Category Archives:Not Filing Taxes

Ohio Lieutenant Governor Candidates Backs Out After Tax Questions Surface

dfgdfAs news broke by several Ohio newspapers that Lieutenant Government candidate Sen. Eric Kearney (D) and his wife owed significant back taxes to the Internal Revenue Service and to state taxing agencies, the candidate decided to pull out of the race.

Races Heats Up as Candidates Face Questions

The race is a heated one, with Cuyahoga County Executive Ed FitzGerald (D) picking the state senator as a running mate in November. And, with only a few weeks to go, this puts the democratic candidate on the line. 

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Thousands of Tax Delinquents have Security Clearances

gggThousands of people holding security clearances are also tax cheats — a major problem considering that financial troubles are frequently considered a threat to national security. The reason? The farther in debt a person is, the more likely it is that they will turn to illegal activity to obtain needed funds. Russia has shown repeatedly that it is willing to pay cash for national secrets and has previously bought off former CIA and FBI agents.

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Do You Have a NY Back Tax Problem? Resolve it or call a Cab

aIf you owe back taxes that exceed $10,000 in NY State, your driver’s license may be suspended.

The New York State Department of Taxation and Finance is sending 16,000 suspension notices to delinquent taxpayers. Delinquent taxpayers will then have 60 days from the mailing date to work out a payment plan. The failure to act will result in the NY Department of Motor Vehicles sending a warning letter. If the taxpayer fails to work out a tax payment plan, within 15 days from the date of the second letter, their driver’s license will be suspended. In order to reinstate their license, full payment or a plan to full pay is necessary.

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Dolce and Gabbana to go on Trial for Tax Evasion

Dolce & GabbanaIn December, co-founders of the famous high fashion label Dolce & Gabbana will go on trial for tax evasion in their native Italy.

Domenico Dolce and Stefano Gabbana are accused of selling their business to Gado Srl, a Luxembourg-based holding company, in 2004. The pair are said to have created the company in order to carry out a plan not to pay taxes, Women’s Wear Daily reports.

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Beanie Sigel Rapper Sentenced to 2 Years for Tax Evasion

Philadelphia rapper Beanie Sigel, born Dwight Grant, was sentenced to two years in federal prison stemming from charges that he failed to file income tax returns. The rapper began serving his sentence on September 12, 2012.

Sigel was accused and convicted of failing to file tax returns from 2003 to 2005. He was reported to have earned over $2.2 million dollars from 1999 to 2005 and owed a total of $728,536 to the federal government. He was ordered to pay all back taxes and penalties and will endure a year of supervised release once his sentence is completed.

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What to Do If You Get Audited... And Cannot Find Your Tax Files...

Help! I’m Getting Audited and Cannot I Find All of My Records!

General speaking the IRS has three years to audit a tax return.  It is not uncommon for the IRS to audit your return in the third and final year.  For many of my clients, this poses a problem because records relating to the tax audit are lost or destroyed.  Although receipts are the best, you must remember the Cohan rule if your receipts are lost or destroyed.

George Michael Cohan was a major American entertainer, playwright, composer, lyricist, actor, singer, dancer and producer.  He was known for songs such as “Give My Regards to Broadway,” “Yankee Doodle Dandy, and “You’re a Grand Old Flag.  Despite writing such patriot songs, the IRS decided nothing was more patriotic than a tax audit.

Cohan’s career required him to travel extensively. He spent large sums entertaining actors, employees, and critics. Cohan did not keep a record of his spending on entertainment and travel, although he estimated that he incurred $55,000 in expenses over several years. The Board of Tax Appeals (BTA) disallowed the deductions due to Cohan’s lack of documentation.

Cohan’s tax attorneys argued that the IRS was wrong because although his records were missing, George had presented other credible evidence of the amount of the expenses on which approximations of the true amounts could be made. On appeal, the court felt that the BTA had been too strict. The court felt that Cohan’s testimony established the fact that legitimate deductible expenses had been incurred. The disallowance of all deductions suggested that no expenses were incurred, an unjust result.  Although the Second Circuit allowed Cohan a deduction for his expenses, the court recognized that the problem originated with Cohan’s lack of documentation. The court stated…

“to allow nothing at all appears to us inconsistent with saying that something was spent. True, we do not know how many trips Cohan made, nor how large his entertainments were; yet there was obviously some basis for computation, if necessary by drawing upon the Board’s personal estimates of the minimum of such expenses. The amount may be trivial and unsatisfactory, but there was basis for some allowance, and it was wrong to refuse any, even though it were the traveling expenses of a single trip. It is not fatal that the result will inevitably be speculative; many important decisions must be such. We think that the Board was in error as to this and must reconsider the evidence.”

Therefore, the court permitted the BTA to estimate deductible expenses conservatively.

The Cohan rule stands for the proposition that a court will allow the taxpayer a deduction for an estimated amount of expenses where it is clear the taxpayer is entitled to a deduction but cannot establish the exact amount of the deduction.  Because this leniency has the potential for abuse by taxpayers, Congress codified stricter standards that require stronger documentation in some areas.  For example, the Cohan rule cannot be used for expenses for travel, entertainment, business gifts, or the use to depreciation records.  Furthermore, no charitable contribution deduction is allowed unless the taxpayer has (a) bank records, such as a cancelled check or bank statement; or (b) a written acknowledgement from the charity documenting the donation’s amount and date.

If you require help with a tax audit, then contact the Law Offices of Todd S. Unger, Esq., LLC. today.  The Law Offices of Todd S. Unger, Esq. LLC. is a law firm devoted exclusively to the resolution of sophisticated tax problems.  If you are currently in a dispute with the IRS or state of New Jersey and require representation by a tax attorney, then contact Todd Unger today.

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The IRS is Killing Lauryn Hill Softly

I’m sorry Lauryn Hill, but even people that live “underground” pay taxes.  I’m referring to Lauryn Hill’s excuse to not file her tax returns because she was claiming to live “underground.” You never saw Jim Henson’s Fraggles in hot water with the IRS because, despite living underground, Fraggles filed their tax returns timely.

The former Fugees member has been charged with three counts of misdemeanor failure to file taxes from 2005 to 2007 on nearly $1.6 million in earnings.

Under the tax code, the elements to successfully prosecute Lauryn Hill of willfully failing to file an income tax return, misdemeanor are   (1) Willfulness; (2) Requirement to file a return, pay a tax, maintain records, or supply information; and (3) Failure to file a return, pay an estimated tax or tax, maintain records, or supply information.

Each of the counts carries a possible sentence of one year in prison plus a $100,000 fine. Hill will appear in a Newark, New Jersey court after being charged by the U.S. Justice Department.  In cases where an overt act of evasion occurred, willful failure to file may be elevated to Tax Evasion, a felony.

The civil penalty for the failure to file is 5% of the net tax due for each month or part of a month the return is late. The maximum penalty that can be assessed for late filing penalty is 25% of the net tax due.  In the case of fraudulent failure to file, the penalty amount for each month is 15% of the net tax due, and the maximum penalty that can be assessed is 75% of the tax.  Normally, the fraudulent failure to file penalty is assessed against taxpayers who did not file in an attempt to evade tax.

If you have years of unfiled tax returns and need immediate assistance, the please contact Tax Attorney, Todd S. Unger, Esq. for a confidential consultation.

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I Cannot Pay the Tax Reported on my Tax Return. Should I file?

In short, the answer is YES!

In order to understand why you must file, it is important to grasp the penalties associated with failing to timely file.

IRS Failure to File Tax Return Penalty

The IRS’s failure to file penalty runs at 5% per month, up to a maximum of 25%, or fraction of month that the return is filed after its due date. Accordingly, if the penalty maxes out, you will owe an additional 25% of the tax due.

In addition, the IRS will tack on a fee of the lesser of $135.00 or the amount of tax due.

For example, if a taxpayer owes $100,000.00 and the penalty maxes out, the taxpayer will owe an additional $25,135.00. To make matters worse, interest accrues not only on tax, but also on the penalty. This causes an IRS tax problem to spiral out of control.

The failure to file penalty is reduced by the failure to pay penalty, example below, when the two penalties run concurrently.

Most importantly, the failure to file can lead to serious non-monetary consequences. The failure to file is a misdemeanor punishable up to one year in jail as well as a fine of not more than $25,000 ($100,000 in the case of a corporation). Even worse, a taxpayer who fails to file returns for multiple years commits a separate misdemeanor offense for each year.

The IRS Failure to Pay Tax Penalty is Not an Extension to Pay

An extension of time to file is not an extension to pay taxes owed. Therefore, if you owe tax it must be paid in full by the due date excluding extensions. If you do not timely pay the tax in full, the Internal Revenue Code imposes a penalty of 0.5% per month, up to a maximum of 25%, for late payment.

For example, if the due date for a tax year is April 15 and you file a valid extension, the return will be due on October 15; however, if you owe money, you will be subject to the failure to pay penalty which is assessed on April 15, the due date.

The failure to pay penalty increases to 1% per month if the taxpayer does not pay within 10 days of a notice of intent to levy. The amount of unpaid tax subject to the penalty is reduced by the amount of any tax which is paid on or before the beginning of a month.

Interest on the failure to pay penalty begins to accrue if the taxpayer receives notice and does not pay.

If you negotiate an IRS Installment Agreement, the 0.5% penalty is reduced to 0.25%. This reduction is allowed only if you filed a timely return.

Application of IRS Failure to File and Failure to Pay Penalty

Below is an example of how the failure to file and pay penalties would be assessed if the applicable federal interest rates vary between 3% and 4%.


On April 15, 2011, Taxpayer does not file an extension and owes $100,000.00 of tax. On November 2, 2011, Taxpayer would be subject to the following penalties:

Failure to File: $22,500.00

Please note, the failure to file penalty, $25,000.00 (5 months late), is offset by the failure to pay penalty of $2,500.00 (5 months late) to derive at $22,500.00.

Failure to Pay Penalty: $3,500.00 (7 months late at .5% rate)

Interest: $2,227.06 (Interest rates of 3% to 4%)

Penalty Interest: $501.09 (Interest rates of 3% to 4% based on the Failure to File Penalty)

Total: $128,728.15 (includes the minimum failure to file penalty which is $135.00)

In the same example, let’s assume you filed a tax return:

Failure to File Penalty: $0.00

Failure to Pay Penalty: $3,500.00

Interest: $2,227.06

Penalty Interest: $0.00 (example assumes IRS did not send the Taxpayer notice)

Tax Savings: $23,000.00


While it is true it may take the IRS longer to find you if you do not file a tax return, you will save yourself money and avoid any potential, although rare, criminal exposure. With both penalties maxing out, the taxpayer faces an additional 50% of tax plus interest. Therefore, if you owe tax, it is essential you timely file your tax return.

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