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Fort Lauderdale Tax Law Blog

Are you ready to be audited by the IRS?

Few items are lower down on most people's wish list than a tax audit. The notice from the Internal Revenue Service (IRS) of an audit of their tax return is something that can cause fear and loathing among most taxpayers.

Because few people actually have their returns audited in a given year, about 8.5 million in 2010, much speculation and concern accompanies what goes on in an audit, but in most cases, it you should be able to survive the ordeal.

Taxpayer Advocates reports IRS inadequately funded

No matter what tax issue you may have, for federal taxes, you have to deal with the Internal Revenue Service (IRS). Whatever your views on taxes may be, at the end of the day, the quality of your experience with the IRS is likely to decline next year, according to a report from the National Taxpayer Advocate (TA).

Her report details that service from the IRS is falling due to a 17 percent cut in the inflation- adjusted budget for the agency in the last five years, combined with an increase in the demands placed on the agency. 

And then there were none? FATCA compliance grows

The Vatican is known as the seat of the Pope, the spiritual leader of the Catholic Church. It is also known for its priceless collection of art and architecture, including the Sistine Chapel and St. Peters.

And now it may be known for Form 8938 and the need for Americans and U.S. green card holders with bank accounts with the Vatican Bank to disclose those accounts to the Internal Revenue Service (IRS), if they fall within the requirements of the U.S Financial Accounting Tax Compliance Act (FATCA).

"John Doe" summons issued in overseas tax investigation

For U.S. citizens with overseas financial accounts, the net the Internal Revenue Service (IRS) uses just became wider. Last week, the Department of Justice (DOJ) received approval from a federal judge for the use of "John Doe" summons for numerous entities, including FedEx, UPS and The Federal Reserve Bank of New York that may have been used by a Panamanian firm to transfer funds to its clients.

A "John Doe" summons is a powerful investigatory tool that law enforcement, the government and the IRS use when they suspect illegal activity in connection with an entity, but do not know the precise identity of potential suspects.

FBAR and the audit potential

A tax audit by the Internal Revenue Service (IRS) of your income taxes is one of the least welcome events in the life of most taxpayers. The prospect of an audit, which can range from a simple paper audit done via the mail, to an audit that brings IRS special agents into your home or business can be extremely unnerving.

Even you are certain that your tax filings have been scrupulously correct, the byzantine-hall-of-mirrors that can be the Internal Revenue Code and its accompanying thousands of pages of interpretations and enforcing regulations, can lead anyone to second-guess their own returns.

Bank secrecy laws affected by FATCA

The long reach of Foreign Account Tax Compliance Act (FATCA) can be seen in concerns raised by the banking system in Lebanon and its bank secrecy laws. Officials from that nation's banks note that despite the disclosure requirements of FATCA, there is "no pressure" to end their privacy rules.

However, if the account holder is an American citizen or suspected of money laundering, the ownership of the account can be disclosed. Holders of U.S. Passports or Green Card holders are asked to sign a consent document with the banks that authorizes disclosure for FATCA purposes.

Does your business comply with non-resident tax requirement?

Nonresident income taxation may be a problem you have never considered, but perhaps you should. Do you or any of your employees work in another state for a period of time? Do you spend part of the year in another location or working onsite for a couple of weeks a few times during the year?

If so, you could be noncompliant with nonresident income tax in those states. In the era of telecommuting, employees who live in one state, but whose business is located in another state could also run afoul of these issues.

What are the elements of tax evasion?

In general terms, most people in Florida understand that tax evasion means not paying your taxes. But simply failing to file a tax return when you should is not the only thing that can lead to the IRS pursuing money and even criminal charges against you.

Cornell University Law School defines tax evasion as using illegal means to avoid paying taxes. One common way for taxpayers to do this is to misrepresent their income in their federal tax return. For example, the individual or business might try to hide some of their income in offshore bank accounts, underreport the income, or claim too much in deductions.

When beneficial status may not be so beneficial

Tax law is complex because it does many things. It, of course, raises revenue that allows the federal government to operate, and that includes everything from the National Weather Service and the air traffic controllers for the Miami airport and South Florida to the U.S. Navy and the federal courts.

But it also serves many policy purposes, from the home mortgage deduction encouraging people to buy homes to federal taxes on cigarettes, designed to dissuade people from smoking. Because money and taxes provide an incentive for behavior, tax policy can be used to sometimes change behavior.

The IRS wants to tax the mayor of London?

Well, sort of. Boris Johnson, mayor of London, holds dual citizenship. Apparently he was born in New York. And like everyone who hold dual citizenship, he has found that causes a problem with the U.S. Internal Revenue Service.

The IRS wants to tax the gain on the sale of his home in the U.K. That sale was exempt in the U.K., but he is refusing to pay the IRS and he finds imposition of U.S. taxes on citizens outside of the U.S. "outrageous."

Nonetheless, the Foreign Account Tax Compliance Act (FACTA) demands that he pay. His other option, besides paying the tax, is to renounce his citizenship. 

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