Honest Dialogue

by Debbie Bush, Tax Consultant, JK Harris and Company

I would like to share a touching story I had with a client. I was so grateful to help this client with his IRS tax nightmare; he had carried around this burden for many, many years. This gentleman had been afraid for many years. He was about 75 years old when he came in to see me about a tax debt that he had with the IRS. He started telling me about all the horrible things people had told him might happen to him from losing his home to losing his small checking account -he was afraid the IRS would have him living out in the streets. He had no family to depend on and could not survive if the IRS took what little he had.

After listening to my client, I responded by asking if he had any correspondence from the IRS and he said not for a while but did from years ago. He took out an old, worn wallet and carefully opened it. He took out a worn, folded piece of paper that looked to be very old. He handed me the letter the IRS had sent to him about 15 years ago. He said he had filed all of his tax returns on time, but just could not pay his income tax when it was due because he worked small jobs for other people, he had received 1099 income and was barely getting by on what he brought in.

I looked at the letter, then I looked up at this old, fearful man and told him that he had nothing to worry about. You see, the statute had run out on his tax liability and the IRS could no longer collect from him. He looked shocked when I informed him of this and he started crying. I explained to him, the IRS had only so many years to collect back taxes and his tax debt had expired. He asked me what he owed JK Harris. I said nothing at all and he started crying again. This 75 year old man had been walking around for years, fearful of the IRS. He had been carrying this sense of dread and worry with him for at least 15 years; worried he would lose his home or that the IRS was going to come after him. He gave me a big hug when he left. I’ll always remember this man who never technically was a client of JK Harris, but who I was able to help breathe a sigh of relief. I will never forget him, or the sense of relief he felt on leaving my office.

National Taxpayer Advocate releases annual report to Congress

Last week, National Taxpayer Advocate Nina Olson released her annual report to Congress detailing the need for reform within certain parts of the IRS. Again this year, Ms. Olson has listed the need for tax reform as the number one priority for the IRS. She expressed concern over the IRS’ continued use of tax liens and the lack of alternative collections methods.

Ms. Olson’s report stated more than 1.1 million taxpayers had tax liens filed against them by the IRS in Fiscal Year 2010. Tax liens can be financially devastating to a taxpayer since the lien shows up on their credit report and will linger for seven years after the tax liability is paid. Once a taxpayer has a tax lien on their credit report, it can affect their ability to gain housing (owned or rented), employment, and can affect their ability to get affordable loans and insurance.

In the industry, we have seen an increased number of tax liens being filed and Ms. Olson’s report confirmed it. The NTA report states that tax lien filings have increased 550 percent in the past ten years.

You can view the JK Harris official press release on this issue at Expert Click.

Honest Dialogue

By Antonia Martin, Tax Consultant, JK Harris and Company

Some clients just don’t believe that the IRS can and will enforce collections against them if they ignore the collection letters that keep coming in the mail.

I had one client who had not filed tax returns for a dozen years. The IRS had done a Substitute for Return* for several of the years the client did not file. (The IRS will do a Substitute for Return for you if you have not filed your tax returns. Instead of giving you the deductions or credits you may be entitled to, the IRS will file a return single with the least ideal tax situation you want to be in.) The client came to the appointment he set up with me with a letter showing he had a tax liability of $54,000. He also had a garnishment letter from his employer. I showed him on the table that comes with the garnishment notice how much of his income the IRS would “allow” him to keep and how much of this paycheck the IRS was going to intercept each week – this amounted to the client getting $179, and the IRS getting $2000.

He scoffed at me and said there was no way that would happen, that it could not be that bad. He said I was crazy to ask the amount of money we needed to do all of his past due tax returns and to get a levy release on his wages. He left the office disgusted with me and disbelieving the IRS would take that much of his income.

The very next week, he called me in a panic because his employer had garnished his wages exactly as I had informed him they would. He immediately decided to hire JK Harris to help him get all of his tax returns filed and to get the wage levy released.

* Important note about substitute for returns – it is very important for you to go back and file for any years the IRS may have filed SFRs for you. In some cases, our clients have found they owed very little back taxes – in other cases they owed nothing.

Tax resolution blog adds new feature

by Gina Anton, Director of Corporate Communications

Happy 2011! In the spirit of the New Year and a fresh new start, I would like to introduce a new feature on our tax resolution blog – Honest Dialogue: Stories from our Tax Consultants. Honest Dialogue will feature information from our consultants on what the most common tax issues they see are, the most frequently asked questions they get and stories from the field – situations they’ve seen where we have been able to help our clients with their back tax problem.

Our tax consultants are the second person to speak with our clients (second only to speaking with one of our appointment setters for their appointment), before the actual work begins on our clients’ cases. Often, our consultants are counselor, confidante and friend to their clients who have been burdened with their back tax liability for quite some time. Our consultants are very familiar with the tax issues our clients deal with and are familiar with the fear the client faces of the IRS and its tactics.

In the first installment later this week, one of our consultants, Antonia Martin, will tell us what the top five questions about tax resolution she gets from her clients are and how she answers those questions.

If you have a tax question you would like JK Harris to answer, please submit it to us here or via email at jkharris@jkharris.com.

Happy New Year!

Former New York Legislator Pleads Guilty to Tax Evasion

On this blog, we have often discussed the importance of filing your tax returns each year and filing them on time. We should also mention it is equally important to file complete and accurate returns. Falsifying your tax returns is something the IRS and the government does not look kindly on.

Former Republican State Senator Vincent Leibell pleaded guilty in court this morning to filing false tax returns for 2003 through 2006. He also admitted trying to influence a grand jury investigating corruption in Putnam County, New York.

Leibell resigned last Thursday, about a month before his eighth term as Senator was set to end. After spending 28 years in the Senate and Assembly, Leibell was elected to serve as the Putnam County Executive.

More details on this story at: http://www.lohud.com/article/20101204/NEWS01/12040336/Source-Leibell-s-charges-include-obstruction-of-justice-tax-evasion.

TIGTA Reports Possible $576 Million in Back Taxes Owed From Non-filers For 2007

According to an article published by Accounting Today, the Treasury Inspector General released a report stating the IRS could unearth up to $1.3 billion in unpaid taxes by making better use of currency report data. These reports could help pinpoint non-filers who have generated enough income from certain financial transactions, but have failed to file a tax return.

TIGTA estimated over 40,000 potential non-filers in 2007 could owe as much as $576 million in back taxes, penalties and interest, while under-reporters could owe as much as $758 million in back taxes, penalties and interest for the same period. Read the full article below:
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The Internal Revenue Service could unearth as much as $1.3 billion in unpaid taxes, penalties and interest by making better use of currency report data to identify taxpayers with potentially unreported income, according to a new government report.

The report, by the Treasury Inspector General for Tax Administration, assessed the IRS’s use of currency reports to address nonfilers and under-reporters. Banks and other financial institutions are required to file reports on currency and suspicious transactions, which are in turn used by law enforcement officials to battle a range of financial crimes, such as narcotics trafficking, tax evasion and financing of terrorist activities.

TIGTA identified a number of individuals who have enough cash to engage in currency transactions totaling at least $20,000, but did not file tax returns even though they appeared to have a filing requirement.

TIGTA also identified a number of other individuals engaged in similar currency transactions who filed tax returns, but reported income that did not appear sufficient to cover their basic living expenses. The difference between their income and expenses raises questions about whether additional income sources should have been reported.

TIGTA estimated that 42,804 potential nonfilers may collectively owe as much as $576 million in delinquent taxes, penalties and interest for 2007. TIGTA also estimated there are 78,770 potential under-reporters who may owe as much as $758 million in additional taxes, penalties and interest for 2007.

TIGTA recommended that, as resources become available, the IRS should explore the feasibility of making greater use of currency transaction reports to pursue additional nonfilers and under-reporters for audit.

IRS management agreed with the recommendation. However, IRS management did not commit to pursuing additional potential under-reporters for audit, nor did they agree with the outcome measure because of concerns with the selection criteria used. TIGTA maintains that the potential $1.3 billion of increased revenue is reasonable considering the assumptions used to make the estimate.

Posted by JK Harris

Wesley Snipes Ordered to Report to Bureau of Prisons; Found Guilty of Tax Crimes

Today, a federal judge rejected actor Wesley Snipes’ request for a new trial and ordered him to report to the Bureau of Prisons to begin serving a three year sentence on tax related crimes. Although his attorneys presented evidence of two jurors claiming members of the jury were prejudiced in the case from the beginning. Prosecutors have accused Snipes of obstructing the IRS and attempting to avoid paying millions of dollars in taxes. For details, read the full article below, written by Stephen Hudak of the Orlando Sentinel.
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OCALA — A federal judge today rejected movie star Wesley Snipes’ demand for a new trial and ordered the actor to surrender to the U.S. Bureau of Prisons to begin serving a 36-month prison sentence for tax-related crimes.

In a 17-page order, U.S. District Court Judge William Terrell Hodges said, “The Defendant Snipes had a fair trial; he has had a full, fair and thorough review of his conviction and sentence by the Court of Appeals; and he has had a full, fair and thorough review of his present claims, during all of which he has remained at liberty. The time has come for the judgment to be enforced.”

Snipes, 48, an Orlando-born star of “Jungle Fever,” “White Men Can’t Jump,” and “The Fugitive” sequel “U.S. Marshals,” was convicted in 2008 of three misdemeanor counts of willfully failing to file federal tax returns.

Prosecutors contend he obstructed the IRS and attempted to avoid paying millions of dollars in federal taxes.

“It is just shocking,” Snipes’ Atlanta-based lawyer Daniel Meachum said in an e-mail to the Orlando Sentinel. “Wesley is very disappointed but staying strong and positive.”

The actor’s defense team had hoped the judge would grant Snipes a new trial after receiving e-mails from two jurors who claimed that other members of the panel had concluded the actor was guilty before the trial began.

Meachum also argued that a key government witness, Kenneth Starr, provided “tainted” testimony against Snipes. Starr, a New York financial adviser with a stable of celebrity clients, pleaded guilty recently to fraud.

“We were hopeful that we had convinced Judge Hodges that the government’s witness, Ken Starr, had perjured himself and that the government knew of his criminal activities and the predetermined minds of three jurors, but we obviously fell short in accomplishing that,” Meachum said.

He said the defense team was “determined to exhaust all plausible avenues in this matter.”

While Snipes could challenge Hodges’ latest ruling and ask the U.S. Supreme Court to review his case, he would likely await the ruling from a federal prison cell.

The judge’s order requires Snipes to “surrender himself” upon receipt of notice from the U.S. Marshal Service or from the federal Bureau of Prisons. It is unclear in the order where and when he must turn himself in.

Best known as the vampire-killing hero in the science-fiction trilogy “Blade,” Snipes was accused of conspiring with Eddie Ray Kahn of Lake County to avoid paying more than $15 million in taxes from 1999 to 2004.

The conspiracy charge accused Snipes of seeking a fraudulent refund of $7.3 million.

Kahn, who founded American Rights Litigators in Mount Dora, sold illegal tax-dodging schemes and convinced the actor that he had no obligation to pay federal income taxes. Kahn was sentenced to 10 years in prison.

Snipes’ defense team provided Hodges with an unsolicited e-mail from a juror whose identity was redacted from public documents and who suggested that other members of the panel were not fair to the actor.

The e-mail read: “I served on the jury in Ocala that found him guilty on 3 counts of failing to file taxes. It was a deal that had to be made because of certain jurors that had already presumed he was guilty before the trail (sic) started and we only found this out in the last few days of deliberation. We thought we were making the right deal because we did not think he would go to jail for not filing taxes. There were 3 on the jury that felt this way and told us he was guilty before they even heard the first piece of evidence going against what the judge had said.”

Jurors take an oath pledging to obey the principle that a defendant is innocent until proven guilty.

In his ruling, Hodges noted the e-mail “presents, to be sure, a troubling set of circumstances,” which would be contrary to the jury’s oath and his repeated instructions before and during the two-week length of the trial.

U.S. law also prohibits courts from prying into jury deliberations without evidence of outside influence.

Hodges pointed out, “It is also worthy of note…that the veracity of the claim of juror misconduct in this case is undermined by the fact that (Snipes) was acquitted of the most serious charges; that the complaining juror waited two and a half years before bringing the alleged misconduct to light; and the fact that the jurors’ complaint was expressly motivated by the Defendant’s sentence — a consideration that, in itself, the jury was expressly instructed to disregard in arriving at its verdict.”

Posted by JK Harris

Check out our previous blogs regarding Wesley Snipes here:

Wesley Snipes’ Lake County tax guru gets more prison time

Frivolous tax arguments do not sit well with IRS

JK Harris Helps Albuquerque Client Save ‘A Bundle’

We recently received an enthusiastic testimonial from a client in Albuquerque, New Mexico. Tina Driver came to JK Harris for help after cashing out a 401K when she lost her job. Although she specifically asked the investment firm to withhold all taxes and penalties, she later found out they only withheld the penalties. When she saw the size of her tax bill, she knew without a job, she did not have the means to pay her back tax debt.

“Needless to say, I owed a bundle,” said Driver. “The penalties and interest alone were close to $60,000. I had no hope of ever repaying that amount.”

Our tax team went to work analyzing Ms. Driver’s situation to determine what she would be able to pay and which IRS resolution programs she might qualify for. The team determined she was a likely candidate for the Offer in Compromise (OIC) program. This program allows a taxpayer to resolve their tax liability by paying less than they owe, although they must meet the IRS’ rigid criteria to qualify for the program.

JK Harris was able to negotiate a deal for Ms. Driver, saving her over $48,000 in penalties and interest.

“JK Harris held my hand through the whole ordeal,” said Driver. “Thanks to JK Harris, I got my life back. I have and will continue to recommend JK Harris!”

IRS Has $164.6 Million in Unclaimed Refunds Belonging to 111,893 Taxpayers

In a news release issued yesterday, the IRS stated they have an overabundance of unclaimed tax refunds, which have gone unclaimed by nearly 112,000 taxpayers. If you think (or know) you are missing a tax refund, you need to contact the IRS and provide them with your new address. Some taxpayers are missing out on not one – but multiple – tax refunds. According to the press release, the average refund check weighs in at $1,471.

If you think you may be owed a refund but have not received it, be sure you have updated your address with the IRS. You only need to update your address once to receive your refund(s). Updating an address is easy. You can file Form 8822 or go online to www.irs.gov and using the “Where’s My Refund?” tool. This tool allows taxpayers to check the status of their refunds and will allow them to change their address online if their tax refund has been returned to the IRS.

If you prefer to check on your refund over the phone, you can use the telephone version of “Where’s My Refund?” by calling 1-800-829-1954. The IRS will provide information over the phone on how to update your address.

If you would prefer not to risk having your check lost, stolen or undelivered, you can choose to have your tax refund electronically deposited to your bank account, divided into two to three separate accounts, or you can choose to buy a savings bond with it. For more information, check out the IRS’ newsroom.

JK Harris Warns Taxpayers to Protect Their Taxpayer Identification Number (TIN)

In past blogs, we have discussed the importance of protecting your identity from identity theft. Multiple use of Taxpayer Identification Numbers (TINs) has been on the rise. Your TIN is in most cases, your Social Security number. The IRS has – and continues to identify the use and abuse of TINs by persons who do not own these numbers. According to TIGTA, the Treasury Inspector General of Tax Administration, the abuse of these numbers has resulted in millions of dollars in erroneous refunds. According to TIGTA, the amount could exceed $1.9 billion over five years if something is not done soon to prevent the theft of these numbers. For more information, read the full report by TIGTA here.

Posted by JK Harris