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Singer Lauryn Hill will serve three months in prison for tax evasion.

As the string of tax liens and evasion charges against celebrities like Wesley Snipes and Lindsay Lohan indicates, the Internal Revenue Service does not tread lightly when prosecuting tax evasion and related crimes - no matter how influential the offender may be. Recently, singer Lauryn Hill - formerly of the Fugees - was sentenced to three months in jail for failing to pay taxes on $1.8 million in income she accrued between 2005 and 2007.

We previously reported that Hill pleaded guilty to failure to file a tax return last summer. She was formally sentenced in a New Jersey court this month and she will serve three months of home confinement after her time in a federal prison, followed by a year on probation.

"Ms. Hill did not get a slap on the wrist and let off with just paying a certain amount of money, but has had to go through this entire criminal prosecution," the singer's tax attorney told the news outlet, adding that this trial indicates that the federal government is clearly committed to prosecuting celebrities as aggressively as other civilians.

He added that Hill has since paid all outstanding back taxes in full.

If you work in an industry with an unconventional income structure, filing your tax documentation can be a complex process. However, as such cases show, it is essential to properly comply with state and federal tax laws in full. If you have questions about tax planning, have unfiled tax returns, or currently face charges of tax evasion or fraud, contact the experienced professionals at Moskowitz LLP and learn your rights and how to protect yourself.

Please see our additional posts regarding this case here.  

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Contact Moskowitz LLP for guidance about offshore tax disclosure.

Given the aggressive public overtures that Internal Revenue Service (IRS) officials have made regarding offshore bank accounts  and tax evasion in the last five years, many taxpayers took advantage of the Offshore Voluntary Disclosure Program offered by the Internal Revenue Service.   However, a report issued by the GAO (Government Accounting Office) has found that many individuals have tried to avoid going into the program by amending their tax returns.     The Washington Post reports that utilizing this technique “results in lost revenue for the Treasury and undermines the offshore programs’ fairness and effectiveness.”  

While we disagree with the characterization that filing amended tax returns reporting the income and bank account outside of the program results in a loss of revenue for the IRS, the report does recommend that the IRS beef up its efforts to detect these ‘quiet disclosures.’  

If you have questions about offshore tax compliance, or are in need of international tax representation, contact the experienced tax lawyers at Moskowitz LLP in San Francisco today.

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A woman convicted of tax evasion reportedly to take care of her horses.

In the second largest embezzlement case in North County history, according to the San Diego County District Attorney's office, an Aguanga woman has been formally sentenced for embezzling approximately $5.7 million from her employer - Proformance Apparel Group, LLP - between 2003 and 2011. She has also been charged with tax evasion for failing to report the income in her tax returns from 2006 to 2010.

A press release from the Franchise Tax Board (FTB) states that 45-year-old Elizabeth Masters managed payroll distribution for the company, and forged more than 700 paychecks in her name over the course of her employment. Masters initially pled not guilty to charges of income tax evasion, forgery and grand theft, U-T San Diego reported in March 2012. However, official documents from the investigation indicate that she had been embezzling from Proformance as early as her second paycheck. Though her annual salary was believed to be $50,000, Masters allegedly pocketed $134,000 during her first year.

According to various news outlets, a large portion of the funds Masters embezzled went toward maintaining her ranch, where she had over 100 horses stabled when her theft was first uncovered.

Last month, Master pled guilty to the charges against her, and has recently been sentenced to nine years in prison. In addition, she must pay back the embezzled amount, plus restitution, to her former employer and the FTB.

In white collar criminal matters, the tax agencies such as the IRS and FTB have powerful and well trained agents to assist the government in presenting its case. An experienced tax attorney can be an invaluable ally.

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Small business owners in San Francisco may need a tax attorney.

Earlier this year, the Internal Revenue Service (IRS) made its 2012 Data Book available online. The publication, which details the tax-collecting body's activities throughout the year, revealed that high-income Americans are statistically more likely to be audited than taxpayers in lower brackets. Now, a new study conducted by National Taxpayer Advocate Nina Olson has shown that the IRS has narrowed its scope even further.

Olson "used data from 2009 tax returns to plot the [Discriminant Inventory Function] scores for sole proprietorships across the country." These ratings, referred to as DIF, are used by the IRS to determine a taxpayer's likelihood of committing fraud.  Small business owners in general are considered more high-risk, the source states, as they have greater control over the income and expense figures the IRS receives. And, based on the DIF scores calculated by the government agency, business owners  are ideal taxpayers to target for tax audits because they take more deductions.

Based on Olson's findings, almost one third of potential targets are in California.    San Francisco and its surrounding bay area counties such as Contra Costa County, Alameda, Marin, and San Mateo were among the most suspect areas, so individuals in these regions may have greater cause to expect an audit.

If you have been audited by the IRS or Franchise Tax Board, an experienced tax attorney can be an invaluable asset. See our success pages and tax audit pages for more information.    These professionals will advocate on your behalf to ensure that you don't pay more than your due. Contact the tax attorneys at Moskowitz LLP in San Francisco to review your case.

With thanks to Elizabeth Prehn, Law Clerk

In early April 2013, the International Consortium of Investigative Journalists released their report, Secrecy for Sale:  Inside the Global Offshore Money Maze.   A New York Times Article on this report, states that "the leak of records mainly from the British Virgin Islands, the Cook Islands, and Singapore, covers 2.5 million files that disclose proprietary information about more than 120,000 offshore companies and trusts and nearly 130,000 individuals agents, including the wealthiest people in more than 170 countries."  (NY Times article here).  

This information has been organized and is now being utilized to identify individuals with the offshore bank accounts for use in tax evasion probes.   This may prove to be very uncomfortable for some - legally and politically.   For instance, Jerome Cahuzac, who formerly oversaw tax enforcement as a Junior Minister for France's Budget at the Ministry of the Economy, Finance, and External Trade, is now under investigation for tax evasion.   This comes on the heels of the publicity surrounding France's tax rate and what has been dubbed the "flight from French taxes."

The story broke after a French investigative website reported that Cahuzac was concealing funds from the government via an undisclosed offshore account.  After initially denying these allegations, Cahuzac - who stepped down from his government position, announced that the charges were true.   The French Press reports that Cahuzac first opened the account in Switzerland in 2009, but eventually transferred it to a bank in Singapore.   It contains approximately $770,000.   "It was an unspeakable mistake to think that I could avoid confronting a past that I wanted to think as behind me," Cahuzac, who worked as a cosmetic surgeon before entering politics, said in a statement.  

This report outlining the data leak, as well as the U.S. push towards identifying undisclosed accounts, only reinforces the need for experienced tax advice when seeking to eliminate or alleviate potential criminal and civil tax and monetary penalties associated with disclosed and undisclosed offshore bank accounts.    If you have an offshore bank account, you should seek advice from a tax attorney highly experienced in international and criminal tax defense.   Moskowitz LLP, a tax law firm has been in practice for over 30 years and has assisted hundreds of offshore bank account holders since the enforcement effort has intensified.   We provide experienced tax advice with regards to potential criminal and civil tax charges, grand jury investigations, voluntary disclosure, IRS reporting, and related issues surrounding offshore bank account and foreign asset holders.   Please contact our office for more information. 

Additional Moskowitz LLP articles of note:

  A Closer Look at the Non-Willful Penalty (as applied to OVDP), published by the State Bar of California Tax Journal  Jan. 2013

  Non-Citizens Risk Immigration Status for Offshore Bank Accounts

Disclaimer:  Because of the generality of this blog post, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Prior results do not guarantee a similar outcome. Furthermore, in accordance with Treasury Regulation Circular 230, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purposes of (i) avoiding tax related penalties under the Internal Revenue Code, or (ii.) promoting, marketing, or recommending to another party any tax related matter addressed herein.

Convicted tax offender and actor Wesley Snipes was released from federal prison in a blaze of press just before the tax return filing deadline this year.    As you may remember, the "Blade"trilogy actor was charged with tax evasion in 2008.    According to reports, Snipes had failed to pay income taxes between 1999 and 2006, during which period he earned an estimated $38 million.   

Snipes was convicted of deliberately failing to file federal tax returns and sentenced to three years in prison even though these were misdemeanor charges.   His legal team appealed his sentence to the Supreme Court on grounds that his sentence was 'too harsh' a penalty for the crime.    However, the Court refused to hear the matter and the sentence stood.  Now that Snipes has been released from prison, he will serve the rest of his four months under house arrest. 

The Snipes case serves to remind us that 1) people, even the wealthy and celebrities, go to prison for tax crimes, and 2) getting caught up with the wrong crowd is no defense - as here, Snipes' original defense was that he was relying on his accountant's advice.   

If you stand accused of any tax problems domestically or internationally, an experienced tax attorney may be your most valuable asset.   These professionals have an extensive knowledge of federal and state tax law, and can fight to ensure that your rights are not infringed upon by a government body.   Further, the tax fines, penalties and interest that tax problems can create can seem overwhelming.  A tax attorney and tax professionals can advise you on the best strategy for you.  Visit the Moskowitz LLP website for more information on how a tax attorney can help. 

Disclaimer:  Because of the generality of this blog post, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Prior results do not guarantee a similar outcome. Furthermore, in accordance with Treasury Regulation Circular 230, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purposes of (i) avoiding tax related penalties under the Internal Revenue Code, or (ii.) promoting, marketing, or recommending to another party any tax related matter addressed herein.

Can a taxpayer utilize a Collection Due Process Hearing to Contest a Tax Liability after the opportunity to have the matter heard in U.S. Tax Court has passed?

This is the topic of our article published here J.D. Supra.    

If you have yet to file your tax return for the 2012 fiscal year, you still have time to enlist the aid of a tax professional. Recently, the Internal Revenue Service (IRS) issued a press release regarding some of the most common tactics that unscrupulous individuals may use to take advantage of lawful taxpayers who seek advice regarding their financial obligation to the state and federal government.

Over the years, the Internal Revenue Service has increased its oversight of tax preparers who  intentional advise and prepare false tax returns or otherwise harm taxpayers, such as, collecting their refunds.   According to the IRS, tax preparer fraud may be a concern for many this season, so it is essential to ensure that the professional you enlist is properly certified and vetted. Earlier this year, the Franchise Tax Board (FTB) also touched on this issue, releasing a list of warning signs that could indicate that a tax preparer is not all that they seem.

But, that isn't the only method by which an individual may get a hold of your personal information at this time. The IRS also warns that phishing scams are also a potential threat.   "Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information," the press release states. "  Therefore, do not open any email you receive that states it is from the IRS.  

We pride ourselves on our dedication, tax knowledge, and experience. We provide realistic and practical solutions. Contact us by phone or our contact form and receive a personal and fast response from our founding partner, Steve Moskowitz, Attorney at Law.

We are honored that the California Tax Lawyer has published our article regarding the Non-Willful FBAR Penalty.   The article can be found here.   In it we not only define the legal obligations related to the Foreign Bank Account Report (FBAR) but also provide an analysis of the civil penalty structure and a detailed description of the non-willful penalty and potential defenses.

While most Californians are starting to file their tax returns for 2012, a few may still have to get their 2011 affairs in order. According to a January press release from the Franchise Tax Board (FTB), the agency has begun the process of reaching out to any state residents who failed to submit the necessary paperwork by October 15 of last year - the final deadline for 2011 returns.

"FTB receives income information from the IRS, banks, employers, state departments and other sources," the press release states. "FTB also uses occupational licenses and mortgage interest payment information to detect others who may also have a requirement to file a state tax return."

The agency then reportedly sifts through all of the tax returns filed from the previous year to determine those who may still have a financial obligation to the state.

So, how much is there to be gained through this process? According to the release, the FTB was able to acquire $ 714 million in unpaid taxes via this outreach last year. And, while it's true that the FTB is already likely to be facing ample processing challenges due to the tax adjustments applied to 2012 returns - particularly Proposition 30, which increases income tax rates for wealthier Californians - that figure definitely makes this time-consuming procedure worthwhile.

If you are contacted by the FTB regarding an outstanding tax return for 2011, you will be required to file a 2011 return within a month. After that point, the agency will calculate your financial obligations using available data regarding your earnings - which may mean you do not benefit from specific tax credits you could be entitled to. For assistance with your 2011 or 2012 tax return, or any other issue involving the FTB or IRS, contact the tax attorneys at Moskowitz LLP in San Francisco.