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Fort Worth Tax Law Blog

What happens when a PEO fails to remit employment taxes?

The employer is generally liable for the unpaid employment taxes. As the use of professional employer organizations increases, a recent case provides a warning.

How does federal law define employer? This was at the crux of a case from earlier this year. Under the Internal Revenue Code, an employer has the obligation to withhold Federal income tax. Case law extends that requirement to withholding and paying FICA (Social Security and Medicare) and FUTA (unemployment) taxes.

Tax fraud charges and professional employer organizations

Reducing employment tax fraud by third-party payers, professional employer organizations (PEOs), has been a federal initiative since 2014. A certification program was designed to require a PEO to notify the IRS of employers using their services.

Yet as of March 31, 2017, only 123 PEOs had applied for certification. Our most recent post on the topic detailed the release by the IRS of its first list of certified PEOs (CPEOs). In this post, we will discuss why the program has not caught on and we'll survey some of the related fraud convictions over the last two years.

IRS tips for financial recovery following a disaster

Disasters – including massive storms (like the hurricanes that recently struck the Southeast and Puerto Rico), fires, earthquakes, mudslides and floods – can result in the complete loss of a person’s belongings. In a catastrophic event, everything can be gone in an instant, including:

  • Furniture
  • Housewares
  • Clothing
  • Mementos/photos/heirlooms
  • Electronics
  • Financial and tax records

It is a daunting task, thinking about trying to handle insurance claims, get repairs made, buy new property, and process your grief and shock caused by the loss.

German “James Bond” busted for tax evasion

It seems like a plot from a blockbuster action movie. A man takes on a position as a deep undercover agent, a spy for Germany. He blends into the criminal underworld, gathering evidence to support the arrest and conviction of drug dealers, diamond smugglers and terrorists all over the world. He helps negotiate the release of hostages and stops the dumping of 41 barrels of toxic chemicals. He was so good at his job that he earned the nickname, the German “James Bond.”

But the ending of this movie is different than most blockbusters. He does not receive great fanfare upon his return. Instead, he is detained and accused of tax evasion. 

Equifax breach might mean tax headaches for years to come

Credit giant Equifax, one of the three main credit reporting agencies, recently revealed a massive data breach that occurred earlier in the year. Hackers got through the company's electronic security protocols and into databases full of confidential information. Conservative estimates put the number of affected Americans at a staggering 143 million.

The information accessed in the hack includes:

  • Names
  • Social security numbers
  • Tax identification numbers
  • Birthdates
  • Addresses
  • Debt account information (mortgages, credit cards, etc.)

Is the FATCA hurting small businesses?

The Foreign Account Tax Compliance Act became law in 2010. It requires that foreign financial entities report certain accounts that are owned by citizens of the United States. A failure to comply with this law can result in stiff penalties, including a 30 percent withholding tax on income from the United States.  

The law was enacted in an attempt to address concerns about terrorists and those who were attempting to avoid tax obligations. In reality, it appears to have a negative impact on small businesses here in the United States. 

Three lessons for tax preparers from recent federal case

Four tax preparers are facing prison time for tax crimes connected to their tax preparation services. The accusations included putting together faulty tax returns and cashing in on fraudulent refunds. The Department of Justice (DOJ) discussed the case in a recent press release, noting that the government is coming down hard on those who break tax law in this manner.

DOJ, IRS investigating Swiss banks, insurers for tax issues

American authorities at the Department of Justice and the Internal Revenue Service are continuing their ongoing investigation into Swiss banks to determine compliance with the regulations set forth by the Foreign Accounts Tax Compliance Act (FATCA). Their investigation has now branched out to include Swiss insurance companies.

Specifically, investigators are looking at insurers who sold so-called "wrapper" policies to very wealthy American investors in the early 2010s. These policies allow the insured to set aside stocks, investment portfolios, private equity holdings and other high-value bankable assets, increasing their economic benefits while avoiding taxation.

High court may face issue of state taxation of all Internet sales

Earlier this week, the South Dakota Supreme Court issued a decision that is likely to end up before the U.S. Supreme Court. The issue before the high court would be whether a state can impose a sales or use tax on purchases by state residents from out-of-state merchants with no physical presence in the state. 

Background 

IRS warns of latest tax scam: 3 ways to avoid becoming a victim

The Internal Revenue Service (IRS) and Federal Bureau of Investigations (FBI) recently announced that the public should be on the lookout for the latest scam. The scam is successful because it is deceptively realistic. It involves an email with a claim that one of these federal agencies is attempting to contact the recipient. The email provides the recipient with a questionnaire. When the recipient clicks the link to download the questionnaire, ransomware is installed onto the computer.

What does the ransomware do to the computer? Once installed, the ransomware locks the user out of data stored on the computer. In order to regain access, the scammers demand payment. In exchange for the payment, the scammers state that they will provide the recipient with the code that will disable the ransomware.

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