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San Jose tax audit attorney for offshore complianceTaxpayers often make errors on their tax returns that are due to simple miscalculations or misidentification of assets and income. These mistakes rarely lead to criminal charges, and they can typically be rectified with help from a qualified tax lawyer. However, when a taxpayer or business makes a deliberate effort to avoid tax liability, this may constitute illegal tax evasion. Tax evasion is a serious crime punishable by up to 5 years’ incarceration and fines up to $250,000 for an individual or $500,000 for a corporation. In recent years, the Internal Revenue Service has dramatically increased enforcement of income compliance with regard to offshore accounts. The United States, however, is not the only country that is concerned about the increasingly common crime of offshore tax evasion. Recently, the U.S. was joined by several other countries in a “day of action” against offshore tax evasion schemes.

IRS Continues to Investigate Potential Facilitation of Tax Evasion

The Sixteenth Amendment to the U.S. Constitution and a number of other laws dictate Americans’ tax obligations. In order to avoid paying their fair share of taxes, however, some individuals and businesses transfer assets outside the United States and into offshore tax shelters. Tax evasion is a massive problem that is estimated to have cost the U.S. federal government $458 billion per year from 2008 to 2010. Tax evasion schemes occur in developed countries around the world. 

In 2018, the Joint Chiefs of Global Tax Enforcement was formed by leaders in the United States, the United Kingdom, the Netherlands, Canada, and Australia to coordinate efforts to fight global tax evasion. The recent “day of action” occurred as part of an ongoing investigation into a financial institution in Central America that may be facilitating tax evasion and money laundering. The Joint Chiefs of Global Tax Enforcement have reason to believe that some taxpayers are anonymously hiding assets and laundering profits from criminal activities using this institution. Using interviews, subpoenas, search warrants, data analytics, and other intelligence, a great deal of information was uncovered about this institution and the activities taking place there. A number of civil and criminal actions are expected to result from the information gained during the investigation.

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San Jose, CA gift tax attorney marital deductionMany people have strong feelings about the inheritance they plan to leave to loved ones when they pass away. After working hard to acquire assets throughout your life, you do not want the value of these assets to be reduced through estate tax or gift tax. If this is something you are concerned about, you may be interested to learn about an estate preservation tool called the unlimited marital deduction.

The Unlimited Marital Deduction Allows Married Couples to Be Treated as One Economic Entity

The unlimited marital deduction lets an individual leave money or property to his or her spouse without incurring immediate federal taxes or penalties. The value of the property that you can transfer is unlimited, and this transfer can take place during your lifetime or upon your death. In 1982, the unlimited marital deduction took effect, eliminating the federal gift and estate tax for property transfers involving spouses. This provision changed the law so that married spouses are now treated as one financial unit when it comes to property transfers.

The Marital Deduction Delays Estate Tax Liability

Spouses have the opportunity to transfer all of their property to a surviving spouse if they choose to do so, and they can do this without incurring federal gift tax or estate tax liability. However, this property is still included in the surviving spouse’s taxable estate, and it is therefore subject to taxation when the second spouse passes away. The unlimited marital deduction effectively delays the estate tax liability until the second spouse in a marriage passes away. It should be noted that in order to take advantage of the unlimited marital deduction, the spouse receiving the property transfer must be a U.S. citizen. However, other estate planning instruments such as a qualified domestic trust may help those who are not yet U.S. citizens gain the marital deduction and reduce their estate taxes.

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San Jose business law attorneyPerhaps no other piece of California legislation has caused as much of a stir in recent years as Assembly Bill 5 (AB5). The bill was signed into law in September 2019 and went into effect on January 1, 2020. AB5, nicknamed the “gig worker bill,” significantly limits when employers can classify workers as independent contractors. Many companies that rely heavily on independent contractors are concerned about how the legislation will affect their ability to stay in business. The trucking industry has been one of the most vocal critics of the bill, and some recent developments may affect how these companies will operate going forward.

California Trucking Association’s Lawsuit Regarding AB5

Assembly Bill 5 instituted an “ABC test” for determining whether a worker can be classified as an independent contractor. According to AB5, all workers must be considered employees unless the following three criteria are met:

  1. The worker is able to carry out services free from the direct control of the company.
  2. His or her work tasks are not part of the company’s usual course of business.
  3. He or she is performing work that is of the same nature as that which he or she is ordinarily engaged in.

Many trucking industry employers and workers are especially concerned with part B of this test. Along with two owner-operators, the California Trucking Association (CTA) filed a lawsuit to fight the new restrictions regarding worker classification. The association argued that the legislation will threaten the livelihood of over 70,000 truckers who are currently classified as independent contractors. The CTA further contends that the new restrictions implemented by AB5 conflict with the Federal Aviation Administration Authorization Act of 1994 and the Federal Motor Carrier Safety Act.

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San Jose, CA tax compliance attorneyMost people know that paying taxes is not optional. However, sometimes something as simple as a mistake or miscalculation on a tax return can result in a tax compliance issue. When the Internal Revenue Service (IRS) discovers a problem with an individual’s tax return, the first method for contacting the taxpayer is typically a letter through the mail. If the issue is not resolved through the mail, an IRS officer may sit down with the taxpayer in a face-to-face meeting to discuss the compliance concerns. If you have been contacted by the IRS because you have not adequately met your tax obligations, an experienced tax lawyer can help you understand your options and protect your rights.

Make Sure That it Is Actually the IRS Who Is Contacting You

In recent years, there has been an uptick in the number of scammers pretending to be IRS agents. A scammer will typically make a phone call to an unsuspecting taxpayer and impersonate an IRS agent for the purposes of gaining access to personal identifying information or stealing the individual’s money. The IRS very rarely makes phone calls regarding tax issues. If an IRS worker does call you, he or she will not demand immediate payment or ask for credit card details over the phone. According to the IRS’s official website, anyone who receives a suspicious phone call from someone claiming to be with the IRS should hang up and call the IRS directly to discuss any potential compliance issues.

Know What to Expect During an IRS Meeting

The IRS recently announced that it will be increasing the number of revenue officers who make in-person visits to taxpayers. These face-to-face meetings will be focused in communities that have been especially affected by reduced IRS resources. In-person meetings only occur after the IRS makes several attempts to contact the taxpayer via mail. These meetings are typically unannounced. The IRS officer should provide two forms of credentials in order to verify that he or she is indeed an IRS worker. If he or she does not offer identification, you have the right to ask to see these credentials. The officer will then discuss your tax concerns and help you understand your options for resolving the issues.

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San Jose tax evasion defense lawyerIf you are being investigated for tax evasion, you may feel lost, confused, and concerned about the possible penalties you may face. The federal offense of tax evasion occurs when an individual or corporation intentionally and systematically attempts to avoid paying taxes. The offender may falsify documents, fail to report income, or use other illegal tactics to reduce his or her tax obligations. In the last decade, countries around the world have worked together to prevent individuals from concealing income in foreign banks. Tax evasion can include any procedures that allow assets, financial instruments, or revenue to go untaxed or be taxed at a lower rate. The potential penalties for tax evasion can include heavy fines and incarceration. If you are being audited by the IRS, you should know how federal laws may affect you.

Federal Law Regarding Tax Evasion

Tax evasion is a willful act. Simply making mistakes on your tax return will not result in tax evasion charges. Section 7201 of the Internal Revenue Code describes the offense of tax evasion. In order for the IRS and other authorities to prove that a party engaged in tax evasion, they must prove that:

  • The party has an unpaid tax liability.
  • The party intentionally took actions to evade or avoid taxes.
  • The party had “specific intent” to evade his or her duty to pay a certain tax.

Because tax evasion is a criminal matter, prosecutors must prove these elements beyond a reasonable doubt to convict a person for tax evasion.

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