IRS Audit

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.

IRS Targets Facebook in New Probe over Billion-Dollar Tax Understatement

- Scott Scammahorn

Earlier this month, the Internal Revenue Service (IRS) announced that social media giant Facebook may have grossly underestimated the value of its intellectual property by “billions of dollars” during a transfer to an Irish subsidiary.

Though the lawsuit cites an international transfer, the concern at the heart of the case remains whether or not Facebook understated U.S. income as a result of the transfer, effectively cutting its tax bill.

In recent years, technology giants have utilized complex tax restructuring, prompting government agencies to launch initiatives aimed at rewriting tax rules to avoid inter-group deals that transfer profits into tax havens.

According to the lawsuit, an initial examination by the IRS suggests that the valuation of the transferred assets were understated by some billions of dollars.

However, Facebook has denied any wrongdoing regarding federal tax law, affirming in a statement that the company obeys the laws of any and all countries in which it operates.

When Might the IRS Audit Your Taxes?

No one wants to be notified by the IRS that they are the target of an audit. For many taxpayers, simply hearing the term “IRS audit” is enough to spark anxiety, but the reality is that the risk of an IRS audit is surprisingly low – for most people.

Depending on your gross income, you may face elevated odds of being targeted by the IRS for an audit. For example, for those making anywhere between $100,000 and $200,000 annually, the audit rate is only around one percent. However, once an individual crosses the $500,000 annual threshold, the rate jumps to more than five percent.

Only those accruing more than $5 million or $10 million see a significant risk for tax audit, at nearly 21 percent and 30 percent, respectively. However, there are cases where the audit rate is slightly higher among low-income adults, such as those making less than $25,000, as many of these cases can involve taxpayers fraudulently claiming earned income tax credit.

However, if you are self-employed and file a Schedule C with your tax return, your chances of audit increase signficantly, regardless of income.   That is why it is good practice to operate your business as a corporation.

That’s not to say that it is ever safe to attempt to cheat on your taxes. In fact, the IRS currently uses sophisticated algorithms to identify returns that need to be audited, such as those involving:

  • Extremely large deductions compared to the total income
  • Certain types of deductions, like those related to travel, automobiles or entertainment.
  • Other deductions like casualty losses or any bad debt deductions.
  • Businesses showing losses, especially if they are recurring
  • Out of character deductions

Additionally, the IRS can use technology to match information on returns to employee forms and other documents issued to non-employees, like W-2s or 1099 forms.

Finding an IRS Attorney

If you or someone you know has received notice of an audit by the IRS, or if you are dealing with another IRS-related issue, it is critical that you contact a qualified attorney as soon as possible.

That’s where the skilled attorneys at the Scammahorn Law Firm, P.C. come in. Throughout Dallas, Texas, we work with clients dealing with a variety of federal tax-related issues, including those stemming from IRS audits or disputes. Our attorneys have a wealth of experience with handling federal tax cases, and can provide the sound legal advice you need as you look to protect your future interests.

Let us work with you to find a solution to your IRS issues. To schedule an initial consultation to have your case assessed by one of our highly qualified attorneys, call Scammahorn Law Firm P.C. today at (903) 595-1000.

Top Three “Excuses” Used to Avoid IRS Penalties

- Scott Scammahorn

Going up against the IRS alone is incredibly daunting, but some individuals have been able to obviate penalties and fines by giving some clever – and often truthful – excuses.

The Scammahorn Law Firm has helped build hundreds of strong cases against the IRS which has resulted in penalties reduced or cleared entirely. When we build a case, we make sure that it is strong enough to stand up against harsh and unforgiving scrutiny and questioning.

You may be surprised by which issues may help your penalties be pardoned, such as:

“The Software Made Me Do It”

In an effort to save money, hundreds of thousands of Americans use software programs each tax season to tally up what they owe or what their refund check will be. Though it may sound silly, this defense was attempted by former Treasury Secretary Timothy Geithner a few years back.

After numerous unsuccessful ‘faulty-software’ cases, a patent attorney did successfully blame his tax mistakes on his tax preparation software. While he still had to pay his taxes, all of his penalties were excused because of his tax software.

“I Have A Mental Problem”

Mental issues and substance abuse are also two common issues which are voiced today as a defense to criminal tax charges. IT consultant Andrew Mottershead had filed false tax returns which claims additional business expenses. Although he was facing jail time, he avoided it entirely by stating that his bipolar disorder was to blame for his tax fraud. He also agreed pay all money back.

Mottershead continued to file more false returns. After being prosecuted a second time, Mottershead claimed that he had filed these fraudulent tax returns during manic episodes. The court believed him and spared him a prison sentence, instead handing down a two-year suspended sentence instead.

“My Accountant Made The Mistake – Not Me!”

What may be the most common “excuse” is that the accountant or another tax professional made the error on your return and that you had no knowledge that this had been done. This happens far more often than we realize in this country and it can leave you with harsh financial penalties and even jail time if you are convicted.

The Scammahorn Law Firm believes in protecting the rights of American citizens, and that includes protecting them from being bullied by the IRS. If you are facing a tax issue and do not know where to turn, we invite you to call us at (903) 595-1000 to discuss your situation.

Mutual Fund Giant May Be out Billions

- Scott Scammahorn

America’s largest mutual fund company is facing the possibility of owing the IRS billions of dollars in outstanding federal income tax liabilities. So-called ’whistle blower David Danon, a former tax lawyer for the Vanguard Group, believes that Vanguard owes $34.6 billion from the years of 2007 to 2014 and has submitted a report to the IRS. The case has now been reviewed by tax law veteran Reuven S. Avi-Yonah and everyone in the tax world is taking notice.

What’s the Issue?

Vanguard currently holds nearly 20% of the mutual fund industry’s assets, and have been able to do so by offering lower fees to its investors. Danon claims that the industry giant has been able to do so because they have been underpaying their income taxes. Vanguard argues that they provide similar services to its mutual funds but are able to do so “at cost” and by not taking a profit. These savings are then passed to investors. 

As Danon points out, Vanguard is a for-profit company and should not be able to charge artificially low prices for the services provided by affiliates. 

“A Clear Cut Case” with Vanguard Still Coming out on Top

Since the report was submitted to the IRS, Vanguard executives have had time to review a copy of the report and they believe that it is without merit. Like other professionals in the tax law industry our attorneys at the Scammahorn Law Firm, however, are taking notice.

One well-known New York business tax attorney says that “it seems like a pretty clear cut case”. The case is still under investigation by the IRS and the Securities and Exchange Commission, but as many tax professionals have pointed out, even if Vanguard were to lose the case and be forced to pay penalties, the amount they would pay would be significantly less than the nearly $35 billion they took in over the course of those 7 years.

Tax Issues Are Never Cut and Dry

As straight forward as taxes may seem to some, tax laws are incredibly complex and difficult for individuals without in depth knowledge and experience to navigate. This is why our attorneys at the Scammahorn Law Firm help clients who are facing IRS issues better understand their case, learn what is at stake and begin to build evidence which will reduce or eliminate fines, penalties, or imprisonment.

We welcome your call to discuss your case today at (903) 595-1000.

93% of Mailed IRS Documents Contain Sensitive Information

- Scott Scammahorn

In March 2009, the Office of Management and Budget mandated that the IRS discontinue sending out correspondence which contained a recipient’s Social Security Number unless it was absolutely necessary. A new audit performed by the Treasury Inspector General for Tax Administration (TIGTA), however, revealed that the IRS is receiving a failing grade in this area.

A Less Than 10% Success Rate

After reviewing 2,749 letters, 891 forms and 195 notices which were issued by the IRS to recipients, they found the following:

  • Only 58 letters had hidden or eliminated sensitive taxpayer data
  • Only 116 forms had hidden or eliminated sensitive tax payer data
  • Only 93 notices had hidden or eliminated sensitive tax payer data

According to this data, the IRS only protected the data of 267 documents which they sent out of 3,835 documents. That equates to 7% of all documentation being appropriately vetted and sent out to taxpayers.

What Else Are They Forgetting?

This audit shows how the IRS is failing to be diligent in reviewing and monitoring what they are sending out of their office. It leads many, including our attorneys at the Scammahorn Law Firm who specialize in IRS-related issues, to wonder what else they may be missing when sending out notices to taxpayers.

You Can Stand Up to the IRS

When our attorneys first meet with clients, many are skeptical and do not believe that they could possibly fight the IRS. However, we quickly put our clients’ concerns at ease during an initial consultation, and go on to discuss the many other previous claims which have resulted in positive outcomes.

In most cases, the best thing our clients can do is to stay in touch with the IRS. Failure to keep in touch may result in an increase in interest and the addition of more penalties.

For those in Texas, our next piece of advice would be to enlist in the help of a tax attorney, Scott Scammahorn. Time is on your side when you are dealing with the IRS, meaning that you have time to build a concrete strategy with us to reduce or fix any tax issues you are dealing with.

Despite the IRS working at a snail’s pace, do not underestimate the impact which not not handling your tax situation will have on you, your family or your business. The IRS may be slow to collect, but the more time you have to gather the necessary documentation to defend your case, the better.

We welcome your contact today to discuss your personal situation at (903) 595-1000.

IRS Accepting More OICs Than Ever Before

- Scott Scammahorn

Statistics recently released by the IRS for 2013 to 2014 have revealed that the tax agency is accepting more Offers in Compromise (OIC) at a higher rate than they have since the dawn of the century. Last tax season, the IRS accepted 40% or more of all OIC offers submitted. This is exceptionally higher than the average of 25% to 30% which were accepted in the early 2000s.

 

What Is an Offer in Compromise?

 

When an individual extends an Offer in Compromise to the IRS, they are asking if they can settle their tax debt and pay less than the amount the IRS has determined they owe. Historically, the IRS has not been very generous in their acceptance of OICs. However, the current upswing in the number of OICs being accepted is promising for the thousands of Americans who are currently feeling pressure from the IRS

 

Who Qualifies for an OIC Consideration?

 

An OIC is more than haggling and striking a deal with the IRS. If this were the case, then everyone would be able to have his or her tax bill reduced to a minimum. In order to qualify, individuals must show that they are affected by one of the following conditions:

 

  1. There is a reason for the IRS to believe that they will not be able to collect the tax bill from you today or in the future. This is referred to as “doubt as to collectibility”
  2. Because of an exceptional circumstance, if an individual were to pay their full tax bill, they would face stress, “economic hardship” or the collecting of money owed would be “inequitable” and “unfair”

 

For those who are uncertain as to whether or not they qualify for an OIC, speak to a professional tax attorney such as Scott Scammahorn, J.D., LL.M. to discuss your specific situation.

 

What Should I Do If I Am Rejected for an OIC?

 

There are typically two reasons why an OIC has been rejected (though the IRS will inform you through a written letter why your application was denied). The most common reason is that your offer of repayment was too low. The other reason why your offer may be denied is that you are someone they consider to be a “notorious character”, such as someone who has been convicted of a serious crime.

 

While a growing number of Americans are qualifying for a OIC, the fact is that the majority are still being denied. If you have had your application denied, do not give up. At the Scammahorn Law Firm, P.C. we have helped our clients come to fair and amicable deals with the IRS, regardless of the tax issue they face.

 

We invite you to contact us today to speak to an experienced tax attorney today at (903) 595-1000.

Fake IRS Robocall Scamming Millions from Texans

- Scott Scammahorn

Those in the North Texas area have been put on alert this month as a rolling IRS tax scam continues to extort millions of dollars from the pockets of thousands Americans. As of earlier this month, it has been estimated that more than 300,000 people have been targeted by the hoax and that more than $14 million has been sent to these fraudulent individuals.

 

The Scoop on the Scam

 

The scam involves a robocall from a group which claims to be the Internal Revenue Service. The message continues to state that the individual receiving the phone call is having a lawsuit filed against them, and that the individual must then phone their department at a certain telephone number.

 

Those who phone the number will then be asked by someone on the other end of the line for their telephone number in order to pull up an individual’s supposed case file.

 

Get It in Writing

 

There are a number of glaring signs that this phone call is a scam:

  • The individual answering your call typically requests your phone number in order to pull up your account.  The IRS accesses taxpayer accounts with a Social Security number, not a phone number.
  •  The individual on the other end may have difficulty with the English language.
  • It is clear that the individual on the other end is in a call center environment, with many other voices in the background.

 

With the resurgence of this scam in Texas, the IRS has issued two key reminders for us all:

 

  1. The IRS will never issue a phone call should you be in any kind of tax trouble. They will notify in you in writing
  2. Anyone facing a lawsuit will be notified in writing

 

What to Do If You Receive a Letter

 

If you have received what you believe to be a legitimate letter from the IRS, you do not need to fight the battle alone. Your best option is to contact an attorney who specializes in tax law. The Scammahorn Law Firm has handled tax litigation for nearly two decades.

 

Scott Scammahorn provides counsel and guidance to those who are facing a number of tax-related issues, such as property seizures, IRS audits, and past due tax returns and tax payments. While your case is pending, we have the ability to stop the IRS from seizing your assets and garnishing your bank account.

 

We welcome your contact today, to discuss how we can help you with your case at (903) 595-1000.

861 Argument Results in Imprisonment for Snipes

- Scott Scammahorn

As the anticipation for Spike Lee’s upcoming musical “Chi-Raq” continues to grow, many of us cannot help but be reminded of the past tax issues which faced one of their lead stars, Wesley Snipes. Snipes has faced a number of IRS-related issues over the years, including conspiring to defraud the United States, numerous counts of willfully failing to file federal income tax returns on time, and fraudulent payment claims.

 

He was then charged with failure to file tax returns from 1999 to 2004.

 

Despite claiming that he was a “non-resident” alien of the USA, it was found that Snipes was a birthright US Citizen. On April 24, 2008 Snipes was sentenced to three years in prison for wilfully failing to file his federal income tax returns (a decision which was affirmed on July 16 2010) and he stayed in the McKean Federal Correctional Institute from December 9 2010 to April 2 2013. He was acquitted on all other charges.

 

The 861 Argument Against Taxes

 

The IRS stated that Snipes was a well known “tax protester”, or someone who regularly challenges the federal government’s ability to collect taxes through what is known as the “861 argument” or tax protest.

 

The 861 argument asserts that only items which are listed under Section 861 of the Internal Revenue Code are taxable. Those who believe in the validity of the 861 argument believe that the domestic income of a US citizen is not taxable.

 

Is the 861 Argument Valid?

 

If an individual attempts to represent him or herself in court against the IRS with the 861 argument, they will almost assuredly have negative outcome. Section 861 stateS that compensation must be paid for labor or personal services provided within the USA, and the IRS has even reiterated the point by stating that citizens “in general” are liable to pay income taxes.

 

You Do Have a Defense Against the IRS

 

Your best defense for any case against the IRS is to hire an experienced Texas tax attorney. At the Scammahorn Law Firm, we help clients explore their best defenses against the Internal Revenue Service so that their tax case ends with the most positive resolution possible.

 

If you have received a notice from the IRS, we invite you to call the Scammahorn Law Firm to discuss your options at (903) 595-1000.