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15 02, 2020

Letter from the Editor: A Tale of Two Tax Penalties

By |2020-04-06T21:12:45-04:00February 15th, 2020|IRS Collection|0 Comments

While the weather is still cold much of the time these days, now in early February, the days are already a little longer than just a month ago. And though it is often cold, after a string of 18 and 19-degree days followed by eight and nine-degree days, a 30-degree day feels downright spring-like. Almost t-shirt weather.red-heart

Any moment now it will be Valentine’s Day. Then at the end of February, major league baseball’s spring training starts. Alas, not long after that comes Tax Day, April 15th, and with it the annual ritual of gathering up one’s bank statements, W-2’s and 1099’s, and sundry receipts tucked away in wallets, desk drawers, and other places you’re trying to remember right now, so that we, on our own, or with help can prepare and file our tax returns.

Because I’ve worked with many a taxpayer who somehow strayed from the righteous path, to represent them so that they did not have to take on the IRS (or New York’s DTF) alone, I’ve heard many stories about how it was that things went wrong.

Frequently, part of the story of how a taxpayer finds him or herself sitting across a conference table from a lawyer, is that in addition to all the tax on income owed for all those years, there are also the tax returns themselves, which were never filed or were filed even a day late.

The taxpayer makes plain: “I didn’t have the money to pay the tax, so I didn’t do the returns either.” And also, occasionally, “I figured that if I didn’t file, they wouldn’t come after me as quickly.”

The problem with this strategy is that, to the IRS, as important as collecting tax payments is, a taxpayer timely filing his or her return is even more important.

How do we know this? The penalties the IRS imposes for failure to file are ten times higher than for paying late.

Late Payment Penalty: where a taxpayer has not paid or paid in full the tax due by the due date, the taxpayer will likely be subject to a late payment penalty of one-half of one percent of the tax due, for every month – or fraction of a month – that the tax is not paid.

For example, if a taxpayer owes $100,000 and it is not paid on time, that taxpayer becomes subject to a late payment penalty of $500 as of the day after the due date.

By contrast, if the taxpayer fails to file a tax return by the due date, the taxpayer will become subject to a Late Filing Penalty 10 times larger than the late-payment penalty, i.e., 5 percent of the unpaid taxes for each month or part of a month at that a tax return is late. So if that taxpayer who owed a $100,000 did not file a return on time, there would be a $5,000 penalty for the first month a tax return is filed late (as compared to the $500 late payment penalty). This late filing penalty is capped at 25% of the unpaid taxes.

Why is this so? Imagine, with Valentine’s Day almost here, that a gentleman did nothing on February 14th, and sometime in March finally got around to bringing his sweetheart flowers and chocolates. “Happy Valentine’s Day, Sweetie!”

Does anyone think this would be a success with this guy’s loved one? Considering the severity of the penalty imposed on taxpayers, not only does the IRS want you to be its gift-giving valentine, but it’s unhappiness seems to go into Fatal Attraction territory, for those of you who recall Glenn Close warning Michael Douglas, “I will NOT be ignored.” As he soon discovers, her threat was not an idle one, and she would cost him dearly.

Similarly, Congress has empowered the IRS, through these penalties, to make the actual filing of tax returns more important that the mere payment of tax, and the IRS is warning you, Dear Taxpayer: “I will not be ignored.”

Happy Valentine’s Day. Don’t ignore your sweetheart.

27 05, 2009

Jobs Agency Owner Gets Temp Assignment (Some Call it a ‘Sentence’) to Federal Prison for Unpaid Employment Tax

By |2020-02-12T14:20:20-05:00May 27th, 2009|100% Penalty, Employment Tax, IRS Collection, IRS Enforcement, IRS News, Payroll Tax, Pierce the Corporate Veil, Tax Crimes, Trust Fund Recovery Penalty, Withholding Tax|0 Comments

A San Antonio, Texas, woman was sentenced to 41 months in federal prison and ordered to pay $1.5 million in restitution to the IRS for her role in a fraudulent tax scheme.

In addition to the prison term, United States District Judge Fred Biery ordered that Terrell Diamond be placed under supervised release for a period of three years after completing her prison term.

According to court records, Diamond, along with her now-ex-husband and co-defendant, William Diamond, conspired to defraud the IRS in the assessment and collection of more than $1.5 million in employment taxes due and owing from November 1996 to June 2003.

The employment taxes owed pertained to temporary employment agencies owned and operated by the Diamonds, including Ameriforce and Primo Labor.

Both Diamonds pleaded guilty to the same charge: one count of conspiracy to defraud the IRS.

23 05, 2009

IRS Auditor Caught Faking Own Tax Return

By |2020-02-12T14:20:20-05:00May 23rd, 2009|IRS Enforcement, IRS News, IRS Power, Tax Crimes|0 Comments

A revenue agent with the Internal Revenue Service has agreed to plead guilty to a federal tax fraud charge for filing a personal income tax return that claimed he suffered a loss in a real estate transaction when in fact he realized a substantial profit. (“Revenue agent” is the official title for the people at the IRS who audit tax returns.)

In a plea agreement, Jim H. Liu, 43, of Diamond Bar, Calif., agreed to plead guilty to subscribing to a false tax return — a charge that carries a penalty of up to three years in federal prison.

‘My Gain is Your Loss’ Shenanigan Uncovered and Confessed

Liu admitted he filed a false tax return for the 2002 tax year that improperly claimed a loss on his sale of a property in Pomona. Liu sold the property for a profit of more than $48,000, but he instead claimed a loss of more than $4,200.

The tax loss to the government, as a result of Liu’s filing, was approximately $14,642.88.

12 02, 2009

Can the IRS file a lien without going to court?

By |2020-02-12T14:20:21-05:00February 12th, 2009|Federal Tax Lien, IRS Collection, IRS Enforcement, IRS Power, Lien, Tax Problem Solving|0 Comments

A taxpayer searching around the internet asked this question. It is a very good question because it asks about the reach — and the limits — of the IRS’s power to reach into our lives whether we like it or not.

Liens 101: What is a Lien, Anyway?

For those unfamiliar with the term, a “lien” is essentially a claim — someone claims you owe them money.

In certain situations, the person (or business, or government agency) making the claim can file a document announcing this claim with the County Clerk or other public records authority.

By filing a lien with the County Clerk, the claimant announces to the world (and especially to credit reporting agencies) that the claimant says you owe it money.


9 02, 2009

Church Sound Man To Face Taxman’s Music

By |2020-02-12T14:20:22-05:00February 9th, 2009|Estimated Tax, IRS Collection, IRS Enforcement, IRS News, Tax, Tax Crimes|0 Comments

Nashville, TN — A Tennessee man who operates a business installing complex sound systems in church auditoriums nationwide, pled guilty to two counts of failure to pay federal income tax. As part of his plea, he admitted that he owes the federal government more than $300,000.

After admitting guilt in August, 2008, the sentencing hearing took place in January 2009. The court sentenced Charles Grecco, 44, of Franklin, Tenn, to serve 6 months in prison, followed by one year of supervised release, and to pay restitution of $300,141.82 to the Internal Revenue Service.

According to the government, Grecco failed to pay more than $67,000 in federal income taxes for years 2001 and 2002 which was only two of the six tax years involved.


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