Pop Star Rihanna Faces an IRS Audit

IRS Audit
IRS Audit

According to reports by the Associated Press, Rihanna is facing some legal drama. This time it is with allegedly unscrupulous accountants, who she is blaming for tens of millions of dollars in losses, poor business advice, and an IRS audit.

IRS Audit

The pop star is seeking unspecified damages in federal court from New York-based accounting firm, Berdon LLP, and two accountants. She alleges that from her 2009 tour, which suffered net losses despite strong revenue, the accountants took 22 percent of the total revenue, while Rihanna only received 6 percent.

The lawsuit also alleges that the accountants repeatedly breached contracts, misguided the singer financially, failed to properly document revenue and expenses, and created entities without her permission.

Unfortunately, according to the singer’s lawsuit, Rihanna lost a great deal of money and is now under the microscope of the IRS because of the unethical decisions of her accountants. To make sure that this does not happen to you, please contact your competent tax professionals.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Hey, That’s My Tax Return: Identity Theft on the Rise

IRS tax attorneys report that tax identity theft is on top of the IRS’ 2012 list of Dirty Dozen Tax Scams. By all accounts, theft of tax refunds continues to be a growing problem. Many IRS tax lawyers say that often these thefts are perpetrated by organized criminal gangs that either con, steal or buy taxpayers’ information to generate fraudulent returns.

A report released by the Government Accountability Office (GAO) indicates the IRS uncovered 245,000 cases of identity theft relating to tax year 2010 alone. According to several IRS tax attorneys, most of these cases involve unsuspecting taxpayers whose social security numbers were stolen and used by unscrupulous thieves to file false tax returns.

IRS tax lawyers reviewing the GAO’s report indicate the number of identity theft cases has increased approximate 364% increase in the past two years. These same IRS tax attorneys say that number may, in fact, understate the actual number of cases which have yet to be uncovered.

So what should you do if you believe your personal information has been compromised? Uniformly, IRS tax attorneys recommend you immediately alert the IRS and others if identity theft is suspected. They also suggest you review the Agency’s top 10 things to know about identity theft which have been listed below:

1. The IRS will not initiate contact with a taxpayer via email;

2. If you get an unsolicited email from the IRS, forward it to phishing@irs.gov;

3. Identify thieves can get your information through a number of means (steal your wallet/purse; posing as someone who needs your personal information – like a bank or insurance company; going through your trash; accessing an unsecure email account or internet site.);

4. If you find a web site claiming to be the IRS, and the URL doesn’t begin with www.irs.gov, report it to phishing@irs.gov;

5. Learn how to indentify unsecure websites, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx;

6. If someone steals your social security number, they can give it to an employer to avoid paying taxes on their income;

7. Your identity may have been stolen if the IRS notifies you there is more than one tax return on file for you during a particular year;

8. If your tax records have not yet been adversely affected by identify theft, but you believe you identity may have been compromised (i.e. lost wallet) you should follow the FTC guidance for reporting identity theft at www.ftc.gov/idtheft, and consider contacting the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490;

9. Show your Social Security card to your employer when you start a new job or to a financial institution for reporting purposes, but don’t carry the card around in your wallet routinely; and

10. The IRS has information about identity theft reporting, phishing and related fraudulent activities on its website, www.irs.gov.

If you have been the victim of identity theft and your tax records have been compromised get help. Contact the IRS immediately, and if you need assistance fixing the problem, consider consulting a competent IRS tax lawyer to get answers you may need to fix the problem.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Obama Care is Several Tax Increases in One

Since the U.S. Supreme Court’s decision approving the corner-stone of  the Obama care law (the “individual mandates”) many have claimed the new “penalty” represents the “largest tax in America’s history.”

According to several IRS tax lawyers, however, there appear to be nine (9) different revenue increases which are, in fact, larger within the  Obama care law itself. IRS tax attorneys point to the payroll and investment tax increases on high-income Americans which is projected to bring in three hundred and seventeen billion dollars ($317,000,000,000.00) over the next ten (10) years, and new taxes on health insurance providers and high-cost “a.k.a. Cadillac” healthcare plans which are expected to each bring in more than one hundred billion ($100,000,000,000.00). Many IRS tax lawyers have identified a total of twenty one new (21) tax hikes in the law, which interestingly also includes an excise tax on medical devices and a ten percent (10%) levy on tanning services.

Significantly, even the U.S. Department of Treasury’s Inspector General, who’s tasked with oversight of the IRS, says the Affordable Care Act “includes the largest set of tax law changes in more than twenty (20) years.” Most IRS tax attorneys will tell you there is little doubt the IRS will need more people to help enforce the new taxes. In fact, several IRS tax lawyers have expressed concerns the IRS will have to hire literally thousands of new employees at a time when its budget is being cut and it’s receiving poor marks for service by the agency’s Taxpayer Advocate.

IRS tax attorneys studying the new healthcare law note the penalty for not having healthcare insurance (the individual mandate) will be either a flat dollar amount or a percentage of household income. After starting at less than one hundred dollars ($100.00) in 2014, IRS tax lawyers say the law’s minimum flat amount rises to six hundred and ninety five dollars ($695.00) in 2016, and is then indexed to inflation in subsequent years. As a percentage of household income, the tax will be capped at 2.5% in 2016 and thereafter.

A 2010 review of the new law by the Congressional Budget Office and the Joint Committee on Taxation concluded that four (4) million people will be subject to the individual mandate’s penalties in 2016. Projections suggest that by that year there will be a total of twenty one (21) million nonelderly uninsured Americans.

Several IRS tax attorneys believe the majority of those uninsured Americans will be exempted from having to pay the “tax” because of their immigration status, religious beliefs, income level, or membership in an American Indian tribe. IRS tax lawyers say the IRS will also be restricted in the way it may enforce the payment of the new “tax”. For example, the Agency won’t be allowed to prosecute people as it can when individuals don’t pay other required taxes. Further, there are no civil or criminal penalties for refusing to pay the tax, ant the IRS will not be able to issue an IRS levy or wage garnishment to collect the tax. Also, no interest accumulates for unpaid “penalties.”

Howard Gleckman of the Urban Institute’s Tax Policy Center claims “the tax [a.k.a. the individual mandate penalty] is a mouse.” Gleckman asserts “it will affect relatively few people. And it will be almost impossible for the IRS to make anybody pay it.”Some IRS tax lawyers have opined the IRS will be forced to resort to scary letters and threats of withholding tax refunds to secure some modicum of compliance.

While the IRS has not yet issued procedures for how taxpayers will prove their in compliance, IRS Commissioner Shulman has suggested a process similar to the one currently used by taxpayers to report interest or investment income. Assuming the IRS adopts such a process, many IRS tax lawyers believe a health insurance company would be required to send the taxpayer and the IRS forms each year verifying the taxpayer is covered. Taxpayers would then be required to include the forms with their tax returns and the IRS would check them against the forms it receives directly from the healthcare insurer.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

IRS receives low-marks for service to taxpayers

IRS attorneys recently reviewed a scathing new report from the Taxpayer Advocate’s Office suggesting the IRS is quickly turning into a rude, machinelike agency offering little human contact with taxpayers. Despite the blistering report, Taxpayer Advocate Nina Olson told Congress it’s not all the Agency’s fault. Ms. Olson claims Congress bears some responsibility for curtailing IRS funding and dithering with tax laws like the alternative minimum tax until the last minute, a yearly occurrence that delays refunds. According to Ms. Olson, “taxpayer’s patience is being sorely tested,” and many IRS tax lawyers couldn’t agree more.

The Taxpayer Advocate’s report slams the new IRS. Like most private sector businesses these days, the Agency has become much more automated, greatly reducing the chance a taxpayer will ever actually interact with a tax agent, even during an audit. For example, a year ago 74% of all taxpayers who called the IRS spoke with a human. This year’s IRS target is 61%. In 2010, a caller would be on hold for about 10 minutes. This year the IRS goal is 18 minutes. Staffing and hours at taxpayer assistance centers are way down.

Many IRS tax lawyers say the shift to automation is especially noticeable in audits, where the Taxpayer Advocate asserts the IRS is being forced to deal with “growing responsibilities and shrinking examination resources.” IRS attorneys agree and cite the new Obama Care “penalties” as just one example of an increasing workload being pushed onto the IRS.

As with email or automated calls, the Taxpayer Advocate says the computerized approach confuses many taxpayers. Ms. Olson noted that in fiscal 2011 the IRS made 12,660,956 mostly automated contacts that “taxpayers have regarded as examinations.” But in reality only 1,564,690 were, in fact, IRS examinations. And even “real audits” have become automated, often turning a simple error into a big deal.

The Report indicates that when tax adjusters and taxpayers talk, problems are usually fixed or avoided. More often than not, when a taxpayer can actually speak with someone at the IRS there is a much higher likelihood they can find a way to address unfiled tax returns, stop wage garnishment, IRS levies, IRS liens, and workout an offer in compromise or some other payment arrangement to address the back taxes owing.

According to Ms. Olson, “automated procedures are more likely to produce inaccurate over-assessments, particularly for taxpayers who have literacy challenges or lack representation. They may also diminish end-to-end accountability by IRS employees, generate rework, burden, and other hidden costs, and leave many taxpayers unsatisfied.” So if you’re a taxpayer who has unfiled tax returns and/or owes back taxes, consider consulting a tax professional for help. A competent tax lawyer or other tax professional can go a long way towards helping you deal with a colder, more impersonal IRS these days.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Implementing Obama Care means thousands of new IRS employees

IRS tax attorneys tracking developments regarding the IRS have learned the Agency is currently planning to add literally thousands of new employees. Not since withholding taxes were first introduced during World War II has the IRS witnessed such a massive staffing expansion. The projected growth is arguably necessary to help enforce new tax mandates and penalties included within Obama Care. In fact, IRS tax lawyers note a new analysis by the Joint Economic Committee and the House Ways & Means Committee staff estimates up to 6,500 new IRS personnel will be needed to collect, examine and audit new tax information mandated on families and small businesses as a result of Obama’s healthcare legislation.

Despite President Obama’s pledge not to add new tax burdens onto the middle class, many IRS tax lawyers report there are literally scores of new federal mandates and approximately 21 new different tax increases totaling $400 billion under Obama Care. Perhaps it’s a sign of the times, but many of those increases have been hidden from voters, according to several IRS tax attorneys and many financial experts.

As most Americans have come to expect these days, the political fallout from the opposition has been deafening. Congressman Brady, a top House Republican and member of the Joint Economic Committee has said that “when most people think of health care reform they think of more doctors’ exams, not more IRS exams.” Congressman Brady went on to say “isn’t the federal government already intruding enough into our lives? We need thousands of new doctors and nurses in America, not thousands more IRS agents.”

Significantly, many IRS tax lawyers have expressed concern that the IRS’s projected staff expansion includes an increased number of criminal investigators whose job will be to arguably “make cases” whenever possible in order to increase financial penalties. In addition to more complicated tax returns, families and small businesses will be forced to reveal further tax information to the IRS, provide proof of government approved health care and submit detailed sales information to comply with new excise taxes. Whether these new requirements will cause a higher number of unfiled tax returns remains the subject of some speculation.

Unfortunately, several IRS tax attorneys along with the Centre for American Progress have expressed concerns that the IRS’s structure of using private agencies to collect “debts” encourages abuse. Under the current program, 12 private collection agencies are awarded as much as 25 cents of every dollar they collect, in addition to a $100 bonus for every account they close. The IRS strategy of paying private debt collectors a 25% commission to collect back taxes originally met with bipartisan resistance from Congress. Members of Congress claimed that the proposal jeopardized the rights and privacy of American taxpayers.

According to political consultant Mike Baker, the very nature of the program incentivizes collectors to push the limits of legality to extract more revenue from their intended targets. As part of the IRS Restructuring and Reform Act of 1998, Congress, fearing overly aggressive collection practices, explicitly prohibited the IRS from compensating its own collectors based on the amount of money they collect. “If Congress believes that incentive-based pay will cause official IRS collectors to cross the line, why would they think private collectors would behave any differently?” asked Baker.

These latest developments cause many IRS tax lawyers to question how much authority the private agencies will be given by the Agency to use IRS levies, wage garnishment and IRS liens to collect back taxes owing. A number of IRS tax attorneys have commented that the IRS’s plan for using these private collection agencies to collect back taxes is not well documented and there remain several important unanswered questions about how the IRS will manage these private collection vendors.

Ultimately, while many Americans applaud the President’s efforts at attempting to craft a national healthcare plan, “the devil is always in the details.” Literally thousands of IRS tax lawyers across the country are still waiting for details on what may only be described as one of the largest tax increases in history.

Mike Baker summed it up for many Americans when he said “It’s a sad situation when the President and Commander in Chief is drastically cutting defense spending including reducing the size of the military while at the same time hiring more tax collectors to squeeze every dime — the dime Obama said would never be levied against Americans — out of taxpayers.”

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Thousands of Charities Lose Non-Profit Status with IRS

The Internal Revenue Service placed more than 435,000 charities on its revocation list, leaving charities with the prospect of paying income taxes on donations received after the status revocation. According to the IRS, the charities lost their non-profit status after failing to file tax returns for three consecutive years.

The revocation of the non-profit status of these charities also has important implications for their donors. The donors, who contributed an estimated $298.4 billion dollars to these charities in 2011, are facing the loss of deductions they were entitled to as a result of their contribution.

Although a revoked status can cause turmoil in the short run for charities whose status has been revoked, reinstatement is possible. The fees for reinstatement range from $100 to $850, according to the IRS. The charity will also face strict scrutiny, as its financial practices will also be under observation by the IRS before a revocation can be overturned.

According to the IRS, 40% of the total non-profit organizations operating at 501(c)(3) organizations in 2011 were listed on this revocation list. As is apparent, this is no small number. To find out how this could affect you and the deductions made on your tax return, please contact your competent tax professional.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Obama Care Passes: What Does This Mean for Taxpayers?

According to IRS tax attorneys tracking recent case law developments, key provisions of Obama Care were upheld last week by the U.S. Supreme Court on grounds the Act’s requirement that most taxpayers must purchase healthcare insurance or suffer a penalty [a.k.a. “individual mandate”] constitutes “a tax”and is therefore permissible under Congress’ power to tax.

Most IRS tax lawyers recognized Obama Care’s individual mandates are the linchpin of the legislation. Without these individual mandates, there would not be a sufficiently large pool of paying participants, many of whom are young and healthy, to cover the cost of treating others who are running-up huge healthcare expenses. In the end, many IRS tax attorneys agreed with the U.S. Supreme Court’s conclusion that what Congress and President Obama insisted was just a penalty under the law was, in fact, nothing more than another tax on taxpayers already struggling in the worst economy since the Great Depression.

It was not overlooked by many IRS tax lawyers that the U.S. Supreme Court also struck down another, arguably equally important part of Obama Care. The Court said the federal government could not require states to dramatically expand Medicaid by penalizing those states who refused to do so by withhold federal taxpayers dollars. The Court said that Congress may offer states incentives for such a desired expansion, but states must have a real choice. Threatening to withhold existing Medicaid dollars “is economic dragooning that leaves the states with no real option but to acquiesce in the Medicaid expansion.”Several IRS tax lawyers have expressed concern that America’s poorest citizens may actually see no benefits from Obama Care if the states in which they live opt not to expand benefits.

For the rest of us, IRS tax lawyers are predicting enforcement of Obama Care will likely result in a crushing new workload being added to an already overburdened I.R.S. At present, details about how the tax collection agency will enforce Obama Care “penalties”are unclear. Assuming the I.R.S. will collect Obama Care taxes in the same way it collects other federal taxes owing, it may be expected to use traditional collection techniques such as an IRS lien, IRS garnishment, and/or IRS levy to go after citizens not in compliance. Equally uncertain, at this time, is whether traditional resolution methods like an offer in compromise and payment plans will be part of the process of resolving Obama Care violations.

If you’re uncertain how Obama Care will affect you and have questions about the legislation, you’re not alone. IRS tax attorneys recommend you get the answers you need from a professional tax advisor.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999