Get Ready for a One-Two Punch: More Taxes and More IRS Audits.
It’s apparent that the government needs money. We have to pay for federal bailouts of banks, insurers, the automobile industry and other troubled sectors. We have to pay for healthcare reform. We have to pay for our foreign military engagements. State and local governments need money also, and lower real estate values means lower property tax revenue.
When the government needs money, it calls on the Treasury Department. The Treasury Department obtains revenue from its tax collector – the IRS. The IRS collects all sorts of taxes: income tax, estate tax, capital gains tax, self employment tax, gift tax, generation skipping tax, etc.
There are various pending measures to raise taxes, at the federal, state and local levels, to finance all of the various government initiatives and programs. Get ready, because taxes are definitely going up.
In addition to raising taxes, the government is also more aggressively enforcing tax laws, tightening or closing loopholes and pursuing tax evaders. The IRS is stepping up its investigations of possible tax abuse and tax evasion. One example: the IRS’ recent success against UBS for facilitating offshore tax fraud, followed by criminal tax fraud indictments against Americans with supposedly “secret” offshore accounts. Other examples include pursuing improper “tax shelters” and other abusive transactions, and increasing audits and tax investigations.
Taxpayers are not only at risk of discovery by the IRS; they face an increased danger of being turned in by private informants seeking recently enlarged rewards. Since 2006, the IRS has increased tipster rewards to 15 – 30% of taxes, penalties and interest collected. In 2008 alone, informants disclosed $65 billion of allegedly unreported income to the IRS, in several thousand submissions. Foreign tax haven banks offer an opportunity for underpaid employees to get rich by becoming IRS informants. Additionally, taxpayers are at risk of being turned in by ex-partners, ex-spouses, ex-companions, ex-employees, litigation/arbitration adversaries, estranged children, or anyone else with a grudge who senses an opportunity to get even and get a reward.
The government’s need for cash, and its pursuit of tax dollars, has been well-publicized. See, for example, “IRS Brings New Focus to Auditing the Rich”, The Wall Street Journal, October 28, 2009 (stating that the IRS is not only looking at the 1040 returns filed by wealthy Americans, but “the entire economic picture of the enterprise controlled by the wealthy individual”); “New York, Needing Cash, Pursuing Tax Delinquents”, New York Times, November 10, 2009 (discussing the hundreds of thousands of tax warrants filed, across a diverse spectrum of individuals and businesses, and the millions of open and active tax cases by the New York State Tax Department); “IRS Begins Major Initiative To Audit 6,000 Companies”, Mondaq, November 24, 2009 (“all companies, large and small, as well as for-profit and not-for-profit, are within the potential scope of the IRS’ new initiative”).
What should you do?
First, work with competent, experienced tax counsel, who utilize proven, tax-compliant strategies.
Second, have tax counsel conduct a “friendly audit” – review your financial activities, bookkeeping and record keeping procedures, and accounting practices to uncover and correct sensitive areas before they are discovered in an IRS audit. Become essentially “audit proof”.
Rubinstein & Rubinstein, LLP has earned a reputation for experience, expertise and creativity in the development of sophisticated tax-compliant domestic and offshore tax strategies, designed to maximize asset preservation and to minimize taxes. We have been instrumental in the development of creative, tax compliant domestic and offshore strategies for the elimination, deferral or minimization of capital gains tax, income tax and estate tax.
If you are being audited or investigated by the IRS or a state tax authority, hire legal counsel with a proven track record of success against the government.
Rubinstein & Rubinstein, LLP has been advocating on behalf of taxpayers for close to twenty years. Our attorneys have extensive experience in the representation of clients before the IRS and before state tax departments. Such representation has included:
- the review and analysis of tax returns and underlying documentation;
- representation at audits;
- representation in Voluntary Disclosure initiatives;
- negotiation of Offers In Compromise, abatements of penalties and/or interest and installment payment plans;
- protest and/or appeal of determinations of tax deficiency and tax assessments; and removal of tax liens;
- representation of clients in civil and criminal tax investigations;
- litigation on behalf of clients before the U.S. Tax Court.
Increased government spending necessitates increased government revenue. Revenue will be raised via tax increases, as well as aggressive IRS and state action in pursuit of maximum taxpayer dollars. In this context, you need tax lawyers who can help you legally and effectively lower your tax bill. And if you are challenged by the IRS or by a state tax authority, you need effective legal counsel to fight back on your behalf.