. Cut the IRS’s budget. In fact, the IRS’s budget has been cut so much, in the last ten years, the IRS lost its most experienced agents and officers. Yet they haven’t been replaced. Yet, Congress insists the IRS do more with less. And because ensuring compliance isn’t really a goal that has a data points that one can rest their conclusions upon, the new focus for the IRS examination divisions has become something that is more measurable — that is, increased assessments. So this is the sea change. The IRS is no longer interested in compliance for compliance sake, but rather wants examinations where there will be a good chance of assessing additional taxes and for them, massive penalties. So what types of cases involve the prospect of huge additional assessments? The focused targets we see are: Domestic cases where the IRS suspects something egregious; Cases involving foreign income and assets. The IRS wants domestic audits where they suspect a slam dunk that could trigger massive civil fraud penalties along with a huge tax assessment. And also, the IRS also wants more international audits. The reason? Cases involving international income and assets are a huge penalty wonderland for the IRS. There exists a litany of penalties that can trip up any decent, honest, intelligent person. Penalties of over $10,000 for not reporting the existence of a foreign bank account on what is known as an FBAR form, and penalties of $10,000 for not reporting the ownership of a foreign bank account on a slightly different form, a Form 8938 Along with: A $10,000 for not reporting interest in a foreign business on Form 5471 A $10,000 for not reporting a Foreign pension on Form 3520-A A $10,000 penalty for not reporting distributions from a foreign pension on a Form 3520. A $10,000 penalty for not reporting a transfer to a foreign business on Form 926. Multiple penalties for multiple years can really add up into the hundreds of thousands of dollars. Oh and by the way, this list is far from exhaustive. And willful FBAR penalties can even be higher How to win your audit? It is critical you get the highest level of legal representation possible if you are worried that a revenue-hungry examiner is looking at you as a mere target to aggregate into a press release. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https;//www.irsmedic.com https://youtu.be/FxVRnJnegMQ IRS Medic

IRS OVDP ended September 28, 2018. What are your options now?

IRS OVDP ended September 28, 2018. What are your options now?

IRS ends OVDP — what to do if you missed the deadline The IRS ended its Offshore Voluntary Disclosure Program or OVDP for short, on September 28, 2018. So what does this mean for taxpayers who have not made a disclosure? What should they do now? Are there any options left? In this video, I’ll explain exactly what paths remain open for those worried about FBAR penalties, the myriad foreign reporting penalties, and criminal prosecution. First thing: Good news, most people don’t need the full OVDP Since June of 2014 when relaxed streamlined disclosure rules were announced, thousands of taxpayers from every corner of the globe have called into our office quite sure they must use the standard OVDP and pay that 27.5% or 50% penalty that the program calls for. But after we talk to most people, we find that the streamlined program is more far appropriate for them. The benefit of the Streamlined program is there is a 0% or 5% penalty and only three year look back for unpaid taxes. So not only is the tax and penalty bill lower, but so to your attorney and tax preparation bill. It’s why we really like the Streamlined program. Which by the way, is still open. The problem is that taxpayers have a difficult time assessing their risk profile. What we find is that the people who should be scared to death of a criminal prosecution often aren’t. Meanwhile taxpayers who are convinced they will be going to prison tomorrow actually have a small risk of prosecution. What program is best for you is really something you need to talk to an experienced tax disclosure attorney about. Additionally, many taxpayers don’t even need a Streamlined disclosure. So many of them are able to just file delinquent forms to solve their problem. Second thing: A voluntary disclosure program MUST ALWAYS EXIST and there is nothing the IRS can do about it. Congress actually mandates that the IRS always have a voluntary disclosure program. So you might be confused. How can the IRS end the OVDP if this is true? The reason is that that the OVDP is a specific type of Voluntary Disclosure. Voluntary Disclosures existed long before 2009, which marked the first Offshore Voluntary Disclosure Initiative and these disclosures were primarily used to protect against unreported domestic income. For instance let’s suppose a taxpayer owns a regional US pizza chain and intentionally did not report sales that were paid in cash. And now he is worried that someone may whistle blow and he could be subject to a tax evasion indictment. Well that person, even though they have no foreign income or assets to report could still get in the standard Voluntary Disclosure program. So for domestic tax evasion, you would use the plain old Voluntary Disclosure program. If international tax evasion was involved, you were forced to use the OVDP. So now with the OVDP gone, the only type of Voluntary Disclosure is left is the plain old non-specific Voluntary Disclosure. You still might be a little confused so let me try to explain more. The OVDP was a combination that offers (1) the standard voluntary disclosure protections from criminal prosecution, along (2) w a pre-determined offshore penalty scheme of either 27.5.% or 50% of asset base. So really the only thing that ended September 28th is this second item. There is no longer that pre-determined offshore penalty scheme. However, you can still get protections from criminal prosecution by getting into the plain old Voluntary Disclosure program. So its wonderful that you can still get protections from criminal prosecution. But what about protections from massive FBAR and foreign informational return penalties? Unfortunately, with the OVDP penalty scheme now gone, each taxpayer making a that plain old Voluntary Disclosure will likely be subject to an IRS examination. The IRS examination is where FBAR and Foreign informational return penalties may or may not be assessed depending on how well your facts and circumstances are developed. The goods news is that the standard of review for such an audit is very much akin to the OVDP opt-out standard, which has delivered some remarkable success for many of our clients. Their OVDP opt-out penalties were much lower than the standard OVDP penalty that they though they would have to pay. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/g9oI7lCbEMg IRS Medic

Should you be nice to the IRS?

Should you be nice to the IRS?

https://ift.tt/1RfwK1f Tax lawyer Anthony Parent of Parent & Parent LLP helps answer this question. The IRS is a scary, dense organization. The IRS has powers you wouldn’t believe, yet communicates in a way that is often indecipherable. Yet it is critical you understand what the IRS is saying — as if you get something wrong, the IRS can levy bank accounts, garnish any payments to you, file a tax lien —- all without a court order. So with these constraints, it is at all possible to be nice to the IRS? Would you be better off being mean and nasty to them? You might think that by chewing out the IRS, you can get them to back off and be reasonable. You might think that by finding the biggest pit bull of an attorney, that will put the IRS in its place. Well does it? I think I can answer this question by answering a different question: Are there any strategic advantages to being nice to the IRS? Let me illustrate the difference. Over 10 years ago, I was at an IRS conference sitting next to a CPA whose had an office down the street from ours. He was bragging to me about how awesome he was. He might have been hitting the wine a little hard too. We were both sitting at the same table. He was showing me letters and emails he sent to IRS agents. So he proceeded to tell me the he enjoyed working overtime to humiliate and annoy all the revenue agents and officers he ran into. He really seemed to be impressed by himself. He was a force to be reckoned with, don’t you know? Afterwards, I asked some of my friends in the IRS what they thought of this CPA. The consensus was something like “Yeah we know he’s a jerk. Too bad his clients don’t know he is ineffective.” Here’s the thing. We tend to be nice. Some of it was bound to happen. My first partner, my father, David G. Parent, worked in state and municipal agencies for decades — he was a government bureaucrat. And myself, I applied for a job as a revenue officer in 1997. So my dad and I never looked at IRS employees “as others.” We thought, you know they could be us? So intuitively, we were also nice to the IRS. We treated them as we want to be treated. And what has this niceness done? As much as I rail on the unfairness, inappropriateness, and the injustice of the US income tax, it would be completely dishonest for me to say that IRS employees are bad. In fact, some of them have been the greatest friends to us imaginable. Below are four quotes from IRS employees who were speaking to us about various cases. While we did not necessarily get the exact thing we were looking for, we did get the overall relief our clients were seeking. “Anthony I can't let your client win on the statute of limitations issue as local counsel won’t sign off on it. But what I will do is put your client into a hardship status where in 5 months they can win on the statute of limitations issue.” This saved my clients thousands in legal fees and a complete disaster at home. If we were nasty, would this IRS appeals officer hand us this unconventional win? “Anthony, if you just get me proof your client is trying to sell their vacant property I’ll push this through. I don’t care what my manager says. I’ll take the heat.” this was a quote from a revenue officer stuck his neck out to help us save our clients’ home and business. If we were jerks, would he have stuck his neck out? “Sorry, your client filed their tax court petition a day late. I can’t do anything about that. But here, why not go to the taxpayer advocate? I bet your client has a better chance getting that employee classification they with them rather than with the tax court anyway.” This was a quote from an IRS attorney. And he was right. We ultimately won and our client saved $480,000. “We were investigating your client for tax evasion and FBAR violations. But seeing how he’s hired your firm, as long as you follow your compliance plan, we will move on to someone else.” This is a quote from a Department of Justice attorney. He saved our client from a criminal indictment and millions in taxes and penalties, restitution, along with the brutal humiliation of an indictment. In all four cases, we got help from the people that were supposed to be against us. I think a reason why is that these IRS and Department of Justice employees saw our clients as real people. Government employees, while perhaps biased, are not inherently bad at all. Their goodness can seep out despite the government’s best wishes. The thing is you have to give them room to do so — niceness helps create that space. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/RTbZlPGCe7U IRS Medic