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Should You Grant the IRS An Extension for Their Audit?

- Scott Scammahorn

Like everyone else, the IRS has deadlines.  If you file a tax return with potential problems, federal law requires the IRS to bring an audit within a certain time frame.  The IRS can only extend the time frame for specific reasons, including if the taxpayer consents to the extension. As counter-intuitive as it may seem to help out the IRS, there may be good reasons to give the IRS your consent for an extension.  Continue reading for a discussion of when giving the IRS an extension on your audit might actually work in your favor, and contact a dedicated Texas IRS audit attorney with any questions or for help with an IRS tax problem in Dallas or Tyler, Texas.

The audit deadline

Pursuant to the assessment statute, the IRS generally has three years from the later of either the date the return was due or the date the return was actually filed to bring an audit.  If the IRS audits a tax return and determines that there is an additional tax liability, they generally must process the tax assessment within the same time period. In order to extend this time period, the IRS generally must get your consent.

Should you give the IRS more time?

It may seem counterintuitive, but there are good reasons to grant the IRS its requested extension.  First of all, if you say no, the IRS will almost certainly issue a notice assessing extra taxes. They are likely mid-way through your review and, if you force their hand, they will resolve remaining ambiguities in favor of a higher assessment.  By agreeing to an extension, you may be able to limit the scope of the extension to certain issues, or give them a specified time limit (such as an additional year).

Secondly, you might have been caught by surprise that you were being audited at all.  Granting the extension gives you more time to hire a tax adviser and/or an audit representation attorney to help you through the audit process and limit your additional tax liability.  By refusing the IRS an extension, the IRS will likely stop the process and issue a notice of deficiency immediately, limiting your time to go through the normal appeals process and petition a tax court.  Additionally, you may find that there are additional audit issues that are actually in your favor and which may offset a proposed tax assessment or even lead to an overdue refund.

If you are able to get all of the information into the record that supports your tax claims, then you may be better off not agreeing to extend the time limit.  Particularly if you are a larger tax payer and the audit is very complex, you may benefit from limiting the IRS’s time to review your return. As noted, the IRS will likely file a notice of deficiency, with a larger tax assessment, forcing you to file a petition in the tax court to fight the assessment.  You may be able to argue that the IRS’s case was not fully developed, and you may prevent the IRS from discovering additional issues. Some taxpayers may prefer to avoid the publicity associated with a public tax case or the financial impact the delinquency notice may have until it is resolved.

Regardless, if you plan to keep the IRS to its three-year deadline, it is good to notify the IRS of as much at the beginning of the audit.  This will help avoid angering the IRS further and causing them to issue an inflated assessment. A seasoned tax audit representation attorney can help you determine the right course of action during your audit.

If you’re facing a complicated tax issue involving back taxes or allegations of tax fraud, tax evasion, or false returns, get skilled legal help with your case from the Texas tax lawyers at the Scammahorn Law Firm, PC at 903-595-1000, with offices in Dallas and Tyler.

Texas Lawyer Faces Fines, Jail Time for Massive Offshore Tax Scheme

- Scott Scammahorn

No one is above the law, and no one can outwit the IRS forever, even lawyers. A grand jury recently returned an indictment against a Texas lawyer for allegedly hiding more than $18 million in offshore bank accounts. Learn more about the case against the lawyer, and contact a dedicated Texas tax fraud defense attorney with any questions or for help with an IRS tax problem in Dallas or Tyler, Texas.

Offshore tax evasion scheme

According to a press release from the Department of Justice, a federal jury sitting in Houston returned an indictment charging a Texas lawyer with one count of conspiracy to defraud the U.S. and three counts of tax evasion. Prosecutors allege the defendant conspired with someone else to hide more than $18 million of the co-conspirator’s untaxed earnings in foreign bank accounts located in the Isle of Man. They disguised the funds as stock purchases by U.S. corporations owned by the defendant and his co-conspirator. The defendant was paid more than $4.8 million for helping to hide his co-conspirator’s untaxed earnings.

Returning an indictment is not the same as proving ultimate guilt. A returned indictment means a grand jury believes charges should be brought, which allows the prosecution to move forward. The defendant is still presumed innocent until found guilty. If convicted, the lawyer faces up to five years in prison for conspiracy, and another five years for each of the three counts of tax evasion.

Criminal proceeds are taxable

Many people do not realize that even criminal earnings are technically taxable. Obviously someone who has committed a crime does not want to tell the government as much by filing taxes on the criminally-obtained profits. As a result, the DOJ will sometimes tack on tax evasion charges on top of other charges or instead of other crimes that may be harder to prove. In this case, the defendant lawyer is also charged with evading taxes on the $4.8 million he earned in the criminal conspiracy, which he allegedly did by withdrawing the funds as claimed non-taxable loans or returns of capital.

If you’re facing a complicated tax issue involving back taxes, tax fraud, tax evasion, or false returns, get skilled legal help with your case from the Texas tax lawyers at the Scammahorn Law Firm. Contact the Scammahorn Law Firm today to schedule a consultation in Tyler at 903-525-6849, or in Dallas at 214-377-2875. The Scammahorn Law Firm also offers consultations via telephone to accommodate all who are facing issues with the IRS.

What Are the Tax Fraud Charges against Paul Manafort?

- Scott Scammahorn

The tax fraud trial of former Trump campaign chair Paul Manafort has recently concluded, and jurors are in the midst of deliberating on whether to find him guilty on some or all of the 18 charges alleged by the Justice Department. Read on to learn about the crimes with which Manafort has been charged, and contact a seasoned Tyler tax attorney with any additional questions.

Paul Manafort has been working for prominent Republican politicians as far back as the 1970s, when he worked for Gerald Ford’s 1976 presidential campaign. Manafort began a lobbying and consulting firm after helping Ronald Reagan get elected in 1980. The firm focused on representing international leaders, many of whom were the subject of controversy. By the early 2000s, Manafort had begun working in the Ukraine, specifically with the pro-Russian Party of Regions. Manafort’s candidate was successfully elected in 2010, but was ousted in 2014 in response to widespread protest. Nevertheless, Manafort earned over $60 million during his time in the Ukraine, according to federal investigators. He began working—for free—for the Trump campaign in the spring of 2016, but stepped down during the summer when he faced increasing scrutiny over whether the payments he received while working in the Ukraine were legal.

Manafort was indicted in October of 2017, with additional charges against him being added in February and June of 2018. The charges were split between two trials. The first trial, which recently concluded, centered on claims of tax and bank fraud. Specifically, Manafort was facing 18 counts for four separate crimes. Prosecutors claim that Manafort set up a network of offshore companies and accounts, where he funneled the money he earned abroad. They claimed that Manafort spent millions of that money on pricey antiques, clothing, real estate, and vehicles as well as making fraudulent “loans” to American companies he operated.

The indictment claimed that Manafort filed false income tax returns when he failed to report this money on his tax returns. They also claim that Manafort violated the law by failing to disclose that he had money stashed abroad by filing an FBAR form (the form required by the IRS when a taxpayer has foreign bank or financial accounts). The remaining counts focused on claims that Manafort lied when seeking bank loans. At trial, Manafort’s former business partner Rick Gates testified that he and Manafort knowingly committed numerous crimes, such as failing to report numerous foreign bank accounts per Manafort’s instruction. Gates has already pled guilty to numerous crimes, including charges of embezzling from Manafort, and testified as part of a deal with federal prosecutors. The jury is still in the midst of deliberations at the time of this writing, and Manafort could face a federal prison sentence lasting the remainder of his lifetime.

If you’re facing tax issues in Texas, such as a tax audit, bank levy, or charges of tax fraud, get help in fighting these charges by contacting the knowledgeable and aggressive Tyler tax attorneys at the Scammahorn Law Firm for a consultation at 903-595-1000, with additional offices in Dallas.

Scammers Posing as IRS Agents Sentenced to Federal Prison

- Scott Scammahorn

After years of defrauding US citizens while posing as IRS or US Citizenship and Immigration Services (USCIS) officials, over twenty individuals were sentenced to prison for their involvement in a widespread scheme that defrauded victims out of millions of dollars. Read on to learn more about this fraud, as well as tips on how to avoid becoming a fraud victim, and contact a Dallas tax attorney if you’ve been contacted by the IRS about a tax problem.

Phone scammers based in India demanded money they claimed was owed to the government

The recent sentencings targeted a phone-based scam operating from 2012 to 2016. Scammers would call American citizens, claiming to be agents from the IRS or USCIS. These alleged agents would threaten individuals with arrest, prison time, or even deportation if they didn’t pay their back taxes or fines to the government. The agents instructed victims to send money in the form of a wire, or through gift credit or debit cards.

While the scam in question was based in Ahmedabad, India, the scam incorporated agents based in the US to collect the submitted wires or gift cards and launder the funds. The recent sentencings targeted the agents based in the US, who were charged with money laundering and wire fraud conspiracy. These so-called “runners” handled millions of dollars in fraudulently-obtained funds, transferring them to the scam’s headquarters in India and earning a percentage of these funds. For example, Miteshkumar Patel is believed to have laundered between $9.5 and $25 million in ill-gotten funds. Patel was sentenced to 240 months in federal prison and three years of supervised release. Twenty other agents who supported the conspiracy were also sentenced, and some are facing deportation once their prison sentences are completed.

Avoid becoming the victim of fraud

You can avoid becoming the victim of phone fraud by following these tips:

  • If you get a call from someone posing as an IRS agent, assume it’s a scam.
  • Call the IRS back using an official number from the IRS.gov website; you can reach the IRS by calling 800-829-1040.
  • No IRS agent will demand payment over the phone, nor will they threaten you with immediate arrest.
  • If you owe back taxes, you’ll have received a bill in the mail before you’ll be called by an agent.
  • Before the IRS will demand payment, they will first give you an opportunity to learn more about the amount you supposedly owe and a chance to appeal their decision.

One excellent way to avoid becoming the victim of a scheme targeting people who owe back taxes is to clear up any tax issues as soon as they arise. A seasoned Texas tax lawyer can help you find a workable solution to address any unpaid taxes or errors on past tax filings, whether through an installment plan, offer in compromise, or other relief from tax debts.

For skilled, seasoned, and professional help with unpaid taxes or audits in Texas, contact the Tyler offices of the Scammahorn Law Firm for a consultation at 903-595-1000, with additional offices in Dallas.

Democratic Candidate for Governor Owes Thousands in Back Taxes

- Scott Scammahorn

While it should come as no surprise to candidates in the internet age, if a politician running for major elected office has some controversial aspect to their life or past, the public is bound to learn about it. A scandal has come to light in the race for the governor of Texas, now that the public has learned about back taxes owed by one major candidate. Learn more about the candidate’s tax situation below, and speak with a seasoned Dallas tax attorney if you owe back taxes in Texas and need help determining a way forward.

Candidate’s tax debt comes to light after primary

Lupe Valdez, former sheriff for Dallas County, earned the nomination as the Democratic candidate for governor in Texas on Tuesday, May 22. Only two days later, news came to light that Valdez owed over $12,000 in overdue property taxes imposed in 2017. The properties on which she owes the taxes are located in Dallas County and Ellis County. The back tax debt Valdez owes does not relate to her home in Oak Cliff. Valdez made one payment of $4,700 the following day, so that the debt is now down to slightly more than $7,000. Her campaign spokesperson told newspapers that Valdez has made an arrangement with the counties in which the properties are located to fulfill her remaining debt in the upcoming months.

Valdez’s spokesperson told members of the media that the current governor of Texas, Greg Abbott, deserves some of the blame for the former sheriff’s inability to stay current on her property taxes. He pointed out, “Under Greg Abbott’s failed leadership, property taxes are unpredictable and burdensome for Texans everywhere, including Sheriff Lupe Valdez.”

Texas law allows nonpayment of property taxes under certain circumstances

Valdez, who is 71, isn’t the only older Texan who struggles to pay their property taxes. Fortunately, Texas law includes a provision that offers relief to Texas seniors who owe property taxes. Texans over age 65, as well as those with a disability and certain others, who own their residence may file an affidavit with their tax assessor that states the reason that they do not have to pay the property taxes owed on their home. The homeowner will no longer be subjected to collection efforts, but they will still receive a bill.

The taxes don’t go away, however; they’ll be due whenever the home is sold or transferred to a different owner. Individuals who are still paying off their mortgage, and some with homeowner associations, may not qualify to defer their property taxes. Unfortunately for Valdez, the back taxes she owes weren’t assessed on her primary residence. A skilled Texas tax attorney can help you determine if you qualify for the deferral or are eligible for other forms of relief when you’re behind on your taxes.

For seasoned, dedicated, and professional assistance with your Texas tax bill, contact the Tyler tax attorneys at the Scammahorn Law Firm at 903-595-1000, with additional offices in Dallas.

Man Acquitted of All Charges after Two-Week Tax Fraud Trial

- Scott Scammahorn

An Ohio man who faced a potential sentence of 90 years in prison was recently acquitted of all charges after a two-week-long tax fraud trial. The man was accused of making false claims on behalf of the clients he served as a tax preparer. Read on to learn more about the case, and contact a dedicated Texas tax fraud defense attorney for help with an IRS tax problem in Dallas or Tyler, Texas.

Indictment alleged preparer claimed hundreds of thousands of dollars in false refunds

Sergio Gardea is a tax preparer based in Ohio. Gardea works primarily with Spanish-speaking agricultural workers in and around Akron and Canton, some of whom are undocumented. Many of his clients’ families remain in their countries of origin. According to an indictment filed against Gardea in September 2017 by US attorneys, a five-year-long IRS investigation revealed that Gardea had filed returns for dozens of clients that included fraudulent claims for child tax credits. The IRS alleged that Gardea had fraudulently included child tax credit claims for people whose children remained outside the US, even though child tax credits may be claimed only when dependents spend most of the year in the US. The IRS used an undercover agent in an attempt to witness Gardea seeking a child tax credit when it was not warranted. Gardea prepared the return for the undercover agent but did not include a child tax credit since the agent did not qualify.

At trial, Gardea faced 21 counts of tax fraud for falsely-claimed child tax credits, to which he pleaded not guilty. His attorney argued that the clients could not remember signing a child tax credit information sheet attesting that they had been honest with their preparer and believed they were qualified for the child tax credit. Thus, the attorney argued, Gardea had asked all the right questions of his clients, but erred only in believing that his clients had been truthful with him. Gardea was acquitted of all 21 counts, and another nine charges that had been added later in the trial were dropped.

Claims made in a federal indictment may be worth fighting at trial

Federal charges of tax fraud often come with steep punishment. Maximum potential prison terms can sometimes amount to a lifetime sentence, not to mention the imposition of thousands of dollars in restitution, penalties and interest that come with a conviction. It’s easy to understand why so many individuals facing tax fraud charges are eager to settle their claims as quickly as possible by pleading guilty to somewhat reduced charges, whether or not they committed the acts as described in the indictment. But guilty pleas can also come with enormous fines and have career-ending consequences. In some cases, skillful legal representation can mean the difference between spending years in a federal prison or walking away after being declared innocent of all charges. If you’re facing an indictment on federal tax evasion or fraud, find out about your legal options by contacting a knowledgeable and experienced tax fraud defense attorney before discussing a plea with prosecutors.

If you’re facing a complicated tax issue involving back taxes, tax fraud, or false returns, get skilled legal help with your case from the Texas tax lawyers at the Scammahorn Law Firm at (903) 595-1000, with offices in Dallas and Tyler.

What You Should Know about Tax Changes in 2018

- Scott Scammahorn

With tax year 2017 in the rearview mirror, it’s time to look ahead and begin to plan for 2018. Congress’ massive tax overhaul has implications for everyone who pays taxes in the US. These changes could affect choices you make during 2018, such as the amount you pay in estimated taxes, how you use investment income, your paycheck withholding, or your charitable giving. Read on to learn about some of the changes to federal tax law that could affect you for tax year 2018, and contact a seasoned Dallas and Tyler tax lawyer with any additional questions.

Most Texans will see a change to their federal tax liability: While the highest earners will see the greatest reduction in their income tax liability, even those in the lowest tax bracket could see a change. One report found that 68% of Texans will see a reduction in their taxes, with the average Texas resident receiving a reduction in tax liability of 2.1%, or $2,520.

Increase in standard deduction: The changed tax law almost doubles the size of the standard deduction. This means that more taxpayers may be able to take the standard deduction and avoid itemizing their tax returns for 2018.

Small business owners see a change in deductions: Individuals will be permitted to deduct 20% of qualified business income earned by a partnership, S corporation, or sole proprietorship. This change is expected to affect roughly 10% of small business tax returns.

No penalty for lack of insurance: Americans without health insurance will no longer be obligated to pay a penalty on their taxes for failing to carry a health insurance policy.

Mortgage interest deduction cap: The cap for deducting mortgage debt will drop to $750,000 for home loan debt incurred beginning in 2018. Those with home equity loans will not be able to deduct new or existing interest on home equity loans as of the beginning of 2018.

Increase in child tax credit: The child tax credit for children under 17 was increased to $2,000 from $1,000.

The changes to the tax law are scheduled to phase out after 2025.

If you’re facing an audit by the IRS, owe back taxes, or are facing federal charges relating to your tax liability, get skilled professional help by contacting the offices of the Scammahorn Law Firm for a confidential consultation, in Dallas at 214-377-2875 or in Tyler at 903-595-1000.

San Antonio Man Pleads Guilty to Wire Fraud and Tax Evasion Charges

- Scott Scammahorn

A Texas resident who was indicted on federal criminal charges in September of 2017 has now pleaded guilty to wire fraud and tax evasion. Read on to learn more about the case, and contact a Tyler tax attorney if you’re facing federal tax charges.

CPA uses tax withholding account to steal funds

Brian Perez was working as a CPA in Corpus Christi. According to a US Department of Justice indictment, he used his tax payment account access through his accounting firm to steal from his employer. Perez is alleged to have designed a system to use the Electronic Federal Tax Payments System to transfer money from his employer’s accounts to his own personal taxpayer withholding account with the IRS. When he later filed his tax return, he failed to disclose the illegally-gotten funds, and also requested a refund of the overpayment in taxes.

Money laundering through transfer to investment account

Over the course of five months in 2015, Perez stole over $160,000 from his workplace through this arrangement. In May of 2015, Perez is believed to have used an investment account to launder a portion of these funds. Perez allegedly transferred roughly $59,000 of the stolen funds from his personal checking account to an investment account.

Indictment in September 2017 and subsequent guilty plea

Perez was arrested by federal agents in September 2017. He faced a 20-charge indictment that included 18 counts of wire fraud, a count of tax evasion, and a count of money laundering. Each count of wire fraud carried a potential sentence of up to 20 years in federal prison. Money laundering carries a potential sentence of up to ten years in prison, and tax evasion carries a potential three-year sentence. The charges also carry potential fines of up to $250,000.

Earlier this month, Perez pleaded guilty to wire fraud and tax evasion. He admitted to fraudulently transferring funds from his employer’s account to his own tax withholding account, to failing to disclose that income on his tax return, and to later requesting a refund of that overpayment. He will face sentencing in July of 2018.

If you’re facing charges of tax evasion or tax fraud in Texas, protect yourself with an aggressive and dedicated tax attorney by contacting the Tyler offices of the Scammahorn Law Firm, PC for a consultation at (903) 595-1000, with additional offices in Dallas.

Houston Tax Preparer Sentenced to Year in Prison

- Scott Scammahorn

A man who pleaded guilty to preparing fraudulent tax returns has recently been sentenced to federal prison and will also owe hundreds of thousands of dollars in fees to the IRS. The case is an example of the serious consequences that the Department of Justice can impose when the IRS believes a taxpayer has included improper deductions or exemptions on their tax return.

False deductions included to increase business

 

Postal Tax Services was a tax preparing business operated by Houston resident Yomi Michael John. The US Department of Justice initiated a criminal case against John for preparing false returns for individual customers between 2010 and 2012. John pleaded guilty to the charges, admitting that he fabricated deductions, business losses, and tax credits for 61 of his customers’ tax returns, all without their knowledge. John explains that he falsified these deductions and exemptions in order to drive up the amount of the refund his clients would receive, thus growing his reputation as a tax preparer and driving up business. John was sentenced to one year and one day in prison, followed by a year of supervised release. He has also been ordered to pay $212,853 in restitution to the IRS, which is the amount by which the IRS claims he inflated his clients’ tax refunds.

Fraud by tax preparers could become client’s problem

 

Fraud among tax preparers isn’t common, but it can be a major problem for the clients of preparers who include false information on returns. Even when preparers aren’t instructed by the client to include false deductions, exemptions, or business losses on a return, the client is ultimately responsible for the information included on their tax return. When you’re having your taxes done by a professional tax preparer, make sure you choose your preparer carefully. Watch out for preparers who guarantee you a large return; there’s no way to know how large your return will be without first being very familiar with your finances, and a willingness to promise a big return could indicate that the preparer plays fast and loose with the rules. Review the return your preparer creates carefully before signing it, and ask about any deductions that seem questionable or inappropriate. If your return is ultimately flagged by the IRS, be sure to contact a skilled Texas tax attorney for help, to ensure that you aren’t unfairly penalized for a preparer’s misdeeds, and that the fraudulent tax preparer is brought to justice.

If you need help with an IRS issue or audit in Texas, get help from a dedicated and effective tax attorney by contacting the Tyler offices of the Scammahorn Law Firm at 903-595-1000.

Texarkana Man Indicted for Filing Fraudulent Tax Returns

- Scott Scammahorn

Texas resident Eric G. Hicks has pleaded guilty to conspiring with an Arkansas woman to defraud the IRS through filing tax returns on behalf of fictional employees. His co-conspirator, former Little Rock tax preparer Lakeshia D. Calvin, was slated to go to trial before a federal judge on the related charges also filed against her.

Over 100 claims filed on behalf of fictional employees

The federal indictment filed against Hicks claimed that the Texarkana resident created fictional businesses with his co-conspirator, Lakeshia D. Calvin, and filed tax returns on behalf of the individuals allegedly employed by these businesses. In all, the pair is alleged to have filed 104 fraudulent claims for tax refunds. The refunds ranged in amount from $2,247 to $10,024. Hicks and Calvin also filed false returns on their own behalf, claiming that they had been employed by businesses that did not employ them. Hicks’ false return was for $3,930, and Calvin’s was for $10,474. Hicks and Calvin are believed to have obtained roughly $555,000 in fraudulent returns through the scheme.

Recorded jailhouse phone calls used to seal the case

Federal investigators gathered much of the evidence they used to support the indictment from phone conversations between Hicks and Calvin recorded while Hicks was in jail in November of 2011 and February of 2012. During these calls, Hicks described the steps that Calvin should take to create limited liability companies, tax ID numbers, and false employee identities to use in filing the fraudulent returns. Hicks and Calvin also discussed the employee identities that “didn’t go through” when filing returns in prior years, as well as where to transfer the funds they obtained from the government and how these funds would be divided between them.

A federal grand jury indicted Hicks and Calvin in September of 2016, but the indictment wasn’t made public until after Hicks was arrested in Miami in April of 2017 on a federal warrant issued in Arkansas. In November of 2017, Hicks pled guilty to conspiracy to file false claims against the United States and submitting false and fraudulent claims. His criminal trial was scheduled to begin on December 4, 2017. Hicks will face sentencing in the coming weeks.

If you’re facing a tax-based legal issue in Texas, get help from a seasoned, experienced Tyler tax attorney by contacting the Scammahorn Law Firm for a consultation at 903-595-1000.