Category Archives:News

Todd S. Unger, Esq. Selected For Super Lawyers 2015 New Jersey Rising Stars

todd unger super lawyers

We are proud to announce that Todd S. Unger has been selected for the Super Lawyers 2015 New Jersey Rising Stars list. This honor is reserved solely for those lawyers who exhibit excellence in their practice.

His listing will be placed in the New Jersey Super Lawyers Magazine (April 2015 issue), which reaches more than 33,000 attorneys, and in New Jersey Monthly (April 2015 issue), which reaches more than 558,000 readers. The selection process for the Super Lawyers 2015 New Jersey Rising Stars list is rigorous, ensuring only the best and brightest attorneys are chosen for recognition.

In April 2013, the selection process for Super Lawyers was granted a patent from the United States Patent and Trademark Office. As a third-party rating system, it is impartial and credible — providing relevant information for attorneys and consumers. Super Lawyers rates attorneys in more than 70 different areas of practice, looking to recognize those who have attained high levels of professional achievement and recognition from their peers.

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Why is everything taking so long at the IRS? The 2015 Budget

IRS 2015 BudgetThrough the 2015 Consolidated Further Continuing Appropriations Act, Congress cut the IRS’s budget for the fifth consecutive year.  Congress reduced the IRS budget by $346 million from the 2014 fiscal budget which was $526 million below the IRS’s 2013 funding level.  The IRS budget is cause for concern when the tax season starts on January 20, 2015.

Where is my tax refund?  I cannot get through to the IRS.

IRS Commissioner, John Koskinen estimated that approximately 50% of calls will be answered during the 2015 filing season.  Koskinen stated that “those who do get through could easily wait 30 minutes more.”

In June 2013, Nina Olsen, head of the Taxpayer Advocate, an independent unit of the IRS whose mission is to protect the taxpayer said “the IRS is an institution in crisis”. . . as a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.”  As a tax attorney whose focus is exclusively on taxpayer representation, I would agree.  The IRS is not functioning well.  Some of the problems that I am encountering in my tax practice are as follows:

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Offshore Voluntary Disclosure Tax Relief

offshore voluntary disclosureOn June 18, 2013, the IRS announced major changes to the voluntary offshore disclosure program (“OVDP”).  OVDP had been criticized by the Taxpayer Advocate and tax attorneys as being too draconian on its participants who failed to disclose their foreign accounts, but were not willful evading their foreign tax obligations.

The 2012 OVDP Terms

Simply stated, the 2012 OVDP deal offered no criminal exposure if you got to the government before it found out about you in exchange for the following:

  1. You paid a 27.5 percent penalty on the undisclosed offshore accounts with the highest aggregate account balance on the period covered by OVDP (8 years);
  2. You filed all delinquent FBAR(s) for the period covered by OVDP (8 years); and
  3. You filed all original and amended tax returns for the period covered by OVDP (8 years)
  4. You paid all back taxes, interest, and a 20% penalty on the taxes owed (the accuracy related penalty)

The 2012 OVDP offered reduced penalty calculations of 12.5% and 5% of the highest aggregate balance, but these reduced OVDP penalties were based on precise requirements.  If you did not satisfy the requirements, OVDP tax agents did not have the discretion to negotiate.  If you did not like the program, you could opt out of OVDP.

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Hiring Private Collection Agencies to Recover Back Taxes

Congress may authorize the hiring of private collection agencies to collect back taxes.  Congress added a proposal in the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act of 2014 which would authorize the IRS to contract with private collection agencies to recover back taxes.  Congress believes that it can recover $2.4 billion in unpaid federal tax debt over the next 10 years through the use of private collection agencies.  Currently, the NJ Division of Taxation utilizes a private collection agency.

privatizing-tax-collectionThis is not the first time that Congress outsourced private tax collectors.  The IRS utilized private tax collectors in 1996 and 2004. Both times the IRS stopped using private tax collectors because they were deemed inefficient in the collection of back taxes.  The IRS Oversight Board (Oversight Board), a nine-member independent body charged to oversee the IRS operations, agrees.  The Oversight Board believes private collection firms are not as effective as IRS personnel in charge of collection (Revenue Officers and the Automated Collections Unit).

The IRS is missing out on billions of dollars by not collecting taxes within the time frame permitted by Congress.  Generally speaking, the IRS has 10 years to collect a back tax or reduce the tax debt to a judgment.  Currently, many cases are sitting in the queue waiting to be assigned.  If the cases are not assigned, within the 10 year statute, then the tax debt is forgiven.  I have witnessed the IRS missing out on hundreds of thousands of dollars in back taxes.  For example, last week, I noticed that the IRS missed assessing a trust fund recovery penalty. If the taxpayer’s business does not pay the FICA portion of payroll taxes, then the IRS can pierce through the business and assess the payroll tax owed against an individual.

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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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“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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DOJ Seeks Appeal of the Ty Warner Tax Evasion Sentence

This is a follow up to my September 23, 2013 article about Beanie Babies creator, Ty Warner, and his tax evasion plea. 

U.S. citizens and residents are required to disclose foreign accounts with an aggregate balance of greater than $10,000.00 by filing an FBAR (Form TD F 90–22.1) with the IRS. The FBAR is an information return and does not report a tax liability.  Taxpayers report on Schedule B of their US income tax return (Form 1040), income generated from offshore foreign accounts.

aaasaAs part of the plea agreement, Warner agreed to pay a $53.6 million in back taxes for failing to file FBARs and report more than $3.1 million in income.   Warner faced jail time, 46 to 57 months, but only received probation and community service.  The U.S. Justice Department has decided to appeal the billionaire’s sentence.

I was surprised with the sentence considering recent celebrity cases such as Lauryn Hill who went to jail for three months for failing to pay about $1 million in taxes.  Although the Hill case was not about an offshore tax haven, it’s ostensibly not as egregious as the Ty Warner case.  According to prosecutors, Warner’s activity was egregious.  Prosecutors alleged that Warner failed to tell his accountants and the IRS about the earned income and the existence of the UBS account.

In 2009, the IRS initiated a series of offshore voluntary disclosure initiative programs.  Each program was designed to settle with taxpayers who failed to report offshore income and file FBARs.  Each offshore initiative, with the exception of the 2012 OVDI program, which was open ended, seemed like it was the taxpayers last chance or the government would prosecute them for tax evasion.

Generally speaking, if you got to the IRS before they got to you, then you could participate in the offshore disclosure program.  Once cleared by the IRS Criminal Investigation Unit, you would:

  1. disclose all of your foreign bank accounts for the previous eight years;
  2. file 8 years worth of delinquent income tax returns and FBARs;
  3. pay all income tax owed plus interest on the understatement;
  4. pay an accuracy related penalty, 20%, on the taxes owed; and
  5. pay a penalty in the amount of 27.5% based on the highest aggregate balance in the previous eight years.  In consideration for the foregoing, the IRS would not prosecute you for tax evasion.

I believe the lenient sentence terrifies DOJ which is why they had to appeal this case.  DOJ is concerned that a slap on the wrist for such a large, high profiled case will not send the right message to others with offshore tax havens.  The IRS has been cracking down on offshore tax evasion and Warner’s case has been cited as one of the largest cases.  DOJ faces the precedent that if you’re wealthy and write a check to pay back taxes, then you could avoid jail time.

I will keep you posted on DOJ’s appeal of Mr. Warner’s tax evasion case as news develops!

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The 2014 Tax Season is Here

The 2014 filing season has officially begun.  If you have not filed in years or are looking for a tax preparer, then you must read this blog.

I have not filed a tax return in years!

If you have not filed in years, do not put off another year of filing.  The failure to file a tax return is costly and exposes you criminally.

First, you may be owed a tax refund from the government.  The IRS has a statute of limitations period which is the later of three years from the due date plus extensions or two years from when the tax was paid.  Therefore, you can lose your tax refund by not filing timely.  

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IRS Audits Are Declining for Most Individuals

aAccording to the IRS, the overall revenue collected from tax audits increased year in FY 2013. The 2013 increase in revenue is in spite of the fact that tax examinations decreased.

The IRS budget has been on the decline since 2010. The decreased budget has been the catalyst for the IRS to focus on high income taxpayers. The IRS believes it can get more bang for the buck by going after high net worth taxpayers.

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