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May 2013 Archives

IRS tax liens: the queen of hip-hop's big bill

The only inevitable things, the old saying goes, are death and taxes. That is surely an overly pessimistic view of the world. But in the case of taxes, there is certainly a sense that, as taxpayers, we can pay now or we can pay later.

IRS Investigating Popular Tax Avoidance Strategy Used by Private Equity Firms

The Internal Revenue Service is investigating a common tax strategy that has been used for years by partners at private equity firms to reduce their tax burden, known as "management-fee waivers" or "fee-waiver conversions."

IRS woes add to uncertainties of tax law enforcement

The Memorial Day weekend is about to begin. Government offices and many businesses will be closed on Monday for that holiday. But the IRS is already closed. It's been closed all day all day today and will be closed on four more business days between now and August 30.

Leniency for FBAR Violators

Much has been made of the government's recent crackdown on secret offshore bank accounts. Despite making the enforcement of these reporting requirements a top priority, courts have been handing out relatively lenient sentences for violators.

Tax Court takes Broad View of IRA "Prohibited Transactions"

A recent decision by the U.S. Tax Court, Peek v. Commissioner, could have huge implications for some individuals with qualified retirement plans. In 2001, Lawrence Peek and Darrell Fleck decided to purchase a company called Abbott Fire & Safety. The partners structured the purchase, utilizing an aggressive tax strategy presented by a CPA.

Online Businesses May Soon be Forced to Collect Sales Taxes for Other States

Since its inception in the early nineties, the internet has become one of the most popular places for consumers to shop. Forrester Research estimates that, by 2015, the online retail industry will be worth $279 billion. This is partly due to the convenience of shopping online and the lower prices that result from the reduced overhead of online companies. Another reason for the boom in online shopping is the ability to often avoid paying sales tax. The National Conference of State Legislatures estimates that all states together lost out on $23 billion in uncollected sales tax last year. Currently, states can only compel out-of-state companies to collect taxes if the company has a physical presence in the state, such as an office, warehouse, or distribution center. This could soon change.

Corporations Troubled by the IRS Need to Check State Filing Requirements

Defending against an IRS audit can be a long and arduous process, often draining the time and resources of a corporation's accounting or legal department. When this happens, the stress of responding to IRS demands for information and records will often lead to some everyday tasks being missed. However, it's important to remember that keeping current or getting up to date with your state's filing requirements may be a vital part of making sure the corporation is able to fight a notice of deficiency in Tax Court.

IRS TEGE Group Criminally Investigated by the FBI: How It Affects the Average Taxpayer

In response to an audit report by the Treasury Inspector General for Tax Administration (available here: http://www.treasury.gov/tigta/auditreports/2013reports/201310053fr.pdf) and a slip of the tongue by Lois Lerner, director of the IRS's Exempt Organizations Division at an American Bar Association meeting, the FBI is looking into reports that certain employees at the IRS improperly scrutinized the tax exemption applications submitted by social welfare organizations with a conservative political slant.

Innocence abroad: foreign account compliance in 2013

Mark Twain's book "The Innocents Abroad" tells of his travels in Europe and the Middle East with other Americans in 1867. It is one of the best-selling travel books in publishing history. As the title implies, Twain's theme was that Americans can often be innocently unaware of the reality and demands of the rest of the world.

Third-Party Payroll Services Are Not Always the Best Option

Managing the many aspects of a small business is a lot to keep up with. For many small business owners, the answer is to use outside service providers to handle aspects such as bookkeeping, information technology, and payroll. According to the National Small Business Association, approximately 40% of small businesses now use third-party payroll services.

IRS Still Seeking to Identify Offshore Account Holders

Pursuing information obtained from individual taxpayers participating in the Offshore Voluntary Disclosure Program, the IRS identified Canadian Imperial Bank of Commerce FirstCarribean International Bank (FCIB) as a foreign financial institution at which many U.S. taxpayers may be keeping accounts in an attempt to evade U.S. taxation. However, because FCIB does not have any U.S. locations, obtaining jurisdiction over the bank in order to demand information, documents, and records has been challenging for the IRS. Nevertheless, finding a creative loophole in its jurisdictional limits, the IRS recently served a John Doe summons to Wells Fargo & Co., a U.S. bank where FCIB maintains a correspondent account.

Tax liens have become big business

Adam Smith, the 18th Century economist, has become a capitalist icon in today’s America. It was Smith, after all, who in “The Wealth of Nations” wrote so persuasively about the productive capacity unleashed by humans’ capacity to “truck and barter.”

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