Another Fraudulent Tax Firm, "Instant Tax Service," Ordered t to Shut Down.

The U.S. District Court for the Southern District of Ohio issued has entered a permanent injunction ordering ITS Financial LLC, the parent company of the Instant Tax Service franchise, to cease operating, the Justice Department announced today.

The injunction order, which was signed yesterday by Judge Timothy S. Black of the U.S. District Court for the Southern District of Ohio, also bars Fesum Ogbazion, the sole owner and CEO of ITS Financial, from operating or being involved with any business relating to tax-return preparation.  The court issued the order following a two-week trial in Cincinnati in June 2013. 

Instant Tax Service, which is based in Dayton, Ohio, claimed to be the fourth-largest tax-preparation firm in the nation.  According to the court, ITS Financial had about 150 franchisees that filed over 100,000 tax returns each year in 2011 and 2012.  Two other entities owned by Ogbazion, Tax Tree LLC and TCA Financial LLC, were also defendants in the case and were also ordered to cease operating.

The court found that Ogbazion and his defendant companies had:

 

1. Filed tax returns for customers without their permission and encouraged franchisees to do the same;
2.  Clandestinely trained and encouraged franchisees to prepare and file tax returns prematurely with paycheck stubs that omitted and understated income and inevitably resulted in the submission of false federal tax returns;
3. Defrauded customers, who were largely low-income, by marketing false and fraudulent loan products to lure them into the tax-preparation offices;
4. Defrauded customers by requiring franchisees to charge phony and exorbitant fees;
5. Forged customers’ signatures on loan checks and used those forged checks to operate Ogbazion’s businesses;
6. Willfully failed to pay over $1 million of their own employment taxes and lied about assets in connection with the collection of those taxes, while hiding money in a secret bank account and defrauding the United States and third party creditors;
7. Lied on government forms and encouraged franchisees to do the same;
8. Obstructed government agents and materially assisted franchisees in circumventing Internal Revenue Service (IRS) law-enforcement efforts involving the suspension of electronic filing identification numbers; and
9. Told franchisees to lie to government agents in connection with IRS compliance visits.

 

The court credited an IRS study concluding that the tax harm caused by Instant Tax Service franchisees in five cities in a single tax-filing season was between $10 million and $25 million.   

 

“Defendants’ harm to the public is extensive and egregious, indeed appalling,” the court stated.  “This is especially so given the nature of Instant Tax Service’s core customer – the working poor – who are particularly vulnerable to [the] Defendants’ fraudulent practices.”

 

The court further stated:  “Defendants’ repeated attempts at trial and in argument to downplay the gravity of their lawlessness was stunning.  The court concludes that even today [the] Defendants have not fully recognized their culpability.  Ultimately, the nature, scope and gravity of [the] Defendants’ offenses, and the unrepentant attitude toward their commission, demonstrate the necessity for a complete injunction putting the Defendants permanently out of business.”

 

The court also concluded that Ogbazion and ITS Financial violated the terms of a preliminary injunction order that the court had entered in October 2012 with their consent.  The court found that, despite their agreement to obey various lending and consumer-protection laws during the 2013 tax filing season, they violated several of those laws by discriminating against active-duty military personnel on loan applications and by failing to obtain a state lending license in a timely manner.  The court determined that they violated the preliminary injunction by causing their franchisees to provide tens of thousands of customers with Truth-in-Lending Act disclosure forms falsely stating that the loans carried no finance charges and an annual percentage rate (APR) of zero.

 

“The court's decision sends a clear message to those who might be tempted to abuse the public trust provided to the tax preparer community,” said Acting IRS Commissioner Danny Werfel.  “Those who deceive their customers and defraud the U.S. Treasury will face swift legal action that puts an end to their corrosive conduct."   

 

 

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Seems Like The IRS Is Having Trouble Delivering Transcipts?

We reprinted Tax Attorney James R Malone, Jr's string of postings from Tax Controversy Professionals LinkedIn Group, which indicates that the IRS doesn't seem to be taking live transcript requests?

Ellen Brody - Partner at Roberts & Holland LLP

My partner had that same problem yesterday - leave me a message with all the detail and we will mail it to you in 7-10 business days.

Stephen Olsen - Tax Attorney at Gawthrop Greenwood

I was able to get transcripts over the last few days, but when I called in yesterday, the person I spoke with said the system was down, and they could not assist at that time. This was in line with computer problems I had dealing with exam and collections this week, with most Service folks claiming the slowness and glitches starting late last week. Yesterday, I was told to wait three hours and call back. I still haven't tried yet. Hopefully, this is temporary.

Dana Snider - Law Office Dana Snider

You're right, they give you the recording, you type it all in and then they say "a transcript will be sent in the next 10 days" or something to that effect then they hang up on you.

 

 

Fast Track Settlement Program Now Available Nationwide To Helps Small Businesses Under Audit

 The Internal Revenue Service today announced the nationwide
rollout of a streamlined program designed to enable small businesses under audit to more quickly settle their differences with the IRS.

The Fast Track Settlement (FTS) program is designed to help small businesses and self-employed individuals who are under examination by the Small Business/Self Employed (SB/SE) Division of the IRS.

Modeled on a similar program long available to large and mid-size businesses (those with more than $10 million in assets), FTS uses alternative dispute resolution techniques to help taxpayers save time and avoid a formal administrative appeal or lengthy litigation. As a result, audit issues can usually be resolved within 60 days, rather than months or years. Plus, taxpayers choosing this option lose none of their rights because they still have the right to appeal even if the FTS process is unsuccessful.  

Jointly administered by SB/SE and the IRS Appeals office, FTS is designed to expedite case resolution. Under FTS, taxpayers under examination with issues in dispute work directly with IRS representatives from SB/SE’s Examination Division and Appeals to resolve those issues, with the Appeals representative typically serving as mediator.

The taxpayer or the IRS examination representative may initiate Fast Track for eligible cases, usually before a 30-day letter is issued. The goal is to complete cases within 60 days of acceptance of the application in Appeals.

Under an IRS Audit?

 

 

Want To Fast Track Your Settlement?

Contact the Tax Lawyers at 

Marini & Associates, P.A. 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or 

Toll Free at 888-8TaxAid ( 888 882-9243)

 

Source

IR-2013-88

IRS Using Every Resource to Find Taxpayers Who Made "Quite Disclosures" of Their Offshore Accounts

 

We have previously written on the topic of the “Quiet Disclosure” alternative for complying with U.S. offshore reporting requirements:

1. IRS Collected $5.5 Billion From OVDI, But According to GAO, May Be Missing Billions More? 

2. IRS Cracks Down on "Quiet Disclosures"  

3. Quite Disclosure" Caught - DOJ Files To Collect 50% FBAR Penalty!

Under this alternative, late filing taxpayers will not participate in the Offshore Voluntary Disclosure Program (OVDP). Instead, they will simply file the delinquent returns and reporting forms late, i.e. “Quiet Disclosure,” and hope that the IRS does not pick up on them for audit or penalty purposes.

A key benefit of the OVDI program is the substantial mitigation of criminal tax prosecution. Those that proceed with a quiet disclosure do not obtain this benefit. (See Quite Disclosure" Caught - DOJ Files To Collect 50% FBAR Penalty!)

The IRS has addressed “Quiet Disclosures” in their 2012 OVDP FAQ's #15 &16:

15.	What if the taxpayer has already filed amended returns reporting the additional unreported offshore income, without making a voluntary disclosure (i.e. quiet disclosure)?	The IRS is aware that some taxpayers have attempted so-called “quiet” disclosures by filing amended returns and paying any related tax and interest for previously unreported offshore income without otherwise notifying the IRS. Taxpayers who have already made “quiet” disclosures are eligible to take advantage of the penalty framework applicable to this program by submitting an application, along with copies of their previously filed returns (original and amended) to the IRS’s Voluntary Disclosure Coordinator (see FAQ 24). Taxpayers are strongly encouraged to come forward under the OVDP to make timely, accurate, and complete disclosures. Those taxpayers making “quiet” disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years.
16.	Some taxpayers have made quiet disclosures by filing amended returns. Will the IRS audit these taxpayers? If so, will they be eligible for the 27.5 percent offshore penalty? Is the IRS really going to prosecute someone who filed an amended return and correctly reported all their income?	The IRS is reviewing amended returns and could select any amended return for examination. The IRS has identified, and will continue to identify, amended tax returns reporting increases in income. The IRS will closely review these returns to determine whether enforcement action is appropriate. If a return is selected for examination, the 27.5 percent offshore penalty would not be available. When criminal behavior is evident and the disclosure does not meet the requirements of a voluntary disclosure under IRM 9.5.11.9, the IRS may recommend criminal prosecution to the Department of Justice.

Recent discussions by professionals suggest that quiet filers may be more at risk than they suppose.

For example, some practitioners have indicated that it is clear that the IRS has figured out a way to detect non-program disclosures, and that such filers may be subject to civil penalties higher than those imposed on OVDP participants. (See Jaime Arora, "IRS Auditors Taking Closer Look At 'Quiet' Disclosures Of Offshore Accounts," 2013 TNT 202-4 (October 18, 2013)).

A speaker at a recent American Law Institute conference noted the IRS is focusing its attention on taxpayers choosing to filed amended returns and foreign bank account reports for previous years.

"As a result, there may be a higher chance that

these so-called “Quiet Disclosures” of
Offshore Accounts

will be found and penalized by the IRS."

Maybe this renewed IRS effort is a result of The Government Accountability Office's (GAO) report regarding offshore tax evasion which was the topic of our post "IRS Collected $5.5 Billion From OVDI, But According to GAO, May Be Missing Billions More?"; which discusses that in the GAO's view, taxpayers are attempting to circumvent taxes, interest, and penalties by not participating in an offshore program, but instead simply amending past returns or reporting on current returns previously unreported offshore accounts, result in lost revenues and undermine the programs' effectiveness.

Whatever the reason, Tax Practitioners need to caution clients considering a "Quiet Disclosure" that the odds of being detected are significantly higher then they were just 3 years ago!

Have You Filed a "Quite Disclosure"?
 

 

Have You Been Caught or Just Uncomfortable With This Decision?  

Contact the Tax Lawyers at 

Marini & Associates, P.A. 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or 

Toll Free at 888-8TaxAid ( 888 882-9243)

Criminal Exposure for Late Filing Even If Qualify under FAQs!

In a recent appellate case, US v. Simon, 7th Circuit Court of Appeals, August 15, 2013, the taxpayer filed required FBAR’s late, using the filing procedure allowed for late filings under the 2009 OVDI FAQ. Nonetheless, the court found that the FAQ relief from civil penalties was not a bar to the government asserting criminal penalties. 

Thus, those doing late filings under the OVDI FAQs should not consider them necessarily safe from Criminal Prosecution.  

James Simon is a Certified Public Accountant, a professor of accounting, and an entrepreneur whose business dealings require a flowchart to unravel. At the center of Simon’s financial life was JAS Partners, a Colorado limited partnership. Simon and his wife Denise each owned one percent of JAS Partners. The Simon Family Trust (hereafter “the Trust”), based in the Cook Islands, owned the other ninety eight‐percent. The Trust existed for the benefit of Simon, his wife and their children; the trustees were a Cook Islands corporation and a retired attorney.

In the case, the taxpayer did not qualify for using the late filing FAQ anyway, since not all offshore income had been reported timely. Nonetheless, it appears the court would still have allowed criminal liability even if the FAQ applied.
 There were some bad facts that likely contributed to the government’s attitude, and possibly that of the court for example:

For tax years 2003 through 2006, the Simon family received approximately $1.8 million from JAS Partners, Elekta, JS Elekta, Ichua and William R. Simon Farms, Inc., most of this recorded as loans in Simon’s personal financial records. Simon and his family spent approximately $1.7 million during this same period of time. Yet Simon paid just $328 in income taxes for 2005, and claimed refunds for the other three years, at the same time pleading poverty to financial aid programs in order to gain need‐based scholarships for his children at private schools. The government charged Simon with:

1. Four counts of filing false tax returns, in violation of 26 U.S.C. § 7206(1) and 18

   U.S.C. § 2;

   
   
2. Four counts of failing to file reports related to foreign bank accounts, in violation of 31 U.S.C. §§ 5314, 5322 and 18 U.S.C. § 2
3. Eleven counts of mail fraud, in violation of 18

   U.S.C. §§ 1341 and

   
   
4. Four counts of financial aid fraud, in

   violation of 20 U.S.C. § 1097 and 18 U.S.C. § 2.

   
   

 

In his defense, Simon sought to demonstrate that the money he received from various entities was loaned to him and thus was not taxable. Alternately, he characterized the money he received as partnership distributions that were not taxable because they did not exceed his basis in the partnership. At worst, he explained, he mischaracterized some of the transactions, but not in a manner that violated any criminal law.

 

The government contends that Simon was not eligible for either the Voluntary Disclosure Practice or the administrative relief set forth in the FAQs and the Notices. Second, the government asserts, the crime was complete when Simon did not file the three FBARs on June 30 of the year following each calendar year at issue.

 

The appeals court determined that both the FBAR counts and the false tax return counts would stand, there is no and there was no basis to challenge the remaining counts under Yates. The judgment of the district court was therefore affirmed.

 

Have Unreported Foreign Bank Accounts or Companies?

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid ( 888 882-9243)

Source:

RubinonTax
 

 

 

 

 

 

 

 

 

Criminal Score Card Not Good For Offshore Account Holders!

In our previous post UBS Criminal Casualties, so Far and More Guilty Pleas Over Offshore Accounts in the Works! regarding the U.S. and Swiss Reach a Deal on American Tax Evaders, the IRS hunt for offshore income and accounts continues unabated.

Now in the wake of H. Ty Warner, the billionaire creator of Beanie Babies plush toys, pleaded guilty last month to evading taxes on secret Swiss bank accounts that held as much as $107 million; Bloomberg has published Offshore Tax Scorecard: UBS, Credit Suisse, HSBC, Baer which is a must read for US Taxpayers who have still not addressed their undeclared income from their foreign accounts.

Warner, 69, is the most prominent defendant in a U.S. crackdown since 2008 on offshore tax evasion that led to charges against about 70 American taxpayers and 30 bankers, lawyers and advisers.

The IRS' hunt for offshore income and accounts is intensifying. See Liechtensteinische Landesbank Turned Over 200 Clients to US government. . 

For those who don’t come forward before they are found, being found can be awfully painful!



The advisers aren’t home free either, and that may be the most notable trend to note. It’s clear the IRS and prosecutors are looking more and more to advisers. See Offshore Tax Scorecard: UBS, Credit Suisse, HSBC, Baer and See Also, Swiss Lawyer Co-Operating With IRS Hunt For Offshore Account Holders! .
There are probably many other cases in the works. The IRS now has many sources of information. See No Safe Havens for Offshore Tax Cheats ... The IRS, Australia & UK Audit Leaked Information!  What’s more, with the unveiling of FATCA, the Foreign Account Tax Compliance Act, there’s no question that even more data is on the way.

Are You One of the > 7 MM Americans
with Unreported Foreign Bank Income?
 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888 882-9243 begin_of_the_skype_highlighting 888 882-9243 FREE 

 

Are Your Ready For The IRS' New Rigid IDR Enforcement Procedures?

On June 18, 2013, the Acting LB&I Commissioner issued a directive           (LB&I Control No: LB&I-04-0613-004) to LB&I employees announcing that for all IDRs issued after June 30, 2013: 

1. The examiner must identify and state the issue that has led the examiner to request the information included in the lDR.
2. The examiner must discuss the lDR with the taxpayer in advance of issuing it, and
3. Both parties must discuss and determine a reasonable timeframe for response.
 

When all of these steps are followed, the expected outcome is that the lDR process will be more efficient, and as a result, there will be less need to enforce IDRs through summonses. 

 

The directive also stated that changes to the enforcement process would be announced in the coming months.

 

Now on November 4, 2013, the IRS has issued a second directive to LB&I employees, that fleshes out the components of the June 18, 201 directive (LB&I Control No: LB&I-04-1113-009); which provides that as of November 4, 2013, all LB&I managers, examiners and specialists must ensure that all outstanding and future IDRs comply with the new requirements for issuing IDRs. 

 The new IDR Enforcement Process involves three graduated steps:
 

1. a Delinquency Notice;
2. a Pre-Summons Letter; and
3. a Summons. 

This process is mandatory and has no exceptions!

It requires LB&I managers at all levels to be actively involved early in the process and ensures that Counsel is prepared to enforce IDRs through the issuance of a summons when necessary.  

Pursuant to this Directive, the IDR Enforcement Process is effective beginning January 2, 2014. 

 

We already have a couple of audits that are in compliance with this new directive and it is apparent that both the taxpayer's representatives and the IRS are going to have huge learning curve during its implementation. 

 

Our initial impression is that delivery dates are at best unrealistic, since they are agreed to at the very beginning of the audit, when neither side truly understands the extent or scope of the issues and/or the availability of the requested information or the difficulty in producing or re-creating credible evidence for the years requested. (e.g. where a Corporation was bought out or merged with a new Corporation; where a taxpayer switched computer systems and the requested information is stored on old system, etc.).

 

We would advise the IRS to not strictly adhere to this rigid framework!  

 

Where it is apparent that the original agreed to delivery dates are at best unreasonable or were upon further reflection impossible; the Revenue Agent should issue a second set of amended agreed to dates especially where the facts support it!

 

Have An IRS Audit?

 

Need Help With This New IRS Audit Methodology?
 

 Contact the Tax Lawyers at

Marini & Associates, P.A.  

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Toll Free at 888-8TaxAid ( 888 882-9243 begin_of_the_skype_highlighting 888 882-9243 FREE  end_of_the_skype_highlighting).