If you would have difficulty paying for professional representation and your income is less than the amount listed in this brochure, you may qualify for the assistance of the NM Low-Income Taxpayer Clinic. If you are located outside of New Mexico, you here a list of LITCs in other states.
- Larry Hess CPA
- Albuquerque, New Mexico, United States
- I am a Certified Public Accountant in Albuquerque, New Mexico specializing in representing taxpayers who are unable to pay the taxes they owe or must file delinquent returns or are under audit. I am also a frequent presenter of IRS Small Business Workshops for new businesses and new employers. You can read more articles on my website.
Saturday, May 18, 2019
The Internal Revenue Service issued a warning to taxpayers against using frivolous tax arguments to avoid paying taxes. This scheme involving outlandish legal claims is on the agency’s top 12 list of tax scams.
Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish legal claims to avoid paying their taxes. The IRS reminds people that time and again, these arguments have been thrown out of court.
The “Dirty Dozen” is compiled annually by the IRS as a consumer alert to warn people about common tax scams. The schemes occur throughout the year, but they frequently spike during tax filing season.
A recurring Dirty Dozen theme throughout the years involves claims peddled by promoters about "secret" schemes to avoid people paying taxes.
“Don’t be fooled by people citing dubious legal schemes to avoid paying taxes,” said IRS Commissioner Chuck Rettig. “Despite what con artists may tell you, there is no secret way to avoid paying what you legally owe. Taxpayers should be on the lookout for these and other common tax scams.”
In “The Truth about Frivolous Tax Arguments,” the IRS outlines some of the more common frivolous arguments, explains why they’re wrong and cites relevant court decisions. Examples of these common myths include:
- The First Amendment allows taxpayers to refuse to pay taxes on religious or moral grounds;
- The only “employees” subject to federal income tax are those who work for the federal government;
- Only foreign-source income is taxable.
Perpetrators of illegal scams, as well as those who make use of them, may face possible criminal prosecution. IRS Criminal Investigation works closely with the Justice Department to shut down scams and prosecute the criminals behind them.
Don’t get talked into using a frivolous argument
Taxpayers have the right to contest their tax liabilities using IRS administrative appeals procedures or in court, but they are still obligated to follow the law. Besides risking criminal prosecution, taxpayers can also face a variety of civil penalties for engaging in these schemes. Key among them is the $5,000 penalty for filing a frivolous tax return. The penalty applies to anyone who submits a frivolous tax return or other specified submissions, such as a request for a collection due process hearing, installment agreement, offer-in-compromise or taxpayer assistance order if any part of these submissions are based on a frivolous position. A list of more than 40 such positions can be found in Notice 2010-33, 2010-17 I.R.B.609. The list is not all inclusive, and the IRS and the courts may add to it at any time.
The IRS reminds taxpayers these schemes also can bring other civil penalties including:
- Accuracy-related penalty—20 percent of the underpaid tax;
- Civil fraud penalty—75 percent of the underpayment attributable to fraud;
- Erroneous refund claim penalty—20 percent of the excessive amount.
Late-filing and late-payment penalties may also apply. The Tax Court may also impose a penalty against taxpayers who make frivolous arguments in court.
Further details, including a list of the Dirty Dozen and information about other tax scams, can be found on IRS.gov.
IRS YouTube Videos:
Saturday, September 29, 2018
Preparing one's own personal income tax returns is not necessarily difficult. Many people have straightforward income from jobs and only a few deductions.
Business returns are another story.
I've seen many returns prepared by business owners. A number of them contained mistakes that resulted in larger tax bills than were necessary. The most common is not being aware of what expenditures might be deductible in the first place. Other returns get audited, not so much because of the deductions they took, but in the way the deductions were presented on their returns.
One example is a N.M. gross receipts tax case where the return contained the wrong standard industry code. The code was for a real estate development business. The owner was actually a real estate sales associate. In N.M. those people are not subject to GRT. Using the wrong SIC code caused N.M. Taxation & Revenue Dept. to mistakenly believe this was a taxable business that hadn't reported its GRT. In the end no tax was due. Nevertheless, there were other consequences. Understandably, the owner worried a lot about having to undergo an audit. The owner had to take time away from earning their living. And they paid for professional representation. (They could have represented themselves; but, hat's a topic for another discussion.)
Another case involved a return where the deduction for office expenses included other types of expenses. The owner used it as a sort a catch-all because they shoehorned everything that wasn't a preprinted line item into office expenses. The result was that the amount of the office supplies deduction was unusually large compared with the business's sales. The IRS noticed this and flagged the return for an audit. While many of the mis-classified
expenses were legitimate, the IRS uncovered some that weren't.
How about sharing your stories of what went wrong because you prepared your own return or the success you had by having your return professionally prepared.
Tuesday, September 11, 2018
- I have bank accounts, brokerage accounts & retirement accounts outside the United States. Do I have to report them?
- My business has been issuing 1099s to workers who are really employees. What can I do to correct this?
- How do I determine whether the individuals providing services are employees or independent contractors?
TAX PROBLEM RESOLUTION