Written by: Theodore M. David, Chair, Tax Law Committee

Current Items:

1) Fun Times at the FBI
2) IRA? Or Whatever You Call It

1) You may have noticed that no bar bulletin filled your inbox for June, July or August. I have dealt with the onslaught of my lawyer colleagues demanding answers to why I have been so lax. I have responded to each of them in a handwritten letter, including a fist full of sand as an explanation. During the summer, laziness is more contagious than the coronavirus. It starts with one ice-cold beer and before you know it, it’s September. Read More

Written by: Theodore M. David, Chair, Tax Law Committee

Current Items:

1) How Far the FBAR?
2) IRS Stats
3) Where’s the Refund?

1) Unfortunately way too many Americans hide their assets overseas. That goes for individuals as well as corporations. It is a game played by the 1% you read about. In a very weak effort to control where exactly this stuff is to be found, IRS created the FBAR project. It requires taxpayers to file a form with the IRS with stiff penalties for those who get caught. Though I cannot confirm my belief, I think this is another example of IRS smoke and mirrors. Giving people the impression that they are in fact on top of this worldwide abuse. The IRS recently posted a reminder with regard to this form filing: A special reporting requirement applies to most people who have foreign bank or financial accounts. Often referred to as the FBAR requirement, it is separate from and in addition to any reporting required on either Schedule B or Form 8938.The FBAR requirement applies to anyone with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2021. They must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-filing System website. Tied to the regular tax-filing due date, the deadline for filing the annual FBAR was generally April 18, 2022. But FinCEN is granting filers who missed the original deadline an automatic extension until Oct. 17, 2022. There is no need to request this extension. And for those who dodge reporting their “world wide “income another IRS warning: Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located. So rest assured the problem is being addressed, sort of.
2) If you have read all of Shakespeare’s sonnets and looking for some really intriguing stuff to sink your teeth into nothing beats the IRS Data Book! The IRS has issued the Data Book detailing the agency’s activities during fiscal year 2021 (October 1, 2020 – September 30, 2021) as well as new information on recent audit data. In addition to describing work performed during the pandemic, the IRS Data Book comprises 33 tables describing a variety of IRS activities from returns processed, revenue collected and refunds issued to the number of examinations conducted and the amount of additional tax recommended as well as budget and personnel information. The Data Book provides point-in-time estimates of IRS activities as of September 2021. For additional context, the IRS also released a related, lengthier discussion on recent audit data.

3). So you filed your tax return and still haven’t gotten your refund. There’s no point asking your accountant about it, they have no clue. But IRS can in fact help. The Where’s My Refund? Online tool has been enhanced to allow taxpayers to check the status of their current tax year and two previous years’ refunds. They can select any of the three most recent tax years to check their refund status. They’ll need their Social Security number or ITIN, filing status and expected refund amount from the original filed tax return for the tax year they’re checking. Please direct your clients to Where’s My Refund? on IRS.gov for more information.

Questions or comments should be emailed to:  Tdavidlawyer@gmail.com

 

Written by: Theodore M. David, Well Retired

Chair, Tax Law Committee

Current Items:
1) Can’t Pay Up?
2) Justice on Fire
3) Crowdfunding?

1). So you owe back taxes. Big deal. Work out an arrangement with IRS to pay up. We have fine lawyers who can help all over the state. The amount you’ll be allowed to keep out of your income is determined by using forms on the IRS website taking into consideration some standard allowances. These Collection Financial Standards are used to help determine a taxpayer’s ability to pay a delinquent tax liability. Allowable living expenses include those expenses that meet the necessary expense test. The necessary expense test is defined as expenses that are necessary to provide for a taxpayer’s (and his or her family’s) health and welfare and/or production of income. Read More

Written by: Theodore M. David,

Chair, Tax Law Committee

 

Current Items:

1) Join the IRS?
2) A New Tax Page
3) Don’t Do It
4) IRS Raises Rates

1) I know there are lawyers out there who are building their practices or trying to stay afloat in these difficult virus filled times. I get emails every day with suggestions how to expand a lawyer’s business. They come in right alongside those who advocate a keto diet so I can be healthier I guess while I am busy expanding my business. And then of course there are plenty of invitations to join match up applications guaranteeing a future and active love life. And it’s nice to know that if all else fails, Amazon is also interested in hiring me. I guess the headhunters don’t get the idea that I’m not expanding my business, nor looking for a mate or in need of the premium diet suggestion or a new career putting packages on a conveyor belt so some goof ball can go into space. But for lawyers who are in fact civic minded and willing to volunteer… (And for those not familiar with that term it means not being paid, and for most of you I know you’re not gonna read any further) I won’t argue with you except to say if you are in fact interested in making an IRS connection then a recent notice by IRS asking for persons to serve on the Taxpayer Advocacy Panel may be of interest. TAP, as those who need that sort of alphabet soup, is a federal advisory committee that works to improve IRS services and taxpayer satisfaction. You can go to IRS.gov for more information and to begin the application process. But before you do perhaps you should read an Op Ed article written by Commissioner Chuck Rettig for Yahoo money where he notes that “the IRS is facing enormous challenges this filing season related to the pandemic and resource limitations.” Frankly, I think those members of the bar with that part of the practice would conclude that the IRS would probably file for bankruptcy protection if it could. That would give them some time to sort out the tons of yellowing letters and taxpayer documents sitting in piles somewhere. With 45 years of experience and having been a former IRS agent and IRS lawyer I would in fact volunteer but I’m scared to death to think that they would accept my humble application and actually ask me to do something. And I must confess that taking a job with Amazon on the conveyor belt has more attraction as I am sure I could use the exercise and perhaps I could go along on the next space flight with what’s his name. Wasn’t that guy on one of those space TV shows years ago in a tight spandex get up? BTW the Keto diet doesn’t give rules for calories. That’s a lot like the tax code.

2) Your car is ensconced in ice. Walking out your door poses the threat of real harm. You have read all of the novels you have piled up over the years. What to do next? It is time to get to a new special page on IRS.gov to provide the latest details and information affecting the 2022 filings season. A number of tax issues that took place in 2021 are addressed at the new page. It is designed to raise awareness about these issues and provide people with the latest timely information. According to the tax Commissioner this new page provides a “one-stop-shop” for the latest key information people and the tax community may need. The tax filing season started officially on January 24 and IRS says it has already sent out 4 million tax refunds amounting to $10 billion. I promise I will get to that page but I still have a few books like War and Peace and the collected works of Ernest Hemmingway to get to first.

3). If you need to be reminded that helping clients commit tax fraud is a crime spend a few minutes looking at the recently released cases brought by the tax division of the Department of Justice. One lady got three years in prison and one year of supervised release for filing fraudulent tax returns for her clients. Another preparer was banned from ever operating a tax-preparation service again. What hurts more is that courts will also determine that these unsavory characters are required to disgorge the fees they obtained by preparing false and fraudulent tax returns. In one case it amounted to $353,000 payable to the United States. The wheels of the Department of Justice turn very very slowly but as most practitioners will attest they eventually grind those caught up in the mechanism.

4) The party’s over. The IRS is raising the rate it charges on underpayments. For the second quarter of 2022 that rate will be 4%. That’s the same rate for individuals on overpayments that is on refunds the IRS doesn’t make in 45 days. But IRS interest rates still offer a financial bonanza for companies and individuals who know how to play the game. Frankly IRS does not require you to submit bona fide financial statements like a bank would before it lends you money. Many taxpayers use the IRS tax money for all host of things including lavish birthday parties, air-conditioned dog houses and all the rest. So long as they don’t encounter any of the stiff penalties, paying interest at 4% without having to disclose their financial wherewithal is a bargain. Needless to say the IRS being overwhelmed and undermanned has no chance in curbing this kind of activity. Some employers don’t show the existence of their employees until the very last quarter of the tax year thereby saving taxes by delaying payment to the end of the year.. They say a tax-deferred is a tax saved. The tax system counts on the honesty of taxpayers and their tax preparers and advisers. Any questions?

Questions or comments should be sent to:

E-mail: Tdavidlawyer@gmail.com

Written by: Theodore M. Davis, Chair Tax Law Committee

1) What does January 24 mean to you? If you’re being sensible about this winter business, it will be just another day to go for a dip or a stroll at the beach in sunny Florida. But if you find that you are still well anchored in New Jersey and worse, responsible for the preparation of individual income tax returns, that day is the official start of tax season. Read More

By: Theodore M. Davis, Chair, Tax Law Committee

Current Items:

1) The Maltese Pension Falcon
2) Santa’s Wishes

1) It’s almost Christmas and you’re still stuck at home with this new virus threat. What to do, oh, what to do! Now, who doesn’t love Humphrey Bogart, Sidney Greenstreet, Peter Lorre, and Mary Astor? If you’re guessing Casablanca you would be close. In the fall of 1941 director, John Houston put together a dazzling cast to create what is perhaps the first noir classic detective story where Bogie plays Sam Spade. By now you of celluloid addictions may be able to guess “The Maltese Falcon.” In this detective thriller, Sam Spade gets more than he bargained for when a case is brought to him by beautiful and secretive Mary Astor playing Miss Wonderly. Sam’s partner is soon murdered and Peter Lorre shows up demanding he locates a valuable statuette. In 1539, the Knight Templars of Malta paid tribute to Charles V of Spain by sending him a golden falcon encrusted from beak to claw with the rarest jewels. But Pirates seized the galley carrying this priceless token and the fate of the Maltese falcon remained a mystery. Of course, none of this is true but it is a great backdrop for the film. Now I will bet you have no idea where Malta is. It is actually an island country located in the central Mediterranean Sea. It played a strategic role in World War II and these days a wonderful vacation spot. I won’t spoil the mystery by telling you how the movie comes out. But by this time you must be asking yourself what does this have to do with the tax law. Read More

By Theodore M. David, Chair, Tax Law Committee

Current Items:                                                                                    

1) Tax Cops   

2) Inflation Hooray

3) A Turkey Tribute

1). Over 2,500 criminal investigations, the identification of more than $10 billion from tax fraud and financial crimes, and a nearly 90% conviction rate are just a few highlights from the IRS-Criminal Investigation (IRS-CI) Fiscal Year 2021 Annual Report. The report details statistics, important partnerships, and significant criminal enforcement actions from IRS-CI, the criminal investigative arm of the IRS, for the past fiscal year, which began Oct. 1, 2020, and ended Sept. 30, 2021. Read More