IRS Urged To Penalize - And Prosecute Payroll Tax Violations, By Robert W. Wood, Esq. Published in Forbes 23 March 2017

The IRS watchdog known as the Treasury Inspector General for Tax Administration has issued a report with some shocking figures about serious employment tax crimes. The number and size of payroll tax violations is going up, and mere IRS penalties are not enough to stop the trend. The report urges two parts of the IRS--including its Criminal Investigations Division--to act. Employment tax embezzlement is a felony punishable by up to five years in prison. Employers are required to withhold and remit payroll taxes including federal income taxes, Social Security and hospital insurance (Medicare) taxes withheld from employee pay. Willful failure to remit them is a crime.

The new report first tries to lay out the levels of payroll tax noncompliance. It also assesses the extent of civil and criminal enforcement actions taken by the IRS. And change is probably coming. The watchdog report recommends that the civil and criminal parts of the IRS take on a new and focused strategy to become more effective against egregious employment tax cases. In addition, the report suggests that IRS collection personnel should expand their criteria for referring potential criminal cases to that division of the IRS. In particular, cases involving over $1 million, and individuals involved in 10 or more companies with payroll tax failures.

In part, IRS officials have already agreed with the recommendations. The IRS agreed with the need to develop a focused strategy. The IRS disagreed that its collection function should expand the criteria for referring cases to the Criminal Investigation Division. But as these issues get resolved, make no mistake, employment tax noncompliance is a serious crime. When employers fail to account for and deposit employment taxes, which they hold in trust on behalf of the federal government, they are stealing from the government.

These stolen funds include amounts used to fund important federal programs including Social Security and Medicare. The federal government must use general tax revenues to make whole the Social Security and Medicare trust funds for uncollected employment taxes. The report sees growing problems. As of December 2015, 1.4 million employers owed approximately $45.6 billion in unpaid employment taxes, interest, and penalties. Assessing 100% trust fund penalties on all responsible persons is an effective civil enforcement tool that the IRS can use to discourage employers from continuing egregious employment tax noncompliance. Even so, we should expect more enforcement, and earlier identification of payroll tax problems from the IRS.

In 2015, the IRS assessed the 100% trust fund recovery penalty against approximately 27,000 responsible persons. That may seem a high number, but it was 38 percent fewer than just five years before. Meanwhile, the number of employers with employment tax noncompliance for 20 or more quarters of delinquent employment taxes is steadily growing. It has more than tripled in a 17-year period. Even the 100% trust fund recovery penalty fails to deter some violations.

The report says that 59 individual taxpayer accounts assessed the trust fund recovery penalty for 10 or more entities. That sounds recurrent if not downright flagrant. Yet the report reveals that only 5 of the 59 individuals (a mere 8.5 percent) had been investigated by the Criminal Investigation Division of the IRS for potential criminal prosecution. The report also notes that there were many taxpayer accounts with over $1 million in trust fund recovery penalty assessments from 2010 through 2015. Approximately 700 individuals were assessed penalties in excess of $1 million each during this period, yet there were fewer than 50 of those individuals who were the subject of criminal investigations.

Although the willful failure to remit employment taxes is a felony, there are fewer than 100 criminal convictions per year.  In addition, since the number of actual convictions is so tiny, the report suggests that fear of prosecution does not deter payroll tax violators. Even though willful failure to remit employment taxes is a felony, prosecutors obtain fewer than 100 criminal convictions each year.

By Robert W. Wood, Esq. Published in Forbes 23 March 2017

IRS Collection Due Process (what you need to know)

The purpose of a Collection Due Process hearing is to have Appeals review collection actions that were taken or have been proposed.

After Appeals has made their determination and you do not agree,
you can go to court to appeal the Appeals’ Collection Due Process determination. You can request a Collection Due Process hearing if you receive any of the following notices:

·       Notice of Federal Tax Lien Filing and Your Right to a Hearing

·       Final Notice—Notice of Intent to Levy and Notice of Your Right to a Hearing

·       Notice of Jeopardy Levy and Right of Appeal

·       Notice of Levy on Your State Tax Refund—Notice of Your Right to a Hearing

·       Notice of Levy and of Your Right to a Hearing

To request a Collection Due Process hearing, complete Form 12153, Request for a Collection Due Process or Equivalent Hearing or a written request containing the same information as contained in Form 12153, and send it to the address on your notice.

You must request a Collection Due Process hearing by the date indicated in the notice we send you (for proposed levies, that date is 30 days from the date of the letter). The request must be led timely to preserve your right to judicial review of the determination issued in your Collection Due Process hearing.

If your request for a Collection Due Process hearing is not timely, you can request an Equivalent Hearing within one year from the date of the notice, but you cannot go to court if you disagree with Appeals’ decision.

During a Collection Due Process hearing, the 10-year period for collecting taxes is suspended and we are generally prohibited from seizing (levying) your property, if seizing your property is the subject of the hearing. We are permitted to seize your property during an Equivalent Hearing or a Collection Due Process hearing about ling of a Notice of Federal Tax Lien, but normally we will not seize property during these hearings. The 10-year period for collecting taxes is not suspended during an Equivalent Hearing.

You are entitled to only one Collection Due Process lien hearing and one levy hearing for each tax period or assessment. You are entitled to propose collection alternatives, such as entering into an installment agreement or an offer-in-compromise, for consideration by Appeals in the hearing. It may be necessary for you to submit financial information or tax returns to qualify for such collection alternatives.

Selig& Associates provides the most aggressive tax representation allowed by law. Specializing in Trust Fund Recovery Penalty (TFRP) representation, and all payroll, income and sales tax controversies. We settle contested tax audits; negotiate excellent payment plans, compromise tax debts, and resolve all civil and criminal tax issues, including innocent spouse relief and separation of liability. 

The Troubling Tax War Between Albany and Small Business (New York Post)

When Mike Brzoza’s cat was away, New York tax agents liked to play — and this was pure hardball hell.

Brzoza is caught in the crossfire of New York state’s deadly tax war on small businesses already struggling for survival, according to his tax accountant.

Brzoza’s Glendale Plumbing offices in Queens were recently padlocked and his staff sent home after state agents arrived, loudly demanding immediate payment of thousands in “overdue” sales taxes, his accountant told The Post.

And, in a strange twist, his office cat, Bella, was held “ransom.”

“They wouldn’t release Bella and only agreed to feed her once I came up with some money,” a distraught Brzoza recalled recently.

Brzoza was assessed $40,000 in “unpaid” sales taxes, excluding interest of 14.5 percent. He was also charged a special service fee: $436 to padlock his door.

“I got a really tough time,” Brzoza said. “I tried to be as nice and reasonable to them as I possibly could, but they were just cold and indifferent.”

Brzoza’s tax case is one of countless piling up in Albany. And sources say officials are dusting off more files that target one of the most vulnerable sections of the business community, small-company owners like Brzoza.

New York is amassing more each year in sales taxes — $27.4 billion estimated by the end of 2015, $4.6 billion more than in 2009, and they accounted for 27 percent of all taxes collected by the state last year, government data reveals.

The tax war comes as conditions for small businesses in New York deteriorate despite some recent breaks, with regulation and red tape sapping morale.

A new study by personal finance Web site GOBankingRates.com ranks New York 26th, in the bottom half of all states, for entrepreneurs wanting to start a business. New York has the nation’s worst tax score, tied with New Jersey, the study notes.

And with an average New York statewide sales tax of 8.48 percent, some analysts credit the latest sales tax haul to a “recovering” economy. Brzoza’s accountant thinks that’s laughable.

“I can tell you firsthand that New York state tax agents are ginning up sales tax liabilities against small businesses in record numbers,” said accountant David Selig, representing Brzoza. “During the past four years, the state has closed more businesses and assessed more fictitious liabilities than it has ever done before.”

In a statement to The Post, the New York State Department of Taxation and Finance said it takes “failure to remit sales tax very seriously because it is theft from customers, local governments and New York state. Customers pay sales tax fully expecting that it will be used for government purposes, not to line the pockets of business owners or to create an unfair advantage over honest businesses.”

Brzoza’s settlement is ongoing.

How Crooked Accountants and Unscrupulous Citizens Cheat on Their Taxes

Selig & Associates provides the most aggressive tax representation allowed by law. Specializing in payroll, income and sales tax controversies for individuals, contractors, restaurants and professional practices. We settle contested tax audits, compromise tax debts and all marital tax issues including innocent spouse relief and separation of liability. All tax representation is provided by a Federal Tax Practitioner and Licensed Attorney. To schedule a FREE face-to-face consultation, contact Selig & Associates today. 

The Internal Revenue Service warned taxpayers to be alert to unscrupulous tax return preparers touting inflated tax refunds. This scam remains on the annual list of tax scams known as the “Dirty Dozen” for 2017.

"Exercise caution when a return preparer promises an extremely large refund or one based on credits or benefits you've never been able to claim before," said IRS Commissioner John Koskinen. "If it sounds too good to be true, it probably is."

The “Dirty Dozen,” an annual list compiled by the IRS, outlines common scams that taxpayers may encounter. These schemes peak during filing season as people prepare their returns or hire others to help with their taxes.

Scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

Scam artists pose as tax preparers during tax time, luring victims by promising large federal tax refunds. They use flyers, advertisements, phony storefronts or word of mouth to attract victims. They may make presentations through community groups or churches.

Scammers frequently prey on people who do not have a filing requirement, such as those with low-income or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement.

Con artists dupe people into making claims for fictitious rebates, benefits or tax credits. Or they file a false return in their client’s name, and the client never knows that a refund was paid.

Scam artists may also victimize those with a filing requirement and due a refund. They do this by promising larger refunds based on fake Social Security benefits and false claims for education credits or the Earned Income Tax Credit (EITC), among others.

Falsely Claiming Zero Wages

Filing a phony information return, such as a Form 1099 or W-2, is an illegal way to lower the amount of taxes owed. The use of self-prepared, “corrected” or otherwise bogus forms that improperly report taxable income as zero is illegal. So is an attempt to submit a statement rebutting wages and taxes reported by a third-party payer to the IRS.

Some people also attempt fraud using false Form 1099 refund claims. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Taxpayers should resist the temptation to participate in any variations of this scheme. The IRS is aware of this scam and the courts have consistently rejected attempts to use this tax dodge. Perpetrators receive significant penalties, imprisonment or both. Simply filing this type of return may result in a $5,000 penalty.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security, veterans or low-income housing benefits. The loss of benefits comes as a result of false claims being filed with the IRS that provided incorrect income amounts.

Choose Tax Preparers Wisely

Honest tax preparers provide their customers a copy of the tax return they’ve prepared. Scam victims frequently are not given a copy of what was filed. Victims also report that the fraudulent refund is deposited into the scammer’s bank account. The scammers deduct a large “fee” before paying victims, a practice not used by legitimate tax preparers.

The IRS reminds taxpayers that they are legally responsible for what’s on their return even if it was prepared by someone else. Taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

Phony Arguments

No matter how some things are sliced, they're still baloney. If someone tells you that you don't have to pay taxes, check out The Truth About Frivolous Tax Arguments, where some of the more common false legal arguments made by those opposed to compliance with the federal tax laws are addressed. The page explains and rejects each contention, deals with frivolous arguments encountered in collection due process cases and illustrates penalties imposed on those pursuing frivolous cases.

See also IR-2016-27, Frivolous Tax Arguments Completes the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season

Doctor & Contractor Convicted! Tax Evasion & Money Laundering + NY Sales Tax “Criminal Charges” call Selig & Associates today

After a budget busting, bankruptcy inducing, two-week trial, a Federal Jury convicted (threw the book at) a well-respected Medical Doctor. You’re guilty! Sneered the sadistic Forman – guilty of tax fraud and money laundering, and that’s all there is to it. Case Closed! The Government called the doctor’s business-model a “scheme” but I see it differently, says David Selig of Selig & Associates. Tax law is complicated, and following the rules isn’t easy. Unfortunately, people that owe payroll and sales taxes are being treated as criminals and that’s the way the mop flops. Truly told, if you’re in trouble with the IRS or New York State Tax Department, the best defense is a strong offence.

Call Selig & Associates Today (212) 974-3435

New York Contractors caught in “Sting Operation” The Antitrust Division New York Field Office with the assistance of the FBI and the IRS Criminal Investigation’s New York Field Office are cracking down on bid rigging, bribery, tax offenses or fraud related to contracts (and NY Contractors are dropping like flys!) Truly told, if you’re in trouble with the IRS or New York State Tax Department, the best defense is a strong offence.

Do  you  have  a  tax  problem  that  needs  to  be  solved?

Has a Revenue  Officer  come  to  your  home  or  business?

Selig & Associates represents businesspeople, contractors and medical providers before the IRS and State.

Contact us today and schedule a FREE and legally privileged consultation in our conveniently located New York Offices (right outside of Penn Station).   

Failure to Disclose Income “You’re Guilty!” Selig & Associates can Help

A man was recently sentenced by a Senior United States District Court Judge to 1 year of incarceration, 2 years of supervised release, 200 hours of community service, and a $5,000 fine for evading federal income tax. Moreover, thanks to the tireless efforts of   the United States and the Special Agent-in-Charge at the Internal Revenue Service’s Criminal Investigation, New York Field Office, the newly minted felon was also ordered to pay $94,601 in restitution to the United States.

The condemned man admitted that between April of 2006 and August of 2010, he attempted to conceal the nature and extent of his assets from the Internal Revenue Service by underreporting the amount of income he earned at a rental property he owned. *The prosecution resulted from an investigation conducted by the Internal Revenue Service, Criminal Investigation.

Selig & Associates If you’re in trouble with the IRS and State – put the power of Selig & Associates on your side. Selig & Associates represents Construction Contractors, business-owners and medical providers before the IRS and State. Call us today and schedule a FREE and legally privileged consultation in our conveniently located New York Offices (right outside of Penn Station).  

(212) 974-3435  

“Tip of the Day” Section 7202 of the Internal Revenue Code provides, in part, as follows: Any person required to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall be guilty of an offense against the laws of the United States. 26 U.S.C. § 7202 United States v. Thayer, 201 F.3d 214, 219 (3d Cir. 1999).