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Criminal Tax Investigations

If you have been contacted by an IRS Special Agent or received word from your bank that the IRS has requested copies of your bank records, it is likely that you and/or your company are under criminal investigation. If your accountant is subpoenaed to appear before a Federal Grand Jury with your tax records a criminal investigation is almost certainly underway.

You are under no obligation to speak with the Special Agent and should politely decline further conversation until you have retained an attorney to speak on your behalf.

Because the relationship between you and your accountant does not fall until "attorney-client privilege" guidelines, your accountant may be forced to divulge what he or she knows about your situation. You should likewise refrain from further conversation with your accountant until the services of an attorney have been retained. <Back to Top>

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You may have avoided filing tax returns for years, but the IRS will eventually catch up to you. The IRS could seek to impose a criminal offense for failure to file tax returns as required. Even if you do file, the tax returns must be accurate and truthful because if the IRS detects false returns, a fraud referral to the Criminal Investigation Division will be generated.

The IRS may also create a “substitute return” to establish an account for a taxpayer who refuses to file, or is unable to file a required return. Such a return almost always results in a higher liability because the IRS does not take into account many exemptions.

We can help get you current with your tax return filing obligations and then analyze your situation to determine the best course of action and minimize the chance of any criminal investigation. For many taxpayers, this typically leads to an Offer in Compromise. <Back to Top>

Established by the Internal Revenue Service, the Offer In Compromise Program is a formal application to the IRS requesting that less than full payment for what you owe for taxes, interest, and penalties be accepted.

An Offer in Compromise may allow you to settle your IRS liabilities at a substantial discount on the basis of doubt as to collectibility, doubt as to liability, or effective tax administration. In addition, while the IRS is considering your Offer, the Internal Revenue Service is prohibited from instituting any levies of your assets and wages.

Most people do not have the necessary skills or knowledge of the IRS collection process to make an Offer In Compromise that is in their best interest. Many people fill out the forms incorrectly, overstate their assets and income, or offer too much. Government figures show that 75% of Offers are initially returned due to incorrect completion of forms; of the 25% that are processed, approximately 50% are rejected.

More information about Offers in Compromise can be found here. <Back to Top>

If you cannot pay all that you owe in taxes, cannot borrow the money to make the payment in full, and do not qualify for an Offer In Compromise, an installment agreement may be your best option. Payment Agreements allow you to pay the full amount of your debt in smaller, more manageable payments. The payments will be based on the amount you owe and your ability to pay that amount within the time available to the IRS to collect the tax debt from you.

A Payment Agreement is often the most expensive option, however. Why? Because the IRS charges interest and penalties on the tax you owe and, in addition, charges interest on the unpaid penalties and interest that have been charged to your tax account. So, while you are making payments on your tax debt, the IRS continues to charge interest and penalties on the unpaid portion of that debt. The interest rate on a bank loan or cash advance on your credit card may be lower than the combination of penalties and interest that IRS charges. <Back to Top>

The Internal Revenue Code authorizes abatement of penalties imposed for failure to file tax returns, for failure to pay tax as well as other penalties, if the failure is due to reasonable cause, and not willful neglect.

Forgiveness of penalties is decided on a case-by-case basis. Generally, if the taxpayer exercised ordinary business care and prudence and was, nevertheless, unable to file the return on time, the delay is considered due to reasonable cause. Also, a failure to pay may be due to reasonable cause if the taxpayer exercised ordinary business care and prudence, yet could not pay the tax liability.

If the IRS determines that failure to pay or failure to file was due to reasonable cause and not willful neglect, the penalty will not be assessed. You would still be responsible, however, for the underlying tax owed plus interest due. <Back to Top>

For taxpayers who file their tax returns but do not pay what they owe, the IRS sends the taxpayer a bill, which includes interest and penalties. This begins the collection process.

If the taxpayer does not respond to the bill or subsequent correspondence, the account becomes delinquent, and may be turned over to for collection. If after several attempts the IRS is still unable to contact the taxpayer, or cannot work out a payment solution, the account may then be turned over to a revenue officer, who will attempt to contact the taxpayer in person to settle the account. If the IRS is still unable to work out a payment solution, it may take enforcement action that includes filing a lien, serving a notice of levy, or seizure and sale of property.

Before the IRS can take any of these actions, it must give the taxpayer up to 30 days from the date of a Final Notice to pay in full or find another solution. Ignoring this notice or doing nothing will only make matters worse. A tax attorney can secure a temporary freeze on further collection activity, giving us time to avoid property seizure, analyze your situation and determine the best course of action. For many taxpayers, this could lead to an Offer in Compromise. <Back to Top>

If you filed a joint return with your spouse, which under subsequent examination by the IRS resulted in additional tax because of erroneous statements or understatement of tax, it is generally true that you both are responsible for the shortage. However, if you can show that you were not aware of the understatement or erroneous information when you signed the return, the IRS may grant you relief from paying the tax.

The three types of relief to a non-liable spouse are Innocent Spouse Relief, Relief by Separation of Liability, and Equitable Relief. Speaking with an attorney will tell you if you qualify. <Back to Top>

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The IRS can assess and seek collection from "responsible persons" the amount of the unpaid payroll taxes. Responsible persons could be officers, partners, corporate directors, shareholders or employees of a business organization. If the IRS has classified you as a responsible person, you will be held jointly and severally liable for the outstanding taxes.

If the IRS determines that you are a responsible person, you will have 60 days after the date of the notification letter to appeal by filing a Tax Protest. Your case would then be assigned to an Appeals Officer for review. If you do nothing or fail to timely file a Tax Protest, the IRS will assess the penalty against you and send you a Notice and Demand for Payment. Thereafter, the IRS can take collection action against your personal assets, including filing a federal tax lien or taking levy or seizure action. <Back to Top>

When forming a legal entity, it's best that it be created separate from the holdings of its owners to ensure limited liability. Historically, the choice has been for owners to form a corporation. Today, however, there may be better choices: C-corporations, S-corporations, Limited Partnerships and Limited Liability Companies (LLC's).

Depending on the nature of the business and number of people involved, each entity offers specific advantages and disadvantages. Some owners may value separation of assets more highly than others, while others may wish to limit tax liability as much as possible.

Choosing the proper vehicle for your business entity is an important decision that requires careful study of current tax and business law. <Back to Top>

The use, conservation, and transfer of one's wealth should always include a well-thought-out estate plan that takes into consideration: (1) The increase in value of an existing estate so that the needs of the family are met; (2) The preservation and protection of the estate from unnecessary taxes and costs; and (3) The orderly administration and disposition of assets upon the death of the owner.

LOWER YOUR ESTATE TAX AND AVOID PROBATE
With the proper Will, Trust and other estate planning documents you can preserve more of your estate for your heirs. Click here to download our questionnaire.
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Assets owned solely in the decedent's name, as well as his interest in property held as tenants in common, must be administered and disposed of under court supervision as governed by the decedent's Last Will and Testament or, where no Will is present, under State law. Not only does this create delays but may also cost as much as 3% of the value of the gross estate.

Assets governed by a trust agreement are administered and disposed of in accordance with the trust agreement; therefore, they are not subject to probate

SETTLE AN ESTATE AND SECURE YOUR INHERITANCE
If the decedent was domiciled in Florida or owned Florida real estate, we can help you. Click here to download our questionnaire.. <Back to Top>