In an effort to curtail corporate financial irresponsibility, the Obama administration has been working fervently to control white-collar tax cheats. The media has successfully portrayed the businesses that have overseas bank accounts as “suspicious” and potentially guilty of tax evasion.  In 2001, there was a $345 billion tax gap–most of which can be accounted for by the underground economy of tax evaders who have strategically utilized foreign tax havens and other methods to avoid giving away 1/3, 1/4, or 1/5 of their income to the U.S.† government. I spoke with Chuck Morse early this month on The Chuck Morse Show about the new tax enforcement regulations and how they can affect your financial well-being.

Click here to listen to the entire interview online.

President Obama has gathered momentous support for his expansion of the IRS; this year, 1,000 new IRS agents will be hired, followed by another 1,000 new tax agents in 2010. In 24 months, the IRS is scheduled to grow by 25% in size. This means the IRS will have even more resources at their disposal to come after your hard-earned money. This is the most crucial time to be aware of the new tax regulations in order to protect your assets domestically or internationally.

The New Tax Enforcement Climate

The main focus of these new tax regulations is to target the offshore bank accounts of American businesses; these accounts are relatively protected from the IRS if they are in a country that does not have a tax treaty with the US–such as Switzerland. Lately, IRS has been pressuring convicted tax cheats to give up names of other tax cheaters in exchange for leniency in penalty. This creates a ripple effect that not only incriminates other tax cheaters, but also potentially jeopardizes the innocence of the tax advisers to the tax cheaters–such as lawyers and accountants. All of the sudden, lawyers and accountants who gave legal advice to their clients may now find themselves under investigation by the IRS for suggesting overseas-tax shelters to their clients.

Once the IRS accuses you of a tax violation, you are considered “guilty till proven innocent.” Some taxpayers go to tax court, but only about 6% of cases that go through tax court are actually ruled in favor of the taxpayer. Most of the time, the government wins. Therefore, it is imperative for you to seek a tax attorney’s expertise to handle the tax problem before you contact the IRS yourself. One of the most common and most incriminating mistakes people make is to speak to the IRS themselves without consulting professional tax guidance first.

What the New Tax Regulation Climate Means to You

• Large sums of money deposits into your bank account will require you to formally alert the IRS
  “Suspicious Activity Report“–this is the sister form to the “Currency Transaction Report“ (which has been around for some time).  The Currency Transaction Report is a form that the bank fills out any time you deposit $10,000 or more into your account. The Suspicious Activity Report is the form the bank fills out when you deposit less than $10,000 at regular intervals (i.e. if you go into your bank once a week for six weeks to put in $7,000 each time). The Suspicious Activity Report is investigated by the IRS more thoroughly than the Currency Transaction Report. All tax investigations are conducted by the IRS privately without public notice.
• Casual cash gifts can get you in trouble–and you have the burden to prove your innocence
  If you receive large amounts of cash gifts (be it at a wedding or birthday, amounting to more than $10,000) and you go to deposit this amount into your bank, the IRS may accuse you of inaccurately disclosing your income. The IRS does not investigate the details of each cash source; therefore if you are in trouble with the IRS due to a personal circumstance unrelated to undisclosed income, you have to prove to them why you are innocent.
• If your business accepts credit card payments, you have to fill out a 1099 form
  By the end of 2010, all credit cards and merchant processors are going to be required to issue the business establishment a 1099 for all the gross credit card receipts that they processed on the business’s behalf. This means restaurants or anyone who takes credit cards as a business are now going to get a 1099 and the IRS is going to compare that to the businesses’ tax returns. This is one area that’s going to go through the roof in terms of enforcement.
• If your business accepts PayPal, you may also need to fill out an IRS Office of Management and Budget Form
  If you’re a business and you take more than one thousand dollars in one day of money orders, or you get a certified check of a thousand dollars or more in one day, you are considered a “currency operation”-in other words, they consider you just like a check-cashing establishment and you have to fill out an IRS Office of Management and Budget Form to alert the IRS that you’re one of these money service operations, even though you’re in a totally different business than cashing checks.

The Amnesty Period and Why You Need to Act Now

With the strict new tax enforcement laws, the U.S. government has offered an “Amnesty Period” which will expire on September 22, 2009. This amnesty period is a “break” for business owners with offshore accounts to voluntarily admit to tax evasion in order to reduce the amount they are fined. Before this period, the penalty is only 5-20% of the tax amount. However, after September 22, 2009, the penalty will be five to seven times the largest amount in your account over the last 6 years. Therefore, it is a really good idea to get your tax problems sorted out now before the September deadline.

Currently, the problem is that in this strenuous effort to enforce overseas tax cheats, a lot of people are going to get caught up in trouble who have not done anything wrong and who in the past, would have done the same thing without thinking twice about it, such as making a standard bank transaction. It is important to remain emotionally detached when dealing with the IRS, and it is an especially good idea to hire professional tax help–someone who knows the laws and are familiar with the IRS–to help defend you against unjust penalties.

I deal with tax problems every day and this year alone, my firm has successfully negotiated hundreds of IRS settlements at a rate of $0.13 on the dollar. For a free, no-risk consultation, please call my office at 866-IRS-PROBLEMS (1-866-477-7762) or visit the Tax Resolution Services web site.

More Tax Help, IRS News and Tax Relief Tips:

1. Tax Resolution News: IRS Warns Against Frivolous Tax Arguments That Can Incur Severe Penalties
2. Tax Resolution News: In 2010, IRS to Put Even More Heat on Tax Cheats
3. Tax Help News: IRS Enforcement to Get Priority, Big Bucks in 2010
4. Tax Help For Taxpayers Short on Cash: Filing a Tax Return Late is Better than Filing a False Tax Return
5. Tax Help: How to Resolve Your Back Taxes & Prevent Tax Problems If You’re Short on Cash This Season

Tags: Chuck Morse, failing to file federal tax return, Free Tax Consultation, income tax relief, IRS help, irs problems, Michael Rozbruch, tax advice, tax attorney, tax cheats, tax evasion, tax help, tax resolution, tax resolution services, Tax Resolution Specialist, Tax Tips

This entry was posted on Friday, June 19th, 2009 at 2:51 pm and is filed under Seeking Professional Tax Help, Tax Debt Help News, Tax news and tips, Taxpayer Advocate, Unfiled Returns - Delinquent Tax Returns, Voluntary Disclosure, tax help. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.