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November 2011 Archives

IRS site visits may result tax preparer fines

In our last post we discussed the return preparer letter that the IRS sent to approximately 21,000 tax preparers in California and across the nation. The intention of the letter is not only to heighten the awareness of taxpayers of the consequences of preparing inaccurate returns but also to inform those who received the letter that they may be selected for a visit by an IRS representative. The visits will begin this month and are meant to confirm compliance with the IRS' return preparer requirements.

IRS to crack down on tax preparer errors in 2011

The Internal Revenue Service has sent letters to about 21,000 tax preparers in California and across the country as part of its increasing focus on tax preparer penalties. Tax law attorneys and certified public accountants are not only bound by ethical standards of conduct to prepare accurate returns but may also face severe civil and criminal penalties if they prepare inaccurate returns. Being investigated by the IRS for a tax preparation error is serious and requires immediate attention from an experienced Orange County tax attorney.

In-depth: how the IRS botched the first-time home buyer tax credit

In our last post we discussed a recent study of the IRS' administration of the first-time home buyer tax credit program. It appears that the IRS has sent erroneous payment demands to some taxpayers who owe nothing while failing to catch a few pretty obvious fraud schemes related to the tax credit. The most recent study into the IRS' antics highlights the importance of calling an experienced Orange County tax law attorney if you are contacted by the IRS. An attorney will properly manage and document all interactions with the IRS so a taxpayer will not fall victim to the failings of the IRS.

California home buyer tax credits an issue for the IRS

An experienced California tax law attorney should be called anytime that an Orange County resident is contacted by the IRS. Any contact with the IRS can indicate that a taxpayer is under investigation or being audited and that it is time to seek a tax professional. It is important not to talk directly to the IRS even if you have not committed tax fraud or tax evasion. Honest taxpayers can find themselves in trouble for misstatements and an experienced tax attorney can properly deal with the IRS to avoid a misstatement becoming a huge headache for a taxpayer.

IRS updates FBAR form

The IRS recently released an updated Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. The FBAR is the primary way for California residents to report offshore bank accounts. It is an important form to file accurately because a Californian may have reporting requirements if they have a financial interest or signature authority over a foreign account even if that account does not produce income.

Credit Suisse discloses offshore account information to IRS

Last month we discussed several tax law issues related to offshore bank accounts and a U.S. tax probe that targets Swiss banks. California taxpayers caught hiding money in foreign bank accounts can face civil and criminal penalties associated with the failure to disclose all foreign assets on federal income tax returns. The IRS has intensified its scrutiny of foreign countries with strict banking privacy rules because it believes that taxpayers in California and across the country are using foreign accounts for tax evasion purposes.

Report: IRS cracked down on refund fraud last tax season

The Treasury Inspector General for Tax Administration recently issued a report indicating that the IRS stepped up its identification of fraudulent tax returns this year. The IRS increased its identification of fraudulent returns 171 percent during the 2011 tax season compared with the 2010 tax-filing season. This means that more California taxpayers will likely face tax fraud-related tax audits than ever before.

An in-depth look at DAD tax shelters

Last week we discussed the government crackdown on "distressed asset debt" tax shelters. A tax shelter is a tax plan whose primary purpose is avoiding federal income taxes. The difference between a tax shelter and a tax-efficient business plan is that a business plan's goals are not primarily the evasion of tax. A DAD tax shelter is a tax plan that allows wealthy taxpayers to shield income by buying junk foreign assets. The problem with many DAD tax shelters is that most participants have no reasonable expectation of profit from buying junk foreign assets and the primary reason for the purchases is to avoid paying taxes on other income. There are many variants of the DAD tax shelter model and users of different tax shelter models have suffered from IRS penalties.