Payroll Taxes

Uncollected Taxes Total $380 Billion (And Counting)

- Scott Scammahorn

If there is one thing which American citizens can almost be certain of year after year, it is an increase in taxes. As our country continues to sink further into national and global debt, the government is struggling to come up with ways to increase its own capital which, more often than not, involves taking more out of the pockets of hardworking Americans.

A new report which was just recently released from the Government Accountability Office is bringing attention to an issue which could significantly reduce the amount of tax hikes we all endure each year. In this report, it is shared that the Internal Revenue Service (IRS) has failed to collect $380 billion in outstanding tax debt – and the amount is only continuing to grow.

IRS Accused of Being Apathetic

The IRS has not only publicly stated that it will audit fewer taxpayers, but in many areas, agents have even been advising taxpayers exactly what limit they would need to reach before they would be audited. In Dallas, those taxpayers (that is, those who were not hung up on which routinely happens – according to Iowa Senator Chuck Grassley) were advised that the IRS would not audit anyone who owed less than $1 million.

This is not to say that the IRS is entirely at fault. Congress has cut the agency’s funding by over $1 billion over the past 5 years. However, it is clear that the IRS must do more to recover taxes from tax cheats, even if that does mean hiring a third party contractor to help collect some of this massive outstanding tax debt.

Americans Want to Pay Taxes

Hardworking Americans want to pay their fair share of taxes. An IRS Oversight Board survey from 2014 showed that 94% of Americans stated that it is everyone’s civic duty to pay their share of taxes. Another study conducted by Pew in 2013 revealed that 71% of Americans claimed that not reporting all of one’s income on their taxes is morally wrong. 

The bottom line is that most Americans want to pay their dues so that schools can be built, and roads can be repaired. But tax laws can be complex and the IRS offers little additional assistance to those who are confused or who have questions. 

This is why many in the greater Dallas area contact the Scammahorn Law Firm. With years of experience in tax law and litigation, Mr. Scammahorn has helped countless individuals fight the IRS and ensure they only pay what is their fair share of taxes. 

If you are having difficulties with the IRS we are here to help, and invite you to call the Scammahorn Law Firm today at (903) 595-1000.

Father and Son Sentenced for Foreign Tax Evasion

- Scott Scammahorn

It was only around two years ago when a father and son were suspected of preparing false tax returns for their clients. In mid-August 2015, the Department of Justice announced that the owners and operators of the family owned company, the United Revenue Service Inc., were guilty of conspiring with their clients to prepare false returns which intentionally neglected to share their clients’ concealed foreign financial accounts and foreign income.


The United Revenue Service Inc. has twelve offices throughout the United States, all of which were a part of an elaborate sham which included concealed financial counts in two Israeli banks and fake companies in Belize and other countries. The accounts in the Israeli banks were held by these fake companies, and funds which were falsely reported as being business expenses or investment losses were transferred into these secret accounts.


Not including themselves, three clients of the United Revenue Service Inc. have pleaded guilty to their role in this grand scheme. One client was able to avoid prison time because of his cooperation in persecuting the Kalais. He has also agreed to pay a stiff civil FBAR penalty of $4.2 billion. The guilty father, David Kalai, was sentenced to serve 36 months in prison, and his son, Nadav Kalai, was sentenced to 50 months.


Clamping Down on Offshore Tax Evasion


In recent years, the DOJ Tax Division has been working tirelessly on prosecuting those involved in offshore tax evasion and unscrupulous return preparers. Tax preparers such as the Kalais who have been found guilty of these activities are being made of an example of as a stern warning to the public.


Because of this, tens of thousands of American tax payers have voluntarily disclosed all of their foreign account information to the IRS as part of voluntary disclosure initiative.


Should I Disclose My Information?


Before you consider jumping on the bandwagon and disclosing your information to the IRS, it is important to speak to a professional tax attorney like Scott Scammahorn at the Scammahorn Law Firm, P.C. in Texas. We have the experience and the knowledge necessary to guide clients through any number of tax issues with minimal (if any) penalty.


If you have received a notice from the IRS or have questions about your unique situation, we are here to help. We invite you to call the Scammahorn Law Firm P.C. today at (903) 595-1000.

IRS Can Collect Taxes on Unused Sick Leave and Vacation Time

- Scott Scammahorn

An employee who resigned received a lump sum payment equivalent to unused vacation time and sick leave credits. But in his IRS tax return for that year, the resigned employee did not include the leave payments as part of gross compensation and was later assessed deficiency income taxes by the IRS. The taxpayer raised the issue before the US tax court, claiming that the leave payments were in the nature of workmen’s compensation for injuries while at work.


Tax Court Ruling


The US Tax Court ruled that the leave payments are not considered as compensation for personal injuries or sickness and are not excluded in the computation of gross income.


Gross Compensation


In computing for income taxes, an accurate determination of the taxpayer’s gross income is absolutely important. The US Tax Code defines gross compensation as “all income from whatever source derived, including but not limited to, compensation for services.” The tax court has ruled in previous cases that payments received for accrued and unused vacation and sick leave are treated as compensation for services and form part of gross income.


The law defining gross compensation excludes ‘amounts received under workmen’s compensation acts as compensation for personal injuries or sickness’.


The taxpayer in the case earlier mentioned relied on this provision, but was not sustained by the tax court.


The US tax code requires taxpayers to pay correct income taxes on time. Failure to include certain amounts as gross compensation can lead to an IRS notice of deficiency income taxes which require the prompt payment of the deficiency tax as well as applicable penalties and surcharges. If the assessed taxes remain unpaid, the IRS may collect through a levy or garnishment.


If you receive a notice of deficiency or levy/garnishment, you may be entitled to taxpayer rights and remedies under the Tax code. Contact your IRS tax attorney immediately in order to protect your property and valuable assets.


In Tyler and East Texas, the law firm of Scott Scammahorn has been helping clients for more than 16 years, representing them before the IRS and availing of appropriate taxpayer remedies such as Offer in Compromise or Installment Agreement, innocent spouse relief, and payment plans.


We welcome your call at (903) 595-1000 to speak to an attorney about your IRS problem.

Personal Liability of Employers for Failing to Pay IRS Taxes on Payroll

- Scott Scammahorn

Maine Chipco International, a poker chip manufacturer in the United States, was recently found guilty of tax evasion for its failure to pay withholding taxes to the IRS. Its CEO was sentenced to 10 months in jail after the court considered evidence showing that the company allegedly used funds that were withheld from employees to pay various expenses, including the CEO’s own mortgage, legal fees, and other personal expenses.

This decision serves as a reminder to company officers of their exposure to liability for unpaid company taxes, even if they claim lack of knowledge or actual participation in the IRS tax violation.

Liability of Owners and Officers for Unpaid Taxes

Federal law requires employers to withhold certain amounts such as social security, and medicare tax from their employees’ salaries at the time salaries are paid to the employees. The withheld taxes are held in trust by the employer, to be remitted to the IRS at specified periods. As funds that are held in trust, these may not be used for other purposes.

When the IRS discovers a shortage in the amount paid as payroll tax, it may pursue all responsible persons who have ownership or signing authority over the company and its payables. And business owners and other responsible officers may have personal liability for the company’s failure to pay payroll taxes.

The IRS can pursue the employer and other responsible officers of the company through a Trust Fund Recovery Assessment which is equivalent to a 100% penalty on the unpaid taxes. Other penalties that the IRS can impose on the company include business closure and criminal penalties.

The poker chip CEO’s conviction arose from a Maine state case, but the IRS pursues similar cases of non-payment of payroll taxes.

Why You Need an IRS Tax Lawyer

The IRS Code is a collection of complex rules contained in thousands of pages of legal jargon which provide the legal foundation for taxpayer remedies. If you have received a notice from the IRS on your company’s alleged failure to deposit withheld payroll taxes, an IRS tax lawyer can help protect your business using knowledge and experience of complex tax rules and procedures.

In Tyler and the East Texas area, the law firm of Scott Scammahorn has close to two decades of tax litigation experience, helping businesses resolve their IRS problems which include IRS tax liens and levies, tax litigation, offers in compromise, and payment plans.

We welcome your call at (903) 595-1000 to discuss your IRS legal issues.