Blog

Federal Court Issues Ruling Against IRS in Class Action Lawsuit Challenging PTINs

- Scott Scammahorn

Every year, thousands of taxpayers in the United States, both individuals and businesses, experience disputes with the Internal Revenue Service (IRS) related to matters such as:

  • Tax penalties
  • Back taxes
  • Employment taxes
  • Unfiled tax returns

Occasionally, these types of matters can grow increasingly complex, requiring careful litigation by a qualified tax attorney. This is especially true in situations where a taxpayer is forced to take legal action against the IRS, like contesting fees or other penalties associated with the filing of tax documents.

Federal Court Ruling Against IRS

A federal judge recently ruled against the IRS in a class-action lawsuit brought by tax preparers that challenged the IRS’ right to charge Preparer Tax Identification Numbers (PTIN). As a result, the IRS may be required to refund the hundreds of millions of dollars in fees that it collected each year the system was utilized.

The decision, which was handed down by the U.S. District Court for the District of Columbia, determined that, while the IRS possesses the authority to utilize PTINs, it lacks the authority to charge individual user fees. The lawsuit had revolved around select regulations that both the IRS and the Treasury Department had issued in 2010 for registering preparers with PTINs.

Four years ago, the same court ruled that IRS regulations that required testing and continuous education of tax preparers had overstepped the organization’s statutory authority. However, it left PTIN requirements for tax preparers in place – a decision that was upheld a year later when appealed.

In response to the recent federal ruling, the IRS has suspended use of the PTIN system, pending further litigation.

Addressing Tax Litigation Issues in Texas

From unpaid taxes to disputing tax-related fees or penalties – as was the case in the aforementioned case – it is important to find an attorney who can work closely with you to solve your tax litigation issues.

Depending on the circumstances surrounding your tax matters, an attorney may recommend several potential courses of action, such as:

  • Filing suit in U.S. Federal Court
  • Installment Agreement
  • Filing suit in U.S. Tax Court
  • Offer in Compromise
  • Penalty Abatement

Finding a Qualified Tax Attorney

If you or someone you know is experiencing a tax issue that requires litigation, the attorneys at the Scammahorn Law Firm, P.C. are prepared to help. Our firm is comprised of only the finest tax attorneys who have the legal acumen and experience necessary when dealing with tax litigation matters. No matter the situation, our firm is committed to working closely with you to achieve a favorable resolution for your case.

To schedule an initial consultation with a member of our legal team to discuss your tax or IRS issue, we invite you to contact the attorneys at the Scammahorn Law Firm P.C. at (903) 595-1000.

Avoiding Criminal Liability When Tax Code Has Been Violated

- Scott Scammahorn

Although the Internal Revenue Service (IRS) estimates that a small fraction of tax crime convictions occur in a given year, the organization also estimates that 17 percent of American taxpayers fail to comply with tax code.

It is mostly individual taxpayers, not corporate entities, that commit some of the most common tax-related offenses, like tax fraud. In fact, IRS estimates reveal that roughly 75 percent of all income tax fraud cases involve individual taxpayers.

Because the United States tax system revolves around the self-assessment of any taxes owed, or “voluntarily compliance”, the IRS uses several practices to discourage violations. This includes assessing fines, seeking prison sentences for offenders, civil taxes and penalties. It also involves the publicizing of criminal indictments related to tax code violations.

Avoiding Tax Code Violations

The tax code is complex set of rules and regulations that can be difficult for most taxpayers to decipher – the IRS understands that. That’s why, when a careless error occurs and there is no evidence of fraud, the IRS will generally assume that it was a simple mistake, rather than an intentional attempt to evade the tax code.

The IRS can also usually distinguish between a simple, negligent error and willful evasion of tax law. Auditors will look for suspicious or fraudulent activity, such as:

  • Falsification of documents
  • Overstatement of exemptions and deductions
  • Transfer or concealment of income
  • Keeping multiple sets of financial ledgers
  • Using false Social Security information
  • Attempting to pass personal expenses off as business expenses
  • Willfully underreporting income
  • Claiming exemptions for non-existent dependents, including children

Although the IRS can usually separate negligent from fraudulent activity, that does not mean that the IRS will not attempt to punish a taxpayer for making a simple mistake. Even if it is unintentional, the IRS may still elect to impose a penalty on the individual – up to 20 percent of the underpayment.

Example of Tax Crime Conviction

In 2015, a Boston court sentenced a man to a year in prison for evading the tax code. The man, who was a business owner and occasional contractor for a family member’s business, was paid by check for any work performed and admitted to using check cashing services, rather than depositing funds in the bank, to avoid any scrutiny by the IRS.

According to the court, the man cashed roughly $3 million in funds using this method. He was also found to be operating his businesses and paying his workers entirely in cash, even requesting that customers not write checks to him for bills exceeding $10,000.

As a result, the man failed to file tax returns for a number of years, eventually gaining the attention of IRS auditors. As is common practice, the IRS publicized this conviction, as it does with other non-filer investigations.

Trusted Tax Attorneys in Texas

If you encountered a tax-related issue, such as failing to file your taxes or intentionally evading the tax code, it is highly recommended that you seek the guidance of a qualified tax attorney as soon as possible.

In Texas, the legal team at the Scammahorn Law Firm, P.C. has secured outstanding results for clients dealing with tax matters, including disputes with the IRS. Our firm advises taxpayers on every facet of the tax code and is prepared to fight the IRS on your behalf. Our goal is to reduce your any criminal liability, wherever possible, and resolve your case through an Installment Agreement or Offer in Compromise.

To set up a preliminary consultation to discuss your tax issue or IRS dispute, contact the skilled attorneys at Scammahorn Law Firm P.C. today at (903) 595-1000.

 

Can the IRS Seize My Tax Refund?

- Scott Scammahorn

If you are scratching your head wondering where your federal income tax refund is this year, it could be missing because the government has seized it. The United States Treasury Department has the authority to hold part or all of your tax refund to cover any debts you might owe.

Six Major Kinds of Debts

There are six major kinds of debts that can result in a government seizure of your federal tax refund:

Federal Income Taxes

If you owe back income taxes to the government, your refund may be seized to pay these back taxes. In this case, you should also receive a notice from the IRS providing an explanation as to why the money was withheld.

State Income Taxes

Believe it or not, the federal government can also intervene and withhold money from your tax refund to put toward unpaid state income taxes.

Student Loans

If you have defaulted on a federally insured student loan, the federal government can seize your refund to offset your defaulted loan. However, they are required to send you notice and provide you with an opportunity to challenge the claim or to pay it off in advance before the refund is withheld.

State Unemployment Compensation

If you have collected more in unemployment compensation than you were entitled to, according to your state, the state can ask the United States Treasury to redirect your tax refund towards this debt.

Child Support

The child support agency in your state can request the federal government to withhold money from your tax refund if you are delinquent in paying court ordered child support. You should receive advance notice of the amount owed, the offset process, and how to contest it.

Spousal Support

If an award for spousal support is included in a child support order, this can also result in a tax refund seizure if the spousal support payments are overdue.

If you believe your federal tax refund has been seized unfairly, it is highly recommended that you contact a skilled and experienced tax attorney to help you contest your IRS issue. The legal team at the Scammahorn Law Firm is well equipped to give you expert legal advice and help you fight unfair penalties from the IRS. If you have been targeted by the IRS and need legal advice about your options, give our office a call today at (903) 595-1000 for a confidential consultation about your tax situation.

Who to Call for Tax Litigation Questions: an Attorney or an Accountant?

- Scott Scammahorn

If you currently find yourself faced with questions about your taxes or a possible impending tax litigation, it is important to bring these questions to the right person. You may be wondering if your tax issue would be better addressed by an accountant or by a tax attorney. If you already know that you need professional tax advice, you have a good start!

Accountants and tax lawyers offer different types of assistance, and both can be extremely useful to you depending on your needs. Here are some differences that you should consider in making your decision:

What an Accountant Can Do for You

An accountant is trained in financial planning and financial strategy and can be helpful as you begin to establish a plan for your finances and your taxes. Accountants are adept at providing straightforward tax advice and for providing assistance to you when filing your income taxes.

For simple tax preparation, a certified public accountant is a great resource to answer your questions and assist you with your planning and tax preparation.

What a Tax Attorney Can Do for You

A tax attorney is educated with an emphasis on studying taxation case law, legal research, and legal writing. If you are faced with tax litigation of any sort, an attorney is where you should focus your attention. Tax attorneys are skilled and experienced on issues of specialized litigation, appeals, and any other issues relating to potential liability.

If your questions are complex or relate to a possible lawsuit, contacting an attorney is the best route for your inquiries. This is even truer if you are faced with responding to tax claims or audits against you or your business. Tax attorneys are armed with extensive knowledge on tax codes and regulations, as well as tried and true strategies to prevail in a litigation setting.

Tax litigation is complex and you need an expert on your side giving you the best and most current legal advice. If you are being targeted by the IRS, today is the day to contact the skilled legal team at Scammahorn Law Firm. In addition to his law degree, our experienced attorney Scott Scammahorn holds an additional advanced law degree with a focus on tax litigation.

If you would like to discuss your options with a lawyer who specializes in the complex arena of tax litigation, call (903) 595-1000 today to schedule your confidential consultation.

Second Round of Form W-2 Scam Begins

- Scott Scammahorn

Last year the Internal Revenue Service (IRS) warned tax payers of a form W-2 scam which targeted payroll and human resources departments. In late January 2017, the IRS renewed this warning after receiving new notifications that this email “spoofing” scam is making its away across the United States for a second time.

The IRS also warns that this scam seems to be evolving. Unlike the scam in late 2016, the latest scam is affecting a larger selection of industries and organizations.

What the Email Looks Like

The fake form W-2s will make it appear as if the company’s chief executive officer (CEO) is sending this phishing email to the payroll office or to a human resources employee. In the email the supposed CEO will ask for information including:

  • A list of employees
  • Social security numbers
  • Birth dates
  • Home addresses
  • Salaries
  • 2016 tax statements

If you have questions about any tax forms you receive, it is important that you call the IRS before submitting any information.

What to Do If You Have Been Accused of “Scamming” the IRS

As much as it is important to protect ourselves from cyber criminals, it is equally important that we protect ourselves in the event that we receive threats or penalties from the IRS.

The U.S. Tax Code is well over 10 million words in length. It would take the average tax payer eight hours a day for over a quarter of the year just to skim over the tax code. The IRS knows that the vast majority of tax payers have not read the tax code, let alone fully understand it.

If you have been threatened by the IRS, it is important that you remind yourself that you have the right to ensure that due process is followed. The IRS must take specific steps before it can initiate a levy on your property, garnish your wages, or take other action against you.

Should you have a complex case which involves litigation issues, liability issues, and/or involves several parties/organizations, you will be best served by contacting tax attorney Scott Scammahorn.

Call the Scammahorn Law Firm today

The Scammahorn Law Firm has helped hundreds of taxpayers across the nation respond to tax claims and audits against themselves, their families or their businesses. We invite you to call us today to discuss your case at (903) 595-1000.

How to Resolve a Dispute with the IRS

- Scott Scammahorn

Unfortunately, it isn’t unusual to find yourself at odds with the IRS, however there are a number of ways to resolve your tax worries without ending up in court.

Five procedures to avoid litigation with the IRS

  • Fast-track settlement. Allows taxpayers the opportunity to resolve audit issues during the examination process by using the mediation skills of the IRS Appeals Office and precedent case law
  • Fast-track mediation. Again, the taxpayer and the IRS mediate the dispute through an IRS Appeals officer who acts as a neutral party. This type of mediation is designed to expedite the resolution of issues that arise during examination or collection actions
  • Early referral. This process comes under the jurisdiction of both the examination and collection departments of the IRS and it allows the taxpayer the ability to transfer their case to the IRS Appeals Office. Only elements of the case can be transferred, therefore examination and collections personnel will continue to handle the issues that are not referred
  • Post-appeals mediation. In this process, a neutral third party will be selected to mediate between the taxpayer and the IRS. The mediator will have no settlement authority and they do not make the decision, but they will help to facilitate negotiations between the disputing parties. This action can be taken after appeals settlement discussions have failed
  • Arbitration. Similar to the above mediation process, an arbitrator will be selected to facilitate settlement, and all parties are bound to the arbitrator’s decision. Arbitration is only available for certain cases within the IRS Appeals Office’s jurisdiction which meet the requirements of the arbitration program

What If I Can’t Afford Legal Representation?

Another alternative for resolving tax issues without going to court is to use the services of the Taxpayer Advocate Service (TAS). This is an independent organization within the IRS that helps taxpayers resolve federal tax problems. You might be eligible for help from TAS if you’ve tried to resolve your tax problem through normal IRS channels and it still remains unresolved. You should also reach out to TAS if you believe that the IRS procedures aren’t working for your particular circumstance. TAS assists both organizations and individuals that are suffering financial difficulties because of their tax problems, and their services are free.

Low-Income Taxpayer Clinics (LITCs) also represent low-income taxpayers with IRS issues such as audits, appeals, and collection disputes. You might be able to receive free (or nominal charge) assistance from an LITC if you are a low-income taxpayer or if you speak English as a second language.

Remember, that no matter what your situation is you don’t have to be alone when handling an IRS dispute. Here, at the Scammahorn Law Firm, we have been protecting hardworking American taxpayers from threats and penalties issued by the IRS for years. If you have been targeted by the IRS and need advice, we welcome your call today at (903) 595-1000 to discuss your tax situation.

Concerned about Tax Litigation?

- Scott Scammahorn

Everyone dreads the heart-pounding moment when you receive an unwanted notice from the IRS informing you that there has been an issue with your tax return, and it can become unbearable when those issues result in tax litigation. You might be surprised to learn that there is a significant amount of both criminal and civil tax litigation in the US every year.

Which Tax Issues Are Most Commonly Litigated?

Typically, the issues being litigated concern the omission of income or the availability of deductions. In most cases, there is an element of fraud, in that taxes have been intentionally withheld through the use of deception. As taxes can be imposed at each of the US federal, state and local levels, proceedings should be brought in the proper court and therefore the venue for litigation will depend on the type of issue at hand.

Is It a Civil or Criminal Offense?

Title 26 of the United States Code (USC) contains the rules governing federal income tax matters for both civil and criminal tax litigation purposes. Title 28 of the USC contains the statutes governing civil litigation and Title 18 contains the statutes related to criminal matters. There are a number of tax-related criminal offenses within the USC which relate to fraudulent activity such as:

  • The attempt to evade or defeat tax
  • The willful failure to collect or pay tax
  • The willful failure to file a return, supply information, or pay tax
  • Providing fraudulent returns, statements, or other documents

This list is not exhaustive and there are a number of other statutes that allow for the prosecution of tax-related criminal offenses within the US.

What Is My Defense?

If you are currently facing civil or criminal proceedings you may be wondering what defenses are available to you? Typical defenses to tax crimes include:

  • The failure to comply was not willful but due to negligence or error
  • The compliance requirement was not met by a third party, such as an accountant
  • The taxpayer lacked the mental capacity to commit the offense

There can also be rare occasions when the government acted improperly because of the taxpayer’s race or religion, or that the government induced the taxpayer to commit the offense.

Tax litigation, whether civil or criminal, can be both stressful and complex, therefore it is always recommended that you have a skilled and knowledgeable attorney to represent you. If you have been targeted by the IRS and you would like to discuss your options with an experienced attorney we invite you to call the Scammahorn Law Firm today at (903) 595-1000.

Avoid These Top 5 Tax-Filing Mistakes

- Scott Scammahorn

Tax litigation is a term used to describe resolving tax disputes with local, state, federal, and foreign tax authorities. Litigation arises when there is a tax controversy which may involve an individual, a business (both for-profit and not-for-profit), an estate or a trust.

With tax season in the United States in full swing, it is important that businesses and individual’s alike avoid these common mistakes when filing their taxes this year to avoid threats and penalties from the IRS:

1. Mistakes in Math

Making a miscalculation can result in one of the following:

  • The immediate return of your taxes along with a correction notice; or
  • A reduction in your tax refund (or you may end up owing more than you thought)

Tax software can make sure that your math is correct. But before you send any tax forms along, make sure that your initial numbers are correct.

2. Computation Errors

Another common mistake are taxpayers, bookkeepers or accountants making mistakes when determining which tax return entries are taxable income, withholding, or estimated tax payments.

3. Misspelled Names

While the IRS may be all about the numbers, they are also all about the names on your tax form. If you file a return where the tax identification number does not match the taxpayer, the spouse or the child’s name, you will either need to:

a) Refile your tax return; or

b) You will not receive your tax return in a timely manner

If you have changed your surname because of marriage or divorce, alert the Social Security Administration (SSA) as quickly as possible.

4. Choosing the Incorrect Filing Status

Taxpayers have five filing status options. It is important to choose the one that is most suitable for your personal tax situation so that you can maximize your return.

5. Leaving Out Valuable Tax Deductions

If you have given to charitable groups over the past year, you may be able to claim these as valuable tax deductions. From cash given to charity to donating property such as cars and land, you may be able to claim these on your tax form.

When to Contact the Scammahorn Law Firm

Based in the Dallas area, the Scammahorn Law Firm protects hardworking American tax payers from threats and penalties issue by the Internal Revenue Service. We handle a number of federal tax-related issues, including delinquent returns and payments, back taxes and audits.

If you have been targeted by the IRS, we want to hear from you. Call us today at (903) 595-1000 to discuss your tax situation.

Recklessly Providing False Info to the IRS Could Cost You a Tax Credit

- Scott Scammahorn

Last month, the IRS finalized regulations that sought, among other things, to reduce the chances that a person would recklessly provide inaccurate financial information to a Health Exchange. According to the new regulation, a person who qualifies for a tax credit, will no longer qualify for the credit if they recklessly provided false information to an Exchange regarding their financial situation.

What Does It Mean to Recklessly Provide False Information?

The IRS clarified that a reckless disregard for the facts occurs when an individual makes little to no effort to determine whether they have provided accurate information to the Exchange. Additionally, the circumstances must demonstrate that the person substantially deviated from the conduct expected from a reasonable person who is providing information to a Health Exchange.

Because of the questions surrounding the concept of “recklessly” providing information, it is important to speak with an attorney if your tax credit is in jeopardy after being accused of providing false information to a health exchange. The Scammahorn Law Firm is well aware of these types of IRS legal issues and can assist individuals who are facing claims from the IRS that they recklessly misrepresented their financial status.

Prior to the regulation being finalized, some commenters sought to shield people who had used experts to assist them in enrolling for health coverage. According to the commenters, these people should not be ineligible for the tax credit because of the work that was done by their tax advisors. Considering this comment, the IRS decided that individuals would not be liable for inaccurate information that was provided by third parties. Additionally, the IRS concluded that the taxpayer would be responsible for misstatements that he made to an expert because the taxpayer had not reasonably relied upon the advice of the expert in providing that portion of the inaccurate information.

You May Have Defenses to These Types of IRS Legal Issues

Naturally, there are many situations where an individual has provided information to an exchange that ultimately proved to be incorrect. These individuals may not fall under the category of having “recklessly” provided false information. To determine whether the information was provided recklessly, it is important to speak with an experienced tax attorney.

Additionally, there are many individuals who have provided information to an exchange that was thought to be incorrect, even though it was ultimately found to be correct. These types of allegations are dangerous to the individual and can be difficult for an individual to defend. As a result, it is always in a person’s best interest to speak with an attorney before attempting to resolve these legal issues with the IRS.

Our attorneys at the Scammahorn Law Firm are happy to provide you with a confidential consultation regarding your IRS legal issues. We can be reached today at (903) 595-1000.

Priest’s Guilty Plea to Tax Evasion Shows Dangers of Not Knowing Your Rights

- Scott Scammahorn

No one is above the law when it comes to paying taxes, as Father Hien Minh Nguyen, 56, discovered. A priest for the Roman Catholic Diocese of San Jose, Father Nguyen pled guilty to four counts of tax evasion following an Internal Revenue Criminal Investigation interview late this summer.

Witness Becomes Target

Father Nguyen’s admittance to his tax evasion resulted when the IRS Criminal Investigation Division appeared at his door. Taken off guard, he agreed to meet with them and answer their questions. The agents informed the priest of his rights and that he was under no obligation to provide information to them or answer their questions. However, it is not uncommon for IRS questioning to lead to the witness becoming the target of the investigation.

Rights to a Lawyer

Father Nguyen unknowingly waived his guaranteed right against self-incrimination when he agreed to speak to the investigators. He was well within his rights to ask for a business card and inform them that a lawyer would be in touch. This would have allowed time to reach out to a lawyer with experience in dealing with IRS legal issues to protect his interests. This approach is still considered cooperating and could have helped him avoid misunderstandings or an inadvertent admittance of guilt.

Willful Tax Evasion

Over four years, Father Nguyen had misappropriated money donated to the Church between 2008 and 2011. The money was deposited into his personal bank account. It was during this period that he admitted he also willfully evaded taxes on the stolen money. Despite the fact he pled guilty to the tax evasion charges, he did not plead guilty to bank fraud.

When faced with IRS legal issues it is important to know your rights. In this case, agreeing to speak to the agents was a poor judgement call on Father Nguyen’s part. This is the time to call a lawyer who understands tax law and who can protect you from answering questions that could incriminate you. In fact, even an innocent person is best off to call a tax lawyer to assist in such situations.

The Scammahorn Law Firm believes in protecting the rights of American citizens, and ensuring they are well represented when faced with potential IRS legal issues. If you have been contacted by the Internal Revenue Criminal Investigation Division, we invite you to call us at (903) 595-1000 to discuss your situation.