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Boston Tax Law Blog

When should you amend your tax return?

Given the complexity of the federal tax code, it’s easy to overlook some detail or other in the rush to get your taxes filed.

The IRS is aware of this. That is why there is a procedure available to allow you to amend your tax return.

In this post, we will discuss when to do this.

Half a loaf may be better for both: the IRS and OIC acceptance

"Half a loaf is better than none," or at least so the old saying goes. And indeed, compromise is often better than protracted conflict.

To a somewhat surprising degree, this is true for the IRS as well. In recent years, the agency has shown itself increasingly willing to negotiate with taxpayers who seek to settle their tax debt for less than the full amount.

In this post, we will discuss the program that allows for this. It is called an offer in compromise (OIC).

IRS Criminal Investigation division, part 2: the numbers are up

In the first part of this post, we began discussing the role of the IRS Criminal Investigation division.

As we noted, the CI's role includes some rather surprising features. It goes beyond investigating suspected tax crimes to include other types of financial crimes. Indeed, it also includes the financial aspects of counterterrorism.

In this part of the post, let's take a look at some of the CI's key investigative priorities and statistics that reflect how actively it is pursuing them.

Tax compliance and the management of personal financial records

There is no single magic bullet for effective tax planning.

To be sure, the majority of taxpayers use a professional tax preparer to assist them with tax compliance. But even a competent preparer cannot make bricks without straw. He or she must first be given the necessary financial information to work with.

Whether you use a tax preparer or not, however, it can be difficult to gather numerous tax-related documents in order to facilitate the actual preparation of the return.

And so, in this post, we will offer a few thoughts on how to organize your financial records well to smooth the way.

The (somewhat surprising) role of the IRS Criminal Investigation division, part 1

Like any other organization, the IRS has judgment calls to make about its priorities.

Of course, in the best of all possible worlds the agency would have plenty of resources to assist taxpayers with compliance questions, as well as do an appropriate amount of auditing and investigating.

Unfortunately, in recent years federal budget woes have led to cutbacks in customer service by the IRS. At the same time, the work of the IRS Criminal Investigation (CI) division has been going strong.

In this two-part post, we will take note of some of the activities of the CI division.

From Orpheus to the IRS: how far can the taxman look back?

In the Greek myth of Orpheus and Eurydice, the musician Orpheus descends into the realm of the dead, trying to save Eurydice from a lethal snakebite.

He reclaims Eurydice and is on the verge of exiting the underworld - but then glances back for a glimpse of her beautiful face. But Pluto, the king of the underworld, had cautioned him not to look back. And with that one fateful look back, he lost his beloved forever.

IRS lookback provisions are seldom as dramatic as this. But for anyone who is facing IRS scrutiny, it is important to know how far back the taxman can go in trying to detect tax evasion, tax fraud or other compliance irregularities. In this post, we will discuss that issue.

Offshore disclosure requirements and honest mistakes

There is a big difference between intentional tax evasion and honest mistakes.

That is why, historically, there has been a clear distinction between tax fraud and other criminal tax violations, on the one hand, and civil tax controversies on the other.

Unfortunately, that distinction seems to have broken down when it comes to prosecutions for alleged failure to disclose offshore accounts.

The title of a recent report on offshore voluntary disclosure by the National Taxpayer Advocate speaks volumes. The report is subtitled ""The IRS Offshore Voluntary Disclosure Program Disproportionately Burdens Those Who Make Honest Mistakes."

How does it do this?

Tax audits: be wary, but also aware there is more than one type

The phrase "tax audit" generally carries the same type of connotation as "root canal." Almost by definition, it's not very pleasant - or at least that is the popular perception.

In practice, however, there is often a misconception about what a tax audit entails. Root canals are a pretty standard procedure. But there is more than one type of tax audit.

One type of audit involves face-to-face encounters between IRS agents and taxpayers that occur in office and field settings. These are understandably stressful experiences, dealing in person with an agent empowered to examine your documentation and ask pointed questions.

But in reality, there are many more audits conducted through correspondence than through face-to-face encounters.

Uptick in criminal investigations noted in IRS report

The IRS wears several hats.

For most taxpayers, the IRS is merely the rather faceless government agency that oversees compliance with tax-filing and payment requirements.

To be sure, that work is an important part of what the IRS does. But besides tax collection and civil compliance, the IRS also wears another, law enforcement-type hat. Its Criminal Investigation (CI) division has seen significant increases recently in the actions it has taken against taxpayers suspected of criminal violations.

In this post, we will take note of a report issued by the CI division this week that shows the extent to which investigations and prosecutions of suspected tax crime have increased.

IRS wants taxpayers to know that tax crimes do not pay

Heading into the frenzy of tax season, the IRS wants Massachusetts taxpayers to know that filing inaccurate returns or failing to make necessary disclosures may result in prosecution for tax evasion or other tax crimes. In addition to paying any unpaid taxes, penalties and fines, the IRS may aggressively pursue imprisonment of taxpayers that commit tax crimes.

In one case, a wealthy taxpayer pled guilty to tax evasion and was originally sentenced to probation and extensive community service. The taxpayer also paid more than $50 million in fines and penalties. The judge did not sentence the taxpayer to jail time based on the taxpayer's history of making significant charitable donations. Unhappy with the lack of jail time, the federal prosecutors have appealed the judge's sentencing recommendation and are seeking jail time for the taxpayer. A conviction for tax evasion can carry a prison term of up to five years.

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