Unfiled Tax Returns and Bankruptcy Discharge

Besides criminal tax exposure, penalties, and interest, the US District Court, Northern District of California gave another reason to file unfiled tax returns. The Court held that a taxpayer’s late filed return was not a return for bankruptcy law purposes and thus non-dischargeable.

unfiled tax returnsIn 2001, a taxpayer failed to file his income tax return.  The IRS utilized third party information to prepare the taxpayer’s 2001 tax return.  An IRS prepared return is known as a Substitute for Return (SFR). On March 27, 2006, the IRS mailed the taxpayer a statutory notice of deficiency for the 2001 tax year proposing back taxes of $70,662. 

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Failure to File Tax Returns and Pay Taxes does not preclude IRS Bonuses

failure-to-pay-irs-bonusesThe Treasury Inspector General for Tax Administration (TIGTA), Reference Number 2014-10-007, discovered that tax compliance is irrelevant when the government issues performance based awards to IRS employees. Therefore, employees who fail to pay their taxes or fail to file their tax returns can receive bonuses.

TIGTA conducted its tax audit in an effort to reduce spending on award programs. According to TIGTA, the IRS Restructuring and Reform Act of 1998 compels the removal of IRS employees who are found to have intentionally committed misconduct, including the willful failure to pay and file taxes.

Providing awards to employees with conduct issues is not mentioned in the 1998 Restructuring and Reform Act; however, TIGTA found paying IRS employees bonuses with delinquent tax accounts is contradictory to the spirit of the Act.

TIGTA recommended the non-payment of performance and discretionary awards for IRS personnel who fail to file or pay their taxes If you did not file taxes last year or owe back taxes to the IRS or state taxing authorities, then the Law Offices of Todd S. Unger, Esq. can help.

The failure to file pay your taxes can result in significant penalties and criminal exposure.  Therefore, there is no time to delay.  The Law Offices of Todd S. Unger, Esq. can implement and execute a tax strategy to become compliant.  By filling out the attached contact form or calling the number below, you can speak directly with Todd S. Unger, Esq. himself.   Email or call Todd S. Unger today (877) 544-4743.

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NJ Sales and Use Tax Relief for Tattooing and Cosmetic Makeup Services in Reconstructive Breast Surgery

toddThe New Jersey Assembly Budget Committee approved a bill, A-4526, that provides a sales tax exemption for permanent cosmetic make-up services provided in conjunction with reconstructive breast surgery.  The new law, known as “Jen’s Law” became effective on January 17, 2014. The law was named after Jennifer Dubrow Weiss of Vorhees, NJ who had a double mastectomy upon discovery of genes that lead to a high risk of cancer.

Under the old New Jersey tax law, procedures for permanent cosmetic make-up to create the appearance of a pre-mastectomy breast were subject to sales tax.  Many insurance companies had excluded sales tax from coverage for cosmetic services which caused large out of pocket costs for the insured.

Assembly woman Caroline Casagrande, who sponsored the bill, expressed the following in a press release:

“Women who are at a high risk for getting breast cancer often take preventative measures to reduce that risk. A mastectomy is an extremely traumatic event for a woman,” “In addition to the physical pain, the psychological effects are often devastating. Reconstructive surgery is often an important step in the healing process. Requiring women to pay out of pocket sales tax for ensuing cosmetic services is an additional burden they should not have to bear.”  She further stated that “During the final stages of breast reconstruction surgery, women often decide to use tattoos to create the appearance of a pre-mastectomy breast.”

On March 21, 2014, the NJ Division of Taxation issued a reminder that sellers of tattooing, permanent body art, or permanent cosmetic make-up application services should not charge a sales tax in connection with reconstructive breast surgery if the customer provides a doctor’s prescription to the seller. 

If you have been assessed with a sales tax on or after January 17, 2014, you should apply for a tax refund from either the service provider or the Division of Taxation.  New Jersey tax law requires that you file your claim for a refund on the Form A-3730 within four years from the date the sales tax was paid.

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Tax Preparer Barred from Preparing Returns

The Department of Justice has announced that Keisha Stewart, a Plantation, FL tax preparer, has been barred from preparing federal tax returns for others.  On March 20, 2014, a federal court in Ft. Lauderdale entered a final judgment of permanent injunction.

The complaint alleged that Stewart and her company Professional Tax Services prepared false income tax returns that inflated income or included fictitious income to qualify customers for earned income tax credits.  The complaint further alleged that Stewart falsely claimed education and home and energy credits, head of household status, dependents, and child and additional child tax credits on her clients’ behalf to reduce their tax liabilities.  

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2014 Interest Rates on IRS Overpayments and Underpayments and Negotiating Tax Interest

If you cannot pay your taxes, then by law the IRS must charge interest on the underpayment of tax.  The IRS computes its interest rate on the federal short-term rate and adjusts the rate every quarter.  The IRS interest rates are compounded daily.

Recently, the IRS has announced that the interest rates on overpayments and underpayments of tax for the 2014 second quarter will remain unchanged. The IRS has announced the following rates:

  • - 3 percent for overpayments, in cases other than corporations;
  • - 2 percent for overpayments in the case of a corporation (except 0.5 percent for the portion of a corporate overpayment exceeding $10,000); and
  • - 3 percent for underpayments (except 5 percent for large corporate underpayments).
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The IRS is Reporting Millions in Unclaimed Tax Refunds Time to File Those Unfiled Tax Returns

When the 2014 tax season ends, you may lose your tax refund.  Often times, I receive calls from prospects claiming that the IRS is keeping their “return.”  The correct terminology when speaking IRS parlance is that they’re keeping your “refund”.

There could be numerous causes of why the IRS is keeping your money or disbursing it elsewhere.  You may be in arrears of your child support obligations or owe back taxes, but the biggest reason for the IRS keeping your refund is because you’re too late.

Generally, a refund claim must be filed within three years from the due date of the return plus extensions or two years from the time the tax was paid either voluntarily or by garnishment or levy.  The exception to this general rule is if you’re “financially disabled” defined as unable to manage your financial affairs due to a serious medical impairment.  The above refund statute is approaching its limitation period for the 2010 tax year.

The IRS reported that it owes more than $760 million in unclaimed 2010 tax refunds.  If you have not filed a tax return in years, you should immediately file the 2010 tax year no later than April 15, 2014 or October 15, 2014, the latter date if you filed an extension.

Contact Us

Todd S. Unger, Esq. is a tax attorney focusing on assisting taxpayers who have not filed in years or are experiencing a tax dispute with the IRS.  If you haven’t filed your 2010 tax return, there is no time to delay.  Don’t lose your 2010 tax refund; Call or Contact Todd S. Unger today (877) 544-4743.

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“Real Housewife” Pleads Guilty to Fraud in New Jersey

taxKnown for their roles in the reality television show The Real Housewives of New Jersey, Teresa and Giuseppe “Joe” Giudice could be facing even more drama after pleading guilty on March 4 to federal charges of committing a long-running financial fraud. The charges include conspiracy to commit mail and wire fraud as well as three types of bankruptcy fraud. Mr. Giudice also pleaded guilty to failing to file a tax return in 2004, admitting to not having filed taxes on income of approximately $1 million over four years, between 2004 and 2008. 

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IRS Tax Liens and Foreclosure and Sale

On February 12, 2014, the United States District Court granted the United States’ motion for summary judgment which entitled the US to foreclose upon a taxpayer’s properties for back payroll and income taxes. 

aIn US v. DeSerio, a couple owned two properties in Cornville, Arizona.  The couple owed outstanding federal employment, unemployment, and income tax liabilities covering multiple tax years from the early 1990s through 2007.  In the aggregate the couple owed the IRS over 1 million in back taxes.  The IRS utilized the powers authorized in IRC §6321 and §6322 and filed a notice of federal tax lien in favor of the United States.  The notice of federal tax lien attached to all of the taxpayers property rights including two Arizona properties owned solely by the taxpayer.

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Watch out for Schedule-A Tax Audits (Tips for Filing in 2014)

taThe IRS has been decimated by budget cuts.  Yet, despite its budget, the IRS has collected more in revenue.  One reason for the increase in revenue was because the IRS focused on higher income earners.  The other reason for the increase of revenue was the expanded utilization of correspondence audits.  Correspondence audits occur by mail and focus on a specific schedule or line-item rather than the entire tax return.  These IRS audits are cheaper than office and field audits and can target taxpayers of all income classes.

The issues that are addressed through the correspondence audit often involve Schedule A issues such as the deduction of medical expenditures, home mortgage interest, unreimbursed employee expenses and charitable donations. If you itemize your deductions, as opposed to taking the standard deduction, then you would file a Schedule A with your 2013 Form 1040.  Therefore, you should be aware of IRS tax audits pertaining to Schedule A. 

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