The difference between tax avoidance and tax evasion may seem solely like a semantic one, but to the IRS, the differences are important.
Anyone with assets diversified in foreign accounts with balances that total $10,000 or more at any time in a given year needs to file a disclosure (FinCEN Form 114 of previously referred to as a FBAR). Fail to file this disclosure and the penalties are draconian.
In neighboring Connecticut, a Chinese restaurant owner accused of using “zapper” software faces serious tax fraud penalties. Massachusetts also assesses a sales tax on meals.
The willful failure to file FBARs (Report of Foreign Bank and Financial Account) increases the associated civil penalties. The exact definition of willful was at the heart of a recent Tax Court case.
As a bar or restaurant owner, you know that taxes are a big concern. In terms of maintaining a healthy business, staying in compliance with all the requirements may rank right up there with pleasing your customers as a key to success.
Why does the IRS use a John Doe Summons to get tax-related information? This type of request is used by the Service when it does not know the identity of a taxpayer.
For the length of nearly two full presidential terms, the IRS has been pushing hard on enforcement of foreign account disclosure requirements.
The twisted tale of former billionaire brother Sam Wyly and his late brother Charles took a new turn recently when a federal bankruptcy judge found that the pair had committed tax fraud with a convoluted scheme of offshore bank accounts, shell corporations, trusts and other tax shelters. The brothers system involved transferring their interest in various commercial enterprises (among them such well-known companies as Michael's arts and crafts stores and Bonanza Steakhouses) to trusts in exchange for private annuities.
The income requirements for filing taxes are quite low. If filing single, you need to file a federal return if you earned more than $10,300 in 2015. The amount doubles for a married couple. If you earned more than $8,000, you need to file a state return. Filing a return is necessary if you expect a refund of taxes withheld by an employer or through the Earned Income Tax Credit.
When you think about it, the tax system here in the United States is really based on the honor system. The federal government trusts that you will honor your responsibility to file your tax forms to the Internal Revenue Service for processing. Of course, you truly are legally required to file them -- but even if you didn't file, some time would pass before any penalties would be inflicted upon you.