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Fort Worth Tax Law Blog

Making the most of investment losses, part 1: deduction limits

In tax planning as in life, success isn't always about big victories. In many cases, it involves making the most of your losses.

This can occur, for example, in the context of making proper use of tax deductions for casualty losses. We discussed that issue in our June 26 post.

Offer in Compromise Acceptance Rate Hits a New High

Newly released statistics show that the IRS has been accepting Offers in Compromise at a higher rate than at any other time during the 21st century. During 2013 and 2014, the IRS accepted 40% or more of all submitted offers.

An Offer in Compromise (OIC) is essentially an offer by a taxpayer to settle tax debt for less than the full amount owed. You have probably heard commercials on TV and the radio from companies promising to help settle tax debt with the IRS "for pennies on the dollar." Many of these nationally advertised tax resolution firms have been forced out of business by consumer protection laws, due to their false advertising.

Two U.S. Return Preparers Sentenced for Enabling Offshore Tax Evasion

The Department of Justice announced that a father and son team of tax return preparers have been sentenced for conspiring with clients to prepare false tax returns omitting the clients' foreign financial accounts or foreign income. David Kalai has been sentenced to serve 36 months, while his son, Nadav Kalai, was sentenced to 50 months.

The Kalais owned and operated United Revenue Service Inc. ("URS"), a return preparation business with twelve offices nationwide. In order the conceal secret accounts owned by their clients at two Israeli banks, the Kalais formed sham companies in Belize and other countries. The accounts were then held in the names of these sham companies. The funds that were transferred to these secret accounts were then falsely reported as either investment losses or business expenses. Three of the Kalais' clients have already pleaded guilty to felonies for their role in the scheme. The Kalais also had their own offshore account that they failed to disclose. 

How does marriage impact your taxes?

Many Americans have heard of the so-called "marriage penalty." This refers to the notion that marriage results in higher taxes for at least some married couples when filing jointly than the members of those couples would have had collectively as individuals.

Is this notion a myth or is it actually supported by empirical data?

Worker classification update, part 2: the 1099-driven economy

In the first part of this post, we took note of the latest interpretation from the U.S. Department of Labor on distinguishing independent contractors from employees. The Labor Department is likely to continue to raise questions about whether employers are making classification decisions that comply with the Fair Labor Standards Act (FLSA).

But federal labor law is only one aspect of the questions about classification that arise in an economy with an increasing number of contractors. There is also the issue of worker classification for payroll tax purposes. And that issue has become even more complicated with the rise of social-sharing services such Uber, in which companies provide services on demand using workers who receive only 1099s and don't get benefits.

FBAR filing deadline moving to earlier date

Sometimes a change makes so much sense that you wonder why it didn't happen earlier. Many taxpayers with offshore accounts would agree this is the case with the recent adjustment of the filing date for the FBAR form.

In this post, we will inform you about the change, under which the FBAR (now known as FinCEN Report 114) will move to an earlier date, beginning next year.

District Court Upholds FBAR Penalties but Scolds IRS for Misleading Taxpayer

The U.S. District Court for the Western District of Washington has upheld FBAR penalties of $10,000 for tax years 2005 through 2008, but admonished the IRS for what it said was "arbitrary" and "capricious" conduct. As a result, the court ordered that any additional interest or late payment penalties are void.

James Moore, a U.S. citizen, relocated to the Bahamas in 1989. While there, he transferred approximately $300,000 of post-tax U.S. income to the Bahamas, with the intention of developing a hotel or resort there. The following year, Mr. Moore faced health problems and was forced to move back to the United States. Before moving back, he met with the general manager of his bank in the Bahamas, who advised him to transfer his funds to Swiss bank UBS. Moore was unaware of the reporting requirements for foreign accounts.

FBAR Due Date Changed

On July 31, 2015, the President signed into law H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. Buried in the bill are some important changes to due dates for returns, including FinCen Report 114 (FBAR).

Starting with the 2016 tax year, the due date for the FBAR will be moved up from June 30, 2017 to April 15, 2017, the same as the due date for personal income tax returns. Just as with personal income tax returns, taxpayers can request a six month extension, which moves the deadline to October 15, 2017. Due dates for the 2015 tax year will remain unchanged, meaning that FBARs will still be due on June 30, 2016, without the possibility of requesting an extension. Additionally, the new law gives the IRS the discretion to waive late-filing penalties for individuals who are required to file FBARs for the first time.

Worker classification update, pt 1: The Fair Labor Standards Act

How employers should classify workers for tax purposes remains a highly troublesome issue. Indeed, with more and more businesses increasing the use of contract workers, classification issues are as pressing as ever.

We've been following these issues regularly in this blog. For example, in our January 15 post, we wrote about tweaks made by the IRS to its Voluntary Classification Settlement Program (VCSP). The VCSP allows employers who meet certain criteria to reclassify existing workers as employees rather than independent contractors.

IRS Focuses on Southeast Asia in Continuing Offshore Crackdown

As the U.S. government's much publicized crackdown on Swiss banks continues, they may be turning their focus to Southeast Asia, where a Singaporean asset-management firm has fallen under criminal investigation. The firm is suspected of accepting transfers from U.S. taxpayers who were forced to shut down their undeclared Swiss accounts when those Swiss banks came under criminal investigation.

Eventually, more than 100 Swiss banks reached non-prosecution agreements with U.S. authorities, in exchange for turning over information about their clients and paying substantial penalties. The U.S. also investigated financial institutions in countries like Liechtenstein, Israel, and the Caribbean.