FMH attorneys routinely represent clients in all manners of disputes with the IRS, including various specialized IRS enforcement initiatives.
The following are representative of the areas that we handle for clients but this is by no means an exhaustive list.
Penalties – Late Filing, Late Payment, Accuracy Related
The tax laws impose penalties for the late filing of tax returns and the late payment of taxes. Each of these penalties can be as much as 25% of the tax due as shown on the return. 26 U.S.C. § 6651.
During the course of an audit, the IRS can assess taxpayers penalties for any errors on their returns. These “accuracy related” penalties can be 20%, 40% or even 75% of the amount of tax owed. 26 U.S.C. § 6662, 6663
The IRS recognizes a limited set of reasons that constitute reasonable cause for the abatement of these penalties.
FMH attorneys help clients evaluate whether they have grounds to request an abatement of these penalties, and if so to navigate the complex IRS process for requesting an abatement.
Unfiled Tax Returns
FMH attorneys routinely help clients address unfiled tax returns and come back into compliance.
In some instances, a taxpayer has a circumstance that causes them not to file a tax return for one year, but then because of the unfiled return, the taxpayer feels that they cannot file in subsequent years.
Multiple unfiled returns only compound the problem by increasing the total unpaid liability, penalties and interest. They also potentially increase the risk of a criminal investigation.
When possible, it is often preferable to deal with unfiled returns before being contacted by the IRS. We assist taxpayers in proactively addressing filed returns (e.g., through a voluntary disclosure), and in other instances we assist taxpayers who have been contacted by the IRS.
If a taxpayer is not able to pay the amount owed for the unfiled returns, we can help address the outstanding balances, such by an installment agreement or offer-in-compromise.
Promoter and Preparer Penalties
The tax laws provide the IRS with the power to seek injunctions against tax return preparers for the alleged preparation of inaccurate tax returns. 26 U.S.C. §§ 6701, 7407.
The tax laws also provide the IRS with the power to seek injunctions against so-called promoters that allegedly market abusive tax shelters or promise false tax benefits. 26 U.S.C. §§ 6700, 7408.
These investigations begin with an IRS investigation that can result in the assessment of significant penalties. In the case of a promoter, the penalty can be the entire gross income from the activity. See 26 U.S.C. § 6700.
These cases can also end up in court, with the United States seeking an injunction to put the preparer or promoter out of business.
FMH attorneys have handled these cases for the government, and they have defended these cases in private practice.
Bitcoin and Cryptocurrencies
Another area that has received significant attention in recent years is Bitcoin and cryptocurrencies.
For example, the IRS now requires taxpayers to disclose cryptocurrency transactions on their individual income tax returns.
FMH helps taxpayers navigate and understand the tax implications of buying, selling and owning cryptocurrencies. We also assist taxpayers with unreported cryptocurrency transactions.
Summons Enforcement
One of the IRS’s investigative powers is to issue summonses to taxpayers and third parties to produce records or provide testimony. See 26 U.S.C. § 7602.
If a taxpayer fails to respond to a summons, the United States can bring a suit in federal district court to enforce the summons. See 26 U.S.C. § 7402.
However, while the IRS has broad power issue summonses, its authority is not unlimited and there are defenses to these requests.
FMH attorneys have counseled clients who have received summonses and represented clients in summons enforcement cases in district court.
Trust Fund Recovery Penalties
Sometimes for various reasons businesses fail to file Forms 940 and 941, and to withhold and pay over employment taxes to the IRS.
In this circumstance, a business owner can be held personally liable for the employment taxes that are not withheld from employees’ wages or paid over to the IRS. These are so-called trust fund recovery penalties. See 26 U.S.C. § 6672.
Depending on the number of employees, these liabilities can easily total tens of thousands, hundreds of thousands or millions of dollars.
Not only can business owners be held personally liable for these taxes and place their own assets at risk, but others who have some role with the company’s accounts payable or finances can be held responsible too.
As with most IRS penalties, there are defenses, but it takes knowledge of the defenses and methodical work to develop and present the pertinent facts to the IRS in these cases.
FMH attorneys have experience defending clients in trust fund penalty investigations and in court.
FBAR Litigation
While the IRS had authority to determine and assess penalties for failure to file FBARs, these are penalties are part of the Bank Secrecy Act (Title 31) and not the tax laws (Title 26). As a result, the procedure is different than tax penalties.
FBAR penalties can be significant. For non-willful violations, the penalty can be $10,000 per year. For willful violations, it can be the greater of $100,000 or 50% of the account value. 31 U.S.C. § 5321(a).
For example, FBAR penalties are subject to a different, and shorter, statute of limitations than tax assessments. 31 U.S.C. § 5321(b).
Also, once the IRS makes an assessment of FBAR penalties, it generally must bring a case in federal district court to reduce those assessments to judgment within two years. 31 U.S.C. § 5321(b).
FBAR litigation is a dynamic and evolving area, involving the Eight Amendment prohibition against excessive fines, administrative law and other legal principles.
FMH attorneys have experience defending clients against the assertion of FBAR penalties.
IRS “Dirty Dozen”
The IRS publishes a yearly list of the so-called “Dirty Dozen” tax scams that the government considers abusive and priorities for enforcement.
Some of these remain constant, and others change from year to year.
FMH attorneys stay up to date on the current IRS initiatives, and we advise clients on these and other areas.
Florida Department of Revenue
FMH attorneys help clients resolve issues and audits with the Florida Department of Revenue.
Whether you are facing a worker classification audit, an audit involving the sales tax on commercial leases or other sales tax issues, we can help.
We also advise clients on documentary stamp tax and other transactional issues.