Florida Tax Lawyer Blog

"The Entire State of Florida is Going to Jail for Tax Evasion."

That was the headline blared by the Broward New Times in a recent article regarding the pace at which Floridians had been filing their taxes this year.

The truth is, it's not quite that serious.

Yes, filing your taxes late could result in some serious headaches and probably some penalties. Still, with the help of an experienced Miami tax lawyer, you should be able to avoid imprisonment and you may even qualify for more of a break than you think.

The majority of the 10 million taxpaying Floridians usually file their taxes far in advance of the April 15 deadline. However, about a quarter only file their returns within just two weeks of the deadline.

Even more filed later this year because of delays on budget compromises between President Barack Obama and Congress earlier this year.

Boca Raton accountants reported that they had between 25 and 30 percent more people filing this March than last year. Usually, companies said this is their slower time. That boom ended up lasting through mid-April.

But even those who scraped by in getting their returns into the Internal Revenue Service prior to the deadline may not be free-and-clear of issues.

The rush to file just before the 15th causes a lot of people to make careless mistakes. In fact, IRS representatives say filings submitted last minute are the most prone to errors.

For example, almost a third of all Floridians skip their deduction entitlement for general sales tax. There are many other deductions - that is, money in your pocket - that you could be forgoing simply because you were in a hurry to get it in on time.

Complicating matters is that there were a number of new requirements and forms this year. Form 8949 is a prime example. This form is used to report capital gain and loss transactions.

Students and parents claiming college credits or any other expenses related to higher education also had new forms. Overlooking these could have been a big hit for some families, who stand to receive up to $2,500 annually.

Another common error is failing to cite - and pay for - previous tax breaks. For instance, the First-Time Homebuyer Credit of 2008 was actually an interest-free loan that has to be paid back in annual installments over the course of 15 years. That's $500 a year that needs to be noted.

Other very widespread mistakes include:

• Social Security numbers that are either missing or incorrect;


• An incorrect calculation of taxes;


• Errors in things like your estimated tax payments, Earned Income Credit, child care credit, or taxable income;


• Simple math mistakes.

If you haven't yet filed your taxes - and you haven't yet filed for an extension - contact our Miami tax lawyers to learn more about how this might benefit you and how we can help.

Continue reading "Floridians Late on 2012 Taxes, IRS Reports" »

Federal investigators with the U.S. Justice Department recently won a major court victory, granting them a summons to force a major Caribbean bank to hand over account information belonging to wealthy American customers.

Our Miami tax lawyers understand this is the latest development in the government's ongoing crackdown on offshore tax evasion. It's not a fight they appear willing to cede anytime soon.

The U.S. Justice Department, in its federal court petition, provided this background:

The Internal Revenue Service had launched a compliance initiative seeking information on U.S. taxpayers who banked with FirstCaribbean International Bank. This is a firm that is based in Barbados - 18 branches in all - but has no actual operations on U.S. soil. However, Wells Fargo, which is headquartered in San Francisco, does have correspondent accounts for FCIB.

So this court order, issued by a federal judge in San Francisco, will require Wells Fargo to hand over any account information it has for Americans holding FCIB accounts in the eight years between 2004 and 2012.

Apparently, the IRS had received some type of information indicating that a number of U.S. clients were not complying with federal tax laws that mandate the reporting of foreign financial accounts, including any income that those accounts earned.

Previously, other international banks targeted by the Justice Department included HSBC, based in London, and UBS in Switzerland.

Acting IRS Commissioner Steven Miller said it is the agency's intention to continue to do everything in the agency's power to pursue these leads everywhere in the world, even if the bank lacks any operations in the U.S.

A spokeswoman for the FCIB said the bank is not defying U.S. orders, and is working with Wells Fargo to understand exactly what is being asked of them, with the full intention to cooperate with U.S. officials, so long as it is shown that the authorities have legal and jurisdictional rights to demand those records.

The IRS declaration made the federal court was that nearly 130 Americans had come forward voluntarily to disclose foreign FCIB accounts that they had previously kept secret, in order to avoid paying income taxes. The government had offered leniency to those individuals who came forward of their own volition.

The IRS subsequently conducted a review of all those voluntary disclosures, and discovered that both individuals and corporations were concealing income through FCIB.

One of those was a taxi firm that used a shell corporation to conceal the true identity of the owner, and therefore avoid the high tax burdens that small business owners must carry.

26 U.S.C. 7201 holds that anyone who willfully attempts to evade taxes may be found guilty of a felony, sentenced to up to five years in prison and be fined up to $100,000 (or $500,000 if we're talking about a corporation). Additionally, a defendant found guilty may also be required to cover the cost of prosecution.

The government continues to offer special amnesty programs for those who may be guilty of tax evasion. Our experienced Miami tax attorneys can help you determine your best course of action, and potentially save you from the most serious of the penalties you face.

Continue reading "Miami Tax Lawyers Warn of IRS Targets to Caribbean Accounts" »

In a recent blog post, our Miami tax audit lawyers discussed ways that one might avoid an IRS audit before submit their returns.

Now that April 15 has passed and you have (hopefully) already filed those returns, we wanted to explore a little bit about what your chances are of being audited and what strategies you might employ if you are contacted by the IRS.

According to the Transaction Records Access Clearinghouse, an individual U.S. citizen's chances for an audit fell by about 7 percent last year. Their calculations put your odds of audit at 1 out of 100, or about 1 percent.

However, no one should be lulled into a false sense of security. Although those statistics might suggest you have a relatively small chance of enduring this process, your odds might be worse than you think, particularly if you fall into one of the following categories:

• You earn an income of $200,000 or more. For these individuals, the audit rate was nearly four times as high as for everyone else last year, with an overall rate of 3.70 percent.


• You are self-employed. The primary reason for this is that taxpayers who are self-employed are able to claim a great deal of write-offs that many other employees can't. These might include business use of a vehicle, home office, etc. The IRS is almost inevitably at some point going to question the legitimacy of some of it. From the IRS perspective, those who are self-employed have a tendency to understate or fail to report their self-employment tax, while overstating their potential deductions.


• Your list of itemized deductions was quite a bit higher than others in your same tax bracket. It's tough to say exactly how wide that gap must be to raise eyebrows, but generally, the more marked the difference, the more likely you are to be red-flagged.

If you're concerned that your itemized deductions might potentially get you in trouble, take a look at the averages. For someone with an income between $50,000 to $100,000, the average charitable contributions were around $2,800, while the average medical expenses were $7,300. If you earn between $100,000 and $200,000, your peers on average are reporting charitable contributions of $3,800 and medical expenses of $10,000. For someone with an income of between $200,000 and $250,000, the average amount of charitable contributions is around $5,800, while medical expenses were around $20,000.

Depending on where your figures fall, that could either put your mind at ease or put you on alert that you may need to consult with a tax attorney.

So what do you do if you are audited?

You will get a notice by mail. What you can't do is ignore it and pretend it will simply go away. It won't. IRS enforcement measures are sure to get your attention, and may include putting a lien on your property or garnishing your wages.

Understand that there are two different types of audits: correspondence and field.

Correspondence audits are the most common - and we can expect to see those in fairly short order after tax day. Usually, these letters are simply computer-generated and they inform you of an error - something that didn't match up. Usually, if you goofed, you simply pay the difference and you're done with it.

In some situations, if you are disputing the claim, you can show them proof that you were correct, so you'll be able to avoid having to pay. If this is the route you choose to go, we would recommend at least an initial consultation with a tax lawyer, to determine whether a more in-depth response is required.

With less common field audits, you will be expected to either report to an IRS field office or the IRS agent will come to you. In either case, contact a tax attorney, as these procedures tend to be more in-depth, and you will undoubtedly benefit from having a representative with experience on your side.

Continue reading "Miami Tax Audit: Likelihood & Response" »

In what is being described as the largest leak of confidential documents since the WikiLeaks scandal, some 2.5 million offshore tax records were released to dozens of journalists across the globe, who are now in the process of sifting through them.

Our Miami tax lawyers have learned that among the thousands who are named in these reports are people ranging from American dentists and doctors to Indonesian billionaires to international arms dealers to Russian executives to hardline despots.

Our understanding is that the leaked information provides massive stockpiles of information on incorporation dates, cash transfers and links between individuals and companies that had previously been kept under wraps. It includes holdings of companies and people in some 170 nations and territories.

The biggest concern for some is that these accounts - containing anywhere from a few hundred thousand to billions of dollars - were never declared to their native countries in order to be taxed. That means that depending on how the individual governments want to go about it, they may have just been handed a smorgasbord of criminal tax evasion cases on a silver platter - but not before the media have the opportunity to first publicly shame those suspected of crimes.

The records were leaked to the International Consortium of Investigative Journalists, which is collaborating with more than three dozen other media outlets across the world, including The Washington Post, to help analyze the information.

It's important to note here that it's not illegal to have an offshore account. Many of the transactions that have so far been revealed by the journalists have been 100 percent legal. But there also appears to be ample evidence of tax evasion, fraud and even political corruption.

There have been studies indicating that the cross-border flow of financial crimes across the world tops as much as $1.6 trillion annually.

There are often very good reasons for placing personal or business funds into an offshore account. The key is to make certain that everything is handled above-board so you don't run into later trouble with the U.S. Internal Revenue Service.

In this leak, some 4,000 of the names were Americans. One of those was a Grammy-nominated songwriter who had raised millions for Democratic political candidates and whose oil trader husband had been wanted on charges of racketeering and tax evasion when he was pardoned by then-President Bill Clinton. She reportedly kept some $144 million in a trust located in the Cook Islands, as of 2006. She has since renounced her American citizenship to become Austrian.

Another American mogul, heir of Mellon oil dynasty, had tens of millions in offshore bank accounts, but insisted to reporters that while this provided him a tax advantage, he never broke the law and he has since disposed of all those accounts. When questioned further, he referenced former Republican presidential candidate Mitt Romney's offshore accounts, adding, "Not everyone who owns offshore is a crook."

In some cases, IRS officials had a difficult time tracking down the details of these offshore accounts because some of those entities were so secretive, the names of the bank owners and staffers were fiercely shielded.

However, that cloak of impenetrable secrecy has been eroded over the years, so now it's a situation of buyer beware.

Essentially, here's what you need to know:

• You have to report your worldwide income on your U.S. tax return. This is true whether you are living or working abroad or are entitled to some exclusion from U.S. taxes.


• Filing your tax return alone isn't enough. If you have foreign bank accounts, you also have to file a TD F 90-22.1 annually. It's also referred to as a Report of Foreign Bank and Financial Accounts, or FBAR.


• If you fail to comply with your tax obligations regarding your offshore accounts, the penalties are serious, as you could be charged with felony tax evasion or fraud - simply by failing to check the right box or fill out the proper form.


• You may have the option of a "quiet disclosure" in which your past problems are corrected by amending all past returns and FBAR filings and then paying the amount you owe upfront.

Continue reading "Report: Millions of Leaked Files Expose Offshore Tax Havens " »

Legendary singer Dionne Warwick has become the latest in a string of high profile bankruptcy cases related to tax liens.

Our Miami tax lawyers understand the 72-year-old had been battling with the tax liens since the 1990s, when she fired her business manager after learning he had mismanaged a number of funds and failed to properly pay the taxes on her behalf. Her attorney says that after paying $300,000 more than what she originally owed in the first place ($1 million) - with virtually all of it going to interests and penalties - she's been forced to take the last resort course of action by filing for Chapter 7 bankruptcy protection.

Her situation illustrates several points that our tax attorneys believe is important for everyone to understand:

1. No matter who prepares your taxes, you will be held responsible.


2. The Internal Revenue Service tends to give a tougher time to those who earn more income, regardless of their actual ability to pay.


3. If you find out you do owe back taxes or have been slapped with a tax lien, it's important to meet with an experienced tax lawyer as soon as possible. You don't want to be wrangling with this for decades to come.

Typically, tax debt is more difficult (or impossible) to discharge once a lien or judgment is rendered. Being proactive and seeking help before a judgment is the best course of action. The other thing to keep in mind is that usually, you can't get your tax liens lifted through a bankruptcy. There are some exceptions, of course, but it's usually more advantageous to work closely with your lawyer, who can help you hammer out a manageable plan with the IRS.

A tax lien, if you aren't familiar, is a claim that the federal government makes on your property when you don't pay your tax debt. The idea is to protect the government's interest in your property, should you choose to sell it without first paying the government what it is owed.

A lien may be attached to all of your assets, including your home, your vehicles and any other property you own. It will also drag down your credit score and could also be tagged onto your business property. In many cases, the tax debt may be continued even after a bankruptcy.

A tax lien is different than a tax levy in that the former is simply a claim on your property, while the latter involves the government actually seizing your property to fulfill your debt obligations.

Avoiding a lien in the first place involves paying your taxes on time and in full. If you can't pay on time or file, ignoring the correspondence you get from the IRS isn't a good plan. Our experienced tax lawyers can help you reach a workable solution with the IRS to fulfill your obligations while still protecting your assets.

Warwick is by no means alone. The government recently released a report indicating that Americans owe roughly $290 billion in back taxes.

Once a lien is in place, it can be difficult to have removed, particularly without the aid of an experienced tax lawyer.

Continue reading "Miami Tax Liens Can Lead to Major Financial Troubles" »

Nobody attaches a sticker to their tax forms saying, "Please Audit Me."

However, our Miami tax lawyers know that some individuals and companies might as well, some by clearly attempting to bend the law in their favor and others by making simple mistakes that cause them to be red-flagged.

Over-the-mail audits for individuals who earned more than $200,000 increased by nearly 13 percent last year compared to 2011. In total, that was nearly 110,000 audits.

The key is to be honest in reporting your income and maintain proper documentation.

It's not 100 percent foolproof, but that's the bare minimum you should be doing.

Some other things to keep in mind to keep Uncle Sam's attentions at bay:

Be mindful of your social media entries - especially if you have underpaid on your taxes or not at all. IRS agents, like law enforcement agencies, are increasingly turning to modern communication tools to not only track down tax-dodgers, but also to catch them inn the act. No matter how personalized it feels, you should consider your Facebook, Twitter, YouTube and other accounts public, as the IRS approaches them as fair game. For example, if you are requesting a reduction of taxes due to financial hardships, but then turn around and boast on Facebook that business is thriving and post pictures of your new vehicle and latest exotic vacation - the IRS may come calling.

As mentioned before, accurate reporting of income is important - and that includes ALL your income. The IRS has software to detect any income that was reported to your Social Security number that wasn't listed on your tax return. So things like interest on a bank account, freelance work or investment income - all of that needs to be reported, no matter how seemingly insignificant. If the IRS flags you for under-reporting your income, it's going to look more closely at all other aspects of your return. This includes your claimed credits and deductions. If they find you owe more than what you paid due to under-reporting, you could end up being slapped with late charges on those amounts owed, in addition to any fines for not reporting it correctly in the first place.

Another thing to be mindful of is mixing business with pleasure. By that, we're specifically looking to the individuals who are self-employed or work from home. There are a number of gray areas when it comes to the kinds of deductions you can claim or exemptions to which you may be entitled. But the IRS can usually pick up on when you are overstating or understating something. So for example, claiming a home office exemption may garner IRS attention.

A common oversight for many families is failure to properly report to the IRS payments made to nannies, gardeners, etc. Depending on income, many of these individuals need to pay Medicare taxes and Social Security, just like everyone else. If you're not doing this, you may be setting yourself up for tax evasion charges leading to fines and thousands of dollars in back taxes.

Lastly, you want to make sure your arithmetic is correct. The IRS reportedly noted some 6 million mathematical errors on tax returns in 2010 alone. That's the most recent data available, but it's an issue every single year. Some of the most common mistakes include how much money they make, how large their deductions can be, how much they owe and the size of their refunds. If your deductions seem out-of-synch with your income, chances are, your filing is going to get flagged. When possible, use exact numbers instead of rounding and make sure the deductions you are claiming are appropriate.

Continue reading "Miami Tax Lawyers Talk Avoiding an IRS Audit" »

Having just lost your spouse within the last year, it's probable that taxes are among the last things on your mind.

The fact is, however, your tax situation has changed, and there are important considerations you need to make with regard to this year's filing. You may have even put it off until now because it was either unpleasant or something your spouse always handled for both of you in the past.

Our Miami tax lawyers want to help you move forward.

The first thing to know is that unless you remarried before Dec. 31, you may still be able to file a joint tax return for last year. Even though from a technical point-of-view, you would have been single at the end of last year for purposes of your federal income tax filing, you are still allowed to file a joint Form 1040 with your recently departed spouse. This gives you the benefit of certain joint taxpayer-only rule in your favor. That joint return is going to include any income or deductions of your spouse up until the time of his or her death. Additionally, it will include all of your deductions and income for the whole year.

Secondly, you may want to note that IRS Code Section 1014(a) allows that if you inherited any capital gains assets from your loved one, you can boost the tax basis of those assets so that it's reflective of the fair market value at the time your spouse passed away. You might also have the option of using the fair market value that was in place as of six months after your spouse's death.

Another tax aspect for the newly-widowed to consider is that you are eligible for the larger home sale gain exclusion. If you aren't familiar with this, it's a tax rule that says unmarried people are allowed to exclude up to $250,000 of gain from the sale of their principal residence. However, those who are married can exclude up to $500,000. But even though you can't file a joint return for any year subsequent to the one in which your spouse died, you would still be eligible for that larger $500,000 credit - but only for the next two years. The clock begins ticking at the time your spouse passes away.

Of course, this won't matter if you don't stand to gain any more than $250,000 from selling your home. But for those whose homes may have appreciated significantly in recent years (somewhat of a rarity in today's housing market), you should carefully consider this rule.

Lastly, you'll want to keep in mind that you have to adhere to the minimum distribution rules for any inherited retirement monies you receive. So if you inherited your loved one's 401(k) or IRA, be mindful of the fact that the minimum distribution rules are going to apply to the inherited account balance. This means that you will be required to take a certain amount out this year and you'll probably have to take a tax hit. However, if you fail to do that, you might risk a 50 percent penalty from the IRS. That penalty can be filed every single year until you start taking out the appropriate amount.

Truthfully, any one of these issues could end up stinging you in the long run. Ultimately, doing it incorrectly could have you facing down an IRS audit. We are here to help.

Continue reading "Miami Tax Help After Death of Spouse" »

There's really no way around it: Taxes are a pain.

That's why so many people seek outside help in their efforts to have their documents prepared. However, our Miami tax lawyers want to urge you to be extra cautious because if your preparer errs - purposely or not - you are the one who will be held responsible. At the end of the day, it's your signature on those forms, affirming that all is true to the best of your knowledge.

Even if you didn't know your preparer was committing tax fraud, you could find yourself in deep trouble. This is why you must always question dubious claims and double check your returns before they are submitted to the IRS.

For example, if your preparer boasts an ability to get you better refunds than anyone else, you should be suspicious. If she makes a point to tell you about how ALL of her clients get high refunds, be suspicious.

It's important that even when you hand over your taxes to someone else to prepare, you read over everything. At the end of the day, you are responsible for what those documents say. If there is something you don't understand or numbers that don't seem to add up, you need to ask. If the preparer dodges your questions or won't let you look over your returns before e-filing them, take that as your cue to leave.

When you go to review your return, there are a few main things you want to look for that should help you catch major errors or fraud.

First of all, you'll want to look at names and Social Security numbers. A simple misspelling (one letter off) could result in major headaches for you, up to and including an audit. If you have gotten married or changed your name in the last year and you haven't changed your name with the Social Security Administration, use your old name. Make sure that your name is the same on every form.

Bring the Social Security cards with you so that you can verify every family member's number. If you try to do this by memory, there is a stronger possibility that you will make a mistake.

Also double check your taxpayer ID numbers that are used on any business schedules. If you're in business, make sure you have given your clients or vendors your correct business ID number.

When you go to review Form 1040 individual income tax return, you want to pay special attention to the bottom of that first page. If there are any figures that don't make sense or that don't seem to add up, question it.

Those paying alimony should pay special attention to that line. Make sure you have noted your ex-spouse's Social Security number, and you may want to check in with them to make sure they have the same amount listed on their return. The IRS will cross-reference returns, and if they aren't the same, you both could face an audit.

Also, make sure your education/tuition costs are properly noted, either as a credit or a deduction. This is one are that gets overlooked quite often.

You want to also triple check your deductions. Pay particular attention to your mortgage interest and contributions. A lot of times, preparers committing fraud will inflate these figures or just make them up, based on national averages. Either way, you need to make sure they're right.

Same goes for credits - especially child tax credits. If you don't have any children, you shouldn't be getting the child tax credit. And if you do have kids, make sure the number on the form is correct.

If after all of this, you still come under scrutiny from the IRS, don't go back to your tax preparer. Speak with an experienced Miami tax lawyer.

Continue reading "If Your Tax Preparer Commits Fraud, IRS Holds You Responsible" »

Florida - and Miami specifically - is ground zero for tax refund fraud and identity theft in this country, according to officials with the local U.S. attorney's office.

Our Miami tax lawyers understand it has been likened to a "virus" by federal prosecutors, pointing to six recent cases involving more than a dozen defendants.

Sometimes these schemes are street-level, involving heisting of mail from a person's mail box. Other times, it involves those higher up, like a Boca Raton hospital scheduler accused of swiping dozens of patients' personal information and then giving the data to a friend. That friend then filed more than $305,000 worth of fraudulent returns, which the two split down the middle.

In another recent case, a man tried to cash some 75 fraudulently-obtained tax refund checks totaling nearly $751,000. Undercover IRS agents nabbed him when he tried to use phony driver's licenses to cash the checks.

In yet another case, employees and owners of two separate tax preparation firms pleaded guilty to federal fraud conspiracy for cashing some $40,000 in tax refunds.

The fact that we are seeing a huge spate of these cases is no coincidence. Last fall, the South Florida Identity Theft Tax Fraud Strike Force was formed and has been churning out these cases left and right. Defendants - even those who have made honest, if negligent, mistakes - will need someone who is experienced not just in criminal law, but the ever-changing tax code as well.

The strike force reports that Florida has 178 complaints of identity theft per 100,000. That represents the highest rate in the country. Compare that to Miami, where that same figure is 325 complaints per 100,000.

Also in Miami, false returns based on stolen identity were 50 percent higher than the national average. Stolen identity refund fraud in Miami, meanwhile, 70 times higher that the U.S. average.

Since the inception of that federal tax fraud task force, the U.S. Justice Department reports that nearly 115 defendants have been arrested, reportedly responsible for nearly $100 million in money that was stolen through tax refund fraud based on identity theft.

If the IRS or the Justice Department has initiated a criminal investigation against you, you will probably be the last person to know about it. If you are contacted by federal investigators - even if it involves someone else - refer him or her to your lawyer or, at least, inform them that you do not intend to answer questions. Even if you haven't done anything wrong, you risk potentially being connected to a criminal enterprise.

And if you know you are connected, talking to investigators about it isn't going to do you any good, and will instead probably serve to damage your case.

Keep in mind it is never a good idea to lie to investigators, as this may only serve to harm your credibility down the road.

Even in cases where the evidence seems overwhelming, taking this seriously might give your Miami tax lawyer enough of a basis upon which to mount a decent defense based on reasonable doubt.

Continue reading "Tax Fraud in Miami, Fort Lauderdale "Rampant," Officials Say" »

Spouses share just about everything. Tax liability is no different.

However, our Miami tax lawyers know that certain exceptions should be made in some cases, particularly if you are no longer actually married, had no knowledge that the tax liability was going unpaid, will suffer some serious economic hardship if forced to pay or were the victim of abuse.

Such circumstances may qualify a person for tax liability relief under an Innocent Spouse claim. Basically, it holds that even if you signed a joint return, you aren't liable for your spouse's unpaid taxes.

These requests can be difficult to successfully pursue, but they are more common with the 2011 changes enacted by the Internal Revenue Service, allowing for relief beyond the previous two-year time limit. Even those who had a previous innocent spouse claim that was denied on the basis of that statute of limitations may again have a shot at relief.

The reason for the change in the law had to do specifically with cases of spousal abuse. One of those, according to USA Today, involved a woman who tried to leave her husband back in 2003. He responded with a gun to her head and a threat to kill her. She remained married for the next four years until finally she was able to escape. She filed for divorce five years later.

It wasn't until that time that she learned she was liable for some $70,000 in unpaid taxes from joint returns her husband had filed on their behalf. She said her husband kept all financial records under lock and key. Any questions were met with severe beatings.

Yet, the court denied her innocent spouse claim because she hadn't filed within the required two-year time frame. She appealed that decision, and won.

Now, the time limit isn't any issue any more.

In addition to situations of domestic abuse, this change will also be beneficial for those going through a divorce. A divorce isn't going to automatically relieve you from liability stemming from a joint tax return that was filed while you were still married - even when your divorce decree explicitly states it. But taxpayers who weren't aware of their spouse or ex-spouse's tax-dodging can seek relief through an innocent spouse claim. In the past, the problem was that people didn't often find out about the lapse until after the two-year limit was up. No, they don't have to worry about that being a factor.

Innocent spouse claims are also invaluable in cases of fraud or death. In fraud cases, one spouse may be convicted of criminal behavior, he or she is likely to have problems with Uncle Sam too - problems that the spouse had no idea about. Same thing in cases of death, particularly for older widows and widowers who had relied on their spouse to handle financial and tax matters.

All that said, the threshold can be quite high. The IRS handles some 50,000 applications for innocent spouse claims annually, and it only grants about 25,000 of those. But given that an estimated 1,500 to 2,000 of those denials stemmed solely from the time limit, we're encouraged that this is no longer a hurdle that long-suffering spouses will have to overcome.

Continue reading "Miami Tax Lawyers Prepared to Take on Innocent Spouse Claims" »

The Internal Revenue Service is working to simplify the tax rules regarding deductions for small business owners who run their operation out of their homes.

Our Miami tax lawyers know that historically, the IRS has required business owners to complete a 40-plus line form in order to simply claim a write-off. It's a time-consuming process with four pages of instructions and text that involves tabulations on everything from utility bill expense allocations to determinations on depreciation.

Now, however, the IRS is seeking implementation of a method known as "safe harbor." It will allow business owners working from home to simply measure out the square footage of the space you use for work and then use that to apply for a deduction.

While this method is sure to eliminate many headaches, the smart business owner will still be consulting with an experienced tax attorney, as there are many considerations to ensure you are paying the government enough - but that you are claiming all the deductions you are allowed.

The news of safe harbor change is going to be pivotal for the rapidly growing number of at-home businesses. Technologies like Skype and high-speed Internet have fueled a shift to work-at-home operations, which tend to be less costly and more efficient than storefronts. The U.S. Census Bureau's most recent 2010 figures show that nearly 13.5 million Americans were using their home at least in part for work. In fact, home businesses employed roughly 10 percent of the U.S. workforce.

Yet, that same year, only about 3.5 million taxpayers actually filed for their at-home deduction. Essentially, people are declining money to which they are entitled.

The reason is simple: Claiming those deductions has become very complicated, and business owners have feared they may have been opening themselves up to an audit if they didn't get it just right. And they were probably right.

The new rules should help - but they won't be an option until 2013 returns are filed. Starting at that time, all owners and workers who work from home will be able to deduct $5 per square foot of their home used for office space annually. You will be given a maximum allowable space of 300 square feet, with the write-off capped at $1,500. The hassle should be minimal.

So long as the space you use is either full-time or at least on a regular basis used as your primary place to conduct business or meet with clients, you qualify. You likely will also be able to deduct a percentage of your mortgage interest, rent, property taxes, hazard insurance and some other expenses based on the space you use for work.

Of course, if you believe you may be entitled to a bigger deduction, you can still have your tax lawyer prepare the longer form. This will be especially important for companies that require more space or that have large insurance or utility bills. The trade-off is that you will likely see higher write-offs.

The IRS has conceded that regardless, if you file a home office deduction, you are increasing your chances of having the IRS target you for an audit. But this is not a reason not to claim your deduction - it's a reason to have a tax attorney either prepare or review your documents to ensure everything is properly filed and claimed.

Continue reading "IRS: Miami Tax Deduction Claims to be Streamlined for Home Businesses" »

A federal appellate court last month affirmed the conviction and 7-year prison sentences of two business partners convicted of tax fraud and mail fraud for failing to file tax returns, submitting false tax returns and ultimately defrauding the government out of $7.5 million.

Our Miami tax lawyers know that while many businesses do their best to be above-board with regard to taxes, the fact is, tax law is complex and fluid - ever-changing. It's critical that every business operation - no matter how small - procure the services of an experienced tax lawyer to conduct periodic reviews before trouble arises.

In this case, the two individuals operated a temporary employment agency in Massachusetts starting in 1998 and ending in 2004. During that time, the Internal Revenue Services alleged that the owners of this company under-reported the amount of their payroll to the firm's insurance companies. Further, the two reportedly did not file the appropriate W-2 forms for all employees and tax forms that were submitted for the company did not accurately reflect the profit accrued.

In addition to their seven-year prison sentences, they were ordered to pay $8.8 million in restitution to both the insurance companies and the IRS.

Upon appeal, the former businessmen didn't challenge that the government had enough evidence to convict. Rather, they alleged that there were major errors at trial that required they be granted a new trial. They argued that they truly believed their agency was not the employer of any of the temporary workers they placed, and therefore, they didn't intentionally defraud the government or their insurers. They didn't deny that workers were given cash, not given W-2s or 1099 forms or that no FICA taxes were withheld. However, they maintained that they were merely acting as a broker, and it was the hiring company that should have paid the taxes - not them.

However, the federal appeals court justices denied their appeal on the basis that there was no prejudice to the defendants during the trial. Further, the court ruled that defense counsel was given ample opportunity to impeach certain adverse witnesses and that the district court didn't err in excluding testimony from certain defense witnesses.

Although unfortunate for these two that their appeal was lost, the case serves to further illustrate the fact that the IRS will not turn a blind eye to what it deems a failure to pay up and the court system can be unforgiving once a guilty verdict has been rendered.

To avoid such a scenario for your company, consider hiring a knowledgeable Florida tax lawyer. This way, you can avoid questions of whether your company is appropriately handling its taxes.

Some elements to consider:

• Time. Figuring out what your various tax obligations are and what you have to do to meet those obligations can be incredibly time-consuming. An attorney with experience can more quickly and accurately help you determine what must be done. This is not something you should try to learn on the job. In order to avoid major headaches down the road, you need to have a system in place from the day you start the business.


• Business income. Businesses are held to a different set of standards than individuals, and what constitutes "income" for a business is not the same as for an individual. Your gross income can include not only income from sales, but goods, property, services and any bartering arrangements. Failure to report any of this could lead to tax consequences, including steep fines and interest.


• State taxes. Even if you are savvy enough to figure out what your tax obligations are in Florida, if you do any business outside of the state, you may be obligated to pay taxes there as well. This can be a complex and confusing web of laws that are, as always, subject to constant change.


• Your business form. Different kinds of businesses have varying tax obligations. Even before you officially begin operations, it's beneficial to meet with a tax attorney to figure out what kind of entity might be most advantageous for you tax-wise.


• Business deductions. You may be entitled to a good number of deductions, but figuring those out can take a fair amount of time. Deductions mean more money in your pocket - but you have to know how to find them.


• Ignorance is not an excuse. This case illustrates that perfectly. The IRS won't care that you didn't realize you were obligated to pay a tax and failed to do so. You will still be held accountable. An attorney will make sure you know what your obligations are, and what is necessary for you to meet them.

Continue reading "U.S. v. Mahan - Businesses' Failure to Pay Taxes Costly" »

As we embark on a new year - and a newly-inked federal tax deal - small business owners in Miami would do well to educate themselves on what the reforms mean - and what other tax considerations they should be making in 2013.

Our Miami tax lawyers are committed to helping you navigate what is a complex and ever-evolving landscape of rules, regulations and exceptions.

The Wall Street Journal reports that small business owners are likely to be the ones hit the hardest by Congress' fiscal cliff deal, which raises taxes for those earning more than $400,000. Even though the corporate tax rate, currently at 35 percent, didn't increase, if small business owners can't convert their companies into corporations, they could be forced to pay an increased rate of nearly 40 percent. That doesn't include the increased costs for employee health care coverage in companies with 50-or-more workers through the Affordable Care Act, set to be fully implemented this year.

All of this means that it's likely to be a year of tough decisions for many small business owners. It makes careful financial planning all the more important. Meeting at the start of the year with an experienced Miami tax attorney can help head off some major legal headaches and perhaps save you some money in the long run.

What you don't want to count on is fudging your business expenses or skirting other tax rules. It can be tempting, considering the higher rates you're facing. You want to stay afloat. But doing this almost always catches up to you, and in addition to being compelled to pay back taxes, interest and penalties, potential investors are likely to frown upon it and be less inclined to take a risk with you.

Even if you've been able to get away with it in the past, understand that both the state and federal governments are becoming more and more desperate for cash. That means they're getting aggressive on small businesses that might have previously been allowed to fly under the radar.

Understand too that the IRS can nail you for things like failing to properly classify certain contractors or freelancers. If those individuals should technically be considered employees, you could find yourself forking over huge fines and penalties.

One bit of good news is that business owners may possibly find it easier to acquire capital thanks to the JOBS Act that passed in 2012, which will grant them the ability to sell equity to pools of investors in online forums. (Still, regulations that govern this practice have yet to be set, so you may want to hold off for a bit before diving in.)

Roughly one-third of small companies say that economic uncertainty is the largest hindrance to longer-term growth in 2013. We want to help you regain a measure of confidence in the future by giving you a thorough assessment of where you stand right now and how you can improve your position tax-wise in the months and year ahead.

To make sure you're compliant on all fronts, schedule a meeting with a Miami tax lawyer to scour your books. Even if you believe you're in good shape, there is a peace of mind that comes with knowing for sure. And if there are areas that require improvement or clarification, you can get ahead of the curve.

Continue reading "Miami Tax Lawyers Urge Small Businesses to Take Action in 2013" »

With the start of 2013, the Internal Revenue Service will begin to see some of the first tax returns rolling in - and the continuation of the same mistakes people make each and every year.

Miami tax lawyers know that these errors are understandable given the fact that tax law is fluid. As the widely-covered fiscal cliff crisis showed us, the tax code is complex and ever-changing. But those mistakes can end up costing you in terms of:

• Lost opportunities for deductions;


• Increase your odds of an audit;


• Cause you to have to pay back taxes, interest and penalties.

Some of these goofs are simple enough to correct. Others are more complicated. Take some time to consider them before you file your returns. Better yet, have a tax professional complete them for you. And if you do run into trouble, immediately contact an experienced Miami tax lawyer for advice on how to proceed.

Let's take a look at some of them one-by-one:

Claiming the wrong marital status. This seems pretty simple, but a lot of people get it wrong. Your marital status is whatever you were as of December 31. Anything prior to that is irrelevant. Married couples can file either jointly or separately, but "head of household" claimants have to meet very specific requirements. If you claim the wrong status, you could be putting other tax credits, such as your child tax credit, in jeopardy.

Leaving out your Social Security number or using the wrong one. These must match for you and all your dependents - otherwise, you are going to risk the IRS rejecting all your deductions and credits.

Not using the proper schedules and forms. The IRS is, above all, a bureaucracy, and it relies heavily on correct numbers filled out on correct forms within a certain timeline. The more mistakes you make in this regard, the more likely you are to get audited.

Not signing and dating your return. This one really is simple, but failing to do it will void the return. That means that for all intents and purposes, the IRS will consider you as not having filed. Not filing your tax return is going to put you at risk for all kinds of penalties and interest and back taxes. The good news is that Miami tax attorneys can usually help you with these kind of simple mistakes with little fanfare - but better to avoid them in the first place if you can.

Claiming dependents that are ineligible. This has been significantly reduced since the IRS started requiring that dependents' Social Security numbers be included, as many people had previously been unlawfully claiming pets. Where this really gets tricky is when you have a "non-traditional" family. That is, you are divorced with children or were never married to your child's other parent or are dealing with multiple other parents or step-parents. The qualifications for claiming a dependent are very specific. Check with a tax professional if you aren't sure.

Not using or improperly using the earned income tax credit. This is a credit that was intended by Congress to aid the poorest people in our country, but it's written in such a way that it is incredibly confusing. Many people who qualify for it don't apply and those who don't qualify for it try to lay claim. It is far and away one of the most-audited tax return items. Last year, Congress added a new form - Form 8867 - for tax preparers to show this issue has been thoroughly vetted.

If you do find yourself running into tax trouble, call us today to see how we can help.

Continue reading "Common Tax Mistakes That Could Land You in Trouble" »

It may seem a bit premature to begin talking about next year's taxes. However, our Miami tax attorneys know that those who file their returns early may actually significantly reduce their risk of becoming a fraud victim.

This is especially important in South Florida, which has an unfortunate reputation of being one of the nation's top tax fraud hot spots. CBS Miami recently reported that more than 74,000 suspected fraudulent tax returns were filed in Miami alone in 2010, prompting an estimated $280 million in government payouts to thieves. The rate of tax refund fraud in Miami is 46 times the national average, according to the Internal Revenue Service.

One of the reasons these fraudsters are so successful is that they strike early. Once they have a few identifying pieces of information about you - which is easier to obtain than you might think - it's a race to file your tax returns before you do, often as soon as possible after the new year. Part of the reason they have had such success is that most people don't even start thinking about filing their taxes until March.

To give you an idea of how fast this industry is growing nationwide, the IRS reported that in 2010, it was able to thwart some 49,000 phony returns with payouts of about $247 million. Then last year, the agency removed nearly 262,000 phony returns with payouts topping more than $1.5 billion. That is a 435 percent increase in one year.

That tells us that the IRS is getting better at catching these scams in action. In fact, the agency teamed with the Justice Department earlier this year in a joint effort crackdown on identity thieves. More than 100 people in more than 20 states were arrested. Additionally, IRS investigators and auditors are auditing some 400 check cashing facilities that were suspected or known to have helped facilitate these transactions. The agency has also implemented a new series of filters that aim to flag potentially fraudulent returns before payment can be remitted.

And the pilot program that started back in 2010 to red-flag the names and identities of deceased taxpayers, in order to prevent their names being misused, is being expanded.

Still, authorities haven't gotten anywhere near squashing the problem altogether.

By filing your returns early, you can decrease your chances of becoming a victim. Doing so with the help of a Miami tax attorney can help ensure not only that it's done accurately and completely, but that you are able to claim as many deductions and rebates as legally possible.

Tax lawyers, as opposed to simple tax preparers (who have come under a greater amount of IRS scrutiny over the last year for their own industry practices), keep up on the changes of ever-evolving tax law and can help you resolve any tax-related issues or questions.

Individuals can certainly benefit from the services of a tax lawyer, but the following groups of people absolutely can't do without one:

• Those who have a taxable estate or need to file an estate tax return;


• New and small business owners;


• You engage regularly in international business;


• You are under criminal investigation by the IRS or may have committed some form of tax fraud.

If you need help filing your early tax returns, call us today.

Continue reading "Miami Tax Attorney: File Early Returns to Reduce Risk of Tax Refund Fraud" »