IRS Increases Number of Audits

June 21, 2011 by

Tommy Williams CFP
schreveporttimes.com
June 18, 2011

Now that most of you have completed your tax returns for 2010, perhaps we might reflect on the most dreaded of tax consequences, the IRS audit.

We spend a considerable amount of time in an effort to be tax efficient. Defer taxes, avoid them and use every tool and technique offered by the Internal Revenue Code to legally limit our tax cost. Given the financial struggles of our federal government, it shouldn’t surprise you to know that the IRS has nearly doubled its examinations of returns from the richest taxpayers.

IRS audits are up nearly 8 percent for the wealthiest Americans. This spring, the Internal Revenue Service released the 2010 IRS Data Book. Journalists and tax professionals looked inside and noticed a couple of eyebrow-raising statistics. The first is that the IRS audited 18.4 percent of 2010 tax returns filed by taxpayers with adjusted gross incomes above $10 million. That’s up from 10.6 percent for 2009. The second is that taxpayers with adjusted gross incomes between $5 million and $10 million were also targets. Audits increased by 55 percent for this group in 2010 with the percentage of audited returns jumping from 7.5 percent to 11.6 percent. So what’s going on here? The IRS has ramped up its efforts to investigate offshore bank accounts and tax shelters, and it appears to be acting on its newfound knowledge. It started a Global High Wealth Industry Group in 2010 to “centralize and focus IRS compliance expertise involving high net worth individuals.”

As IRS Commissioner Doug Shulman said at a meeting of the New York State Bar Association Taxation Section, “We’re looking for and finding points of leverage, also called ‘nodes’ of activity, where multiple people not paying taxes can be detected. Financial institutions are one such potential node of activity. Promoters of evasion schemes are another.”

Now the IRS has started an Offshore Voluntary Disclosure Initiative, providing information in eight languages to reach taxpayers and preparers who are non-native English speakers. By coming forward about undisclosed offshore accounts, they stand a chance of avoiding criminal prosecution.

Audit rates increased across the board last year. The overall IRS audit rate was 1.11 percent in 2010, up from 1 percent in 2009. The taxpayers least likely to face an audit were within the $75,000 to $100,000 adjusted gross income range with 0.64 percent of their returns being audited.

Experts tell me to do your part to look good. Most audits are not purely attributable to bad luck. Why not do the little things that may help to decrease the odds? Some of the basics are to document all expenses relatable to your business, report every bit of income, claim sensible but not outlandish deductions, avoid portraying a hobby as a business venture, sign your return and work with a really good tax preparer.
If you do find yourself with a tax problem, I’d suggest you invest in some professional guidance.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual. To determine which investments may be appropriate for you, consult your financial adviser prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

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Former Louisianna Sheriff’s deputy, wife plead guilty to fraud

June 21, 2011 by

By Littice Bacon-Blood
The Times-Picayune, June 21, 2011

A former St. Charles Parish Sheriff’s lieutenant and his wife, who owned an accounting service company, pleaded guilty to fraud in federal court on Monday for filing false federal tax returns and collecting more than $800,000 using the names of inmates held in the parish jail, according to U.S. Attorney Jim Letten’s office.

The Times-Picayune archiveHale Boggs Federal Building, 500 Poydras Street, U.S. District Court, Eastern District of Louisiana
The couple is said to have filed false tax returns over a 10-month period from about April 8, 2005 to about Feb. 20, 2006.

Lt. Warren LeBeauf Jr., 42, and his wife, Tamara Scott-Landry, 37, entered the guilty plea the morning of their trial before U. S. District Judge Carl Barbier, authorities said.

The two were charged May 6, 2010 in an 88-count indictment and are set for sentencing on the charges on Sept. 22 before Barbier.

They face a maximum of 10 years on the conspiracy to commit fraud charge, a fine of $250,000 and up to three years of probation.

Scott-Landry, who also pleaded guilty to wire fraud and aggravated identity theft, faces a maximum 20 years on the wire fraud charge and a mandatory two years added to any sentence she receives for the aggravated identity theft charge.

LeBeauf, who had been employed by the Sheriff’s Office since 1989 and worked as a resource officer at Destrehan High School, was terminated July 30, 2010 for violating department policies, said St. Charles Sheriff’s Office spokesman Capt. Pat Yoes.

According to federal authorities, LeBeauf used a law enforcement data base to obtain personal information on inmates such as Social Security number and birth date and passed it along to Scott-Landry to make fraudulent income tax refund claims.

Authorities say that LeBeauf met a St. Charles Sheriff’s Office 911 call center operator at a park and paid $100 for more than 4,000 pages of print outs from that law enforcement database which was used to fraudulently collect approximately $810,183 in income tax refunds.

Yoes said the operator, who had worked for the department for nearly 30 years, resigned July 2, 2010 before disciplinary action could be taken against her.

The tax forms filed electronically with the IRS made the returns payable to cashiers checks and stored valued cards. The money was then deposited into bank accounts controlled by LeBeauf and Scott-Landry, authorities said.

According to the indictment, the individual tax return amounts ranged from $1,577 to $3,525.

At one point authorities say Scott-Landry withdrew $26,000 in cash over a three-day period from an ATM and the couple went to a Chevrolet dealership and bought a 2004 Chevrolet Suburban “with a paper bag full” of cash.

It was in that SUV, parked in the drive way of Scott-Landry’s house, that authorities say they found inmate names and other items used in the scam.

During the execution of a search warrant, and “in the presence of almost a dozen armed IRS agents,” authorities say LeBeauf arrived at the house with an unknown person and attempted to leave with the SUV.

The case was investigated by the Internal Revenue Service, Criminal Investigation Division which has made investigatin refund fraud and identity theft a top priority said James C. Lee, special agent in charge, IRS criminal investigation.

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CA Man Arrested After IRS Mistakenly Deposits $110K In His Account

June 21, 2011 by

The Huffington Post
James Sunshine, 06/19/11

Last September, Laguna Beach resident Stephen McDow found $110,000 deposited in his bank account, courtesy of the IRS. That same deposit has now landed him in hot water, according to CBS Los Angeles.

The IRS mistakenly sent the tax refund money, meant for a 67-year-old woman, to McDow, instead, reports local news station KCAL. The Los Angeles woman reportedly failed to inform the IRS that she had closed the bank account she had filed with them, and the account number was subsequently assigned to McDow.

When the woman discovered that McDow had been the recipient of her refund, she called him and demanded her money back. McDow, in turn, offered to pay back the balance in monthly payments, as he had already spent $60,000 paying off student loans and his home mortgage. Unsatisfied with the suggested size of the monthly payment, the woman declined the offer, according to KCAL.

McDow was subsequently arrested and charged with one felony of grand theft by misappropriation of lost property. He reportedly faces four years imprisonment and is currently being held on bail for the exact amount he first received: $110,000.

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Some tax cheats work at the IRS

June 21, 2011 by

Almost 3% of IRS workers caught cheating but some slip through cracks

By Andrea Coombes, MarketWatch.com
June 21, 2011, 5:35 p.m. EDT

SAN FRANCISCO (MarketWatch) — The IRS catches almost 3,000 tax scofflaws in its own ranks each year, but some employees still dodge the system, according to a new Treasury Department report.

The Internal Revenue Service’s internal program caught on average about 3,000 incidents of noncompliance on employee tax returns each year from 2004 through 2008 — that’s about 3% of its workforce — but 133 employees who may have violated tax law avoided that program’s net in 2006 and 2007, according to the report from the Treasury Inspector General for Tax Administration, or TIGTA, which monitors the IRS.

The potential violations include failure to file a tax return, filing late, failure to report income and failure to pay taxes due.

While the report found that only a tiny portion of the IRS’s some 107,000 employees (in 2007) slipped through the cracks, TIGTA called on the tax agency to root out any and all workers who may be trying to game the system.

“In the inspector-general community, we have a zero-tolerance policy for any incidence of fraud, waste or abuse,” a TIGTA spokeswoman said.

“As the agency of the federal government whose chief mission is to administer the federal tax system, IRS employees are particularly expected to comply with all tax laws,” the TIGTA report said. “The IRS risks an erosion of public confidence in the American voluntary tax system if it does not appropriately address employees who are not complying with their tax obligations.”

For its part, the IRS said in a statement that it imposes harsh penalties for tax fraud within its ranks. “Ensuring that IRS employees comply with the tax law is a top priority for the IRS… Employees who are judged to have willful tax-compliance problems are terminated, in addition to other potential sanctions.”

Also, the IRS said that it investigated the 133 problem cases and most did not constitute fraud. “In 44% of the cases, employees filed a tax return late but were due a refund. And over half the cases have already been reviewed and closed because the facts did not merit further review. We are analyzing the rest of the cases, and if there are problems they will be addressed,” the IRS said.

Inside job

While the scope of the problem appears to be small, examples of IRS workers committing fraud are not hard to find. An IRS agent in Santa Clarita, Calif., in May was sentenced to three years in prison for filing fraudulent returns “for himself and innocent relatives that claimed, among other things, bogus deductions for alimony and mortgage payments,” according to a U.S. Justice Department release.
In April, a part-time data-entry clerk at an IRS office in Fresno, Calif., was charged with filing false tax returns and committing wire fraud and identity theft after allegedly stealing 68 tax returns from an IRS office, filing fraudulent returns using taxpayers’ personal information and claiming excessive federal tax withholding, presumably to generate tax refunds.

Separately, another IRS employee in Fresno in April pleaded guilty to filing false income-tax returns in the names of her husband, who was in state prison at the time, and other prisoners. The tax returns claimed federal tax withholding on wages the prisoners had never earned, to generate tax refunds. The IRS issued tax refunds totaling more than $13,000 based on the false returns, according to Justice Department statement.

And a separate TIGTA report in 2009 found that 128 IRS employees claimed the first-time home-buyer tax credit, even though they might not have been eligible. TIGTA simply identifies potential problems that require further investigation by the IRS.

Andrea Coombes is MarketWatch’s personal finance editor, based in San Francisco.

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Seizure on Restaurant Released, But Tax Problems Still Loom

June 21, 2011 by

By Jarret Bencks
Medford Patch, June 2, 2011

The bright orange seized sign on the front door of Il Faro restaurant has been taken down, but the Medford Square restaurant is still in hot water with the state’s Department of Revenue.

The seizure on the business was lifted after revenue officials determined nearly all of the restaurant equipment belonged to the landlord at 21 Main St. and could not be auctioned off to pay some of the back taxes, said revenue spokesman Bob Bliss.

The Italian eatery, owned by Giuseppe Longo, still owes $142,784.20 in taxes and penalty fees dating back to 2006, and has made no efforts to create a plan to start paying the debt off, Bliss said.

“The taxpayer clearly is not taking any steps to work anything out with DOR,” Bliss said.

Nearly all of the back taxes, which date back to 2006, stemmed from failing to pay the meals tax, Bliss previously said.

Before being taken down, the sign, dated May 11, read: “The Business Property of Il Faro, Inc. had been seized for nonpayment of taxes, and is now in possession of the Commonwealth of Massachusetts…Any person who attempts to tamper or interfere with this property will be prosecuted to the full extent of the law.”

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Medford Square Restaurant Seized By MA DOR

June 21, 2011 by

By Jarret Bencks
Medford Patch, May 18, 2011

A seized Medford Square restaurant charged patrons a meals tax but didn’t pay what they collected to the state, a Department of Revenue Spokesman said Thursday.

Il Faro, an Italian eatery located at 21 Main St., was seized by the Department of Revenue last week because it owes the state a total of $142,784.20 in taxes and penalty fees, department spokesman Bob Bliss said. Nearly all of the back taxes, which date back to 2006, stemmed from the meals tax, he said.

“Patrons paid the meals tax, but the restaurant didn’t forward that to DOR,” Bliss said.

Seizing a business is the last thing the Department of Revenue will do in their efforts to collect unpaid taxes, Bliss said.

“You only get to this point when everything else DOR tries to collect has failed,” he said. “This is sort of the last stop.”

The restaurant had an orange sign on its door Tuesday, reading “SEIZED.” Several florescent signs remained lit inside the windows of the Italian eatery Tuesday afternoon.

If Giuseppe Longo, the owner of the restaurant, can come up with a reasonable down payment and payment plan going forward, the business could be reopened, Bliss said.

“We always hope that’s the case, because it’s a lot easier for us,” Bliss said. “We get the money, the business opens back up and the jobs don’t get lost.”

The business, not the building, was seized. If a payment plan isn’t agreed upon, the property of the restaurant will go to auction in about 4 to 6 weeks, Bliss said.

A call to the restaurant Tuesday was unanswered.

Original Story:

A restaurant in Medford Square has been seized by the Massachusetts Department of Revenue for nonpayment of taxes, according to a sign on its door.

Il Faro, an Italian restaurant located at 21 Main St. in Medford, had an orange sign on its door Tuesday, reading “SEIZED.” The sign was dated May 11, 2011.

Several florescent signs remained lit inside the windows of the Italian eatery Tuesday afternoon.

According to filings with the Massachusetts Secretary of State, the owner of the business is Giuseppe Longo. Il Faro first filed as a business with the Secretary of State in 1996, according to state records.

The business was seized but not the building.

The sign on the door read, “The Business Property of Il Faro, Inc. had been seized for nonpayment of taxes, and is now in possession of the Commonwealth of Massachusetts…Any person who attempts to tamper or interfere with this property will be prosecuted to the full extent of the law.”

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Lots of Big Stars Are in Big Trouble With the Tax Man

March 21, 2011 by

By Lindsay Carlton
Published March 21, 2011|FoxNews.com

March 26, 2010: Al Pacino poses for a portrait in Beverly Hills, Calif.
Despite their high-priced tax attorneys and mega-millions, big stars can find themselves in big trouble come tax time.

Take Hollywood director Martin Scorsese. He was recently nailed with a $2.85 million bill for unpaid taxes. Scorsese was charged for past-due tax and related interest penalties. Although Scorsese’s spokeswoman Leslee Dart says the entire amount is now paid in full and that he has no current IRS debts, sources say the Oscar-winning director’s tax woes are due to his dealings with celebrity accountant Kenneth Starr. Starr was jailed for seven and a half years for a $33 million ponzi scheme, and has duped other superstars in his corrupt plots. He scammed Hollywood heavyweights such as Uma Thurman, Lauren Bacall and Al Pacino, to name a few.

Pacino allegedly failed to pay taxes for two years, a bill for $169,143 in 2008 and $19,140 in 2009, totaling $188,283. Anyone who would stiff this “Godfather” star out of $200,000 might be sleeping with the fishes too, but luckily for Al Pacino, the IRS doesn’t handle their business the same way the mob does. Pacino poured the blame on Starr, his business manager and close friend for years. The money hungry financier apparently used a lot of his fraudulent earnings to play sugar-daddy to his younger wife, ex-pole dancer Diane Passage, who enjoyed a lavish lifestyle. “Managers can be very helpful, but many are not skilled in the area of tax planning and some are outright greedy when given control of celebrities finance,” said Ray Lucia, a certified financial planner.

A spokesperson for Pacino said the “Scarface” actor is working to resolve the situation as soon as possible with a new financial manager.

Another Hollywood cash cow who skipped his IRS bill is Jennifer Lopez’s husband, Marc Anthony. The Latin crooner owes $3.4 million for unpaid taxes on his Long Island mansion. Anthony has a history of running from the tax man. In 2007 he failed to pay taxes on his $15 million income over a five-year-period and ended up paying $2.5 million in back taxes. One might assume that such a power couple would have a better handle on their finances, but some tax attorneys aren’t surprised. “They live in a world where everyone gives them more and more leeway and slack — and they slowly develop an attitude of being above it all,” said Doug Burns, a federal prosecutor who has prosecuted dozens of tax fraud cases.

One pop star even sang a song about paying bills, the aptly titled “Bills Bills Bills,” but then forgot to fork up the cash herself. Former Destiny’s Child singer Kelly Rowland owes $98,634 in back taxes. The government filed a lien against her on Nov. 8, according to the Detroit News. The songstress hasn’t had much success since splitting from the Beyonce Knowles-led girl group. She also recently parted ways with her long-time manager and Beyonce’s father, Matthew Knowles. “Celebs who are attending to other details in their lives may brush taxes aside for later, but by then it’s too late,” said CelebTV.com host Kelli Zink.

“Survivor” winner Richard Hatch has had his fair share of tax trouble. The reality star spent three years in jail for failing to pay taxes on the $1 million prize money he won on the hit show. Hatch is heading back to the slammer for not settling a tax bill that is now reportedly up to $2 million. Hatch is currently starring in Donald Trump’s “Celebrity Apprentice” show. Although the episodes of the series have already been filmed, he will miss the live finale in May while he finishes his sentence behind bars. Along with his prison term, Hatch will remain under supervision for 26 months, and 25 percent of his wages will be garnished to pay back the IRS.

Joe Francis, founder of “Girls Gone Wild,” also spent some time behind bars for his tax tribulations and says the IRS targets celebrities every year around tax day. To avoid glitches in your taxes, Francis recommends Hollywood newcomers hire reputable business managers and get references from their other clients. “Good financial managers are helpful, ones like Bernie Madoff are awful. I was young, I was making a lot of money,” Francis said. “You trust people like lawyers and accountants. I didn’t even sign my own tax return. I didn’t even question it.”

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Oprah Hates Writing Checks to the IRS

January 30, 2011 by

Chicago (January 21, 2011)
By Michael Cohn
accountingtoday.com

Oprah Winfrey told Piers Morgan that the most difficult check she has to write each year is for the Internal Revenue Service, and she usually needs some tequila from her accountants when she signs it.

Winfrey admitted to Morgan during the debut episode Monday evening of the CNN talk show he is taking over from Larry King that she only signs checks for amounts over $100,000 nowadays. Winfrey launched her new cable TV network, the Oprah Winfrey Network, or OWN, earlier this month. But she still has “several hundred” checks to sign for over $100,000.

“It would knock your socks off,” she told Morgan. “Millions are going out.”

Morgan asked if that was painful. “The most pain I feel — and my accountants will tell you this — is every time I write a check to the IRS, it’s a ceremony. For years they came in with wine. Now they come in with tequila. It’s a tequila-signing ceremony.”

Morgan asked her what was the most painful check she ever had to write to the IRS, but Winfrey cannily ducked the question, teasing Morgan, “You’re good. You think I’m going to give you the number. No, no, no, no, no.”

Morgan noted that Forbes magazine estimates that Winfrey is worth $2.7 billion, and asked if the figure was accurate. She responded, “I knew you were going to go there sooner or later. I’m not sitting around counting it.” However, she added that she knows how much she’s worth “because I already had counted it.”

Morgan followed up by asking Winfrey about her philanthropic endeavors, which include the Oprah Winfrey Leadership Academy for Girls, a school she runs in South Africa for economically disadvantaged young women. Morgan noted that Winfrey reportedly has given away over $300 million to various charities, and Winfrey corrected him, saying she knew it was more than that amount.

He asked if she knew how much she has given away, and she replied, “No, I really don’t, but I know it’s more than $300 million. I have this school and it’s ongoing and I’m responsible for all of these girls and them getting an education, and I pay for every single thing and I think that the charitable work that you do — and when I’m gone everything that I have is going to go to charity because I don’t have children and I believe that that’s what you should do, that that’s how you should live your life. To whom much is given, much should be given back. To me, the money, it’s certainly a wonderful thing, but it is in direct proportion to how you’re able to bless yourself and how you bless others with it.”

Asked whether money can buy happiness, Winfrey responded, “It can certainly pave the way for it.”

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As the Federal Trade Commission and state Attorney Generals crack down on scam tax relief firms, where can consumers turn to for help with their IRS and state tax problems?

November 2, 2010 by

Just last month, the Federal Trade Commission shut down American Tax Relief, a Beverly Hills, California-based company that guaranteed it could settle tax debts for individuals for a fraction of what they owed. The state of California recently filed suit against Roni Deutch, AKA the “Tax Lady”, for a deceptive ad campaign that offers very little proof that the firm’s clients are getting any real-world benefit and overstates claims of winning against the IRS. Suit was also brought against J.K. Harris of Charleston, South Carolina by the state of Massachusetts in conjunction with the attorney generals from 17 other states for false and deceptive trade practices and nonperformance of work. A $1.5 million judgment against J.K. Harris was awarded to the state of Massachusetts and the other 17 states. Are these three isolated cases? Can you believe any firm that says they can help settle your tax debt for less than what you owe?

“These three firms are just the tip of the iceberg when it comes to companies claiming to be tax debt relief specialists who say they can settle your tax debt for pennies on the dollar,” said Matthew Previte, CPA, of Matthew J. Previte, CPA, PC and TaxProblemsRUs.com. “The sad part is that tax representation firms like these create a genuine distrust of any company who can genuinely help delinquent taxpayers with tax debt owed to the IRS or their state DOR.”

Previte, whose Natick, Mass.-based tax representation firm has specialized exclusively in representing individuals and businesses with IRS and state tax problems since 1997, says the real problem with companies like American Tax Relief, Roni Deutch, and J.K. Harris is that they make promises to clients that they can’t possibly deliver on. Says Previte, “The simple fact remains that approximately 95 percent or more of delinquent taxpayers do not qualify to settle their tax debts through an Offer in Compromise.”

So, what options do Americans who owe the IRS or their state DORs have besides representing themselves? Previte suggests there are plenty of reputable tax representation firms out there but consumers must do their due diligence before selecting a firm, such as:

• Avoid firms that guarantee a settlement – There are four main factors involved in settling your tax debts through an Offer in Compromise. The four factors are: (1) your current financial condition, (2) the tax law and IRS procedure, (3) your cooperation in providing the requested information needed to settle your case, and (4) the competency of the tax representation firm you have chosen. A tax representation firm that guarantees settlement is a major red flag since the first three of these factors are completely outside of their control and can change while in the process of trying to settle your tax debts causing an eligible Offer candidate to become ineligible. Meaning, you could start off as a great Offer candidate but later become ineligible due to changes in your financial condition, tax law and IRS procedures, or your failure to cooperate.
• Use a locally based tax representation firm staffed by licensed tax professionals (CPAs, Enrolled Agents (EAs), or tax attorneys) that practices exclusively in resolving IRS and state tax problems – Negotiating with the IRS or state DOR is a unique skill set unto itself. CPAs, EAs, and tax attorneys, although they perform various tax services such as tax return preparation and tax planning, are rarely well versed in the workings of the IRS or state DORs. It is rare if they handle one tax controversy case a year. You want to work with a licensed tax professional whose firm focuses exclusively in representing individuals and business in trouble with the IRS or state DORs, with a physical, brick-and-mortar location that’s within driving distance to you so you can schedule a face-to-face meeting before engaging them to represent you.
• Ask for references – If you don’t know anything about a particular tax representation firm, ask for references. Most will be more than happy to provide contact information for satisfied clients or conventional tax professionals (CPAs, EAs, tax attorneys) who have referred them clients. You can also research a prospective tax representation firm by going to your state’s society of CPAs web site, state bar association web site, or state society of Enrolled Agents web site. The overwhelming majority of licensed tax professionals working at any reputable tax firm will be members of one of these societies. Also, do a search with your local Better Business Bureau and state licensing board (CPAs, tax attorneys) or IRS Office of Professional Responsibility (EAs) as well as a general Google search. You would be amazed at what you can discover about your prospective tax representative online.
• Work with a smaller firm – When it comes to larger vs. smaller firms, you are most likely to get personal attention when working with a smaller firm. Larger firms tend to assign your case to junior staff and there’s a possibility that a senior staff member might not even review your case. For many larger firms, the focus can be more on selling and collecting retainers than getting actual results. With smaller firms like Matthew J. Previte, CPA PC, the principal reviews every case.

“It makes perfect sense that somebody carrying a huge tax debt would turn to one of these tax representation firms for help with their IRS or state tax problems. What you don’t want is an additional problem, like wasting precious dollars on a tax representation firm that makes promises it can’t keep,” said Previte. “By doing a little research before handing over a retainer fee, you prevent your hole from getting any deeper and can feel rest assured you’re taking a positive step forward in resolving your IRS and state tax problems.”

For more information on Matthew J. Previte CPA PC, please visit www.TaxProblemsRUs.com. To schedule a free confidential consultation, call 877-259-8200.

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Why Wesley Snipes got caught. Celebrity or not, non-filers can run but they cannot hide from the IRS.

August 12, 2010 by

The simple answer as to why Wesley Snipes will soon begin serving a three-year sentence for tax evasion is that he didn’t file his tax returns for 1999 through 2004 and also tried to get a $7 million refund in 2006 on returns filed before he stopped filing in 1999. The broader answer is that in 2010, the IRS has more sophisticated resources, more personnel, and more incentive (nearly $345 billion owed to the federal government, which has a budget deficit in the trillions) than ever before to track down non-filers. In 2010 and beyond, if you fail to file your tax returns, chances are exceptional that you will get caught.

“What non-filers do not realize is the IRS will prepare a Substitute For Return (SFR) for you if you don’t file a tax return yourself. Only that SFR will not have the vast majority of the deductions you might be entitled to had you filed on your own,” said Matthew J. Previte, CPA, a local taxpayer advocate expert and owner of TaxProblemsRUs.com. “So, if you don’t file a tax return for several years like Mr. Snipes, the IRS has the technology to prepare an SFR for you and then will start burying you with severe penalties and interest based on that grossly inflated SFR assessment.”

Fortunately for non-filers, the IRS generally only looks back six years for unfiled tax returns. Yet without including all the deductions one might be entitled to, those SFR assessments can be grossly inflated due to that lack of deductions. The IRS can also utilize any number of resources to calculate income. For example:

  • Bank accounts – IRS can track non-filer accounts and review your deposit and spending histories.
  • Credit card spending – IRS can track overseas and domestic spending to prove income.
  • Audits of payees – Often times the people non-filers pay for goods and services are audited and that can alert the IRS to the payer’s non-filing.
  • IRS whistleblower programs – Does anybody else know you haven’t filed? An ex-wife or significant other? Perhaps a vindictive business associate? IRS whistle-blower programs raise the red flag and agents are more than happy to follow those leads.

So, with all the mechanisms available to the IRS to catch non-filers, why do people still not file?

“The reasons vary. Everything from bad advice from tax protestors and unscrupulous tax advisors to financial or health problems to even just plain old general neglect. Once one year is unfiled, fear and embarrassment most often perpetuate the problem, causing additional years to go unfiled. Some might even think if they don’t file, they won’t ever have to pay taxes. I’ve represented quite a few people who haven’t filed for 25 years or more,” said Previte. “The reality is, with the resources the IRS now has, non-filers will get caught and the punishment, if prosecuted and proven guilty like Mr. Snipes, is one year in prison per year you don’t file up to six years. If you’re lucky enough to avoid prosecution and jail time, the IRS will still bury you in taxes, penalties, and interest.”

Continues Previte, “The real irony about non-filers is that by filing their tax returns—even if they don’t have the money to pay the IRS—they have more options to resolve their tax debts than by not filing their tax returns.”

Some of those options include: 

  • Offer in Compromise program
  • Payment plan
  • Bankruptcy
  • Uncollectible status
  • Penalty Abatement
  • Lien Subordination
  • Innocent Spouse Relief

“These are just a few of the scenarios where having a qualified licensed tax professional represent you—instead of pulling your bed covers over your head and praying you don’t get caught–can literally save you thousands of dollars and dramatically reduce the likelihood of prison time,” said Previte. “At the very least, it can lessen the stress and anguish that come with having tax debt hanging over your head and your family’s.”

To schedule a free confidential consultation, call 877-259-8200 or, for more information, visit www.TaxProblemsRUs.com.

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