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San Jose, CA quarterly tax payment attorney

If you have foreign bank or financial accounts, you should be aware that there appears to be a change in the way penalties are calculated in instances of an unintentional breach of tax law. The change could mean significantly higher financial penalties for those who are not in compliance.

This change was signaled in an opinion rendered by the U.S. District Court for the Central District of California in the case of United States of America v. Jane Boyd. The court ruled that a breach of the filing obligations of the reports of foreign bank and financial accounts, or FBAR, could incur a penalty of up to $10,000 per foreign financial account.

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San Jose retirement plan tax attorney self-correctionThe administration of retirement accounts is notoriously technical, and mistakes by plan sponsors can occur. Furthermore, since an account holder will be maintaining and contributing to a retirement account for many years, there are often changes that must be made. Tax issues may arise when 403(b) and 401(a) retirement plans need to be corrected, and the IRS must typically be notified of any corrections. Fortunately, the IRS has several self-correction mechanisms in place that allow plan sponsors to resolve errors or mistakes on their own.

The IRS has three correction programs:

  1. Self-Correction Program (SCP): Used to amend certain plan failures without communicating with the IRS or paying a user fee.
  2. Voluntary Correction Program (VCP): Used to rectify failures not eligible for the SCP or get the IRS’s statement in writing that specified failures were correctly resolved.
  3. Audit Closing Agreement Program (CAP): Used to correct failures found in the course of an IRS audit that cannot be self-corrected.  

The IRS recently announced an expansion of the self-correction program to allow additional types of failures to be remedied through the SCP instead of requiring parties to make a VCP submission to the IRS. The VCP process can often be expensive and lengthy.

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San Jose, CA estate tax lawyerThere are several ways the IRS will be involved in the estate of someone who has died (known as a “decedent”). The IRS is notorious for enforcing payment of the taxes it claims it is due, including in situations involving a deceased person’s estate. 

Tax issues will be important to a deceased person’s personal representative, executor, successor trustee, and heirs, because the estate must pay all taxes due before the estate’s assets can be distributed to the beneficiaries. The IRS can even audit the tax returns of a dead person.

The estate will have to pay any income taxes due for the year of the person’s death (as well as for any year that the decedent did not file). Just like a taxpayer filing his or her income taxes each year, the estate administrator will file a Form 1040 for the estate. Depending on how organized the estate is, the estate administrator may need to file a Request for Transcript of Tax Return in order to get needed documents related to the deceased person’s income and taxes.

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tax preparer fraud, San Jose tax lawyerMany individuals and businesses turn to a tax preparer for the extra assurance a preparer gives that taxes will be filed properly. While most tax preparers provide a valuable service, some preparers use tax season to scam customers as well as state and federal governments.

Different Schemes Used by Tax Preparers

Tax preparers can set up schemes to defraud in a number of ways. For example, a tax preparer could claim credit or deductions for which the individual was not eligible. A tax preparer could also divert tax refund checks to his or her own bank account.

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irs offshore accounts, San Jose tax law attorneyThe IRS has announced that it has received nearly $10 billion as part of a special program offered to taxpayers who were shielding assets in undisclosed offshore accounts. The $10 billion dollars was paid by 55,000 taxpayers who utilized the Offshore Voluntary Disclosure Program (OVDP). This sum includes taxes, interest, and penalties.

The OVDP is offered to those with undisclosed income from foreign financial accounts and assets and allows them to come into compliance with tax returns and report obligations. The program incentivizes taxpayers to voluntarily disclose these assets before the IRS finds out about them later. If the IRS discovers that an offshore account has not been disclosed, more severe penalties and possible criminal prosecution can result.

Similar to the OVDP, taxpayers have used a second program called the Streamlined Offshore Disclosure Program to pay approximately $450 million in taxes, interest, and penalties.

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