Tax Litigation Law Office of Scott Kauffman
(949) 751-6456

Hackney Literary Award
Mighty River Short Story Contest Winner

Orange County Tax Law Blog

Tax considerations for start-up entrepreneurs

When starting a business, it is crucial to take time to get the choice of entity correct. The differences between a sole proprietorship, partnership, corporation and LLC will not only affect your legal liability, it will affect taxes.

From estimated taxes to writing off losses, there are many tax issues to consider. In this post, we will cover three potential issues

Two ways the IRS contacts taxpayers & Three red flags for fraud

Getting contacted by the Internal Revenue Service (IRS) can lead to a spike in blood pressure and a pounding headache. Adding to this stress is the fact that the contact may not even be legit. As such, it is wise to have a basic understanding of some of the common ways the agency will make contact and common red flags for a potential scam. 

Ransomware, the dark net and taxes

Federal criminal investigations related to fraud, theft, money laundering and drug sales frequently dovetail with tax evasion. Virtual currency exchanges are in the crosshairs for their role in facilitating criminal conduct.

The Treasury, the Financial Crimes Enforcement Network (FinCEN) in coordination with the U.S. District’s Attorney Office took action against BTC-e. The foreign-located virtual currency exchange (by volume one of the largest in the world) faces a civil fine of approximately $110 million for violating U.S. anti-money laundering (AML) laws.

IRS Criminal Investigations: Focus on data and international

IRS Criminal Investigation (CI) chief Don Fort recently announced two new programs that will focus on data analysis and international tax enforcement. Sworn in on June 26, the new chief has spent 26 years as criminal investigation agent.

The data investigations unit will have a national scope and tie together information coming out of field offices to better focus resources. The international tax enforcement group will be based in the Washington D.C. field office and bring together special agents who have becomes subject matter experts in a focused operational group.

IRS error allowed $152 million in improper credits

The Treasury Inspector General for Tax Administration (TIGTA) recently released a report relating to the erroneous or possibly fraudulent issuance of refundable tax credits. The credits total over $152 million, and deal with the implementation of the 2015 PATH (Protecting Americans from Tax Hikes) Act, specifically the reduction of retroactive Earned Income Tax Credits, Additional Child Tax Credits, Child Tax Credits and American Opportunity Tax Credits.

While more than $152 million is seemingly a huge number of improperly allowed credits and deductions, it is a mere drop in the bucket to the overall total of $24.3 billion for fiscal year 2016 alone. In spite of slashed budgets and fewer audit staff in its branch locations, the IRS is likely to eventually try to recoup those huge losses by means of en masse tax collections.

IRS Office of Appeals going virtual

What can be lost in a phone call? For starters, in a face-to-face interaction of several minutes as many as 10,000 non-verbal cues are exchanged. This is just a start, but a face-to-face sit down can often resolve disputes that a phone call might not.

Last October, the IRS revised its Internal Revenue Manual in a move to have Appeals Officers hold conferences by telephone instead of in person. Changes were needed based on dwindling agency resources. A new pilot offering virtual tax appeals may help bridge the gap.

Are life insurance benefits added into a taxable estate?

Life insurance benefits are meant to replace family income when the worst case occurs. They can also be used by business owners and farmers to provide liquidity to buy out a sibling or pay off the mortgages on equipment.

The general rule is that death benefits transfer without triggering federal income tax. But in some cases life insurance may be included in a taxable estate and might subject a portion of an estate to taxes.

Collection Due Process Hearings: Fight like a champ

Tax problems can arise in a number of ways. It may be profit from the sale of a company in one year or something that accumulates over several years of limited liquidity.

For Floyd Mayweather, Jr., it was in part how he was paid for a 2015 fight against Manny Pacquiao. He remained undefeated with a decision win in the boxing match. But after earning as much as $250 million, he is now facing off against the IRS. The boxer will be squaring off against the Service by contesting a purported $22 million tax lien in a Collection Due Process (CDP) Hearing. What happens at these hearings?

The use of obstruction charges scrutinized in tax case

Obstruction of justice charges are often catchall, broadly-worded provisions. In recent years, the U.S. Supreme Court has been scrutinizing how the Justice Department uses these charges.

The most recent case along these lines relates to a conviction for obstructing the administration of tax laws. The justices may continue to narrow the scope of some white-collar prosecutions in this tax case.

Hobby or business? Why does the IRS care?

Sometimes a person’s hobby can also generate income that must be reported to the IRS. For example, a talented woodworker or quilter may sell valuable creations that bring in profits. The legal issue that arises is at what point is a hobby actually a business for tax purposes? The reason it matters is the way the IRS treats the deductibility of related expenses. 

Ordinary and necessary business expenses