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Manhattan Tax Law Blog

Restaurants accused of tax fraud, face state and federal charges

The Department of Justice (DOJ) has accused five restaurants to tax evasion. The charges include claims the restaurant owners made use of software called “tax zappers” to remove revenue from their books. Instead of properly claiming proceeds from their restaurants on tax returns, the government claims the owners removed cash from registers and used the funds to pay employees under the table.

What is “tax zapper” software? Business owners can use the software to suppress sale records and illegally reduce tax obligations. Business owners use the software to delete selected transactions. The software will also recalculate receipts and taxes the business owes — essentially creating two financial accounts for the business allegedly using the software.

You have mail: What to do when the IRS asks about a foreign asset

Those who are savvy in their financial planning efforts likely have diversified their investments. For many, this includes the use of financial assets. When done wisely such planning is legal and beneficial. However, a simple misstep could result in a failure to report the assets to the proper authorities.

What will happen if I do not properly report foreign accounts? United States taxpayers are required to report foreign assets. A failure to do so can result in harsh monetary penalties and, depending on the evidence gathered by the Internal Revenue Service (IRS), potential imprisonment.

Investment strategy leads to allegations of tax fraud

Investing assets is a complicated business. As such, it is not uncommon to hire a financial planner or to seek advice from investment professionals to aid in creation of an investment strategy. In many cases, this can lead to a strategy that minimizes risks while maximizing benefits. In some, it can lead to financial catastrophe.

That is the situation in a recent case. The case involves allegations recommended tax planning strategies resulted in a tax crime.

IRS provides guidance on “crack and pack” planning technique

President Donald Trump pushed through tax reform at the end of 2017. The Trump administration stated the new tax law, the Tax Cuts and Jobs Act (TCJA) would result in tax savings for many Americans. Unfortunately, it has also led to confusion. Many provisions within the law are unclear and taxpayers are struggling to determine how the law will impact their returns.

One particular area that requires further explanation: income limits for pass-through businesses.

Bonus depreciation available to business owners

We’ve written extensively on the potential impacts of the new Tax Cuts and Jobs Act. While it’s true that we know your 2018 tax situation could look different compared to last year, not everyone is sure what it will look like on an individual level. If you are a business owner, you are probably doubly concerned with what the tax law means for both your business and your livelihood.

To help business owners adjust to the changes, the government is offering temporary rules or one-time tax breaks this year related to depreciation of valuable business assets like real estate and vehicles. Depreciation allows business owners to spread out the cost of an asset over its lifetime – and the new TCJA is offering depreciation bonuses. According to The Balance Small Business, bonus depreciation offers additional incentives for business owners to buy capital assets. How does this apply to your business?

Partnership tax audit rules: Is your business ready?

The rules regarding how the Internal Revenue Service (IRS) can conduct tax audits of partnerships have changed. It is important for business owners to review the rules and have a basic understanding of the impact on their business. In some cases, business owners may be wise to take proactive steps to better ensure their business’ interests are protected.

Why did the rules change? The change is the result of the Bipartisan Budget Act of 2015. It went into effect January 1, 2018. This new law changes the rules for federal income tax audits of partnerships, limited liability corporations (LLCs), limited partnerships and S corporations.

Partnership tax audit rules: Is your business ready?

The rules regarding how the Internal Revenue Service (IRS) can conduct tax audits of partnerships have changed. It is important for business owners to review the rules and have a basic understanding of the impact on their business. In some cases, business owners may be wise to take proactive steps to better ensure their business’ interests are protected.

Why did the rules change? The change is the result of the Bipartisan Budget Act of 2015. It went into effect January 1, 2018. This new law changes the rules for federal income tax audits of partnerships, limited liability corporations (LLCs), limited partnerships and S corporations.

Can you avoid huge tax penalties when the OVDP is about to end?

The Internal Revenue Service (IRS) requires taxpayers to report certain foreign assets. This requirement has led to many questions, including what should you do if you have a foreign asset? Can you come into compliance without facing serious penalties? In short yes, you should come into compliance and yes, you can mitigate the risk of serious penalties.

How can I come into compliance with applicable U.S. tax laws? Taxpayers can come into compliance with applicable tax laws through use of the Offshore Voluntary Disclosure Program (OVDP). The program allows taxpayers to voluntarily come into compliance with reporting requirements. In exchange for voluntary compliance, the government will agree to cap penalties. Taxpayers that wish to take advantage of this program must act promptly. The government recently announced the OVDP will end in September.

Treasury Report: IRS not prepared to enforce FATCA

The Treasury Inspector General For Tax Administration (TIGTA) recently conducted a report on the Internal Revenue Service’s (IRS) ability to enforce compliance with the Foreign Account Tax Compliance Act (FATCA).

Quick review: What is the FATCA? Congress passed the FATCA in 2010 to increase foreign financial reporting and tax compliance. The law requires taxpayers to use Form 8938 to report foreign assets that exceed a set threshold amount to the IRS. The government has currently set the threshold at $50,000 for single, $100,000 for married taxpayers living in the United States at the last day of the tax year or $75,000 and $150,000 at any point during the tax year. The agency has set the threshold for taxpayers living outside the United States at $200,000 for single filers or $400,000 for married filers at the last day of the tax year or $300,000 and $600,000 respectively at any point during the tax year.

What happens if I can’t pay the IRS?

According to the Tax Foundation, income earners in the U.S. are subject to an average tax rate of 21 percent. That figure can prove burdensome for business owners and individuals who find themselves owing money at tax time. Although the bill may be unwelcome, you still have an obligation to pay the Internal Revenue Service, and options are available to you to make the payment. Here is how you can take advantage of your tax payment options and utilize proactive steps in the future.

Your options to pay the IRS

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