Tuesday, February 10, 2009

Tuesday, February 10, 2009:

From: Alvin Brown, esq. retired from Office of IRS Chief Counsel
New fines for federal income tax preparers (Requested by Robert Alan Jones, esq.

What "reckless" means in 6694(b) [ The fine may be $5,000. per year. ]

Section 6694(b) WILLFUL OR RECKLESS CONDUCT. --If any part of any understatement of liability with respect to any return, or claim for refund, is due --6694(b)(1) to a willful attempt in any manner to understate the liability for tax by a person who is an income tax return preparer with respect to such return or claim, or 6694(b)(2) to any reckless or intentional disregard of rules or regulations by any such person, then such person will be subject to, in our view, a new excessive fine or penalty.

There are regulations that define "reckless" -§1.6662-3(b)(2) Disregard of rules or regulations. --The term "disregard" includes any careless, reckless or intentional disregard of rules or regulations. The term "rules or regulations" includes the provisions of the Internal Revenue Code, temporary or final Treasury regulations issued under the Code, and revenue rulings or notices (other than notices of proposed rulemaking) issued by the Internal Revenue Service and published in the Internal Revenue Bulletin. A disregard of rules or regulations is "careless" if the taxpayer does not exercise reasonable diligence to determine the correctness of a return position that is contrary to the rule or regulation. A disregard is "reckless" if the taxpayer makes little or no effort to determine whether a rule or regulation exists, under circumstances which demonstrate a substantial deviation from the standard of conduct that a reasonable person would observe. A disregard is "intentional" if the taxpayer knows of the rule or regulation that is disregarded. Nevertheless, a taxpayer who takes a position (other than with respect to a reportable transaction, as defined in §1.6011-4(b) or §1.6011-4T(b), as applicable) contrary to a revenue ruling or notice has not disregarded the ruling or notice if the contrary position has a realistic possibility of being sustained on its merits.

The plain flush language of these regulations say that a person is "reckless" (and therefore subject to the $5,000 6694(b) penalty) if the return preparer does not follow defined rules and REGULATIONS. The "rules" would include IRS published positions.But what about the "realistic possibility" defense?"The Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28) changed the “realistic possibility” of success" standard in Code Sec. 6694(a) to a "more-likely-than-not" standard for nonabusive undisclosed items.Rev. Rul. 78-344, 1978-2 CB 334 is illustrative of how the IRS administers the "realistic possibility" standard under section 694. You will find that this standard requires that you follow all of the Code, regulations, case law, etc.

But the standard is less than the "substantial authority" standard. Since both standards are subjective, I do not see how one can avoid the 6694(b) $5,000 penalty if the return preparer does not precisely follow all published regulations that support all deductions, expenses and credits.Rev. Rul. 78-344 follows:Section 6694.--Understatement of Taxpayer's Liability by Income Tax Return Preparer26 CFR 1.6694-1: Understatement of taxpayer's liability by income tax return preparer.- An income tax return preparer who, following instructions from a taxpayer without consulting the regulations, excludes certain items from the gross income reported on the taxpayer's return that are required by the regulations to be included is subject to the panalty imposed by section 6694(a) of the Code for negligent or intentional disregard of rules and regulations.

[Text]Advice has been requested whether, under the circumstances described below, an income tax return preparer is subject to the penalty imposed by section 6694(a) of the Internal Revenue Code of 1954 for negligent or intentional disregard of rules and regulations.A, a tax return preparer, was engaged by B, a taxpayer, to prepare B's federal income tax return. B had certain items of income which B did not believe were properly includible in gross income, and instructed A not to include the items in gross income as reported on the tax return. Although the income tax regulations provide for the inclusion of these items in gross income, A did not bother to consult the regulations, but chose instead to follow B's insructions on the assumption that B was probably correct. A's failure to include these items in B's gross income resulted in an understatement of B's income tax liability.

Section 6694(a) of the Code imposes a penalty on an income tax return preparer who understates a taxpayer's liability by negligent or intentional disregard of rules and regulations. Section 1.6694-1(a)(3) of the Income Tax Regulations provides that the term "rules or regulations" includes the provisions of the Internal Revenue Code and the Treasury regulations issued under the Code.Section 1.6694-1(a)(4) of the regulations provides that an income tax return preparer who fails to follow an income tax regulation is not considered to have negligently or intentionally disregarded the rules and regulations if the preparer in good faith and with reasonable basis takes the position that the regulation does not accurately reflect the Code. This section further provides that, for purposes of section 1.6694-1(a) the view of the taxpayer concerning a rule or regulation is not material.

In this case, not withstanding that B instructed A not to include the items in gross income because of the belief that they were not properly includible, A did not in good faith and with reasonable basis take the position that these items of income were not includible in B's gross income.Accordingly, A is subject to the penalty under section 6694(a) of the Code for understating B's income tax liability due to negligent or intentional disregard of the regulations.

Saturday, February 7, 2009

IRS SANCTIONS IMPOSED AND UPHELD AGAINST WINNERS

IRS SANCTIONS IMPOSED AND UPHELD AGAINST WINNERS

One would think that when the Taxpayers win a case or prevail in a settlement of their defense claims against the Internal Revenue Service any sanctions handed out by the court would be against the IRS. Not necessarily so as Mr. and Mrs. Robert Gillespie, a couple in their early eighties, and their counsel Robert Alan Jones discovered recently.

Mr. and Mrs. Gillespie who have operated small businesses for years in Wabash, IN, but are now retired, ran afoul of the IRS in the late nineties when they invested in an asset protection and business trust arrangement. The Gillespies failed to appeal the IRS rejection of the program to the United States Tax Court and all of their legitimate business and personal deductions as well as the business trust benefits were disallowed. This resulted in a tax bill multiplied many times over until it reached some $498,000.

When the IRS attempted to collect this bogus amount which the Gillespies were and are totally unable to pay, they retained Mr. Jones a former federal prosecutor, and nationally known tax defense counsel to represent them. Mr. Jones secured what is known as a "Collection Due Process" hearing for them pursuant to Internal Revenue Code§ 6330. Unfortunately, the IRS settlement officer did not give them a hearing, instead labeling their representative’s written letter request for information necessary to prepare for the hearing as the hearing itself. She then issued a "notice of determination" upholding the IRS’ bogus bill.

Of course the Gillespies through their counsel Mr. Jones, following the law petitioned the Tax Court for appellate review of the settlement officer’s negative determination. At this point the local office of the IRS Office of Chief Counsel, and IRS Appeals reviewed the entire proceedings in depth and agreed with Mr. Jones that the actual liability was vastly overstated. The IRS agreed to settle the $498,000 bill for less than $44,000 including penalties: the actual amount owed.

Unfortunately for the Gillespies and Mr. Robert Alan Jones the case did not end there. The case was called for trial, or settlement. On its first scheduled calendar call, (Gillespie v. Commissioner of Internal Revenue, Case no. 3405-05L, et al.) the Tax Court mindful of the settlement that had already been reached, ordered the Gillespies and Mr. Jones to show cause why they should not be sanctioned. The reason: for filing a frivolous petition to delay the collection of taxes previously determined by the IRS to be valid.

After a short hearing and later briefing by parties on both sides, the Tax Court imposed sanctions on Mr. Gillespie, and "excess costs" sanctions on Mr. Jones attributable to the delay in the proceedings caused by the filing of the "frivolous petition" in Tax Court. (See T.C. Memo. 2007-202.) Of course the only way to reduce the $498,000 bill by 90% was to file a petition in Tax Court and settle the matter within the system. The sanctions are for many thousands of dollars and may teach taxpayers and their attorneys that the price of trying and winning is more prohibitive than accepting the original injustice.

The Tax Court decision was appealed to the United States Circuit Court of Appeals for the Seventh Circuit in Chicago, Illinois. To no ones surprise the Circuit Court in an unpublished opinion (292 Fed.Appx. 517, 2008 WL 4218808) upheld the Tax Court’s ruling while ignoring the fact that the Gillespies had never been given a hearing of any kind although it is a specific requirement of the statute.

Mr. Jones is currently contemplating filing a petition for certiorari in the United States Supreme Court. However, it appears that the law as handed down by the Court, is not on the side of the taxpayer if he wins below, but is on the side of the government, win or lose. For all practitioners and their counsel this is a chilling and sad state of affairs.

Monday, February 2, 2009

The (IRS) Empire Strikes Back

Much as in the fashion of "Star Wars" the Evil Empire: the Internal Revenue Service has petutlantly struck back at Thomas Seidel and his counsel Robert Alan Jones because they were fortunate enough to have pinned the IRS ears back before a United States District Court jury last month on January 8. (See Case no.
5:07-cv-04128 U.S.D.C. NDCA Jan. 8, 2009
.)

Mr. Seidel, as reported in our previous blog, overturned a $1,000,000 penalty assessment against him based upon misrepresentation by the IRS, and the deliberate conduct of revenue officers in ignoring the law. You would think that after hounding the Seidel family for twelve years with liens and levies against both him and his wife even the IRS would honor the jury verdict and release the liens against the Seidels' family home, and Mrs. Seidel's closely held corporation and its real estate.

But of course not; according to the Assistant U.S. Attorney who attempted and failed to gain a judgment against Mr. Seidel, the United States may decide to appeal. This of course may take two or three years. It makes no difference to the government that the Seidels currently have no debt to the IRS and that is the "law of the case." Further, it does not seem to matter that the Seidels may lose their home because the final date to pay off their mortgage was November 1, 2008, and the landlord has held off until now to see if Mr. Seidel would prevail in court, which he has.

So the beat goes on, but you can bet your last dollar if you have one that if the government had prevailed, it would not have waited two or three years of an appeal period before the Seidels' home was sold at auction. "Fair and balanced," not exactly, but we have hope that the judge who has been extremely fair at the trial stage will, after 60 days when the time for filing a notice of appeal has expired, irrespective of any appeal, order the IRS to release the liens.

Your comments and suggestions are appreciated.

Wednesday, January 21, 2009

IRS Strikes Out

This past week a California civil jury comprised of three women and three men struck an overdue blow for freedom in the United States District Court of Northern California, San Jose Division. For those citizens and residents of the United States who believe that they cannot get fair treatment from our government and our legal system, this proves, at least in one specific case, that justice can prevail.

With good lawyers, a fair judge, and a willingness to stick to his guns, Thomas E. Seidel of Monterey, California overturned a tweleve year old IRS determination that he owed some $601,000.00+ in civil penalties, plus interest, all totaling more than $1,000,000.00. Mr. Seidel (along with his family) has been battling federal tax liens, levies on his property and that of his wife, including their wages, and seizures totaling hundreds of thousands of dollars from his wife's wholly owned corporation since before the turn of this century.

The IRS violated Mr. Seidel's statutory rights to notice and an opportunity to be heard and contest the IRS' determination of liability back in 1996. Ten years later, unable to previously collect, the IRS sued Mr. Seidel to reduce their determination (assessment) to judgment. Mr. Seidel, represented by Robert Alan Jones, a nationally known tax defense attorney, and Ms. Randy Pollock of Oakland, Ca. his local co-counsel, contested the IRS action. The defense attorneys alertly demanded all relevant government records and notes. These materials when delivered clearly showed that Mr. Seidel's rights had been violated. The court agreed, U.S. District Judge Jeremy Fogel ruling as a matter of law that notice was insufficient. However, the IRS through representation by the United States Attorney's Office Tax Division from San Francisco presented a case to indicate that the violation was waived by the defendant Mr. Seidel's consent to assessment.

Not so! ruled the jury. The defendant was not given his rights, and the government may not benefit by violating these rights. This is truly a landmark victory for the taxpayers, but hardly unexpected in cases tried by Robert Alan Jones against the IRS.

Mr. Jones has won three landmark cases in the past nine months against the IRS. The current case is USA v Thomas E. Seidel, Case no. 5:07-cv-04128 U.S. District Court for the Northern District of California. Previously on May 16, 2008, in U.S. District Court in Cincinnati, Ohio Mr. Jones was successful in having a complicated criminal tax conspiracy case against four defendants dismissed for violation of their speedy trial rights, Case no. 1:05-cr-45. Finally, on May 1, 2008 Mr. Jones and co-counsel, Mr. Declan O'Donnell, of Castle Rock, Colorado prevailed in U.S. Tax Court persuading Tax Court Judge Renato Beghe to re-open taxpayer fraud claims against the IRS that they had been misled into settling their Tax Court cases when IRS lawyers withheld vital information from them upon which their settlements were based. Hartman, Lewis, and Liu v. Commissioner of Internal Revenue, Case no. 1371-85 (T.C. Memo. 2008-124)

Mr. Jones, a former federal prosecutor and member of the retired U.S. Marine Corps Reserve can be reached through info@acriminaltaxattorney.com for those who want to challenge the "judicial system" within the rules of the judicial system.

IRS SANCTION DOUBLED BY U.S. TAX COURT

FOR IMMEDIATE RELEASE

IRS SANCTION DOUBLED BY U.S. TAX COURT

Long time Colorado attorney Declan Joseph O’Donnell reports that his clients’ $30 million judgment against the IRS doubled in value to $60 million (+++) on May 1, 2008. Judge Beghe of the U.S. Tax Court filed the Court’s long awaited decision. It solidified a broader base of beneficiary-clients and detailed the enormous fraud on that Court more precisely. Clients are air line pilot investors in the Kersting Project.

Robert Alan Jones, a well-known Colorado tax attorney with principal offices in Las Vegas, Nevada, and Mr. O’Donnell’s associate, labeled this cogent 137-page decision as “seminal, sensational, and unprecedented.” The IRS lawyers and participating personnel were undressed in public, so to speak, by their own fraud on the Court, on the lead cases, (known as the Dixon group of cases with Messers Hartman, Lewis, and Liu leading this supplemental challenge), and fraud on all eighteen hundred taxpayers who relied on this lead case as honestly tried by IRS attorneys.

Mr. Jones and Mr. O’Donnell as lead counsel on this Hartman and Lewis T.C. Memo. 2008-124, (May1, 2008) teamed up to turn the tide for their clients and five hundred of Kersting investor-petitioners who previously settled and paid the full deficiencies to the IRS. They were excluded from the previous $30 million judgment registered in 2005 and reported nationally. The IRS claimed the fraud on the Court was procedural only and these investors should have known better when they settled, so they should have released or waived participation in these refund proceedings.

The U.S. Tax Court sided with the fully settled investors. The fraud on the Court of bribing witnesses with lucrative settlements before they testified, failing to advise the U.S. Tax Court of the settlements, and, believe it or not, subsequently attempting to hide the ball institutionally was deemed a structural defect that destroyed confidence in the court system, broke every rule in the book, and embarrassed the IRS and thousands of its dedicated honest workers.

Attorney Joe Alfred Izen of Houston, Texas, the lead counsel in earlier test case and appeals proceedings participated with O’Donnell and Jones in remand proceedings for the group of thirteen hundred (1300) investors. This specific May 1, 2008, decision to O’Donnell and Jones for their clients focused on previously excluded investors who had settled before the “fraud on the court” was recognized by the the Ninth Circuit in its landmark decision in 2003, Dixon V, .

Until this current decision, the IRS has refused to deal with settled investors who were also cheated by the IRS counsel fraud claiming finality of the settlements. by tax court rule. Kudoos are not only in order for Mr. Jones and Mr. O’Donnell. Our hats go off to United States Tax Court Judge Renato Beghe whose logic and wisdom is clear to all who read his opinion, but most importantly he has struck a devastating blow in favor of judicial integrity and protecting our court system and taxpayers from IRS abuse.

All objections by the IRS evaporated under Judge Beghe’s chronoligy, logic, and detail. Mr. Jones and Mr. O’Donnell are finally satisfied that this 19 year court struggle against overwhelming superior government resources is nearly over. The IRS was most recently represented by Mr. Henry O’Neill, trial attorney, Honolulu, Hawaii, IRS Regional Counsel’s Office. Mr. O’Neill does not comment on these cases.

Declan J. O'Donnell, Esq.Declan Joseph O’Donnell
777 Fifth Street
Castle Rock, Colorado 80104
Telephone: 303-688-1193

Robert Alan Jones, Esq.R.A.J., Ltd.
1061 E. Flamingo Rd. #7
Las Vegas, Nevada 89119
Telephone: 702-791-3405
RAJLTD@AOL.COM

Source: http://questforfairtrialinconcordnh.blogspot.com/2008/05/irs-sanction-doubled-by-us-tax-court.html

Thursday, January 8, 2009

Reasons for Getting a Tax Attorney

Author: Ioan Margineanu

People can get sued for many reasons. There are a few ways to protect your self from a lawsuit, but some lawsuits are just unexpected. The most common way of getting in trouble with the law without even knowing it is when it comes to the tax law. Many people make mistakes when it comes to their taxes without even knowing it, but they will later find themselves in rough problems with the IRS. In this case, the best way to get protection is with a tax attorney.

Most people don’t realize that there is a significant difference between a CPA and tax attorney. A tax attorney can prepare a strong case when dealing with the IRS and everything you tell him is confidential. If you tell your CPA that you’ve done something illegal when it comes to taxes, he has to testify in court. On the other hand, the relationship between you and your tax attorney is somewhat similar to that between you and your priest or your doctor. Most people hire a tax attorney when they start having problems with the IRS, but it is best to already have an attorney before any incident. If the IRS starts an investigation on you, it might be a mistake or you might have done something illegal. There are a number of things that you can do wrong when it comes to taxes and the IRS has the right to start investigating. To make sure that the investigation doesn’t end badly for you, you need to hire yourself a good tax attorney. Unlike general attorneys, tax attorneys are confronted with tax problems every day. They have higher experience in this field and they know how to get around a rough situation.

The tax law is complicated because of three facts: it changes often, it can differ from state to state and it is not black and white. If you don’t have special knowledge about this matter, you will find it hard to keep in touch with all the changes in the jurisdiction. That is why you need a person with experience to handle your problems with the IRS. Your tax attorney will "fight" the IRS for you. Most people get in higher difficulties because they try to handle the IRS themselves and they give more information than they should. The IRS can start investigation based on our statements so it is best to let a tax attorney talk for you.

A tax attorney can stop the IRS through a number of strategies and it is up to you to decide what exactly to use. You can explain your situation and you and your attorney can come up with the best solution for your problems. The IRS uses many techniques in order to get what they want and they usually succeed. Only an experienced tax attorney can stop them in their tracks.

Any person that owns a business or has a reasonable amount of money in real estate or cash should try hiring a tax attorney. You can’t keep in touch with every move in the tax law, but your attorney can. A good tax attorney can make you save thousands of dollars in tax deductions and he can make sure that the IRS can’t touch you. The best way to stop a problem with the IRS is preventing it and only a good attorney can help you do that. You just need to search and find out who is the best.

Article Source: http://www.articlesbase.com/law-articles/reasons-for-getting-a-tax-attorney-255310.html