Orange County Tax Lawyer Blog

Being contacted by the IRS is a scary thing especially if you have done nothing wrong. Unfortunately, many taxpayers feel harassed by the IRS every year because they have fallen victim to identity theft. Identity theft is increasingly being used to file fraudulent returns which can result in an audit when a taxpayer files his or her legitimate return. It is important to have an experienced California tax attorney on your side to help you deal with the IRS and restore your good standing with the government.

The IRS recently warned of a wave of suspicious communications being made on its behalf. Apparently criminals are pretending to be the IRS and soliciting personal information to steal an individual's identity. These schemes are known as "phishing" scams and result in millions of dollars in theft losses every year. Many of the criminals involved in these scams even use the IRS logo or names of officials to make their communications seem more authentic.

Last week we discussed the fact that sometimes business expenses are characterized as hobby losses by the IRS. The line between business expenses and hobby losses is sometimes thin, especially in the context of new businesses.

We also discussed a recent tax court case that involved an author who claimed $19,140 in businesses losses associated with his worldwide trip that was taken to gather material for a book. The IRS disallowed the expenses and stated that the would-be author really had hobby losses, not business expenses.

The IRS has reopened the Offshore Voluntary Disclosure Program (OVDP) for offshore bank account holders. This is a significant opportunity for California taxpayers with hidden overseas accounts to disclose these accounts to the IRS and avoid the possible criminal tax evasion penalties that are typically associated with offshore accounts.

Contact an experienced California offshore bank account lawyer if you have bank accounts overseas that have gone unreported to the IRS. An attorney who exclusively practices tax law and is experienced in tax evasion defense can assist taxpayers with their accounts and make sure that their exposure to penalties is minimized.

This is the year that many Orange County residents will follow their passions and start their own businesses. The current economic climate has shown many Californians that being an employee of someone else is not as risk-free as it once was, which is why increasing amounts of Californians are going into business for themselves while still employed. Normally, businesses can deduct expenses but the deduction of business expenses may not be as straightforward for many upstart businesses.

Contact an experienced California tax law attorney if the IRS contacts you because it disagrees with your deduction of expenses for a new business. Often the IRS will consider business expenses associated with a new business to be "hobby losses." The difference between business expenses and hobby losses is significant when it comes to a tax audit because this may result in an accuracy related penalty being assessed against a taxpayer.

In our last post we discussed the importance of calling an Orange County tax attorney if you are contacted by the IRS. We also began discussing the tax issues that one teacher faced after someone stole his identity and filed a false return for a refund. The identity theft prompted the IRS to send the teacher audit letters and the IRS continued to harass the teacher even after he filed an affidavit of identity theft.

The teacher grew angry after repeatedly calling the IRS and telling them that he had filed the identity theft affidavit. The teacher said the response was usually "Well this department doesn't communicate with this department.

"Their bureaucracy is just, wow," the teacher said. "All they try to do is just sort of placate you, and it's just ridiculous because you know it's going on with a lot of people."

Dealing with the IRS can be a frustrating experience. Save yourself a headache by contacting an experienced Orange County tax attorney if you are sent a letter or given a call by the IRS. Remember, there is no harmless contact by the IRS even if you have done nothing wrong.

One teacher recently found this out the hard way. He was called by the IRS and told that they wanted to audit his tax return. The taxpayer thought this was odd because he typically filed jointly with his wife and he had not even filed taxes yet that year. It turns out that his identity had been stolen and used to file a fraudulent tax return. Although the teacher filed an affidavit of identity theft fraud, he kept being harassed by the IRS.

The year is not over and it is not too late to make some shrewd moves to save on your yearly tax bill. In our last post we discussed the importance of proper tax planning for high income individuals and the fact that some deductions may trigger an IRS audit. We also discussed three tax saving tips that the IRS recently issued including donating to charity, installing green-energy appliances, and making changes to an investment portfolio.

Each of the IRS' tax saving tips can help a California taxpayer save money, but each tip has several rules and exceptions that may apply. That is why it is important to consult with an experienced tax professional if you are considering taking one of these last-minute deductions.

Orange County residents with high incomes are more likely to itemize their tax deductions and to be targeted by an IRS audit. The IRS is more likely to scrutinize the deductions that a high-income earner takes and the failure to provide supporting documentation for a deduction can get a taxpayer into serious legal trouble.

An experienced tax law attorney can help high-income individuals establish a proper tax plan that can reduce the chance of an audit and be honored if an audit does occur. A proper tax plan may include deductions that reduce a person's overall taxable income, but any such deductions should be properly supported to avoid the risk of penalties.