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Fort Lauderdale Tax Law Blog

Robert Redford sues to scuttle double taxation effort

The Constitution gives states and the federal government certain authority to levy and collect taxes. But there are limits beyond which the various governments cannot go.

Wrangling over where the line is drawn was one of the reasons we fought the Revolutionary War. And as readers of this blog likely can appreciate, battles continue to be fought over some questions about boundaries to this day. When tax controversies arise, the history and nuance of the law tend to require the skill of experienced legal counsel.

IRS offshore tax evasion investigation snares Florida man

Under federal tax law, an American citizen must file annual reports with the IRS that disclose foreign income. In a recent example, an 83-year-old Florida man was convicted of filing false returns over a 25-year period, from 1987 through 2012. 

Specifically, the man failed to report the money he held in accounts in Switzerland and Israel. Although even a tax lawyer would agree that federal income tax forms might become complicated, the omission in this case appeared intentional. For example, the man used a code phrase in communications with those international bankers. In addition, his withdrawals were always under $10,000, which is the threshold when banks must report a transaction to federal regulators.

U.S. company explores tax minimization strategies

Walgreen Co. recently announced that it would not be reincorporating its retail and pharmacy business abroad. Notably, the primary reason behind the proposed move was to minimize its tax obligations.

Walgreen had been considering what is known as an inversion, which is where a U.S. company that also owns a foreign business shifts it tax domicile by reincorporating abroad. In this case, Walgreen also owns the European pharmacy chain Alliance Boots, so it was considering a domicile change to Britain or Switzerland. 

How does the IRS distinguish tax fraud from negligence?

The tax code in the United States is notoriously complicated. We know that we are supposed to pay our taxes and complete a tax return every year, but that can be the extent of many people's understanding.

Due to the complex nature of the tax code, it can be easy for people to make mistakes when completing a tax return. When and if the Internal Revenue Service identifies suspicious activity, they may launch an aggressive investigation to determine if criminal charges will be pursued, or they could determine it was simply an honest mistake and issue a small fine.

But many people in Florida may be wondering: How does the IRS know if a mistake was intentional or accidental?

The long wait for an audit to be done

We all have to pay taxes. Anyone living in Florida has both their state and federal taxes to pay, from individuals to businesses. What can be particularly terrifying, however, is facing an audit from the Internal Revenue Service. Not only could an audit mean having to pay the IRS even more, but it could also lead to potentially serious punishments, even if you have done nothing intentionally wrong. It is no wonder that many people facing an audit will work closely with tax attorneys.

Audits are often very stressful, right from when you first receive notice. Imagine how much more stressful they are when the IRS says it will get back to taxpayers within 30 to 45 days, but consistently fails to do so. Not only does that drag on the audit, but it is also very difficult to get information from the IRS on the status of your audit, at least according to a report by the Government Accountability Office.

Renouncing your citizenship? You may have to pay for that

Three weeks ago we wrote about expatriate Americans who are frustrated about the Foreign Account Tax Compliance Act. As one of the few countries that continues to tax its citizens even when they aren't living in the country, it is understandably difficult for expatriates to want to comply with American tax law. And what many people fail to remember is that these laws apply to both the Americans who were raised in the U.S. and chose to leave the country and to those Americans who were born with American citizenship, but never truly lived in the U.S.

It should be no surprise then, that some dual citizens are renouncing their American citizenship and retaining whatever other citizenship they possess. For some Canadians, this means going to an American consulate or embassy and filing the paperwork to give up their U.S. citizenship.

Former lawyer convicted of tax fraud for creating tax shelters

Nearly everyone in Fort Lauderdale is required to pay taxes, but there are some people who choose to avoid paying taxes or underpay taxes. If they are caught, these individuals may face serious criminal charges, years in prison and be ordered to make large restitution payments. What this also means is that anyone who is charged with some kind of tax crime will likely want to work closely with a tax lawyer to help clear his or her name or risk the possibility of stiff punishment.

Let's use the case of a former lawyer as an example of just what can happen if convicted of a tax crime. It should be noted that this lawyer's crimes happened outside of Florida, but because tax law is federal law, these actions would also constitute crimes in Florida. The 63-year-old lawyer was convicted of creating tax shelters to help his wealthy clients avoid paying taxes.

America's unintentional tax criminals

While most Americans don't especially look forward to paying their taxes, they realize that they must. Of course, there are those who refuse to pay their taxes or try to hide their foreign income, but a majority of Americans, both here and abroad, recognize the need to pay their taxes. Unfortunately for Americans living abroad, there are an increasing number of issues associated with taxation that has meant many people may be unintentionally breaking America's tax laws.

And it doesn't look like U.S. tax laws are going to get any simpler in the near future, as the Foreign Account Tax Compliance Act rules go into effect this month. What this law does is require that foreign banks send information about their American customers' accounts to the Internal Revenue Service.

Will fewer federal tax loopholes lead to more investigations?

A handful of senators are looking to reform the federal tax code and, in the process, eliminate a number of the loopholes. While many businesses have long asked for a lower corporate income tax, something Senator Ron Wyden has proposed, might an elimination of tax loopholes cause an increase in investigations into corporate tax crimes? Because Wyden and other senators have not yet started the process of rewriting the tax code, it is not entirely clear what the impact will be, but corporations may find themselves needing the help of tax attorneys if they come under suspicion.

Unfortunately for many Fort Lauderdale businesses, corporate taxes are not that easy to figure out. Even when a company uses an accountant or accounting firm, there is the possibility of errors, which could lead to an audit or accusations of criminal tax behavior.

Alleged FBAR violations result in still penalties for Florida man

An 87-year-old Florida man has been assessed a 150 percent penalty concerning his alleged willful failure to file a Report of Foreign Bank and Financial Accounts form. Because of this purported failure, he is being required to pay a penalty in proportion to the annual value of his Swiss account for 2004, 2005 and 2006. This penalty amounts to $2 million which would be 50 percent of the annual value of the account for each of those years. The man's attorney stated this was the largest penalty of this kind ever at least in terms of percentage.

The IRS and other federal authorities have been aggressively prosecuting perceived offshore tax evasion. The FBAR penalties concerning these offshore accounts have often exceeded criminal fines. Such prosecution has also motivated a number of taxpayers to enroll in the IRS amnesty program in an effort to lessen the threat of prosecution by federal agents.

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